ICRA Expects Towers Merging With One Another To Remain Competitive

By February 18th, 2011 AT 3:01 PM

ICRA Expects Towers Merging With One Another To Remain CompetitiveIn the backdrop of Indian telecom sector’s phenomenal growth story, ICRA Ltd, expects that telecom tower industry in India will get consolidated with the smaller players either getting acquired by the larger ones or merging with one another to remain competitive.

However, the pace of consolidation would depend on the prevailing market conditions; pace of infrastructure rollout by the telcos, especially for 3G and BWA; and the financial flexibility of the larger tower companies, ICRA said.

India has witnessed significant growth in subscriber base over the last decade, with increasing network coverage and a competition-induced decline in tariffs playing facilitators.

The growth story and the potential have also served to attract newer players in the industry, with the result that the intensity of competition has kept increasing, forcing the telecom operators (telcos) to look for cost-cutting measures.

One such measure has been the hive-off of telecom tower related operations into separate companies to allow for greater operating efficiencies and tower sharing.

In ICRA’s view, telecom tower companies with a relatively large portfolio of towers offer certain clear advantages to telcos, including rapid rollout over a large area, and tenancy driven discounts.Further, large tower companies can access capital markets better to fund growth. These advantages make it somewhat difficult for the smaller tower companies to grow, thereby paving the path for consolidation in the industry.

So far, the telecom tower industry has witnessed some consolidation, including, among others, Quippo Telecom Infrastructure’s acquisition of Wireless Tata Tele Info Services, and Global Telecom Infrastructure’s acquisition of the tower assets of Aircel Cellular.

Despite the consolidation witnessed in the recent past, the telecom tower industry in India continues to be highly fragmented. Going forward, ICRA expects the trend of consolidation to continue and gain pace.The attractiveness of the telecom tower industry, given the aggressive network rollout plans of the telcos, has led to the entry of several companies in the fray.

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