Asia news

Summary of tower industry news across Asia

Australia: Macquarie’s Axicom to buy 56 towers from Southern Cross Austereo

In the first transaction of this kind in Australia, a broadcaster is selling its towers to an independent towerco. The portfolio will help Axicom expand its footprint into five regional markets: NSW, Queensland, Victoria, South Australia, and Tasmania. The sale is for 45 transmission sites at a value of A$12.6mn (US$9.25mn). The deal also involves a long-term license agreement where Axicom will oversee maintenance while Southern Cross continues to operate from the sites and manage all radio and television broadcasters on the sites. Axicom was formerly known as Crown Castle Australia, until a Macquarie-led consortium acquired the 1,700 tower portfolio in 2015 for A$2bn. Axicom now has over 1,900 sites.

Australia: TPG to spend US$440mn to build fourth mobile network in Australia

The Australian mobile market is entering another phase of intense competition as TPG Telecom joins Telstra, Optus, and Vodafone. TPG has announced it will spend A$600mn (US$440mn) to build out its network, with the goal to cover 80% of the population and break even at 500,000 subscribers. TPG spent A$1.26bn for two blocks of 700MHz spectrum. TPG already has existing operations in the domestic fibre broadband market as well as carrier-grade fibre/dark fibre offerings. They are also an MVNO provider with 450,000 customers, almost equally split on the Vodafone and Optus networks. The Australian regulator ACCC was in the process of potentially enforcing infrastructure sharing in rural areas, thereby giving TPG access to Telstra’s network (or Optus’), however, has since decided against the mandate.

China: China Tower Corporation received CNY¥61.6bn (US$8.9bn) in network leasing revenue in 2016

A March report from Nomura highlighted the networking leasing costs and number of towers rented by each of the operators to China Tower Corporation (CTC) for 2015 and 2016. China Mobile paid CNY¥5.6bn for 900,000 towers in 2015 compared to CNY¥28.1bn for 1.11mn towers in 2016. China Unicom on the other hand spent CNY¥2.9bn to access 554,000 towers in 2015, growing to CNY¥19.5bn and 690,000 towers in 2016. China Telecom’s leasing costs remained the lowest amongst the three operators, growing to CNY¥14bn from CNY¥2bn, with tower rentals of 500,000 and 610,000 respectively. According to CTC Chairman and General Manager, the company passed break even in 2016, with net profit of CNY¥80mn.

India: 10.3% Bharti Infratel stake sold for US$951.6mn to a consortium led by KKR and CPPIB 

In March 2017, Bharti Airtel completed the secondary sale of over 190mn shares of its subsidiary Bharti Infratel representing 10.3%, to a consortium of funds advised by KKR and Canada Pension Plan Investment Board (CPPIB) for a total consideration of over INR 6,193.9 Cr (approximately US$951.6mn), executed at a price of Rs. 325 per share. Bharti Airtel will primarily use the proceeds from this sale to reduce its debt. This transaction makes it KKR’s second investment in Bharti Infratel. Previously, the funds managed by KKR had invested in Bharti Infratel during the period 2008 to 2015. Post this transaction, the stake held by KKR and CPPIB (combined) will be the single largest public shareholder block.

India: Bharti Airtel sells 11.32% of Bharti Infratel to wholly-owned subsidiary Nettle Infrastructure

Bharti also transferred a 11.32% stake to Nettle Infrastructure Investments, which is its wholly-owned subsidiary. At this point, Bharti Airtel owns 50.33% equity in Bharti Infratel, with a further indirect ownership of 11.32% through Nettle.

India: Bharti Infratel partners with Ericsson for Smart City project

In April, it was announced the Bhopal Smart City Development Corporation awarded a contract for the deployment of 400 smart poles across the city. The poles will be deployed by Bharti Infratel and powered by Ericsson technology to act as mobile sites. The smart poles will be equipped with environment sensors, electric vehicle charging points, surveillance cameras, digital signage system and Wi-Fi access points. The poles will be backed by a 200km fibre optic network, also to be deployed by Bharti Infratel. Total investment in the project is US$107mn with a nine-month lead-time.

India: Private equity firm IDFC Alternatives buys 33% stake in Ascend Telecom 

Ascend Telecom Infrastructure recently raised money by selling 33% equity to IDFC Alternatives for US$91.2mn. Ascend’s portfolio currently consists of 5,222 towers. The deal involved Rs 365 crore of shares and Rs 220 crore of convertible debentures, as well as IDFC Bank refinancing Ascend Telecom’s loans of Rs 620 crore.

India: CCI and shareholders approve sale of RCom’s 45,000 towers to Brookfield

Shareholders in Reliance Communications and the Competition Commission of India have both approved the sale of ~45,000 towers, to be demerged into Towercom Infrastructure, which will be 100% owned by Brookfield. RCom will use the Rs 11,000 crore proceeds to relieve debt.

