Bharti Infratel To Take Annual Hit Of Rs 780 Crore From Vodafone Idea Exit
Bharti Infratel Ltd. said its consolidated revenue, including that from Indus Towers, is expected to take around Rs 780 crore hit on an annual basis, due to the exit of Vodafone and Idea Cellular from co-located mobile towers.
Following completion of Vodafone-Idea merger, the companies have served exit notices to Bharti Infratel and its subsidiary Indus Towers from 27,447 co-located mobile towers on a consolidated basis.
“The aforesaid co-locations contribute to 13.7 percent of the total co-locations basis as on Jun. 30, 2018. This is likely to result in a net reduction of consolidated service revenue of approximately Rs 60-65 crore per month with effect from Sept. 1, 2018,” Bharti Infratel said in a regulatory filing.
The exit of these tenancies would mean reduced revenue of close to Rs 455 crore for the tower major for the remaining part of the ongoing financial year. However, the tower infrastructure company said the adverse impact on revenue will be mitigated by exit charges and incremental revenues on account of anticipated new network rollouts by the operators going forward.
The tenancy rationalisation could result in a decline in tenancy ratio to 1.89 times from 2.19 times, according to Morgan Stanley. Tenancy ratio is the number of tenants or operators who have put up their antennae on the towers.
“With this churn, we think overhang on the back of operator consolidation should largely be over,” the brokerage wrote in a note. Meanwhile, another brokerage Motilal Oswal said the cancellation was below their expectations and a reduction in tenancy could increase the rental rates by 15 percent.
Currently, Bharti Infratel owns 42 percent stake in Indus Towers, while the remaining is owned by Vodafone Plc., Idea Cellular Ltd. and private equity Providence. However, Bharti Airtel and Vodafone will jointly control the two tower companies post their merger. The transaction is expected to close before the end of 2018-19, subject to statutory approvals.