Telecom Tower companies to see 5-6 per cent tenancy growth on telco capex, returns to improve: Crisil Ratings
New Delhi, June 17
Telecom tower companies are headed for a stronger growth phase over the next two fiscals as renewed capital expenditure by telcos lifts tenancy ratios and improves asset returns, Crisil Ratings said on Wednesday.
"Renewed capex push by select telcos for expansion of the 4G network and 5G rollout is likely to accelerate tenancy growth to 5-6 per cent over this fiscal and next, even though spending by some large telcos remains calibrated," Crisil said in its report. The ratings agency added that notably, more tenancies on existing sites because of network expansion in overlapping circles will lift the tenancy ratio to 1.46-1.48 times by March 2028.
The better utilisation of existing infrastructure will strengthen operating leverage by enabling tower companies to absorb fixed costs more efficiently. Consequently, the Ebitdar margin of the players is projected to increase to 50 per cent in fiscal 2028 from 48 per cent over the two fiscals through 2026. Return on capital employed is also estimated to improve to 17 per cent by fiscal 2028 from 14 per cent in the previous two fiscals, reflecting more efficient asset utilisation.
Crisil's analysis of three towercos, which account for 90 per cent of towers in the independent telecom tower industry, shows the sector is reversing years of moderation in tenancy ratio. Towercos saw tenancy growth of 6 per cent in fiscals 2024 and 2025, supported by 5G rollouts, network densification and rural expansion by leading telcos. However, tenancies were added largely on single-tenant towers after telecom consolidation, dragging the tenancy ratio down to 1.42 times in fiscal 2025 from 1.47 times in fiscal 2023. Last fiscal, tenancy growth slowed to 4 per cent as network expansion by some large telcos moderated.
The report said towercos will continue to invest to support growth and cost optimisation. Says Nitin Bansal, Associate Director, Crisil Ratings, "Towercos are estimated to undertake annual capex of Rs 10,000 crore over fiscals 2027 and 2028 for adding new towers, upgrading existing sites and deploying energy-efficient solutions, such as solar systems and lithium-ion batteries. Strong internal accruals will likely fund majority of the capex, limiting reliance on debt."
As a result, leverage will improve, with net debt including lease liabilities to Ebitdar expected to decline to 1.8-1.9 times in fiscal 2028 from 2.0 times in fiscal 2026, keeping credit profiles stable. Crisil added that the pace of network expansion by telcos remains monitorable and will determine the actual pace of tenancy additions.
— ANI
Reader Comments
5G rollout is great, but what about the affordability? With inflation and rising costs, common people are struggling. Tower companies might see profits, but will data prices come down? Doubt it. 🤷♂️
Interesting read. The focus on energy-efficient solutions like solar systems is a smart move. India needs sustainable infrastructure, especially with our climate goals. Hope these companies also think about reducing e-waste from old equipment.
As someone who works in the telecom sector, this is spot on. The tenancy ratio improvement is crucial for profitability. But let's not forget the ground reality - many towers still face issues with local disputes and power supply. Infrastructure is only as good as its implementation.
Crisil's reports are always so detailed. The 50% Ebitdar margin target sounds impressive, but I worry about the environmental impact of all these new towers. Hope they're following proper radiation norms and not just rushing for profits. Public health should not be compromised. 🌿
Finally some good news for the telecom sector! After the Jio revolution and then consolidation, it's been a tough ride for tower companies. The 5G push is what we needed. But I'm skeptical about the Rs 10,000 crore capex - will smaller players be able to compete with the big boys? Only time will tell.
M