The telecom industry's move towards oliogopoly will potentially impact telecom tower companies through factors like tenancy losses, a report said Tuesday. The number of telecom operators has now reduced to about five from a peak of 15 in 2012, the report by domestic rating agency Crisil’s research arm said. “The telecom sector moving towards an oligopolistic structure, with three players accounting for more than 90 per cent market share, will pose challenges for towercos,” it said.
It said the merger of Vodafone and Idea Cellular to create the largest entity by subscribers alone has resulted in over 57,000 tenancy losses for the towers industry as the combined entity consolidated its network. A further reduction of 21,000 tenancies is expected till September, it said, adding that the exit penalties will only partially offset the revenue loss and the impact of tenancy losses will spill over to FY20 as well.
The reduction in operators and concentration of the market in the three companies will also put pressure on rent revenue per tower as the number of tenants per tower would go down. The stressed financial condition of debt-laden telecom incumbents will also restrain any material hike in rentals, at least over the medium term, it added. Even though Bharat Sanchar Nigam (BSNL) and Reliance Jio are adding towers, they are captive ones which does not expand the industry’s revenue base, it said. In the last 12 quarters, there has been a stabilising trend till the first half of fiscal 2018.