Telecom: Hiving off tower business - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Telecom: Hiving off tower business

Mar 30, 2007

Recently almost all the major private sector telecom companies have come out with announcements with regard to hiving off of their telecom tower businesses. While the strategy of hiving off the towers have been widely reported, investors must note that there are other telecom infrastructural assets also that the companies wish to offload from their books along with the telecom towers. The telecom companies want to embrace an asset light model so as to be able to focus more on the core business of marketing their telecom services and innovating their offerings. This will enable them to acquire a larger subscriber base.

Hive off of telecom towers
Company name Number of Towers Owned Number of towers to be hived off
Bharti Airtel 40,000 40,000
Reliance Communication 15,000 15,000
Tata Teleservices Ltd. 5,000 5,000
Idea Cellular 8,000 8,000
Source: Company websites

While Idea is still mulling hiving off the tower business, the remaining telecom companies have already made the decision and are in the process of forming subsidiaries to accommodate this business.

Impact of the move on telecom companies

Expanding services: The move will help the companies focus on their core competence i.e. offering of telecom (and related) services as they will not have to worry about the operations and maintenance of the networks. This allows the companies to focus better branding and marketing of the products. For instance, the company can target specific market segments (like students, lower income earners etc) with products designed for them and thus enhance their market shares.

Achieving cost efficiencies: Currently in the more matured markets like the US and Europe, there are specialised telecom infrastructure management companies that take on their books the cell sites and other infrastructure of the telecom companies. These companies specialise in managing the infrastructure and bring in operational efficiency, thus aiding the increase in profitability. A similar scenario when created in India will yield the benefits of cost efficiency to the Indian telecom companies too. Meanwhile, when the companies are viewed on a standalone basis (i.e. after a subsidiary has been formed for the infrastructure business), they will reflect an improved performance of the cellular mobile service business. This will be because their financial statements will reflect the true costs associated with the provision of these services.

Unlocking value in the future: Currently, the parent companies are forming wholly owned subsidiaries to manage the telecom infrastructure business, and are thus in the process of creating revenue-generating assets (as these can be leased out to the main parent company as also other telecom companies) for these subsidiaries. This will have the impact of improving the transparency in the sharing of passive infrastructure by the telecom companies. Also, this will lead to value unlocking for the investors as and when these subsidiaries are listed on the bourses.


Driven by this newfound wisdom and in a bid to create shareholder value, the Indian telecom companies are falling in line with their global counterparts by separating the telecom infrastructure business from their core business of cellular services. We believe that the move will augur well for them in the longer term, as it will help them consolidate their positions and compete effectively.

Equitymaster requests your view! Post a comment on "Telecom: Hiving off tower business". Click here!


More Views on News

1,300% in One Year - Are You Kidding Me? (Views On News)

Nov 29, 2021

An amount of Rs 1 lakh invested in the midcap stock a year ago would have turned into Rs 15 lakh today.

Bharti Airtel's Humongous Rights Issue to Open on 5 October. Key Points Investors Should Know (Views On News)

Sep 23, 2021

Shares of Bharti Airtel trade near record high ahead of rights issue.

This Company has Quietly Built an Enviable Startup Portfolio (Views On News)

Sep 22, 2021

The startups era has just begun, and it will provide massive opportunities to those who can spot the right trends at the right time.

Top Stocks Riding the 5G Wave in India (Views On News)

Dec 3, 2021

The 5G revolution is unfolding at a faster rate than you would expect. Here's how you can hop on to this ride.

More than 450% Gains for Tejas Networks in the Past Year. What Next? (Views On News)

Aug 18, 2021

Shares of Tejas Networks are up 173% since January 2021. Is the rally justified?

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 8, 2021 01:09 PM