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BL Research Bureau

Spice Communications’ sale of 875 of its telecom towers to a private tower operating company, believed to be Quipo, should help bring in a one-time cash flow for the company.

The exact consideration is unknown, as is the structuring of this sale. But such transactions between a telecom operator and specialist tower operating company are usually on a ‘sale and lease back’ model.

If this is the case, the telecom operator will continue to have access to the towers, even after the sale, through a leasing arrangement.

Such a deal will envisage periodic payments to the tower company, which is decided on mutual agreement. The buyer would also benefit from depreciation that can be claimed from the asset transfer.

Spice also intends to raise a total of $810 million in debt from HSBC Bank and China Development Bank for investments in network expansion.

Incidentally, the company’s IPO was predominantly to repay huge debts that it had incurred and it has part-repaid this debt.

The company is yet to turn profitable. Fresh debt may create uncertainty on interest costs.

The company’s realisations (ARPU) has also been steadily decreasing. With new circle expansion pending regulatory approval, Spice may for now, have to depend on existing circles for growth. But here too, subscriber additions have not been very positive.

The company has been adding about lakh subscribers a month in Punjab and Karnataka circles put together, which is among the lowest for these two circles.

The stock’s appreciation may be explained largely by speculation about a stake sale by promoters in January and the sale of its towers, rather than by any strong change in business fundamentals.

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