June 12--State-owned Power Grid Corp. of India Ltd (PGCIL) has put its plan to lease 200,000 of its transmission towers to the telecom sector on the back burner, reflecting the Indian telecom sector losing its sheen.
In the initial phase, the public sector unit (PSU) had plans to expand its telecom business by leasing out 15,000 transmission towers to firms such as
"What can we do? The entire scenario on which we had made these plans has changed after the 2G scam and the Supreme Court verdict," said a top PGCIL executive requesting anonymity.
The national transmission carrier wanted to leverage its extensive reach--particularly in semi-urban and rural areas. PGCIL had hired consultants such as Booz and Co. and KPMG to help it with tower leasing plans and expected to earn '400 crore in annual revenue within eight years of operation. The transmission utility operates 90,000 circuit kilometre of transmission lines with 145 sub-stations.
"The entire market has been down. This has led to the postponement of our plans," said another PGCIL executive who also didn't want to be identified.
The main reason for the drying up of the potential market for tower companies in India is the 2 February Supreme Court verdict that cancelled 122 telecom licences allocated to nine companies in January 2008.
The order led to the number of operators in the country being slashed by half.
Most of the older operators such as Bharti Airtel and
The telecom sector on the whole is also facing significant margin pressure with regulatory uncertainty putting a question mark on the future viability of the business. The 2 February court order also directed the Telecom Regulatory Authority of India (Trai) to draw up auction rules. The regulator's rules have set the base price for the auction of basic 2G spectrum as high as '3,622 crore per megahertz. This has led to many of the operators looking to cut spending on capital and operational expenditure, significantly leaving stand-alone tower companies with very little chance of survival.
The growing confusion over the process surrounding the spectrum auction is beginning to affect companies, with some of them putting their fund mobilization plans on hold. A case in point is Reliance Communications (R-Com), the mobile telephony arm of the Anil Ambani-led Reliance Group halting the proposed sale of its telecom tower assets. Over the last two years, R-Com has been looking to hive off its 50,000 telecom towers in order to bring down debt, but hasn't been able to conclude a deal.
There are may be compatibility issues regarding the use of the power transmission utility's towers for telecom services, according to some experts.
"Most of the towers of Powergrid are not technically feasible for the needs of a telecom company. There are some structural issues in terms of the necessary height and also the space needed for the telecom equipment. The equipment is housed in a base station adjacent to the tower," said a telecom analyst working with a multinational brokerage firm requesting anonymity as he is not authorized to speak to the media.
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