Bharti Infratel: On the winning side

Bharti Infratel which has the biggest footprint in India of telecom tower assets, could be a big beneficiary of 4G broadband wireless services

With data services set to gain traction in the country with the launch of fourth generation (4G) broadband wireless services, Bharti Infratel, the telecom tower arm of Sunil Mittal-led Bharti Airtel is widely perceived to be the biggest potential beneficiary.

Bharti Infratel has the biggest footprint in India, in terms of telecom tower assets spread across the country, and has all its bets hedged. The company, which was listed on the bourses in December 2012, owns around 34,000 towers directly. It also owns a 42% stake in Indus Towers, a joint venture between Vodafone India, Aditya Birla Telecom and itself, which is India’s largest telecom tower firm with 1,10,000 towers.

Between the two ventures, Bharti Infratel has around 84,000 towers in its portfolio in all the 22 telecom circles of the country, and have a 40% share of the telecom towers market by assets.

Bharti Infratel, Sunil Mittal, Bharti Airtel, telecom tower, Indus Towers, Vodafone India, Aditya Birla Telecom

Telecom sector analysts who are keenly watching out for Mukesh Ambani-led Reliance Jio Infocomm to roll out 4G services in India (it has to do so by June before its licence expires), observe that with the kind of assets it owns Bharti Infratel would be a big beneficiary of the new-age telecom service to be offered in India. In March, Bharti Infratel signed a pact with Reliance Jio to give the latter access to 82,000 telecom towers across 22 telecom circles.

According to a JP Morgan research report, Reliance Jio will take up around 1,50,000 telecom tower tenancies for its 4G services over the next four to five years, in order to offer substantial service coverage across India. Bharti Infratel is expected to get at least 50,000 of these tenancies, along with Indus.

Two telecom sector analysts who spoke to FE on conditions of anonymity said that Reliance Jio could take up at least 1,00,000 of these tenancies in the next couple of years itself, subject to the level of success with which its 4G services are met. FE couldn’t independently verify this Reliance Jio.

Bharti Infratel, Sunil Mittal, Bharti Airtel, telecom tower, Indus Towers, Vodafone India, Aditya Birla Telecom

Along with the launch of 4G services by Reliance Jio, Bharti Airtel, which owns 74.85% in Bharti Infratel, will also look to scale up its own 4G services across the country, which is likely to benefit Bharti Infratel. The telecom  tower company already has India’s three largest telcos Bharti Airtel, Vodafone and Idea Cellular as tenants utilising capacity on its towers. These companies are looking to aggressively ramp up their data services offerings in India and this will also stand Bharti Infratel in good stead.

One of the telecom sector analysts cited earlier said that if Reliance Jio’s anticipated big-bang entry into the data services business had the anticipated impact, incumbents would be forced to improve their data networks and this implied more business for tower operators like Bharti Infratel.

“We believe data proliferation and regulatory clarity are likely to be key growth drivers for Bharti Infratel, as operators expand footprint to monetise spectrum investments and drive data growth,” a Standard Chartered research report says. “We, therefore, raise our tenancy assumptions for Bharti Infratel with an accelerated growth over FY15-18.”

The analyst expects Bharti Infratel, which had about 1,75, 000 tenancies at the end of the September quarter, to get about 50,000 to 75,000 additional tenancies in the next 4-5 years. “However, Bharti Infratel could suffer if there is a significant reduction in the number of telecom operators, due to consolidation in the sector,” he cautioned.

Bharti Infratel is also the least leveraged company among telecom tower firms, while some of its competitors are grappling with significant levels of debt on their books. On a net level, Bharti Infratel is a debt-free company and had a cash surplus of R658.20 crore as on September 30, according to Bloomberg data.

In comparison, its competitor, GTL Infrastructure (which has 30,000 towers) has been forced to go for corporate debt restructuring with a net debt of nearly R5,000 crore as on September 30, which it is unable to service. Unlike Bharti Infratel and Indus Towers, the Manoj Tirodkar-led company wasn’t backed by promoters that had their own telecom operations. GTL Infra’s expansion plans, which were synchronised with the anticipated ramp up of services by new entrants like Aircel, went awry when the Supreme Court cancelled the licences of several telcos, in connection with alleged wrongdoing in allocation of 2G licences by the erstwhile government. The country’s second largest telecom tower company, Viom, also had a net debt of around R6,500 crore at the  end of  the same quarter.

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