Release Date: January 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indus Towers Ltd (BOM:534816, Financial) recorded the highest-ever tower additions in its history during Q3 FY24, with 7,563 macro towers and 7,217 co-locations added.
- The company saw a 6.4% year-on-year increase in total revenues, reaching INR72 billion, with core revenues from rental growing by 7.3% year-on-year.
- Indus Towers Ltd (BOM:534816) achieved a higher network uptime of 99.97% despite challenging weather conditions, showcasing operational resilience.
- The company made significant progress in sustainability, adding over 3,300 solar sites in Q3 and reducing diesel consumption by 7% year-on-year.
- The rapid uptake of 5G and ongoing migration from 2G to 4G is expected to spur demand for passive infrastructure, positioning Indus Towers Ltd (BOM:534816) well for future growth.
Negative Points
- The company continues to face challenges with energy margins, which were at negative 2.7% in Q3 FY24, impacted by past period settlements and reconciliation issues.
- Provision for doubtful debts remains a concern, with an additional provision of INR0.6 billion reported in the current quarter.
- The tenancy ratio has been impacted by significant single-tenant tower additions, which may affect profitability in the short term.
- Despite improvements, the collection of past overdue payments from major customers remains a work in progress, affecting cash flow stability.
- The company faces competitive pressures in the leaner towers market from regional players who claim faster delivery times and better geographical knowledge.
Q & A Highlights
Q: What is the status of our tower fiberization, have we achieved 100% coverage on tower fiberization?
A: The tower fiberization is currently at about 30% to 35% for most customers, with one operator having a slightly higher level. There is still a long way to go to achieve full fiberization.
Q: Are we witnessing demand for more sites from Jio or is the growth mainly coming from Airtel?
A: We have limited input on this matter; it is best answered by the operators themselves.
Q: Are we looking at broader digital spaces like data centers, especially on the enterprise IT side, once the demand for additional sites starts to notice?
A: It is too early to say, but if an opportunity presents itself, we will consider it. We are evaluating all opportunities where we can participate as an infrastructure provider.
Q: How do we account for payments from operators with overdue amounts?
A: Payments are first accounted towards old invoices, moving on a FIFO basis. This results in the reversal of provisions for doubtful debts when overdue amounts are collected.
Q: Why is the loading revenue from 5G not reflecting significantly in our sharing revenue data?
A: The revenue reported includes various elements, including upsides from loading and rollouts, but also downsides like lease accounting provisions and renewal discounts. These factors offset each other.
Q: Can you give more disclosure on the upside from loading revenue and the downside from renewals?
A: The upside from 5G loading revenue is broadly in the range of 5% to 10%. The downside from renewals continues as more portfolios come up for renewal, with about 50% to 60% of the portfolio still to be renewed.
Q: How do we protect our market share in the leaner towers market where regional players are becoming aggressive?
A: We have ramped up our commercial offering and execution abilities to be competitive. Our robust partner ecosystem and focus on uptime provide a differentiation that customers appreciate.
Q: What is the return profile for new towers based on a single tenant?
A: The return profile for new towers is generally in the low to mid double-digit range, with some cases being high single digits.
Q: How does the entry of Starlink and other satellite connectivity companies affect our business?
A: Satellite connectivity is expected to provide complementary services, primarily in uncovered areas. It is not seen as a threat to the tower requirements from operators at this stage.
Q: What is the outlook for dividend payouts given the regular payments from customers?
A: Our dividend policy is linked to the free cash flow of the company at the end of the financial year. We will evaluate the possibility of a dividend with our Board members based on the free cash flow at that time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
