Solo Telecom Tower Companies To Follow Coalition Dharma

The telecom tower business is not for weak-kneed. If you are a solo tower venture, the business is unlikely to take you anywhere unless you are big enough (a la American Tower Corp). The minnows of the Indian tower industry are joining hands to pad them up against other biggies like Bharti Infratel, Reliance Infratel, the Bharti-Vodafone-Idea combine Indus Towers or even Tata’s yet-to-be named tower company.
How do the stand alone tower companies such as Essar Telecom Tower & Infrastructure, GTL, Quipo, Xcel telecom, and TowerVision stack up against them? They do not have a chance individually, so are planning to consolidate their businesses to compete with the biggies, according to a report in The Economic Times.
The Indian telecom sector is the fifth largest and one of the fastest growing in the world - probably just after China. The market is large enough for accomoodating multiple tower companies, but if the company is not large enough then they can miss the market opportunity, a primary reason being the coalition dharma among the smaller firms. Also the consolidation will help them reduce their capex considerably and address power supply issues in rural India, besides bringing in operational efficiencies such as avoiding duplication of costs and help them acquire more land, and so on.
As of now, Indus Towers, the recently-announced joint venture between Bharti, Vodafone and Idea (they own passive sites), has over 72,000 towers, Bharti Infratel has over 21,000 sites while Reliance’s RTIL is slated to end this fiscal with 40,000 towers. In comparison, the stand-alone tower firms have less than 5,000 towers.
What is interesting is that most of these stand alone telcos have an investment from the private equity investors, Xcel Telecom (which has already obtained a commitment of about $500 million from US-based investment fund Q), Spice Communications (sold its tower arm to Srei Infrastructure (which owns stand-alone tower company Quipo for Rs 500 crore), Tower Vision (Morgan Stanley picked up a stake), and it remains to be seen how they structure the deal.

Comments

Popular posts from this blog

Business schools or Hogwarts school of money?

What is Nestlé Waters Hiding?

The God Delusion of Arvind Kejriwal