Moody’s predicts about 8%-10% year-on-year revenue growth for tower operators in India during the next one to two years
The Dollar Business Bureau
Telecommunications tower companies in India are set for a significant growth, largely due to their supportive regulatory framework, foreign direct investment (FDI) policies and a high number of mergers & acquisitions and consolidations expected in the next two-three years, a global research agency said. Moody's Investors Service, in its recent global credit research report titled "Revenue Growth, Consolidation Will Accelerate as Mobile Operators Sell Towers" released on Tuesday, juxtaposed Indian telecom tower companies with those of Indonesia and said the units in the two countries have been the most successful in Asia, and are expected to achieve a significant growth over the years. "We expect continued growth in both markets as mobile operators, building out and strengthening their third-and fourth-generation (3G and 4G) footprints, will seek to lease tower space and sell more of their own towers," says Nidhi Dhruv, Assistant Vice President and Analyst, Moody's. "In this context, we expect overall year-on-year revenue growth of about 8%-10% for tower operators in both countries during the next one to two years," she said. Tower companies in India have larger scale, with substantial number of subscribers. But privately-owned tower operators are less in number due to stringent regulations. "Indian tower companies have stronger operating metrics and balance sheets but lower profitability. Indian companies also have higher tenancy ratios, but their reported EBITDA (Earnings before interest, taxes, depreciation and amortization) margins are lower owing to higher fuel costs and the associated accounting, as well as lower tower rental rates," says Maisam Hasnain, Moody’s. "Mobile operators are looking to sell their towers and use the proceeds to fund capex and reduce debt, because -- for them -- there is a limited strategic benefit to owning towers versus leasing them. Purchasing these towers will help independent operators achieve scale and a competitive edge through expansion of their geographic footprints," adds Dhruv. The rating agency, however, cautioned that some prominent factors, including geographical, operational and regulatory differences will affect their growth rates. For example, the approval process for the establishment of new towers is complex and time-consuming in India, it highlighted. Presently, foreign ownership of tower units in India is 100%, but Indian regulators have proposed reducing it to 74%.
March 29, 2016 | 02:00pm IST