After a phase of subdued growth, the fortunes of telecom tower infrastructure companies could see a revival with the entry of fourth generation (4G) mobile technology players, specially Reliance Jio Infocomm Limited (RJio).
Mukesh Ambani, chairman of Reliance Industries and promoter of Rjio, had in June told shareholders that RJio would roll out 4G services, for both voice and data, in phases in 2015.
Since then, the telco has entered into pacts with several tower infrastructure companies, the latest being with GTL Infrastructure Limited, which has on September 18 signed a Master Services Agreement (MSA) for tower infrastructure sharing with RJio.
A Credit Suisse report last month stated that Reliance Jio Infocomm was on track to launch its pan-India 4G data and voice services by March 2015.
Apart from GTL Infra, RJio has signed pacts with Ascend Telecom for more than 4,500 towers, with Tower Vision for 8,400 towers, with ATC India for 11,000 towers and with Viom Networks for 42,000 towers. It also has an agreements with Anil Ambani-led Reliance Communications for sharing the latter?s optic fibre infrastructure and over 45,000 towers. Additionally, RJio already has an agreement in place with Indus Towers (a joint venture between Bharti Infratel, Vodafone India and Idea Cellular along with another with Bharti Airtel) to utilise its submarine cable.
A JP Morgan report estimates that RJio will roll out at least 150,000 4G tenancies over the next four to five years for a substantial coverage. Of the 1.5 lakh 4G tenancies, at least 50,000 tenancies (one-third) will likely be from Bharti Infratel (standalone) and Indus, which collectively have over 40% total tower share in the country.
?With the entry of an additional pan-India player like RJio, projected market share gains for the big three telecom operators (Airtel, Vodafone, Idea) may need some adjustment, especially on data, but this emerging scenario is an encouraging one for tower companies such as Bharti Infratel and Indus?, the report said.
The report estimates RJio to be paying a monthly rent of R34,000 per tower to the tower infrastructure companies from fiscal 2014 to fiscal 2020.
At present, over 75% of telecom towers in India is controlled by mobile operators, while others like GTL Limited and GTL infrastructure, which do not provide for mobile services, have suffered.
GTL Infra, together with Chennai Network Infrastructure Limited (CNIL), a subsidiary of GTL Infra?s parent company Global Group Enterprise, currently holds a combined portfolio of over 27, 800 towers.
Global Group?s CEO Charudatta Naik said in a recent BSE statement that the launch of 4G network and the rise in the consumption of data services will be the major growth driver for tower companies.
Global Group, an infrastructure services company, has two companies listed on Indian stock exchanges, GTL Limited and GTL Infrastructure. Both companies had to go in for corporate debt restructuring (CDR) over the heavy loans taken to purchase Aircel?s tower assets for about $1billion in 2011. The companies are currently pinning their hopes on the roll out of 4G services and the surge in data usage to improve their financial positioning.
The future of the telecom tower companies also looks optimistic with the expansion of existing second generation (2G) networks in the 900 MHz band, and the roll-out of third generation (3G) services in the 2100 MHz band as well as broadband wireless access (BWA) services in the 1800 MHz and 2300 MHz bands.
A research report by JM Financial, released in February, forecast a 2% CAGR in tower-sites and 4-5% CAGR in total tenancies till FY17.
During his speech to the shareholders in June, Mukesh Ambani called Reliance Jio a ?R70,000-crore-initiative,? indicating that RIL is investing more in its new telecom business than what was estimated.
?From the outset, Reliance Jio will cover all states in India, with 5,000 towns and cities and 215,000 villages,: Ambani said.
Telecom Infrastructure companies, especially independent companies, are keen to see the plans fructify, as their own future will be depending on them.
