Consolidation in India’s telecoms sector is taking a heavy toll on tower companies in the country, which have seen co-locations drop sharply and revenue plummet, even as new towers are added, results from three tower companies showed.
The mobile market will soon have just five players (including state-run BSNL and MSNL which are both small, together representing less than 10 per cent of connections), down from ten about a year ago. Fewer players of course means fewer tenants at each site.
Analyst company Crisil estimates rentals per tower in India will decrease by between 7 per cent and 9 per cent in fiscal 2019 (ending 30 March). The company told The Economic Times operating margins of the tower sector are expected to fall 4.5 percentage points in fiscal 2019 and 3 points in fiscal 2020.
Bharti Infratel’s calendar Q3 numbers demonstrate the extent of the decline: while the number of towers inched up 1.7 per cent year-on-year to 39,950, co-locations dropped 17.2 per cent to about 78,000. The sharing factor per site fell to 1.96 at end-September from 2.41 a year earlier. The sharing revenue per tower declined 5.2 per cent each month to INR82,621 ($1,177) at end-September. The company’s net profit in Q3 fell 5.2 per cent to INR6 billion.
Akhil Gupta, chairman of Bharti Infratel, said in its earning statement with the mergers complete, “the uncertainties in this respect are broadly addressed”, noting the country’s telecoms industry is now embarking on the next phase of rollouts.
He added: “We remain confident of India’s long-term growth potential for telecoms sector driven by rising data demand…This would necessitate rapid network rollouts.”
More pain ahead
The country’s largest tower company, Indus Towers – a venture between Bharti Airtel, Vodafone India and Idea Cellular (now Vodafone Idea) – was hit even harder in Q3, with co-locations down 23.3 per cent year-on-year to 229,960. The sharing factor dropped to 1.84 from 2.43, and revenue per tower fell 9.4 per cent to INR72,477. It added just 1,160 towers from the previous year to end September with 124,230.
And the tower sector hasn’t yet felt the full impact of the Vodafone Idea merger, which closed in late August. The company recently said it is targeting full integration of Vodafone India and Idea Cellular in fiscal 2021 (ending 31 March).
American Tower Corp (ATC), with 74,600 towers in India, said in its Q3 earnings release its operational and financial results were impacted by churn driven by carrier consolidation and expects churn to “occur at varying rates over the next several years”. The loss of Tata Teleservice, which was acquired with Bharti Airtel, reduced monthly tenant billings by about $10 million.
But like Bharti Infratel, ATC is bullish in the longer term about the future and estimates more than 1 million cell site leases to be needed for 4G coverage and capacity, up from a baseline of 600,000 to 700,000 after the most recent consolidation.