Can you scale to new heights in the telecommunications industry?
Indus Tower: Can Indus Towers stock surpass lifetime highs? Indus Tower Limited, headquartered in Gurugram, Haryana, is one of the largest tower network providers globally with over 3500 employees. In 2007, Bharti Infratel (a subsidiary of Bharti Airtel), Vodafone Essar and Idea Cellular merged to provide shared telecom infrastructure on a non-discriminatory basis to telecom operators.
Indus Tower Industry Overview
The global telecommunications tower industry size is expected to grow from $69 billion in 2023 to $120 billion by the end of 2030. Increased demand for 5G networks may be the main reason. Moreover, the spread of telecom and internet services across remote parts of the world will be a helpful spur to the expansion of the tower sector.
Lastly, since connectivity largely depends on ease of communication, government efforts to connect border areas will also benefit businesses involved in infrastructure development.
Indus Tower Company Overview
indus tower In 2007, Bharti Infratel, Idea Cellular and Vodafone Essar merged. Initially, the main goal of all three companies was to integrate passive infrastructure assets consisting of 16 communication circles. We also had plans to harmonize and provide shared communications infrastructure services to all carriers on the market.
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The company boasts of having close to 200,000 towers and 3,50,000 co-locations. In addition, Indus Tower has the widest reach in India with presence in all 22 telecom circles in the country. Its major customers include Jio, Vodafone Idea, Bharti Airtel and Bharti Hexacom.
Indus Tower Company Analysis
Early ownership patterns
Bharti Infratel merger
In 2017, Vodacom Group and Vodafone Idea held a 53% stake in Indus Tower, which Bharti Infratel was looking to buy. Vodafone then issued a formal order to Bank of America, Merrill Lynch and Morgan Stanley to begin looking for a potential buyer in July. Everything about Indus Tower stakeholders In April 2018, an agreement was finally reached to merge Bharti Infratel and Indus Tower.
As per the terms of the deal, Bharti Infratel will transfer 1,565 shares owned by Indus Tower, valuing Indus Tower at $10 billion. On completion of the merger, BhartiAIRtel (parent company of Bharti Infratel) held 36.73% stake in the merged company and Vodafone group held 28.12% stake. With the completion of this merger, Indus Towers has emerged as the world’s second largest telecommunications tower infrastructure operator.
Sale of shares in Vodafone Group
Vodafone has decided to sell about 18% of its shares, a significant increase from the 10% previously decided. This will help the telecom giant raise around $2 billion, which will be utilized to meet Vodafone Idea’s funding needs. On Wednesday, June 19, 2024, the National Stock Exchange of India announced that over 615 million shares of Indus Towers were traded in several block transactions.
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Indus Towers Financial Highlights
The company’s revenue has grown rapidly over the years, increasing four-fold from ₹6,743 Cr in 2020 to ₹28,601 Cr in March 2024. The company’s net profit also increased from 3,299 Cr in 2020 to 6,036 Cr in 2024. This can be linked to government revenue. These include the drive for connectivity, 5G implementation by major telcos, and India’s continuously growing smartphone market. Despite the challenges in 2023, the company’s operating margin and net profit declined from 54% to 34%, to 6,373 Cr. Each is changed to 2040Cr. Management attributed this to the company’s severe difficulties collecting payments from one of its top customers.
Indus Tower’s competitors
Currently, there are no large companies like Indus Towers in the Indian market, which could pose a potential threat to the company. However, there are some emerging players in the domestic market such as Tejas Network, Sar Televenture Limited, Anant Raj Limited, Suyog Telematics Limited and ITI Limited.
Foreign companies such as AT&T, China Tower Corporation, Crown Castle, and American Tower will play a constraining role in the global space. As Indus Tower is one of the world’s largest players in tower installation and maintenance, it will continue to be the largest player in the domestic market.
Key Indicators of Competitors
Future prospects of Indus Tower
Indus Towers has an extensive presence in all sectors. communication It has strong growth potential as data consumption and data users/devices continue to increase. Additionally, long-term contracts with leading wireless communication service providers in India will provide visibility into the company’s future revenues. As of March 31, 2024, the weighted average remaining period of service contracts concluded with telecommunication carriers is estimated to be 6.34 years.
Finally, Indus Towers has started co-locating lithium and VRLA using state-of-the-art HSBTS switches, which lowers diesel costs. Additionally, we are evaluating and planning a pilot deployment of a state-of-the-art aluminum-air energy generation solution for high fuel usage sites. Apart from this, Indus Tower plans to accelerate the installation of 5G towers across all areas.
SWOT Analysis of Indus Tower
driver: In the future, the global telecommunications market is expected to grow as the demand for better connectivity continues to increase, with Asia Pacific region expected to be the leader in the growth of this industry. This can be attributed to increasing globalization and urbanization, as well as increased investments to improve 5G connectivity across the country. This is where giants like Indus Towers have the opportunity to further strengthen their influence.
Restrictions: Nonetheless, Indus Tower may face competition from nascent players in the domain. Moreover, because telecommunication companies are customers of tower companies, the domestic small-scale telecommunication industry is at a disadvantage to tower companies. If even one telecommunications company fails, it could have a serious negative impact on the tower company’s ability to carry out business.
Indus Tower Key Indicators
What should investors do?
Motilal Oswal: We are neutral on the stock and our previous target of 352 has been met. A ‘HOLD’ rating has been assigned to the stock. The main reason is that although Indus Tower stock is the market leader, its stock price has already surged recently.
ICICI Securities: We have a “sell” recommendation on the stock, believing that capex will continue for several quarters as the company expands its 5G network across all segments.
conclusion
In conclusion, considering the sale of shares of Vodafone India, it will be interesting to watch the stock’s movement over the next few days. It will be interesting to see how Indus Tower turns its growing tower business into profit. Will capital expenditures meet expected results?
Written by Deepangshu Kundu
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