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Market consolidation led to tenancy losses for tower companies, says CRISIL study

June 06, 2019
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According to a study by CRISIL, telecom tower companies have reported substantial tenancy losses over the past one and a half years due to market consolidation and 4G densification. For instance, the recent Vodafone-Idea merger has resulted in over 57,000 tenancy losses, the research firm said.

Further, CRISIL expects a further reduction of nearly 21,000 tenancies in the first half of fiscal year 2020.

This would trigger slowdown of base transceiver stations (BTS), the firm said. As per CRISIL, operators are currently focusing on densification of 4G networks. The replacement of 2G and 3G BTSs with 4G BTSs will slow down net BTS additions to 155,000 in fiscal years 2020, as against 275,000 additions in fiscal year 2019, the study said.

The firm said that the exit penalties are expected to partially offset the revenue loss and the impact of tenancy losses is expected to spill over to the fiscal year 2020.

As per CRISIL, the telecom sector is moving towards an oligopolistic structure, with three players accounting for more than 90 per cent market share. This will pose challenges for tower companies. With operators divesting in tower assets, the tower industry is expected to the shift to pure-play independent tower companies from the operator-led model, it added.

Moreover, the firm added that the towers added by Bharat Sanchar Nigam Limited (BSNL) and Reliance Jio accounted for a considerable share of captive towers and the revenue from these towers does not flow into the industry.

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