)
Bharti Infratel, the telecom tower arm of Bharti Airtel, has had anything but a good run at the bourses since its listing in December last year.
The stock today plunged to its all-time low level of Rs 148 per share on concerns of drop in tower rentals. Shares of the company were last trading at Rs 151.1, down 0.8% on BSE. The scrip is more than 30% lower compared to its IPO price of Rs 220 per share.
The Street is worried that rental structure in the company's telecom tower business could get disturbed following the deal between Reliance Jio and Reliance Communication, which was done at a monthly rental of Rs 15,000-18,000 per tower, about 50% below Bharti Infratel’s rentals.
“This (Reliance Jio and RCom deal) has the potential to disrupt the rental structure in the industry and for Bharti Infratel,” said Viju George, analyst at JP Morgan in a report.
Bharti Infratel is one of the biggest tower telecom company in the country. It has more than 34,000 towers of its own and another 110,000 through its subsidiary, Indus Towers, in which it holds a 42% stake. More than 80% of Bharti Infratel's tenancies is from the Big 3 telecom operators –Bharti Airtel, Vodafone and Idea.
Analysts believe Vodafone and Idea could move to other tower companies such as Reliance,Viom Networks if they get much better deals there.
“Indus Tower enjoys the right-of-first-refusal from the Big 3 but that does not prevent the Big 3 (notably Idea and Vodafone) from going to other tower companies such as Reliance/Viom Networks if they get much better deals there, particularly in the circles where Bharti Infratel (standalone) operates. As the rental agreements come up for renewal, it is possible that the Big 3 (more so Vodafone/Idea) may bring pressure to bear on Bharti Infratel to reduce its rentals,” the JP Morgan report states.
Telecom tower rentals is one of the largest expenses for telecom players in the country.
Bharti Infratel had raised over Rs 4,000 crore from its IPO in December. Sundaram Mutual Fund, Morgan Stanley, Citigroup and Alliance Bernstein were among the big institutional investors that invested in its IPO. At its IPO price the company commanded a market capitalisation of about Rs 41,500 crore compared to just Rs 28,728 crore today.
ENDs
