Independent telecom tower companies are expected to spend Rs 21,000 crore over a period between fiscals 2025 and 2026 in order to support the telecom companies in expanding rural networks and also improving service quality in urban areas, stated a report by CRISIL Ratings. Over the past two fiscals, the push for better coverage and connectivity, along with rollout of 5G, had driven a capital expenditure (capex) of around Rs 23,000 crore.
While the capex is expected to witness limited demand risk, navigating the counterparty risks will be crucial, it said. However, healthy cash accruals, which will also be used to fund the capex, provides comfort to the credit profiles.
CRISIL Ratings analysed three tower companies accounting for around 90 per cent of the towers in the independent telecom tower industry to release the findings.
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Anand Kulkarni, Director, CRISIL Ratings, said, “The industry witnessed robust addition of towers in the past two fiscals to support 4G and 5G services. Now that the major rollout of 5G services is done, network capex of telcos is expected to decrease gradually. Nevertheless, healthy addition of towers will continue as a geographically diversified tower portfolio is critical for telcos to gain competitive coverage. Telcos will remain focused on tower densification in underpenetrated rural areas, which had a tele density of just 59 per cent at fiscal 2024-end, compared with 134 per cent in the urban areas. Plans by some telcos to expand their 4G and 5G coverage can also drive the tower capex.”
Since the tower industry is highly capital-intensive requiring upfront spending, towers are typically installed only when there is at least one confirmed tenant — to ensure minimum rental income from the start. In the recent year, CRISIL maintained, the tower companies’ tenancy ratio has been on a downtrend, following the consolidation in the telecom sector. This is crucial, given that a higher tenancy ratio for tower companies translates into better returns. On average,
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