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Teledata

Tele Data

Mobile Subscribers Yearwise comparision

Bharti Infratel: On an upward trajectory

July 17, 2017

 

The increasing demand for data services is rapidly transforming the Indian telecom landscape. While 3G and 4G service roll-outs by operators have been fundamental to high speed data delivery, telecom infrastructure providers, particularly tower companies, have also offered relevant support to ensure seamless and high quality access to users.

Moreover, the massive telecom infrastructural support required for the successful implementation of the government’s Digital India initiative and the Smart Cities Mission will open up new growth avenues for the telecom tower industry. Bharti Infratel, the mobile tower arm of Bharti Airtel Limited and one of the leading telecom infrastructure players in the country, has ambitious plans to tap these opportunities.

tele.net takes a look at the company’s performance, plans and strategies…

Strong operational and financial wicket

Bharti Infratel had a total footprint of 90,646 towers as of March 2017, which includes 42 per cent equity interest in Indus Towers. Further, the number of co-locations stood at 210,606, an addition of 15,571 during 2016-17, the highest in the past five years. This growth was partly driven by the entry of Reliance Jio Infocomm Limited (RJIL). Meanwhile, the stand-alone average sharing factor stood at 2.26, amongst the highest in the industry.

This robust operational performance was complemented by sound financial numbers. During the year ended March 2017, the company’s revenues stood at Rs 134.24 million, a growth of 9 per cent over 2015-16. In addition, Bharti Infratel reported a double-digit growth of 22 per cent in its net profit, from Rs 22.47 billion during the year ended March 2016 to Rs 27.47 billion during the year ended March 2017. Its earnings before interest, taxes, depreciation and amortisation margin stood at 44.3 per cent.

Change in shareholding

The foreign institutional ownership touched an all-time high of 34.34 per cent as of March 31, 2017, as compared to a mere 8.65 per cent at the time the company issued its initial public offering in December 2012. This was owing to Bharti Airtel’s sale of its 10.3 per cent stake to a consortium of foreign investors including private equity firm KKR and the Canada Pension Plan Investment Board for Rs 61.94 billion.

Considered one of the biggest financial transactions involving the stake sale by any operator in its tower arm, the deal will help Bharti Airtel create a war chest of funds to survive the growing competition in the sector. The entry of the new player had an adverse impact on the incumbents’ earnings, which have declined over the past two quarters.

Meanwhile, Bharti Airtel sold an 11.32 per cent stake in Bharti Infratel to its wholly owned subsidiary, Nettle Infrastructure Investments Limited, for Rs 68.06 billion. Following the closure of the transaction, Bharti Airtel’s equity holding in Bharti Infratel stands at 50.33 per cent, while that of Nettle Infrastructure stands at 11.32 per cent.

Exploring new growth avenues

Bharti Infratel has been exploring new opportunities beyond its traditional tower building and leasing business model. During 2016-17, a Bharti Infratel-led consortium was selected as the successful bidder for setting up intelligent street poles under the Smart Cities project in Bhopal, Madhya Pradesh. To this end, the company has partnered with Ericsson and will reportedly deploy 400 smart poles equipped with environment sensors, electric vehicle charging points, surveillance cameras, digital signage system and Wi-Fi access points in the city. These smart poles will be backed by a 200-km long optic fibre network, which will be deployed by Bharti Infratel.

According to the tower company, the project presents a unique opportunity to foray into the small cell space and experiment with fibre as a monetisation model. The Smart Cities projects are a long-term game. Given that the industry would eventually shift to 5G technology, an early foray into the small cell and fibre space will be helpful. Bharti Infratel also  plans to participate in bids for other Smart Cities projects.

Key issues and challenges

At the industry level, the roll-out of towers and other telecom infrastructure remains a challenge due to issues related to approvals, procedures and levies that vary from one location to another. While the government is trying to resolve these problems, as is evident from the recent right-of-way policy, more efforts are required to ensure that the benefits of the policy are realised. The state governments too need to incorporate these guidelines into their respective policies.

Further, a large amount of capital is required for building infrastructure. Although the IP-1 model has been successful in meeting the capex requirement for building infrastructure, its scope is limited to towers. Through this model, the tower industry has managed to attract investments of over Rs 1.25 trillion and has reduced both rental and energy costs by sharing vital infrastructure on a non-discriminatory basis. This successful model can be replicated for fibre, Wi-Fi and in-building solutions as well.

Increasing energy costs and managing energy consumption at the sites has always been a major concern for the tower industry. To this end, Bharti Infratel has undertaken  various energy management initiatives. The company has institutionalised the Green Towers P7 programme, aimed at minimising the dependence on diesel consumption and reducing the carbon footprint. The programme promotes the energy efficiency of tower infrastructure equipment, usage of renewable energy resources, and the reduction of load on tower infrastructure equipment. It was initially based on seven innovative clean energy technologies. However, the company has now implemented more than 15 technologies under the programme.

Bharti Infratel has also adopted solar-powered solutions, which help in reducing emissions from diesel generator sets, thereby contributing to energy security. As of March 31, 2017, around 3,000 tower sites of the company are solar powered on a consolidated basis. In addition, the company is working towards scaling up solar installations across its network. Bharti Infratel is also partnering with renewable energy service companies to help power its telecom towers using renewable energy and ensure community power development in rural areas. Further, the company has adopted integrated power management solutions and plug-and-play cabinets as a part of the standard configuration for the deployment of new towers. This would ensure the effective utilisation of grid power supply to these towers. Besides, it has implemented hybrid battery bank solutions in its towers across the country. Bharti Infratel has also undertaken a comprehensive programme to ensure zero diesel consumption at its tower sites. As a result, the company has over 38,500 green towers across its network.

Conclusion

The telecom infrastructure industry is emerging as the fulcrum of growth in the sector owing to an explosion in data-based services. The year 2016-17, in particular, was an exciting year for the industry, as data traffic grew five times after the entry of the new player and the price war that followed. Data, unlike voice, is not limited by the users’ capacity to talk and thus, there is no cap on the minutes of usage. Data uptake can, in fact, grow ten times on a per-user basis given the right set of applications.

Going forward, operators will continue to be aggressive with their 4G roll-outs. Bharti Infratel, in significant tower footprint and client base, is counting strongly on this growth. Indus and Bharti Infratel together reportedly account for about 40 per cent of the country’s tower footprint and close to 50 per cent of its tenancy footprint. It would be only logical for any operator that wants to compete with the incumbent to leverage Bharti Infratel’s infrastructural strength. The company is currently working closely with all leading operators in the industry to analyse the demand presented by 3G, 4G and the upcoming 5G technology, and provide them with the most optimal solutions.

 
 

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