The telecom tower business has taken the centre stage of the
communications sector in India. And the recent development that has excited
everyone is the Quipo-Spice Telecom alliance.
Expansion plans of the existing operators and the proposed
launch of new players following the resolution of the spectrum issue has thrown
open new opportunities for telecom tower companies, and they are on an expansion–through
organic and inorganic-spree.
Quipo Telecom Infrastructure's buyout of 875 telecom towers of
Spice Telecom-for close to Rs 600 crore-spread over the two states of Punjab
and Karnataka strongly indicates a move for consolidation in the segment.
It is significant that the all-cash deal will be funded through
internal sources. As part of the agreement, the independent tower company, Quipo,
will not only maintain and rent these towers, but also set up new towers to meet
future requirements of Spice Telecom. Spice is actively looking at rolling out
services in other telecom circles.
Following the takeover of towers, the number of towers of Quipo
Telecom has gone up to approximately 4,000. During the 2008-09 fiscal, Quipo
will look at both organic and inorganic expansion. It is earmarking around $1.5
bn-$2 bn for takeovers, and the funding will be through a combination of equity
and debt. However, Quipo's main focus is on the Indian market, where all major
telecom developments are happening currently.
Valuation
The main concern for any company, however, will be valuation of the tower
business. Industry experts feel that valuation is conservative at present. Since
telecom operators are increasing their presence in the tower business,
consolidation is bound to happen.
The deal came at a time when three leading telecom operators-Bharti
Airtel, Vodafone Essar, and Idea Cellular-formed an independent tower company,
Indus Towers, to offer passive infrastructure services to all the operators.
The formation of Indus Towers by the three rivals, a unique
thing in the telecom industry, has toughened the competition. Independent tower
companies are forced to look for operators such as Spice, Aircel, BSNL, and MTNL
for new businesses as cellular operators like Reliance Communications and Tata
Teleservices have their own tower business.
| The main
concern for any company will be valuation of the tower business, which
industry experts feel is conservative at present |
For forming Indus Towers, the three competing companies have
decided to merge their existing passive infrastructure in sixteen telecom
circles-Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Kolkata,
Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu, Chennai, West Bengal, and
Uttar Pradesh (East and West).
The joint venture is expected to assist the operators to lower
operating costs and capital costs. They are expected to become more profitable
as compared to other operators.
Since the new independently managed and operated company, Indus
Towers, which will have 70,000 cell sites across the country, also plans to
undertake tower management of other telecom operators, independent telecom tower
companies are in a tight spot.
The consolidation is good for the industry if they pass a part
of the benefit to consumers and expand in places where there is no telecom
presence.
Baburajan K
baburajank@cybermedia.co.in
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