State-run China Tower, which now owns about 1.6 million towers across the country, lost CNY1.3 billion ($195 million) in Q2 on revenue of CNY13.2 billion but plans to be profitable by the end of the year or early 2017.
Its forecast follows the negotiation of new tower rents and pricing of related assets in July with the country’s three mobile operators, according to a report from a local securities firm.
As major shareholders in the tower company, the three operators (China Mobile, China Telecom and China Unicom) will benefit as China Tower becomes profitable. In the short term they expect tower usage rates to remain high due to the low co-use rate but forecast leasing fees to continue to fall as the tower sharing ratio rises.
Leasing fees can drop 20-40 per cent when a tower is used by two operators and 30-50 per cent when shared by all three, C114.net said. As co-use increases China Mobile, China Unicom and China Telecom reportedly can reduce leasing fees by CNY2.4 billion, CNY1.9 billion and CNY1.8 billion respectively.
The three mobile operators handed over much of their tower assets to China Tower last year. In H1 China Telecom was leasing 550,000 towers, or 55 per cent of its total, from China Tower. China Mobile leases one million towers, or 30 per cent of its total. China Telecom paid an estimated CNY15.1 billion in co-use fees in H1, while China Unicom paid CNY7.7 billion.
Unlisted China Tower, with a debt of CNY150 billion, is valued by the securities firm at about $47 billion. It is targeting being listed next year, but analysts say it must raise its operational efficiency.
According to C114.net, China Tower controls 13 times more towers than the world’s second largest tower firm Indus.