The Reliance Communications-GTL deal on telecom towers could pave way for similar moves by other telecom majors. Bharti and Idea, which have a substantial number of telecom towers, may decide to cash in on their networks once they have a better idea of valuations. Using the RCom-GTL deal as benchmark, Bharti’s infrastructure arm could be worth Rs 48,000 crore while Idea’s tower unit may be worth Rs 15,500 crore.
Like RCom, Bharti and Idea also have a large debt burden — made heavier by the license fee for 3G and broadband wireless spectrum recently. Moreover, profitability is going to be under pressure as new players ramp up their presence and rates continue to fall. “Large telecom operators are generating cash at operating level, but the profits are lower due to depreciation and interest expense,” says Mr Satyender Khatter, telecom sector analyst with Elara Capital.
“Disposing asset heavy and capital intensive parts of the business, such as infrastructure arm, could help,” he adds. Having a large listed player such as GTL would provide a ready reckoner for valuation of tower businesses.
Selling a stake in a subsidiary rather than the parent company also makes sense for telecom operators at this point. This is because these stocks have performed badly over the past year, and a stake sale would be at a low price.
Bharti currently has over 30,000 towers in Bharti Infratel, its infrastructure arm. It also owns a 42 per cent stake in Indus Towers, a joint venture of Bharti, Vodafone and Idea, which has 1.05 lakh towers in all. “The company plans to list Bharti Infratel but there is no immediate action on this front right now. We will think about Indus once we list Infratel,” said a senior offical from Bharti. Edelweiss, a Mumbai based brokerage, has pegged the total value of Bharti Infratel and its stake in Indus Towers at Rs 48,200 crore.