Indus Towers Positive About Vodafone Idea Survival

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The Indian telecom market is currently "witnessing" almost 40% year-on-year (YoY) growth in data volumes, said Bimal Dayal, managing director of Indus Towers in the fourth-quarter earnings call on Friday. According to Dayal, the surge in data volumes is “fairly rapid” and will “continue to drive growth” for all the industry players. Indus Towers on Thursday reported its fourth-quarter results for the period ended March 31, 2021, with the company recording Rs 1364 crores as consolidated profit after tax, translating to a 38% YoY increase.

Data Volume Continues to Grow in India

The company engaged in the passive telecom infrastructure space reported Rs 6492 crores as consolidated revenues for the quarter ended March 31, 2021, translating to a 3% YoY increase. It has to be noted that the results reported by the company on Thursday was its first full quarter of operations following its merger with Bharti Infratel effective November 19, 2020.

In its quarterly report, the company highlighted that it has 179,225 towers for the period ended March 31, 2021, as compared to 175,510 towers in the previous quarter. Indus Towers highlighted that its towers portfolio increased by 3715 quarter-on-quarter (QoQ) and by 10,223 YoY.

“I think data volume continues to grow constantly and this actually drives and makes addition of additional sites an ongoing requirement,” Dayal said in the earnings call on Friday.

Indus Towers in its quarterly report also highlighted that the net co-locations, sites where a tower company installs telecom antennas of multiple carriers on a single tower, increased by 4128 during the quarter. However, ICICI Securities in a report on Friday said that it is “concerned about the sustainability of strong tenancy” additions due to the “huge spectrums” purchased by Bharti Airtel and Reliance Jio.

“This growth must have come from Bharti Airtel’s continued network rollout and has been likely driven by both coverage and capacity requirements, in our view,” ICICI Securities said in its report. “Our concern is on rising single tenancies, which puts pressure on margins. Also, Bharti and RJio have bought huge spectrums in the 2021 auctions, which may impact capacity-led tenancy demand.”

Dayal in the earnings call noted that the spectrum acquired by the operators in March 2021, auctions will be used equally for coverage and capacity and that historically hasn’t had an impact on tower demand.

Vodafone Idea Shutdown May Significantly Impact Indus Towers: Analysts

Crucially, Dayal said that the telecom market in India will “certainly” be a three-player market with the managing director of Indus Towers “aware” of the struggles Vodafone Idea is “facing currently.”

“Chronology tells us that where they (Vodafone Idea) are and where they were maybe around the last year, I think they have managed to do quite a lot of things and from a tower company perspective, we certainly believe that it would be a three-player market,” Dayal said.

Dolat Capital, a financial firm engaged in trading markets in a report on Friday said that Vodafone Idea (VIL) survivability is a “medium-term risk for Indus.” The firm said that VIL shutdown may “significantly impact the business of Indus.”

“That said, Indus is fairly covered for receivables from VIL for next one year led by advance rentals from VIL on Indus stake sale and security cover from Voda Plc (Vodafone Group),” Dolat Capital said in its report. “In the interim, significant fundraise by VIL and steep tariff increase are inevitable for a three-private player market.”

Motilal Oswal, an Indian firm engaged in financial services, in a report on Saturday said that Vodafone Idea's “long-term business concerns” continues to “remain an overhang” for Indus Towers.

“VIL remains a large client for Indus Towers, and the tower sharing business has limited business case for single tenancy operations,” Motilal Oswal said in its report.

The firm also said that Reliance Jio with its enhanced focus on tower infrastructure “may weaken” the positioning of Indus Towers.

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Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.

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