What is the valuation per telecom tower of the deal between Tata Teleservices Ltd and Quippo Telecom Infrastructure Ltd?
Quippo Telecom has paid Rs2,400 crore for a 49% stake in the business. It already has 5,000 towers, while Tata Teleservices brings 13,000 towers to the deal. Quippo is, therefore, paying Rs2,400 crore for a 49% stake in 8,000 towers. That works out to a bit more than Rs61 lakh per tower.
Gaurav Dua, head of research at Mumbai-based brokerage Sharekhan Ltd, points out that earlier tower deals involving Bharti Infratel Ltd and Reliance Communications Ltd had valuations of between Rs1.6 crore and Rs2 crore per tower. The deal shows how far valuations have fallen in the business.
For Tata Teleservices, the deal will bring in the money for its expansion programme. With the new telecom companies such as Datacom Solutions Ltd, Unitech Wireless Ltd and Swan Telecom Pvt. Ltd eager to set up their networks, the telecom tower business should do well.
The introduction of 3G services will also help. Mobile 3G phone services enable high-speed data access allowing users to surf the Internet or download content, including music and video, at speeds faster than those supported by current cellular technologies.
Dua says that although it costs about Rs35–40 lakh to build a new tower, sharing passive infrastructure reduces firms’ capital expenditure costs and time to market.
From the market’s point of view, while analysts have lowered their valuations for the tower business since the days of the Bharti and Reliance Communications deals, the Quippo-Tata Teleservices deal could lead a further fall in tower valuations for all telecom companies.
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