The central government’s decision to convert part of Vodafone Idea’s spectrum debt into equity will not only give the cash-strapped telco some much needed cash flow relief, but will also translate to improved growth prospects for Indus Towers, analysts said.
The tower company, which counts Vodafone Idea as one of its major customers, and will now benefit from the telco’s accelerated network expansion, and will have better visibility on repayment of dues by Vodafone Idea.
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“This (the debt-to-equity conversion in Vodafone Idea) is positive for Indus in the medium term, unless Vi’s RMS (revenue market share) falls meaningfully below its current ~15% warranting a reduction in equipment intensity,” analysts from IIFL noted.
Buoyed by the news of spectrum debt relief to Vodafone Idea, Indus Towers shares rose 5.54% on the BSE on Tuesday, ending the day at Rs 352.60. The news of government’s debt-to-equity conversion in the stressed telco came on Sunday, and markets were closed on Monday on account of Eid.
Analysts said that Indus Towers could snap up as much as 66% of market share in the network expansion rollout that Vodafone Idea undertakes between FY25 and FY28. In Q3FY25, when Vodafone Idea added 4,000 sites, Indus Towers accounted for 2,600 of these, analysts added.
“Vodafone Idea is enhancing infrastructure by deploying macro sites and high-powered small cells to tackle coverage and capacity challenges where Indus dominates the market,” analysts from Ambit Capital observed.
Vodafone Idea’s spectrum bands are similar to Bharti Airtel’s, which has extensively rolled out its network on Indus. Jio’s coverage band (800MHz) differs from its peers, and it has rolled out its network primarily with telecom infrastructure platform Altius Infra.
As on December 31, 2024, Indus Towers had 234,643 towers, adding 4,985 from a quarter ago. Its colocations, however, grew at an accelerated pace at 386,819, up 7,583 from the previous quarter. This, the management said was on account of increased network expansion activity by Vodafone Idea.
Colocation in cell tower industry refers to multiple telecom service providers mounting their antennae on a single tower.
Analysts added that cash flow easing for Vodafone Idea will also percolate into better chances for Indus to recover outstanding dues from the telco.
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