S Tel’s Tenancy with Reliance Infra – Positive for RCom

RCOM announced an infrastructure sharing agreement with S Tel that includes sharing of Telecom Infrastructure (TI), transmission BTS and fiber backbone. S Tel is one of new operators in India with licenses in 6 C circles – Orissa, Bihar, HP, Northeast, Assam and J&K. S Tel plans to launch wireless services before end 09. The deal gives S Tel
access to 10,000 towers of Reliance Infratel in these circles.

Coming on the back of a deal with Swan-Etisalat, this agreement will be strategic positive for RCOM, in our view, as tenancy of Reliance Infratel (Tower arm of RCOM) increases with third party tenants. Further, it will alleviate the broadly held concern over lack of third party tenants for Reliance Infratel and should lead to more deals over the next few months, in our view.

We expect the deal to ramp-up over the next 6-12 months and reach steady run-rate after 12 months. Given limited incremental investments, typical margins on such deals are quite high – 65%+ at EBITDA level in our view.

Author: Webmaster