American Tower Corporation (ATC) Chief Executive Officer James D Taiclet, Jr, is in India. The company could face serious challenges with the possible closure of Tata Teleservices Ltd (TTSL), one of its main tenants.

ATC, which includes ATC Telecom Infrastructure (earlier known as Viom), earned 30 per cent of its revenue in the second quarter of 2015 from TTSL, according to a report by Goldman Sachs. However, these numbers could have changed as ATC also roped in new clients like Reliance Jio after 2015.

But at the global level, TTSL accounts for USD 80 million, or five per cent of the consolidated property revenues in the quarter ending June 2017, and USD 40 million in gross margins, or 3.5 per cent of ATC’s total margins. The importance of this one client can be gauged from the fact that India accounts for 18 per cent of ATC’s property revenues and 11.2 per cent of its property gross margins.  

But experts say it would be difficult for the company to make up for the potential loss of business through new and existing clients.

ATC also gets substantial business from Telenor, now bought over by Bharti Airtel, which has its own tower business, as well as Aircel, whose future is not clear after the failure of its merger with Reliance Communications.

Of course, the tower company can get incremental business primarily from Jio. The company, which is using around 175,000 towers, according to analysts (of which 60,000 are its own), is planning to increase it to 250,000.

However, while Jio is a client of ATC, the incremental business from it is expected to be divided among a whole host of tower companies, which include Bharti Infratel, Indus Towers and Reliance Infratel. This apart, Jio plans to build its own towers. Jio is unlikely to replace TTSL, which was one of ATC’s anchor clients. 

Even Bharti would expand its tower capacity to take on Jio, but according to Goldman Sachs, it constituted only nine per cent of ATC’s India revenue in 2015. Experts say Bharti, which is looking at consolidation of its own tower business, would rather use its own infrastructure or that of a tower company in which it has a large stake (Indus Towers).

ATC, of course, could make up the loss from the cash that TTSL has to pay it as part of the contract for cancelling the tenancy agreement, which runs for another six years. TTSL has to pay about 35 per cent of the remaining contract value as termination payment. Telecom companies say that at an average the lease rental is around Rs 25,000 per tower per month, or Rs 3 lakh a year.

An ATC spokesperson said on September 30, the average remaining non-cancellable contract term with TTSL was in excess of six years. The firm expects to fully enforce the average non-cancellable remaining contract terms on the leases with TTSL as well as other contractual provisions included in the Viom transaction.

TOWERING ISSUES

  • TTSL accounts for 5 percent of ATC’s global property revenues and 3.5 percent of its gross margins
  • ATC in India earned 30 percent of its revenues from TTSL 
  • It wants TTSL to pay for contract cancellation in line with the deal for the remaining six years 
  • It might get incremental business from Jio but that might not be enough to replace its largest anchor tenant. – Business Standard 

 

matrix-telesol-till-20171126

20171009-Ni

Infosec Intelligence Conclave

Nextgen Conference

Telecom Convergence Summit

spotforum-upto-20171129

iot

Read Current Edition of Communications Today