India’s biggest phone services firm by revenues, the state-run Bharat Sanchar Nigam Ltd or BSNL, will form a separate telecom tower company early this year. It plans to lease out almost 40,000 towers to private companies.
BSNL hopes to generate revenues from smaller companies, such as Spice Communications Ltd and Idea Cellular Ltd, that might prefer to share telecom infrastructure as they expand into tier II towns in the country.
India’s mobile firms have been trying to unlock the value of their infrastructure, especially towers, to raise cash for other investments and increase profitability.
“We are going to appoint an independent consultant to help us take that decision, it may be too early to comment anything further on this,” BSNL chairman and managing director Kuldeep Goyal told Mint on Saturday in a telephone interview.
He had earlier told Mint in a November interview that BSNL was examining the issue of forming a separate company for the telecom tower business.
“Making a separate entity, which will manage your infrastructure, makes sense from a point that you can devote better on your core competency. It can be a separate company,” Goyal had said in November. “All other players such as Reliance have got good valuations for their tower companies, so we are considering whether to have a separate company.”
Indeed, Yogesh Kirve, a financial analyst with Mumbai-based Anand Rathi Securities Ltd, says BSNL’s tower business could attract a valuation of almost $10 billion, or Rs39,300 crore.
“The valuation will be good because most of its towers are located in tier II towns and villages—places where many phone firms are now seeking to expand their footprints,” predicts Kirve. “BSNL’s towers will have more tenants, thereby ensuring better occupancy rates.”
BSNL had annual revenues of Rs39,715 crore in fiscal 2007.
Last month, Bharti Infratel Ltd, the telecom tower unit of Bharti Airtel Ltd, India’s biggest mobile firm by subscribers, sold an almost 9% stake for $1 billion to a consortium of investors, led by Singapore’s Temasek Holdings Pte Ltd.
BSNL has around 31,000 GSM towers, and almost 7,500 towers supporting CDMA technology, and has also floated a tender inviting companies for establishing another 6,000 towers across the country. “We will add another 30,000 towers within one year,” claimed a senior BSNL official, who did not wish to be named.
“A CDMA tower can have almost four to six tenants, when compared to a GSM tower that can only accommodate one to two tenants,” added Kirve. GSM stands for global system for mobile communications and CDMA is short for code division multiple access; they are rival technology platforms for offering phone services.
As Indian mobile phone companies expand into rural areas, they are seeking to share available infrastructure for reducing capital expenditure on setting up new telecom towers of their own.
During the past few months, several mobile firms have sold part of their tower businesses to financial investors. On 26 December, Spice sold around 875 telecom towers for Rs600 crore to Quipo Telecom Infrastructure Ltd, an independent tower company.
In August last year, Reliance Communications Ltd, which runs its networks on the CDMA standard, sold about 5% of its towers subsidiary, Reliance Telecom Infrastructure Ltd, to investors for $337.5 million, valuing its 13,000 towers at $7 billion.
And in December, Bharti Infratel, along with Idea Cellular and Vodafone Essar Ltd, formed a joint venture called Indus Towers Ltd with some 70,000 towers (30,000 were Bharti Infratel-owned) being shared by the operators in 16 Indian states.
The Bharti firm and Vodafone Essar own 42% each, with 16% held by Idea.