Connect with us

Daily News

Reliance Jio Set To Disrupt Telecom Tower Industry

Reliance Jio’s unit may become a potential competitor for the tower industry, especially Bharti Infratel, analysts say.

Jio has around 2,20,000 towers and 3,00,000 kilometers of optical fibre. The company’s Board of directors had given the approval for hiving off these assets in December.

“Jio is in the process of demerging its tower and fibre into a separate company. Jio will lease the infrastructure and will look to raise funds in these companies… assets and part of the debt will move to these companies, making Jio asset-light. Part of the future capex will also move. Jio is also open to sharing its tower and fibre with the competition. While we look forward to more details, this can be a potential competitor for Bharti Infratel,” BNP Paribas said in an analyst note after the telecom firm announced its third-quarter results last week.

Bharti Airtel along with incumbents Vodafone India and Idea Cellular – now Vodafone Idea after their merger – have been impacted financially after the arrival of Reliance Jio that disrupted the market its free voice calls and dirt-cheap data tariff offers.

An increased user base coupled with a surge in data usage had helped the newest telecom player Reliance Jio Infocomm (Jio) post a 65 percent increase in its net profit at Rs 831 crore for the third quarter ended December 2018.

Jio has also set its eyes on the broadband and enterprise segment as they offer huge opportunities. It has announced the acquisition of three multiple system operators (MSOs) which is awaiting regulatory clearances and will provide it infrastructure and manpower.

Credit Suisse in a note said Jio intends to hive off tower and fibre assets and get outside investors in to reduce overall debt levels. “This effectively punctures hopes of tariff increases for other telecom players.”

Though Jio has indicated its tower footprint is potentially larger than the largest tower operator in the country (Indus at around 1,20,000), in a three-player market, there is little strategic merit for three large independent tower companies to co-exist, Goldman Sachs analysts said.

The other two companies are Bharti Infratel and American Tower Corporation. Bharti Airtel and Vodafone Idea also jointly own tower company Indus Towers, which is in the process of merging with Bharti Infratel.

“Entry of a new tower co could potentially result in pressure on Infratel’s rentals unless we see further consolidation in the tower space,” it said.

Recently, Bharti Airtel and Vodafone Idea also hived off their fibre assets, 2,46,000 route km and 1,56,000 route km respectively, into separate units. While Vodafone Idea plans to monetize the fibre assets, Airtel is looking to form an independent fibre company and could also monetize its holdings in the unit.

Analysts say Jio is not in a hurry to raise tariffs until it meets its target of 400 million users. At the end of December, its subscriber base stood at 280.1 million.

“Jio’s focus in the near term remains on adding subscribers and it said it would not tinker with tariffs and risk disrupting their strong subscribers’ momentum. For incumbent telcos, this could mean revenues staying stagnant until Jio reaches its earlier stated target of around 400 million users… the Rs 501 JioPhone plan could continue being offered for the foreseeable future and we forecast 302 million subscribers for Jio by end of FY19,” analysts at Goldman Sachs said.―DNA India

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2023 Communications Today

error: Content is protected !!