India: GTL Infrastructure valued at US$1.5bn; ready for sale pending merger with subsidiary

GTL Infrastructure has initiated a process to auction the company and its assets, with sale pending the completion of its merger with its subsidiary Chennai Network Infrastructure Limited (CNIL). The auction is to be led by EY, and will entail the conversion of debt into equity. There is talk of valuation around US$1.5bn.

India: TAIPA pushes to reduce dependence on diesel and increase access to electricity

According to a spokesperson from the Towers and Infrastructure Providers Association (TAIPA) towercos have rolled out 90,000 diesel-free mobile sites so far, or around 20% of the total number of operational towers in the country. To meet the government’s Go Green initiative and enable less diesel fuel usage, TAIPA is lobbying for tax holidays, low-cost grid power and fuel subsidies through the Universal Service Obligation Fund.

Akhil Gupta, Chairman of TAIPA, Vice Chairman of Bharti Group and Executive Chairman of Bharti Infratel, has gone on the record to ask “all state governments to direct their electricity boards to give special treatment to telecom sector and tower operators.” Power availability and stability varies widely across India and the industry is hoping the regions that are currently more lacking will improve to facilitate future rollouts.

India: American Tower urges tax and fiscal benefits for Indian telecom infrastructure sector

Amit Sharma, EVP and President – Asia at American Tower authored an article that appeared in the Economic Times of India encouraging that similar benefits to those granted to telecom service providers back in 2002 be applied to telecom infrastructure providers. Key points include:

1) Relaxation of ‘refinancing’ and ‘end use’ of External Commercial Borrowing (ECB): Telecom Infrastructure sector be allowed to refinance the existing ECB loans meeting loan conditions. Further the ‘end use’ of ECB should also be relaxed to include brownfield investments and acquisitions. The sector should also be made eligible for issuing Tax Free Bonds and access to long term low cost debt from Infrastructure Debt Funds (IDFs).

2) Inclusion of telecom infrastructure service providers within the meaning of the term ‘industrial undertaking’ for the purposes of section 72A of Income Tax Act: To allow accumulated losses and unabsorbed depreciation in the hands of the Telecom Infrastructure companies similar to the benefit granted in 2002 to Telecom Service Providers.

3) Increase in tax depreciation rate from 15 per cent to 65 per cent on batteries for industrial or commercial use (used as power backup for telecom towers) to ensure cost recovery within three years’ economic life of the batteries.

4) Petroleum and diesel to be brought within the ambit of GST so that the duties paid on it are available as ‘credit’.

India: State-owned MTNL plans 1,800 sites’ expansion in Delhi

State-owned Mahanagar Telephone Nigam Ltd currently has 800 towers in Delhi and expanding at a rate of over 100 towers every month as it seeks to improve coverage and data speed for its 3G customers. In late March MTNL announced it will invest Rs 400 crore for the deployment of 1,800 towers over the next eight to ten months. The project is financed through bank loans.

India: BSNL staff strikes against tower carve-out

State-owned telecommunications company Bharat Sanchar Nigam Limited (BSNL) has received “in-principle” approval to carve out its estimated 65,000 towers into a separate entity. However, in mid-December, BSNL staff (part of Tripura unit of the Centre of Indian Trade Unions) held demonstrations across the state to protest against the creation of a subsidiary tower arm, alleging the move would benefit private telecom operators.

India: MNO consolidation to restructure Indian tower industry

In the last quarter news has broken of the proposed merger of #2 and #3 MNOs Vodafone India and IDEA Cellular, with #1 and #8 operators Airtel and Telenor also proposing to merge. The consolidation is expected to result in the sale of 10,926 stand-alone Vodafone India towers, as well as 8,886 towers held within IDEA Cellular Infrastructure Services. IDEA has also sold 4.85% of its stake in Indus Towers to Providence Equity, with the remaining 11.15% expected to be sold to reduce debt. Vodafone India has also expressed intent to monetise their 42% stake in Indus Towers. For a deeper analysis, read “How MNO consolidation is restructuring the Indian tower market”.

Indonesia: Bahana Securities positive on Protelindo staying as Indonesia’s biggest tower operator

Sarana Menara Nusantara (Protelindo) is expected to remain a heavyweight in the market based on organic and inorganic growth, according to a report published by Bahana Securities, part of Daiwa Capital Markets in January 2017. The report noted projected tower growth up to 16,500 by 2018 year end. Current tenancy ratio is 1.67, which is slightly higher than Protelindo’s closest peer Tower Bersama (TBIG) at 1.60. Through 2018, the tenancy ratio is forecasted to be in the range of 1.67 to 1.69. Protelindo’s acquisition of 2,500 towers from XL Axiata in 2016 was a key contributor to its YoY tower growth.

Indonesia: Existing shareholders sell 13.23% of Protelindo for IDR5.4tn 

Believed to be led by U.S. hedge fund Tiger Global Management and HK-based Tybourne Capital management, twelve stakeholders sold a collective 13.23% stake in Protelindo. The private placement scheme amounted to 1.35bn shares of total outstanding shares of 10.2bn, with total transaction value at IDR5.4tn (US$405.3mn). The transaction values Protelindo at a little over US$3bn.

