Singapore, March 29 (IANS) Indian telecom tower companies are likely to see about 8-10 percent growth over the next one to two years as they look to sell the towers to fund capital expenditure and reduce debt, global rating agency Moody’s said on Tuesday.
“We expect continued growth in Indian markets as mobile operators, building and strengthening their third and fourth-generation (3G and 4G) footprints, will seek to lease tower space and sell more of their own towers. In this context, we expect overall year-on-year revenue growth of about 8-10 percent for tower operators in India during the next one to two years,” said Moody’s assistant vice president Nidhi Dhruv.
The Moody’s report on Indian and Indonesian tower companies titled “Revenue Growth, Consolidation Will Accelerate as Mobile Operators Sell Towers” said mergers and acquisitions and consolidation are likely in Indian markets during the next two to three years.
“Mobile operators are looking to sell their towers and use the proceeds to fund capex and reduce debt, because — for them — there is a limited strategic benefit to owning towers versus leasing them. Purchasing these towers will help independent operators achieve scale and a competitive edge through expansion of their geographic footprints,” said Dhruv.
In contrast to Indonesian companies, Indian tower companies have stronger operating metrics and balance sheets but lower profitability.
“Indian companies also have higher tenancy ratios, but their reported EBITDA (earnings before interest, taxes and depreciation) margins are lower owing to higher fuel costs and the associated accounting, as well as lower tower rental rates,” said Maisam Hasnain, associate analyst at Moody’s.
According to Moody’s, Indian tower companies have significantly larger scale, when compared to their Indonesian counterparts. India, which has a much larger population and number of mobile subscribers, has more than five times the number of towers in Indonesia, it said.
Also, India has a more supportive regulatory framework for investing in tower companies. India allows up to 100 percent foreign ownership of tower companies, but regulators have proposed reducing this to 74 percent, it said.
The approval process for the deployment of new towers is complex and time-consuming in both countries, the report added.