Bharti Infratel Riding Reliance Jio Network Expansion

Bharti Infratel TowersBharti Infratel [Telecom Tower & Infrastructure Company] together with Indus towers, has been gaining market share. Bulk of tenancy additions during the quarter came from data networks (by definition, this excludes the 3G loading sites which do not contribute to the tenancy number). This suggests that a decent amount of new 3G/4G site demand is coming up already (as against the expectation of 3G loading continuing on existing 2G locations continuing). Reliance Jio contributed significantly to qoq surge in additions reported by Bharti Infratel standalone [agreement with Indus signed end of 2Q]. However, strong 2Q volume growth did not translate into commensurate rev growth given late quarter tenancy pick up.

Bharti Infratel Fiber Backhaul
Mgmt said that Under its current IP-1 license, BIL / Indus are allowed to deploy only dark fiber, but to run active fiber business, it would have to come under current licensing regime that would result in 8% license fee payment to government. The differences between tower business and fibre business in terms of the pace of technological change, duration of contracts and pricing, that have forced the company to deliberate more on fibre business opportunity. Mgmt. acknowledged the need for fibre in the country given expected data growth, and therefore it would be looking at this opportunity much more closely in future.

Inorganic Growth Strategy of Bharti Infratel
Management reiterated that company is not looking at Africa to grow inorganically, and is more interested in Bangladesh, Sri Lanka and India (15K towers owned by Voda/Idea in the seven BIL circles). Company is trying to address the regulatory issues in a possible acquisition of Airtel towers in Bangladesh and Sri Lanka. With regard to India, mgmt. feels BIL valuations have gone up significantly over the last year, suggesting that lack of agreement on valuations is among the key hurdles in buying out towers of Voda and Idea. Further, doing a deal might not be a priority for all parties concerned, given lack of urgency to close out such a transaction.

Management indicated that due to regulatory reasons, share premium account can’t be utilized to pay special dividends, which leaves out the possibility of share buybacks in the medium term

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