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 state-run 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 financial year 2018 and then a drop for the first time in five years in the second half of fiscal 2018 owing to tenancy losses, it said.
Citing its interactions with the industry, the analysts said telcos are currently focusing on densification of the 4G networks. The replacement of 2G and 3G BTSs (base transceiver stations) with 4G ones will slow down net BTS additions to 1.55 lakh in FY20, against 2.75 lakh in FY19, it said.
The number of BTSs per tower is, however, expected to increase marginally to 3.85 in FY20 from 3.67 in FY19, on increased loading by telcos to increase their capacity per site and support existing coverage during high traffic and congestion, it added. It said the fall in rentals has dented tower valuations and called out valuations as a key monitorable from here on.
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