Bharti Infratel on expectations of accelerated network roll out on back of robust data growth and recent spectrum investments by telcos, mgmt. expects FY16 tower addition and capex to be greater than FY15 number of 2,524 and Rs20.8bn, respectively.
Management remains upbeat on growth potential for tower companies led by expected acceleration in data networks. While we agree with the management on the pace of rollouts, we expect a bulk of the incremental 3G/4G tenancies for the next few years to come in the form of loading.
Data adoption driving data capex driving data tenancies driving accelerated revenue growth for tower companies is a natural and appealing narrative, we appreciate. The extent of revenue growth kicker from data tenancies (of incumbents; R-Jio tenancies will be a growth kicker as their tenancies are all fresh; our focus is on incumbent operators here) will depend on what proportion of the data tenancies from incumbents are in the form of loading and what proportion are fresh ? fresh tenancies (on existing towers) are a lot more value-accretive than loading tenancies
Company mentioned that no contracts are coming for renewal at least for next 4 years. More importantly, they are not seeing any pricing pressure in the market (tower capacity is not a fungible one) and believe that their rental rates are comparable and competitive w.r.t. competitors.
