The telecom tower industry is all set for consolidation with some of the bigger players looking for acquisitions. Tower firms such as American Tower Corporation and Viom Networks are scouting for buys as some of the smaller companies are struggling for survival in tough market conditions.
“Recent industry developments and regulations in India have raised questions about the sustainability of independent tower businesses.
“In particular, the exit of some of the newer operators, which were primarily engines of India’s tower growth, is affecting cash flow and debt repayments and could even push some tower companies to the brink of bankruptcy,” said analysts at global consulting firm ATKearney. According to industry sources, American Tower is close to finalising a deal with TowerVision India.
While ATC has over 10,000 towers, TowerVision has around 8,000 towers. Viom, the joint venture tower company of Tata and Srei Infrastructure, is looking to double its tower installation base from the current 40,000 primarily through acquisitions.
Buyers’ market
“The entire telecom sector is set for consolidation. If the number of mobile operators gets reduced to four or five, there cannot be 10 tower companies. This is a buyers’ market,” said the owner of a telecom company looking to exit the space.
This is a far cry from the situation in 2006-2011, when the tower industry saw annual growth rates of over 30 per cent. Sensing this to be a lucrative business, over 50 independent telecom tower companies soon sprung up, most of them with a small portfolio of a few hundred towers. The tower industry started feeling the heat in fiscal 2010-11. It added less than 10,000 towers in the year due to oversupply in urban areas and viability issues in rural areas.
“Cut-throat competition in the telecom wireless segment brought down tariffs and, hence, the profitability of the players.
Also, the stretched balance-sheets on account of the Rs 1-lakh crore 3G-BWA (broadband wireless access) auction payment left little room for telecom service providers to go all out for network expansion,” said a report from CARE Research.
Meanwhile, the tower industry shifted its focus from building more towers to increasing tenancies, as single-tenant towers were not viable and tower sharing was helping augment profitability.
Situation to improve
Market watchers said that the industry fortunes will improve over the next year or two and whoever has the financial muscle to hang on till then will stand to gain.
Industry revenue is projected to grow from Rs 1,36,100 crore (March 2012) to Rs 1,60,900 crore by 2017, according to a report from Analysis Mason.