Indus Towers, based Gurugram, Haryana, India, could post high single-digit operating income growth over the next several years if key mobile network customer Vodafone Idea (VI) closes its much-awaited $5.4 billion fundraise on schedule and invests in network expansion, The Economic Times reported. At the end of 2023, Indus Towers was India’s largest tower company with 211,775 towers and 360,679 colocations, according to Inside Towers Intelligence.
Cash-strapped VI said it will open a sale of new shares during April 18-22, to raise $2.2 billion. This transaction will be closely followed by a $3.0 billion fundraising via debt. The company says it has already approved raising $249 million from a promoter entity through a preferential share issue. VI’s promoters include Aditya Birla Group and Vodafone Group (NASDAQ: VOD), which hold 18.1 percent and 32.3 percent stakes, respectively.
Analysts expect VI will use the fresh capital for adding around 75,000 sites to cover network gaps in its priority markets. This buildout will allow VI to compete more effectively with MNO rivals, Reliance Jio and Bharti Airtel. VI’s investment could then lead to 40,000-45,000 tenancy additions for Indus, The Economic Times reported.
VI has indicated that its two-part equity and debt fundraising plan is aimed at repaying dues to key vendors such as Indus, bolstering its existing 4G operations and launching 5G services to intensify competition with Jio and Airtel.
Note that American Tower’s (NYSE: AMT) agreement in January to sell its tower portfolio in India to Brookfield Asset Management (NYSE: BAM), was prompted largely because VI, its largest customer, was significantly behind in lease payments and unable to raise funds at the time, Inside Towers reported. That deal is expected to close in the second half of 2024.
In recent months, VI has also started to pay down a portion of its large dues owed to Indus, boosting the tower company’s 4Q23 net profit. Citi Research recently estimated VI’s total dues to Indus at $684 million, after the last round of payments.
In the immediate term, Emkay Research expects momentum of Indus’s tower and tenancy rollouts through 1Q24 will be driven by its biggest MNO tenant, Airtel, which is focused on expanding 4G presence in rural India. The firm said, over the past five months, Airtel has deployed more than 30,000 sites for expanded coverage into 60,000 high-potential villages to boost its share of 4G net additions.
Analysts expect the pace of Airtel’s site additions to moderate once the rural expansion is completed, however. According to Jefferies Financial Group, if VI goes for “a limited network expansion” instead of an aggressive roll out, most of the incremental tower/tenancy additions for Indus still will be driven by Airtel.
By John Celentano, Inside Towers Business Editor
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