The Telegraph
Since 1st March, 1999
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Telecom trio join hands for tower firm

New Delhi, Dec. 8: Bharti, Vodafone, Idea — the top three GSM mobile operators — have come together to set up an independent tower company, Indus Towers, which aims to share passive infrastructure with all telecom players to help cut costs and improve efficiency.

Bharti Infratel — a subsidiary of Bharti Airtel — and Vodafone will each own a 42 per cent stake in the new tower business. Idea will own the balance 16 per cent. The passive infrastructure will be shared in 16 telecom circles.

Indus Towers will have 70,000 sites and will be an independently managed and operated company.

“The new company will offer telecommunication infrastructure services to all operators on a non-discriminatory basis,” the three companies today said in a joint statement.

In addition to telecom companies, Indus Towers will share infrastructure with other wireless service providers such as broadcasters and broadband service providers.

Telecom companies such as Reliance Communications have not been getting the right valuations for their tower business, prompting companies to come together.

According to a report prepared by Lehman Brothers, telecom operators have been converting capital expenses into operational expenses, which have led to lower earnings before interest, taxes, depreciation and amortisation (EBITDA). This becomes a key factor while valuing a telecom company.

“Indus Towers will propel the mobile sector towards achieving the government’s tele-density goals and broader rural coverage,” said the joint statement.

Bharti Infratel in a separate statement said it would transfer its existing 30,000 towers in 16 telecom circles to the new entity. “Bharti will operate the passive infrastructure in seven circles ... and offer services to all telecom and wireless service providers on a non-discriminatory basis. It will own approximately 20,000 sites at inception,” it said.

Asim Ghosh, managing director of Vodafone Essar, said, “We are delighted to be an anchor of this agreement, which will not only improve efficiency but also help more people go mobile.”

“This is a landmark step in creating a shared passive infrastructure, which is crucial for providing affordable services,” said Sanjeev Aga, managing director of Idea Cellular.

The joint statement said while these companies would continue to run their active infrastructure independently, they would be able to enjoy the capital expenditure and operative expenditure savings, enhanced operational efficiency and quicker expansion of coverage.

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