Company Trend Analysis - Tower Spin-Off Of Limited Benefit For BSNL - NOV 2017

BMI View: S pin ning -off its tower s assets will help BSNL mitigate its net losses, but it will be no panacea for its lack of profitability in the short and medium- term. N et losses have been accentuated by the mobile price war triggered by Reliance Jio ' s entry in late 2016 and the regulator ' s reluctance to intervene means downward pressures will not ease .

The Indian government has approved state-owned BSNL's plan to spin-off its mobile towers assets into a separate company. This specialised tower company would manage BSNL's 66,000 sites, representing 15% of all telecoms towers in India. This development pays out our 'operator-as-a-service' core view, of which the most famous example is Telefonica's spin-off of its infrastructure assets into Te l xius in 2016.

We believe this development will be beneficial for BSNL ahead of its long-planned merger with MTNL. The infrastructure assets will be monetised more efficiently, as more tenants can be hosted on the network. Furthermore, a specialised tower company can take advantage of scale and synergies to operate the assets more efficiently. These two implications would allow BSNL - and potentially the merged entity - to dramatically lower its capex and focus its investments on services, running a leaner operation.

3G/4G Migration To Drive Infrastructure Investment
India - Mobile Market Forecasts
f = BMI forecast. Source: TRAI, Operators, BMI

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