The peak (time/location) characteristics of mobile data could restrict the upside from a potential data demand explosion for BHIN, in our view. Need for data capacity ramp-up to keep up with demand tends to be concentrated around select ‘hotspots’ and macro cell architecture has its limitations as far as concentrated data capacity expansion is concerned.
Negative impact of a potential Idea-Vodafone merger looms and the tail risk of a ‘race to the bottom’ in the wireless industry impacting BHIN could be material in terms of impact.
We see a rather simplistic positive narrative building up for BHIN – Jio-led steep correction in data prices to drive an explosion in data demand, which would in turn drive significant upside in tenancy potential for BHIN. We call this narrative simplistic because it fails to appreciate the nuances of data demand.
Capacity of a data network can be enhanced in multiple ways –increasing macro site density, deploying additional spectrum, wi-fi offloading and introducing small cells and in-building solutions (IBS) into the mix. Of these, only the first one, a denser macro site network, benefits BHIN (and other towercos) in the form of higher tenancies. Tower companies in India largely do not operate in the small cell or IBS arena.