Friday, September 4, 2009

AircelTowerBusiness M-9426201999

Aircel tower business a strategic fit: Quippo Tele M-9426201999
Aircel is planning to sell entire stake in tower business that is valued at about USD 1.8-2 billion and CNBC-TV18 learns that Quippo, Bharti Infratel and ATC are in the race to acquire the business. Commenting on the tower valuation Arun Kapur, MD and Group President at Quippo Telecom Infrastructure said that tenancy and cash flow per tower were important factors while valuing a tower and he saw the Aircel tower business as a strategic fit. He added that he saw consistent demand and highest rollout at this time in the telecom space.

Here is a verbatim transcript of the exclusive interview with Arun Kapur on CNBC-TV18. Also watch the accompanying video.

Q: Can you tell us how valuations are panning out in the tower space because that’s what investors are really watching out for now with respect to your Aircel bid itself – is it a little more expensive than what it was during the TTSL deal or is it less?

A: There are two distinct questions as far as from a valuation standpoint I think the market seems to have matured and also have recognized that it needs to move past from what was a flawed thinking earlier of per tower valuation to what is the fundamental business which is essentially based on tenancies and I must say that the independent telecom infrastructure companies have a different business model as oppose to that of the operator on captive tower companies. From our perspective I think when we look at an acquisition so we look at what is the strategic fit and only then we ascribe values to that.

Q: You brought up a very interesting point about per tower valuation but a lot of deals went through like that, which means huge amounts were paid for it. What are the dynamics, which means is this is a valuation game where a foreign guy needs to get in, so he is ready to pay whatever to get in but when you speak to some of telecom companies they’re saying there are enough tower suppliers now and we are able to negotiate lower rates or we’re more in a bargaining position. So looks like the dynamics in terms of revenues may be changing for the tower companies – could you comment on both the sides, which are how are dynamics changing for the valuation and how are the dynamics changing?

A: Again I would like to take up back from the standpoint that from a per tower evaluation it has to be seen what is the tenancy of the tower – what is the cash flow. This is not a short-term business it is a long-term business. It is also business of mutual interdependence as a part of the infrastructure play.

Q: I just wanted get some numbers if you could – compared to last year do you think you’re agreeing to lower prices with telecom operators? Is it 20% less, 10% less – is the tenure or the period of contracts changing? Could you just comment on some specifics here?

A: We are seeing a consistent demand as a matter of fact there is a significant demand which is coming up. We are doing the highest roll out at this point of time. The tariff have more or less remained the same and most of our contracts that we’ve looked at have been in the range of between 15-20 years, which hasn’t changed.

Q: Will you be tapping the capital markets at all – planning to list your company?

A: We’ll have to look at what is an appropriate point of time. We would need to ensure that there is certain amount of stability of size and scale. Today we have a portfolio of nearly about 25,000 towers and I must say that perhaps one of the few tower companies which have a physical tenancy in excess of two. We are essentially not in the numbers game but we want to create one of the most valuable infrastructure companies.

Q: In an industry where obsolesce is about three-four years away, which means yesterday’s leaders and gone today – I am kind of surprised that these guys are signing 15-20 year contracts. They think the technology is going to remain for this huge period and no technological advancements will made some of these towers redundant?

A: There are two distinct parts – passive infrastructure contributes to nearly about 65% of the capex of a telecom operator. M-9426201999

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