Spice may sell towers to Wipro

Xcel Telecom and American Co too in the race

MUMBAI: Spice Communications is planning to sell 875 telecom towers to a tower operating firm. The mobile service provider will sell its initially-bought towers and the sale amount is expected to be Rs 500 crore. At present, the company has more than 5,000 towers, including the shared ones, which it uses for its mobile network.

A source close to the development said that the company has short-listed three parties to divest its towers, in which Wipro is the front runner. Apart from Wipro, the Dallas-based $4 billion multi-strategy fund Xcel Telecom, and American Towers Co are too in the race.

Talking to DNA Money, B K Modi, chairman, Spice said, “The board has approved the deal and if the particular company pays the amount then it would be sealed.”

Modi declined to give any names of bidders.

Spice will also avail borrowing facilities up to $400 million from Hong Kong & Shanghai Banking Corp and another $410 million from China Development Bank for growth and network expansion.

Experts said the equity dilution in the tower arms will bring financial investors on board and provide operators the capital to build infrastructure at huge scale.

Sunil Mittal and Anil Ambani already control almost half the telecom market in the country through Bharti Airtel and Reliance Communications (RCOM) respectively. However, suddenly a lot of people are waking up to another part of their telecom businesses that could be a money-spinner.

The setting up ground-based tower cost up to Rs 1 crore, depending on the site and terrain. There are also variable costs like rent, fuel for generators, air-conditioning and maintenance. The average cost of a site is Rs 25 lakh, excluding the transmission and switching gear housed in a tower shelter.

Ganesh Duvvuri and Shreyash Devalkar of IDFC-SSKI said in a note to clients on November 28 that India will have 467 million wireless subscribers by FY10 requiring 480,000 base transceiver stations (BTSs).

According to stated plans of various tower companies, India will have 4,07,000 towers, of which 3,59,000 would be shareable. Thus, the tower industry would operate at a tenancy factor of 1.34 by FY10.
 
Plans of major tower companies suggest erection of 291,000 towers over FY07-10. Bharti and RCOM are slated to have 1,05,000 and 85,000 towers respectively by FY10.

Also, the largest independent tower cos, including GTL Infrastructure, Essar Telecom Infrastructure and Quipo aim to erect 20,000 towers each by FY10.  The report further said that policy thrust to achieve a target of 500 million wireless connections by 2010 and intense competition has made infrastructure sharing a necessity rather than
advantage.

The Indian wireless industry had a base of 1,16,000 telecom towers as of FY07, of which 25% were being shared in rural areas. The government’s target of reaching 500 milllion wireless subscribers by FY10 and a likely escalation in competition is providing impetus to sharing of passive infrastructure to facilitate speedy rollout of networks.

r_mithun@dnaindia.net