Viom Networks says turns corner, to now search for PEs to sell stake

Viom Networks, the telecom tower joint venture company between the Tatas and the Srei group of Kolkata, made a first-time profit during 2012-13. It is now looking for private equity (PE) partners to fund its plans.

The company earned a net service income of Rs 1,504 crore and made a net loss of Rs 138 crore in the first six months of FY13. In the second half, the company turned positive on profit after tax, said Sunil Kanoria, director.

Viom has 41,000 towers in the country, as compared to listed peer Bharti Infratel's 34,000. The latter's market capitalisation is Rs 33,000 crore.

The turnaround is good news for the company, facing corporate governance issues till recently and making losses for a long while. In 2011-12, Viom made a loss of Rs 327 crore on a net service income of Rs 3,246 crore.

Kanoria said soon after its June board meeting, the company would rework on plans to look for PE partners. It had planned an initial public offering (IPO) of shares in December 2011 but had to cancel due to bad market conditions.

"We have been continuously reducing expenditure and brought down the cost of setting up a tower from Rs 25 lakh to Rs 11.5 lakh. We are noticing that strong growth is coming back to the sector and our cost cutting efforts paid off in the second half," said Kanoria.

Tata Teleservices owns 54 per cent in Viom. The Kanorias and other investors hold the rest. The Tatas are expected to bring down their stake after the IPO and/or share sale to PEs, a banker said, asking not to be named. An email to the Tatas did not elicit any response.

The Tatas hold shares in Viom via their unlisted loss-making telecom company, Tata Teleservices. The latter is itself in talks with Telenor for a possible merger, once the government issues a merger and acquisition policy for the telecom sector.

The Tatas have appointed Lazard for the possible merger, while Citibank is working for Telenor.

Analysts expect a steady increase in tower demand from wireless operators to handle voice traffic growth, especially in the smaller category and under-penetrated B and C circles, as well as handle the increasing data volumes in urban circles.

As the coverage requirements have been achieved, wireless operators like Viom are focusing on optimising their costs. Tower companies are focusing on loading existing towers instead of building new ones. Analysts expect the increase in tower demand to be met by an increase in tenancies, as opposed to one in tower count.