The recent cancellation of 2G licences has hit several telecom tower companies hard.
Tower companies, which were betting on the roll outs by new players such as Etisalat and STel, are hit with most of these players shutting down operations.
The Mumbai-based GTL Infra, for instance, is expecting a 6 per cent impact on its revenues. Reliance Infratel, which has been in talks for selling stake to private equity, is reworking its valuation.
“The consolidated monthly revenue will be impacted by about Rs 7 crore (6 per cent of the revenue),” Mr Ramakrishna Bellam of GTL Infrastructure told
roll-out of towers
The pace of roll-out of cellular towers has already declined significantly to just 8,000 a year compared with 14,000 in the previous financial year.
According to data available with the Department of Telecom, over 40,000 new towers were added in 2009-10. A growth of only 2.3 per cent is expected by the end of the current year from 3.47 lakh towers on March 2011 to 3.55 lakh towers. This, after a 60 per cent year-on-year growth in 2008. The exit of some of the new 2G players will further slow down the roll out.
Mr Umang Das, President, Viom Networks, said, “The challenge posed by cancellation of 122 licences can be tackled with a quick decision making and implementation driven by market-based spectrum allocation. We believe that this in the long run will help in providing impetus to the growth of the industry.”
Market analysts, however, reckon that the sector would see a turnaround after the 2G auctions.
Mr Akshay Grove, Associate Vice-President, Telecom practice of Ernst &Young, said, “While licences have been cancelled, many of them are likely to bid for the licences and renew them.”
“Impact currently is not too bad as companies that have declared that they want to exit, Etisalat for instance, had very little own equipment to materially impact tower companies. But if larger companies like Idea or Uninor end up not winning licences in the auction, there could be a material impact,” he said.
Mr Alok Shende, Analyst at Ascentius Consulting, said that since companies such as MTS are keen on investing in the Indian market, the business will continue.
Viability Gap Funding
“The operators that are going to rebid already have a deal with their tower partner, so it will be as good as before,” he added.
Tower companies are also encouraged by the Viability Gap Funding announced in the Budget and inclusion of tower infrastructure industry in the infrastructure categorisation.
“The announcement will propel investment in difficult terrain and far-flung areas of India that need connectivity,” said Mr Das.