Indonesia: Protelindo secures alternative funding to boost financial performance

In March 2017, Protelindo entered into an agreement with The Bank of Tokyo-Mitsubishi and Bank Sumitomo Mitsui Indonesia for a total revolving loan facility without commitment up to IDR 250bn (US$17mn). The 12-month loan will be used as working capital. Back in December 2016, Protelindo also secured Rp 500bn (US$37.2mn) of revolving loan facility from Bank Central Asia. This was set up as one part time loan revolving facility, with maturity in three years, and one part uncommitted money market line facility, with maturity in twelve months.

Indonesia: Tower Bersama Infrastructure executed US$500mn of bank loan securities

In late March, the Indonesian towerco announced it had secured a new US$200mn revolving credit facilities, with maturity of five years and three months. It has also extended an existing revolving credit facility of US$300mn to match the maturity date of the new loan. This was arranged through banks already active with the towerco.

Malaysia: Axiata and edotco secure US$700mn with three investors at a valuation of US$1.5bn 

Malaysia-based Axiata Group Berhad and its subsidiary, edotco have raised a total of US$700mn through private equity. Back in December 2016, the group announced the placement of US$400mn worth of primary shares with the Innovation Network Corporation of Japan (INCJ) and US$200mn in secondary shares with Khazanah Nasional Berhad. The placement valued edotco’s final portfolio at equity value of close to US$1.5bn and an enterprise value to FY2016 EBITDA multiple of 12.5x, which is comparable to regional peers. The final portfolio takes into account the potential injection of tower assets in Cambodia and Sri Lanka at a later date with a resultant increase in Axiata’s shareholding in edotco. The new investors would collectively own 34.1% of edotco, with Axiata remaining the majority shareholder at 65.9%. A few months later in April 2017, the group announced a further US$100mn in placement with Malaysia’s second largest pension fund Kumpulan Wang Persaraan (KWAP) in secondary shares, at the same previous valuation. INCJ, Khazanah, and KWAP would own 21.5%, 10.7% and 5.4% respectively of edotco, with Axiata remaining as the majority shareholder at 62.4%.

Myanmar: Fourth operator entering Myanmar to operate under Mytel brand with formal launch in 2018

What is apparently the last telco license – the fourth – in Myanmar was formally awarded in January to Myanmar National Tele & Communications (MNTC), a joint venture between Vietnam’s Viettel, a consortium of eleven local companies, and Star High Public Company. MNTC paid US$300mn for the 15-year license, compared to just over US$500mn by Telenor and just over US$1bn by Ooredoo back in February 2014. The new operator will operate as Mytel and is looking to install a network of 5,000 base stations initially, with a focus on rural coverage. It will operate in the 900MHz and 2.1GHz bands. MNTC is said to be targeting 25% mobile market share by 2021.

Myanmar: Telenor Myanmar’s 1,200 site portfolio up for sale

Telenor is reportedly looking at offloading 1,200 sites, of which the large majority (1,050) are rooftops. The locations are said to be good although most sites were built for single tenancy. As such the structures will need to be strengthened to allow the addition of new tenants. At least three towercos have expressed interest in acquiring the portfolio and boosting their growth. Reports suggest the valuation may be challenged by the high cost of renting urban rooftops, and the resultant dampening effect on margins.

Myanmar: PAMEL potentially seeking re-financing; cooling talks of sale 

Local sources suggest that PAMEL is looking at refinancing options. Back in October 2014, the towerco secured US$85mn in financing from DBS, ING, OCBC, Standard Chartered and Sumitomo Mitsui.

Myanmar: OCK’s Myanmar operations turned profitable in Q416

After three quarters of start-up losses in 2016, OCK’s business in Myanmar reported a small profit in the last quarter of the year. Earnings are expected to be positive from the first quarter of 2017 onwards, thereby lifting OCK Group’s net profit by RM1.1mn and contributing approximately 13% of this year’s net profit.

Vietnam: Malaysia-based OCK completes Vietnam towerco acquisition for US$50mn

First announced in August 2016, the deal between OCK’s local subsidiary OCK Vietnam Towers Pte Ltd and Southeast Asia Telecommunications Holdings Pte. Ltd. (SEATH) was finalised in January 2017. As of December 2016, the SEATH portfolio included 1,972 towers. SEATH is 100% owned by Vietnam Infrastructure Limited (VNI), an investment vehicle established to target infrastructure and related investments within Vietnam’s emerging market; it is also listed on the AIM (Alternative Investment Market) of the London Stock Exchange. For now VNI is retaining its in-building solution (IBS) portfolio. Moving forward, OCK is said to have allocated US$5mn to US$8mn for its growth in Vietnam, targeting 200 to 250 tower builds per year. It also seeks to increase tenancy ratio from 1.26 to 1.3 by the end of 2017.

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