The telecom sector which was going though troubled times, has started seeing signs ofrevival. The recent policy announcements of allowing 100 % FDI in telecom, givinginfrastructure status to telecom and the various announcements pertaining to bringing infresh investments into the Indian economy should improve the business climate movingforward.
Despite the negative developments like the cancellation of 2G licenses and the exit ofcertain telecom players, we have more or less maintained our revenue and EBIDTA margins.
Post the proposed merger of Chennai Network Infrastructure Limited with GTLInfrastructure, to be approved by all the competent authorities and becoming effective,the operational and financial highlights for the year ending March 31, 2013 would be asfollows:
Operational snapshot (on combined basis)
No. of towers after considering the impairment of assets due to cancellation of2G licenses are 29,432
No. of tenants are 39,782
Financial snapshot (on combined basis)
Revenue is Rs. 1,458.55 Cr.
EBIDTA is Rs. 757.43 Cr.
EBIDTA margin of 51.93 %
We had completed the restructuring of debt from Banks and Financial Institutions lastyear and completed restructuring of Foreign Currency Convertible Bonds (FCCB) this year,the details of which are available in the Directors Report.
India is still one of the fastest growing telecom markets, with substantial scope forincreasing the penetration of Internet and Broadband networks. We envisage the followingfactors to be the demand drivers for the tower industry:
(a) Expansion by existing operators
Clarity of telecom policy may lead to much awaited capital inflow in telecom sector.For example the recent policy announcement of 100 % FDI in telecom should help. Also, themuch awaited new telecom policy should be able to spur the consolidation among theindustry and growth of the Industry. Existing Operators are likely to expand theirnetworks into additional circles, such as Class B and C circles for their growth. Thelaunching of new services is expected to create demand for co-location on towers in theseareas. This will increase the demand for the telecom towers.
(b) Increase in usage of data services
The 3G license winners have started providing data services on 3G networks. However,the demand for such services was low because of higher tariffs and high cost of 3G enabledsmart phones. We expect that the demand for such services will increase since many of theoperators have launched attractive tariff plans and the cost of smart phone handsets hasdecreased. Since 3G operates on higher frequency, the demand for towers is higher for 3Gnetworks as compared to 2G networks.
BWA operators have yet to start rolling out networks. We expect that they will startrolling out new networks within the next 12 months in all metros and other A and B classcities. This will lead to increase in demand for towers in metros and large towns.
(c) Rural expansion
With teledensity in metroes already crossing 100 % mark it has become inevitable forthe operators to approach the rural market for further growth. As the ARPU is low in ruralmarkets, the operators are opting for sharing of passive infrastructure to bring down bothcapital as well as operational expenditure.
Maximize use of existing tower capacity
Our goal is to increase per tower revenue and cash flows. This can be done only byincreasing occupancy on the towers. Rural expansion by incumbent operators, and 3G, BWAlicense winners are expected to drive tenancy growth as they have launched in very limitedgeographical areas for the time being. In coming years, when the licenses for 4G servicesare issued, we expect that 4G will further drive tenancy on our towers.
Minimize capital expenditure
We consider building new towers only if we have order from at least two operators forthe same. This will ensure that we incur minimum capital expenditure and generate quickerreturns.
Increasing efficiency and reducing operational cost
We intend to improve our returns on our tower portfolio by entering into arrangementwith other players in the industry on bilateral basis for single tenant towers.
We are also in the process of rationalizing our tower portfolio to reduce operatingcost. We will reduce the overlap between GTL Infra and acquired towers from Aircel. We arealso planning to monetize some unoccupied towers.
For maintaining better network uptime and serving our customers, we have centralizedour network operations at Pune and also restructured our organization. Our employees havealso offered their support by accepting pay cuts in the range of 10-20 % and letting go oftheir several benefits and incentives.
The Road Ahead
We expect that the policy clarity from the Government, the growth of 3G and 4G networksto be growth drivers for the telecom infrastructure business in the medium to long term.
For all that our Company has accomplished over the years, we would like to thank allour stakeholders, customers, financial institutions, partners and employees for theirunwavering interest and support and look forward for the same in future.
|Place : Mumbai ||Manoj G. Tirodkar |
|Date : May 9, 2013 ||Chairman |