Indus Towers Q1 FY24 Performance was Decent Owing to Tenancy Addition: ICICI Securities

The high tenancy addition for Indus Towers is unlikely to sustain in the medium term. Bharti Airtel’s rural 4G coverage will be completed soon, and over the next 12 months, the 5G rollout would largely come as loading. Both factors are likely to impact the tenancy addition for Indus Towers.

Highlights

  • Indus Towers, a leading telecom infrastructure provider in India, saw a decent Q1 FY24.
  • The company saw an accelerated tenancy addition with a net add of 5,048 despite witnessing 518 exits.
  • There were no provisions made that affected the EBITDA (earnings before interest tax depreciation and amortisation).

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Indus Towers

Indus Towers, a leading telecom infrastructure provider in India, saw a decent Q1 FY24. The company saw an accelerated tenancy addition with a net add of 5,048 despite witnessing 518 exits. Further, there were no provisions made that affected the EBITDA (earnings before interest tax depreciation and amortisation).




According to a fresh ICICI Securities report, the high tenancy addition for Indus Towers is unlikely to sustain in the medium term. Bharti Airtel’s rural 4G coverage will be completed soon, and over the next 12 months, the 5G rollout would largely come as loading. Both factors are likely to impact the tenancy addition for Indus Towers.

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It is also worth noting that the tenancy addition for Indus Towers was lower than tower growth due to the exits. The report also highlighted the growing number of single-tenancy towers.

In terms of revenues, Indus Towers reported a growth in rental revenues (2.7% YoY/ 2% QoQ) to Rs 43.3 billion in Q1 FY24. Tenancy addition and single tenancy tower growth are expected to slow down post- Bharti Airtel completes rural 4G coverage, which is not far from here.

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Telcos are also expected to decelerate the rollout of 5G from FY25 onwards, said ICICI Securities. The report added that the 5G rollout accelerated to 12000 BTS in June 2023 from 5000 BTS in March 2023. It is estimated that 5G rollout has been done in 250k-275k sites covering 3500 cities/towns. However, Reliance Jio's website says that they have covered 6,258 towns/cities with their 5G.

The report mentioned that out of the total sites where 5G has been rolled out, 1/3 rd of them have been done by Indus Towers. In the next two to three years, Indus believes that 5G will be rolled out on all the towers, like 4G at the moment. But there are still risks that remain when the business of Indus Towers is concerned.

The report mentioned Vodafone Idea as one of the key risks. VIL (Vodafone Idea Limited) still has pending dues with Indus Towers, and the telco’s business has now been questioned a lot, putting a major remark over its status as a ‘going concern’.

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