Data continues to be a key driver for tower demand and management suggested 3G and 4G network deployments have almost doubled on a year to year basis. The company suggested that most of the 3G/4G deployments were via the loading route and for the next 6-12 months telcos are expected to continue with the loading route. That said, management is of the view that the next round of deployments will target coverage gaps and in turn will improve tenancy. In our view, loading phenomenon may run for another 18-24 months, limiting upsides from data opportunity.
The management of Bharti Infratel views Single RAN deployment by telcos as positive as they result in lower occupied space by telcos and allows tower cos to accommodate new tenants. In the process, it is possible some loading revenues are lost but if a new tenant comes in, it more than offsets revenue decline. We are of the view that Single RANs are a near-medium term negative for tower companies as it is not obvious all Single RAN towers will see a new tenant coming in.
The Spectrum Trading regulations are not negative as they allow operators to use the un-utilized spectrum that would have otherwise remain idle. We believe spectrum trading is theoretically negative for tower companies as it allows more spectrum per tower. However, the respite is that most opportunity via trading is available only in 2,100 spectrum band/3G whereas the demand is more for spectrum in 1,800 band.
Finally, Bharti Infratel sees regulators focus on call drops as opportunity but the upside from the call drop issue is somewhat limited, in our view.