India’s telecom tower industry is set to get a new top dog. Having already pipped its older rivals—Vodafone Idea Ltd (VIL) and Bharti Airtel—to become the largest Indian telecom operator by number of subscribers, Reliance Jio is set to replicate that feat in towers.
Reliance Jio Infratel—Jio’s tower asset venture—aims to add another 45,000 towers to its 130,000-strong portfolio over the coming year. This would beat the combined might of Bharti Infratel and Indus Towers, which hold around 163,000 towers. The two have been in merger talks since late 2018. Once these plans come to fruition, Jio Infratel’s portfolio will be the second largest in the world, bested only by China Tower, which has a whopping 1.95 million towers in its home country.
Jio Infratel’s surge comes on the back of its new ownership. It was recently acquired by Canadian asset management firm Brookfield Infrastructure and its institutional partners, with a committed investment of over $3.7 billion.
As part of the deal, RIL’s subsidiary Reliance Industrial Investments and Holding Limited (RIIHL) signed a master services agreement with Brookfield for 30 years. For Brookfield, Jio’s long-term tenancy assures it a meaningful, predictable stream of revenue. A single-tenant arrangement—something that Jio Infratel has previously had with Reliance Jio—however, makes Brookfield’s investment something of an oddity.
Conventional wisdom in the telecom industry holds that multi-tenancy, where a single tower hosts the equipment of more than one telco, is the only viable model. Without it, turning a profit is improbable, if not impossible, many in the industry believe.
The current state of the industry makes this clear. Indus Towers is a joint venture between Airtel, VIL, and UK-based Vodafone Group. Indus and Bharti Infratel, which is solely owned by Airtel, have two anchor tenants—Airtel and VIL. Even American Tower Corporation (ATC), the other major tower company in the country, has multiple tenants across 70% of its tower assets, said a senior tower industry executive. He requested anonymity as he is not allowed to comment on specific telcos.
Even as the Jio-Brookfield deal awaits regulatory approval, Brookfield CEO Sam Pollock has already weighed in on the tenancy issue. In a statement, Pollock spoke of “meaningful upside” through multi-tenancy. Bucking Jio’s captive towers arrangement, while appealing in theory, may be difficult to put into practice though.
Since Jio’s entry into telecom in 2016, the market has seen rapid consolidation. While there were many telcos and few tower providers earlier, something that naturally lent itself to multi-tenancy, that is no longer the case. There are, in essence, three tower operators on the supply side—Indus-Bharti Infratel, ATC, Jio Infratel. On the demand side, there are three telecom operators—Jio, Airtel, and VIL. Acquiring a second tenant, therefore, could be easier said than done.