Telecom infrastructure is not a sector which many investors and analysts track and are keen to invest in. They prefer the telecom services sectors and the two big boys are namely, Reliance and Bharti Airtel. Both the sectors have seen a massive upside in the last two decades benefitting the government by way of revenue and for consumers a product which they can’t do without. The Indian telecom operators have been able to develop an affordable mass market telecommunications service model in the last decade or so, which allows for service availability across India’s urban and rural areas at affordable prices. A strong focus on optimisation of operational expenses through the outsourcing of non-core areas, process innovation, cost-to-serve alignment and strategic partnerships has also resulted in steady growth of the Telecom Tower Industry. There are two types of towers— ground based and roof top towers. Currently, most operators prefer to lease towers from tower companies rather than build them for captive use. Infrastructure sharing is effective in optimising the utilisation of available resources and helps in bringing down the cost of providing telecommunications services. With the reduction in overall tariffs and restrictions placed by various local regulatory bodies on the installation of telecom towers, infrastructure sharing among service providers has become the norm rather than the exception in the Indian telecommunications industry. Tower companies like Bharti Infratel provide the entire range of tower infrastructure that is required by wireless telecommunications service providers to offer mobile telephony services to their subscribers. Tower infrastructure refers to equipment such as towers, shelters, power regulation equipment, battery banks, diesel generator sets, air conditioners, fire extinguishers and a security cabin, required at a site where such towers are installed. Bharti Infratel reported its quarterly set of Q1 FY2021 numbers recently with a 21% drop in its consolidated net profit to Rs 704 crore as against Rs 887 crore for the corresponding quarter of the previous year. The consolidated revenue were also lower by 6% year on year at Rs 3,505 crore for the June quarter 2020. Telecom analysts have commented that the company’s core revenue and EBIDA is stable, but tenancy additions were impacted due to the lockdown. But analysts tracking Bharti Infratel are confident that next full year financial results will be decent for the company on the back of 5G rollout and massive upside in its valuations. For the year ending March 2020, Bharti Infratel has declared an equity dividend of 105% amounting to Rs 10.5 per share. At the current market price of Rs 190, it translates into a dividend yield of over 5%. Investors can buy the Bharti Infratel stock at the current price for dividend returns and a 25% price appreciation in the next one-year time horizon.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.