The Hindu Business Line : Bharti’s tower business draws more suitors

Mobile phone operators are getting a rousing reception to stake sales in their telecom tower infrastructure business. PE giant - Kohlberg Kravis Roberts (KKR) is the latest to invest $250 million in Bharti Infratel, the telecom tower arm of Bharti Airtel; this follows a stake sale valued at $1 billion to a clutch of international investors in this company in December last year.

Revenue stream

The valuation for this tower company has been pegged between $10 -12.5 billion; but the actual valuation for this company will be decided based on Bharti Infratel’s actual operating performance in 2008-09.

Multi-tenancy in tower sites helps in saving the operator capital expenditure and operating expenses, due to sharing of infrastructure and maintenance costs.

The valuation will be a function of factors such as tenancy levels, rentals, split of ground-based towers to roof-top towers and circle category.

The potential revenue stream from multiple-tenancy in tower sites seems to be prompting telecom companies to bet big on this.

Reliance Communications had also sold a five per cent stake in its tower business for Rs 1,400 crore last year and is slated to come out with an IPO for the same soon.

The trend of stake sales in tower operations — the formation of Indus towers jointly by Bharti Airtel, Vodafone Essar and Idea Cellular is a case in point — suggests that this segment is clearly moving from being a captive one, towards a more organised and multi-tenancy mode for mobile phone operators.

Ideal Levels

With the subscriber base seeing six-seven million additions every month, operators face a constant need for additional cell sites.

However, for multi-tenancy on such towers to reach ideal levels (>2 per tower site) will take time. Cell sites in rural areas may hold more promise in the near future.

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