According to India Ratings and Research (Ind-Ra), any possibility of an exit of Vodafone Idea from the Indian telecommunications sector will have a negative impact on other telecom industry players as well such as tower companies. This is because the telecom industry operates on shared infrastructure basis.

As per Ind-Ra estimates, tower companies’ EBITDA may decline by 9-10 per cent for every 10,000 reductions in tenancies. On the other hand, if tower companies pass on the entire impact to large telcos like Bharti Airtel in the form of higher tower rentals, it will only cause a marginal decline of around 3 per cent on Bharti Airtel’s India EBITDA.

Thus, the risk of having a deep negative impact on cash flows is much higher for a typical tower company than for large telcos, who have the capacity to absorb higher costs.