Bharti Infratel, Airtel’s tower unit, may suffer decline in revenue and operating income during FY18-20 owing to the tenancy cancellations by the Vodafone India-Idea cellular combined entity, an ET report stated.
Estimates by Swiss brokerage UBS over tower unit of Bharti Airtel reveals “a 10-12% decline in revenue and 15-18% fall in operating income or ‘Ebitda’ during FY18-20 to reflect the latest tenancy cancellations by Vodafone Idea”.
Bharti Infratel is likely to bear revenue losses of ₹60-65 crores per month due to recent notice issued by Vodafone-Idea to close down 27,447 tenancies, effective September 1. Merrill Lynch, a division of Bank of America anticipated more tenancy cancellations notices then actually received by the telecom tower company as Vodafone earlier mentioned “73k overlapping sites”.
A news report by ET says, “As Vodafone Idea has just started networks integration, we do not rule out the possibility of further tenancy cancellations in the next 12 months.”
UBS says, It is not definite how Bharti Infratel would redeem the penalty incurred by early departure of Vodafone Idea. It quoted, “We estimate total exit penalties could be Rs 1,400-1,500 crore, but conservatively assume Bharti Infratel will collect only 25% of the sum, with the balance adjusted against future revenues.” Although, Bharti Infratel in a regulatory filing has mentioned its approach to deal with fall in EBITDA by incremental revenues and exit charges. It is expecting a net reduction through probable rollouts by operating in the coming time.
Edelweiss believes that there are limited opportunities for Bharti Infratel given Reliance Jio Infocomm has its own towers and Vodafone is on the verge of consolidation. Infratel said, “needs to deploy capital in related businesses such as fiber optic networks and smart cities to optimise returns for equity shareholders”.
Adding to this, Edelweiss said,”Fiber sharing would have been a natural extension of the tower sharing business, especially when telcos are planning large home broadband ramp-ups, but such upsides may be limited for the future Indus-Bharti Infratel merged entity as Bharti has moved its fiber assets to its subsidiary, Telesonic Networks.”
As per Merrill Lynch, Indus-Infratel is the best solution to cater the rising needs of 70000 crore subscribers accessing 10 Gb of data via internet every month.
Telecom industry analysts expects Indus-Bharti Infratel, a merge tower entity to rise an independent company with similarities from both Voda-Idea and Bharti Airtel highlighting the mega-collaboration of the tower companies.
Tower Airtel