Tower Firms to undergo Rs 8000-Crore Loss if Vodafone Idea Shuts Business

Mobile-tower companies will lose a key tenant in more than a third of their towers in case Vodafone Idea closes down its operations.

This will make a major dent in their revenues and profitability, bringing down their tenancy ratio drastically. The loss for tower companies could be around Rs 8,000 crore per annum, according to estimates.

However, tower companies say the short-term pain will be over within three years as data usage goes up and 5G is launched, which would require more tower capacity.

According to estimates, Vodafone Idea uses 180,000 towers with various vendors (there are 4.8 million active towers). The average tenancies currently range from 1.7 to 1.8 in the case of most of the big players and a loss of one tenant could have a substantial impact on revenues, margins, and viability. The move could lead to a downward spiral of rentals.

Manufacturers of telecom equipment, including fibre, say if Vodafone Idea closes down, there could be a loss of around $1.7 billion in FY20 in orders.

This would impact the key players Ericsson, Nokia, and Huawei all of which have contracts with the telecom company.

Companies running telecom towers are, however, banking on good times for three reasons. One, they point out that even Vodafone Idea goes to the National Company Law Tribunal (NCLT), the resolution professional will ensure that it is run as an ongoing business.

Secondly, based on the ambitions of telcos, they expect that average data usage will double in the next three years to 20 GBPS per customer per month. To achieve that, there has to be a substantial increase in tower infrastructure and new business to support high speeds.

Thirdly, with 5G expected to come in the next three years, operators will require nearly a threefold increase in the number of towers (even though they would be smaller) to sustain such high speeds.

 “The Aircel experience (which was also in the NCLT) has shown everyone (where operations were closed down) that the value of the assets deteriorates dramatically in telecom if operations close down. He said the company might reduce the number of towers by 50,000-60,000, said the chief executive officer (CEO) of a tower company.