Subscribe to Bharti Infratel IPO, say KRChoksey
KRChoksey has come out with its report on Bharti Infratel IPO. According to the research firm, high capital requirement and comprehensive technology are major entry barriers for new entrants and it reduces risk for the company on operational front. One can subscribe to this issue, says research firm.
December 04, 2012 / 15:18 IST
KRChoksey has come out with its report on Bharti Infratel IPO. According to the research firm, high capital requirement and comprehensive technology are major entry barriers for new entrants and it reduces risk for the company on operational front. One can subscribe to this issue, says research firm.
Bharti Infratel is the largest tower infrastructure provider in India with 80,656towers, which is 37.8% of tower market share. The company enjoys 42.5% of tenancy market share. Vodafone and Idea which are co-owners of Indus, have 70% revenue market share including Bharti Airtel. This gives supports strong revenue growth in future.Also Read: Veto Switchgears looks reasonably attractiveExtensive presence in telecommunications circles with high growth potential: Bharti Infratel along with Indus has nationwide operations across 22 circles in India. The company has a significant presence in B Category and C Category presence telecommunications circles while Indus operates in the metro telecommunications circles and A, B and C category circles. Increasing demand in data services and untapped consumer potential for voice services will lead to more service providers approaching for tower infrastructure services which drive growth for Bharti Infratel and Indus, which combined is the largest tower infrastructure company in India.Long tenure contracts with the leading wireless service providers
Bharti Infratel and Indus have MSAs (Master Service Agreements) with tenure of 10yrs to 15 yrs with the leading wireless service providers in India. Early termination of these contract triggers significant penalty payments by the customer. These adverse consequences of contract termination provide stability to Bharti Infratel and Indus’s business throughout the term of the MSAs and provide visibility with regard to future revenues.Entry barriers for new players as the tower infrastructure is capital intensive and requires comprehensive technology: To build a single telecom tower requires anywhere between Rs 2.5mn to Rs 3mn capital. Also comprehensive knowledge of technology is required for efficient operation. These are major hurdles for any new player in the tower infrastructure industry.Strong financial position and access to capital
We believe that the strong balance sheet and ready access to capital of Bharti Infratel and Indus enhance their ability to expand their tower portfolio at the rate, in the manner and within the constraints required by wireless telecommunications service providers. We believe that financial strength of Bharti Infratel and Indus is a key differentiator in a capital intensive industry.Valuation & Outlook: Bharti Infratel’s IPO is coming at ~26% discounted valuation at 13.7x EV/EBITDA to global average of 17.4x. We believe long term contracts with leading wireless service providers give strong revenue visibility in future. The company enjoys market leader position in both tower market share and tenancy. High capital requirement and comprehensive technology are major entry barriers for new entrants and it reduces risk for Bharti Infratel on operational front. We recommend to "SUBSCRIBE" this IPO.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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