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Telcos may pare up to Rs 90,000 cr debt via mobile tower stake sale: Icra

Significant pressures on cash flows pushed operators to reduce their debt levels by monetising tower asset ownership

Press Trust of India  |  New Delhi 

Telecom Tower, Telecom Sector

The could pare as much as Rs 90,000 crore debt if stake sale deals of assets, currently being discussed, materialise, credit rating firm said on Monday.

It predicted structural and material changes for the tower in the medium term.

also anticipated some headwinds in the short term, as consolidation of operators leads to rationalisation of tenancies, but remained confident about the growth prospects in coming years.

This growth would be fuelled by the network expansion of operators, keen to meet the data needs of consumers, it said.

"As per estimates, debt to the tune of Rs 80,000- 90,000 crores can be pruned from the if the stake sale transactions of tower assets currently under discussions materialise," it said.

With around 400,000 towers and 800,000 tenancies, the tower space is a sizeable one in the world, it added.

It said the sector has 10 organised players (besides small tower owners) wherein nearly three-fourths of the portfolio (74 per cent) is controlled either by tower promoted by operators, or by operators themselves.

"Over the next one-three years, there is likely to be a material change in the structure a number of players expected to reduce to four-five," predicted.

Summing up the upcoming trends, it said that one of the key developments would be the expected change in ownership from operators to independent players, given ongoing consolidation moves and the interest from institutional investors and independent tower

In addition, the is also headed for robust growth in the coming years fuelled by the network expansions of operators, it added.

Also in the offing is upside in rentals due to improved negotiation power that would follow consolidation as well as from greater independent ownership, said.

"At the same time, the consolidation transactions could entail migration of some debt to the tower from the industry, where elevated debt levels remain an area of concern," it added.

Harsh Jagnani, sector head and vice-president Corporate Ratings, said the is now on a "solid footing" to expand as the sector pursues network expansion to meet the growing data needs.

"The generates steady cash flows given its indispensability to the services and benefits from the inherent strengths of the lease agreements...which include long tenure, penalties on exit before a fixed lock-in period, per annum escalations in rentals, and incentivising addition of new tenants," Jagnani added.

Significant pressures on cash flows and stretched capital structure of the sector have pushed operators to reduce their debt levels by monetising their tower asset ownership, said and forecast a significant debt reduction once ongoing deals materialise.

"estimates that the consolidation transactions in the tower would entail some debt migrating from the to the tower However comfort is drawn from the tower industrys relatively stronger balance sheet and greater predictability of cash flows," Jagnani said.

First Published: Mon, December 11 2017. 16:22 IST