American Tower Corporation (ATC), one of the leading infrastructure providers engaged in the telecom space is expecting the telecom operators in India to hike tariff “some point in the next quarter or so.” Rod Smith, CFO and treasurer of ATC, highlighted in the UBS Global TMT Conference Call on December 7, 2020, that the upcoming tariff hikes would “provide additional cash flow” to the operators in India. ATC is said to own and operate 74,569 tower sites in India as of September 30, 2020, with the country accounting for 15.4% of the total property revenue during its third quarter.
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Upcoming Tariff Hikes to Aid Vodafone Idea
Airtel, Vodafone Idea (Vi) and Reliance Jio are said to be major telecom operators to be engaged with ATC in India.
“We expect that they’ll do that [tariff hikes] again here in some point in the next quarter or so,” Smith said in the UBS Global TMT Conference Call. “And that would provide additional cash flow to all of the wireless businesses and importantly into Voda-Idea, so that would be a constructive step forward.”
Smith said that the Indian telecom market was “really challenging” over the past couple of years due to multiple reasons including the consolidation of wireless carriers. The ATC CFO said that the consolidation happened “quicker” than what the company anticipated but that from a “structure standpoint” the Indian telecom market now “looks very much like the US.”
Similar to “other developed markets around the world,” Smith said that the Indian telecom market now has “three to four primary wireless carriers” with nationwide networks catering to the Indian users.
“The other headwind is the issue of the adjusted gross revenues definition that was part of a Supreme Court case and negatively affected some of the wireless carriers, although not all of them, primarily of the existing carries, it’s Vodafone,and then to a lesser extent, Airtel and it doesn’t really affect RJio too much,” Smith said in the UBS Global TMT Conference Call.
Indian Telecom Market to Re-Emerge As Fastest Growing Market
The CFO of ATC said that India was one of the “fastest growing markets” for ATC and that the country will “return to that” state “once we get through some of these headwinds.”
“The primary issue now is the adjusted gross revenues definition and how that may affect Vodafone-Idea over in India,” Smith said in the UBS Global TMT Conference Call. “So, that’s really what we are looking at, at the moment. And we’re looking for a couple of things from Voda in terms of the pathway forward. Certainly, the timing of these things will be important.”
With the operators receiving a 10-year timeframe to make the payments related to the AGR case, Smith said that the judgement provides a “much longer runway” for Vodafone Idea to plan its cash flows and “make arrangements to make those payments.” Further, Smith highlighted that Vodafone Idea is in the market looking to raise equity and that ATC is hoping “something constructive there happens at some point in the next quarter or so.”
“We’re watching all those potential activities and certainly rooting for Voda to have a lot of success in those arenas in raising equity and raising prices and continuing to work with the government,” Smith said in the UBS Global TMT Conference Call. “We do see a very supportive executive branch in the India government. They’re very supportive of telecommunications in general, and they have a strategic objective to digitize the Indian economy.”
Smith said that India offers a “great opportunity” and that the company believes “there’s a lot of potential, a lot of upside” in the Indian market.
“It’s a market that has 1.3 billion people in it,” Smith said in the UBS Global TMT Conference Call. “It primarily relies on 2G and 3G networks, a little bit of 4G network available through the RJio network, but primarily 2G and 3G. So, a significant amount of investment is required in order to bring those networks up to 4G capability and improve the quality over time. So, that is really exciting.”
Smith highlighted that Vodafone Idea represents 5% of ATC’s total company property revenue and 40% of India property revenue. However, Smith said that Bharti Airtel and Reliance Jio are currently driving the business activity in India.
“We’re going to build about 4,000 new towers in India this year,” Smith said in the UBS Global TMT Conference Call. “The majority of those towers will be built for Airtel. There remains a lot of capital being deployed in India, building out these networks to get them where they need to be in order to handle the 4G networks that will be coming in the future.”
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