According to ICRA, telecom tower industry has witnessed a net tenancy loss of around 100,000 tenancies with tenancy ratio declining to 1.37 times as on December 31, 2019, from 1.78 times as on March 31, 2017. This was primarily due to the financial pressures, impact of recent adjusted gross revenue (AGR) verdict by the Supreme Court (SC), and exits of players following consolidation in the telecom market.
The tenancy losses have been higher on a gross basis. However, the impact was moderated by network rollout primarily by Reliance Jio and Bharti Airtel. Overall, the industry tenancies fell to around 740,000 as of December 31, 2019, from its peak of around 840,000 on March 2017. The towers increased to around 540,000 from around 470,000 over the same period resulting in a decline in industry tenancy ratio to 1.37 times. In this regard, ICRA highlighted that the temperance in the overall tenancy ratio has been on account of the sizeable single-tenant captive sites for towers of Bharat Sanchar Nigam Limited (BSNL) and Reliance Jio (now owned by Brookfield).
Bharti Infratel, American Tower Corporation, Indus Towers and GTL Infrastructure are some of the top infrastructure providers in the country that are impacted on the back of increased financial pressures on telcos, which have also rationalised their network spend.
Further, ICRA added that the telecom service provider industry has been witnessing a turbulent phase, with intense competition and pricing pressures forcing the exit of some telecom operators along with consolidation resulting in the reduction in a number of players. This impacted the telecom tower industry in the form of sizeable tenancy losses. Further, the current AGR crisis has resulted in the weakening of the credit profile of some telcos.
As per the credit rating agency, rising data demand, the rollout of new technologies and newer applications point to the need for greater network expansion by the telecom industry in the future and thus additional tenancies for towers. ICRA estimates that industry would add around 120,000 tenancies by financial year (FY) 2023 driving the tenancy ratio to around 1.45 times as on March 31, 2023, from 1.37 times as on December 31, 2019.
The tower industry, according to the rating agency, is also witnessing greater fiberisation which is relevant for newer technologies such as 5G to evolve.