Will consolidation help turn around sorry state of telecom tower sector?

When telecom industry catches a cold, it is only natural that its sub-segment the telecom tower sector gets a fever.

Now, with Indian telecom companies suffering from high fever, telecom tower companies are on the death bed.

So, consolidation is the way ahead for the survival of these companies.

When the going was good during the pre-2G scam period, a lot of tower companies sprang up eyeing the lucrative opportunity that the sector offers.

But the scam revealed the government’s golden-goose policies had only served to kill the sector, which in turn impacted the tower companies adversely.

Finally, the sector got to hear a good news last month, when the Delhi High Court approved the merger of Vodafone Essar’s tower assets with that of Indus Towers.

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Indus Towers is a joint venture between the three leading telecom operators, Bharti Airtel, Vodafone and Idea Cellular.

The joint venture was formed in 2008 and but the merger of towers of Vodafone was held back after I-T department in India opposed the move on tax concerns.

This has now been cleared, said a report in the Times of India, adding the move is likely to facilitate a much-talked-about initial public offering of Indus Towers.

However, according to a Hindu Business Line report, the tower sector in India is in the cusp of consolidation.

[caption id=“attachment_797969” align=“alignleft” width=“380”] The companies that are looking for acquisitions include American Tower Company and Viom Network. Reuters[/caption]

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Quoting an AT Kearney report on the Indian tower sector, it said because of the regulatory issues prevailing in the telecom sector, independent tower companies are finding it difficult to survive.

Exit of companies like Etisalat and STel only worsened the situation. The global consulting firm sees debt and lack of cash flow pushing some of the tower companies into bankruptcy.

The companies that are looking for acquisitions include American Tower Company and Viom Network, the report said.

It also said quoting sources that ATC may be close to a deal with TowerVision India, which has 8,000 towers.

“The entire telecom sector is set for consolidation. If the number of mobile operators gets reduced to four or five, there cannot be 10 tower companies,” the owner of a telecom company looking for exit has been quoted as saying in the report. He thinks buyers will set terms in the telecom tower consolidation.

However, even if the tower consolidation takes place soon, such a move in the telecom sector is going to be a long call. This is because the government is yet to finalise its merger and acquisition guidelines for telecom operators.

The distress sale of telecom tower companies is only the last act in the tragedy that is being played out in Indian telecom.

One can only hope that the sector will see its fortunes turn around once the shakeout will help those fit to survive.