Reliance Jio has entered into infrastructure sharing agreement with Viom Network , in which the latter will lease all its 42,000 towers, said Sunil Kanoria, vice-chairman of SREI Infrastructure , part owners of Viom.
"We have signed this agreement with Reliance Jio for sharing our towers for their rollout, planned both for the 4G and the new spectrum that they have taken recently in the 14 circles," he told CNBC-TV18's Latha Venkatesh and Anuj Singhal.
Though the financials of the deal have not been disclosed, analysts feel SREI Infra is likely to gain from the deal as it will help improve tenancy ratios of Viom. "We have the highest tenancy amongst entire tower industry. Thus, our pricing in this model would be among the best," he said adding Viom's tower tenancy ratio of over 2.3 will cross to 3 in the next 2 years because of the deal.
Viom Networks is a joint venture between SREI Infrastructure and mobile carrier Tata Teleservices . SREI Infra holds around 18 percent stake in Viom. Tatas own 54 percent and 46 percent is held by a group of shareholders led by SREI and the Kanoria family. The SREI Infra management had told CNBC-TV18 in an interview on March 6 that they were open to tower-sharing agreement with Reliance Jio.
Kanoria feels that Reliance Jio would overall need around 80,000 to 100,000 sites in the next 18 months. He believes that Viom would be able to provide 10,000-15,000 sites to the company in the next 12-18 months.
Kanoria said the company is now reasonably well-leveraged and "we have been able to cut down on our debt substantially in the past 15 months".
Reliance Jio has a tower sharing agreement with Bharti Infratel too. When asked whether there could be a possibility of overlap in some areas, Kanoria said the chances are less likely.
Kanoria added that the company is still in the exploratory stage to get Viom listed on the stock exchanges.
Below is the interview of Sunil Kanoria, Vice Chairman, SREI Infrastructure with Latha Venkatesh & Anuj Singhal on CNBC-TV18.
Anuj: We do not know the financial details of this transaction yet. Could you give us some more details since you have about 18 percent stake in Viom Networks?
A: We have signed the mast sharing agreement with Reliance Jio for sharing our towers for their rollout which is planned both for 4G and the new spectrum which they have taken recently in 14 circles. Basically it is an open agreement that all our 42,000 sites and the new sites which we would have, would be available to them for sharing and based on our planning on city to city then they will identify how many sites come into their radar which are owned by Viom.
Latha: What is the money involved?
A: It depends on how many sites would ultimately go in the next few years but Reliance Jio overall would need almost 80,000 to 100,000 sites in the next 12-18 months and we have that offering. We believe that we should be definitely able to provide 10,000 to 15,000 sites to them out of our existing sites and also the advantage is that because we have among the highest tenancy in this country among all the operators, our pricing as in this model as the second-third-fourth tenant comes in, there is a discounting factor to the new one who comes in on existing site. Our pricing would be among the best because our overall tenancy ratio in all our towers is among the highest.
Anuj: In this case is there any upfront fees that will help reduce the debt or is this all dependent on as and when the tenancy improves?
A: The company is now reasonably well leveraged; it doesn't have a high leverage. We have been able to cut down our debt in the last 15 months substantially and the levels which we are there today is reasonably enough to take care of its cash flow as it repayments, so therefore I do not think debt as a challenge but with this the revenues and the business should grow especially with data coming in, we have been continuously saying that the growth is back in this sector and in the next two–three-four years, we would see a good rampant growth in tenancy in this infrastructure sharing business.
Latha: Reliance Jio already has an infrastructure sharing agreement with Bharti Infratel as well. How does it work? You all will be offering the services in areas where you do not have common towers and which would those areas be?
A: The way we had build Viom in the last eight-nine years, we had a basic principal internally that we were not building a site if there was a site already in a particular area. We could not help stop others to build a site next door to us during the phase of growth in 2008-09-10 but as a result of that the overlap which we have with the other operators is very limited even with Bharti, Indus or any operator, the overall level of common sites is very limited which Viom has and that is the reason why our tenancy is among the highest because we are there where others are generally not there.
Latha: Can you give us some idea of what is the financial gain for Viom, after all that will also help us understand how the debt will move?
A: As I said whatever revenue we get it is going to come down right to the earnings before interest, taxes, depreciation and amortisation (EBITDA) of the company because we are already having a tenancy of over 2.3 and our debt is well covered for the tenancies which we have and we are now profit after tax (PAT) positive. Therefore, whatever revenue comes in, we have no expenditure as such. It comes in straight to our EBITDA and that would help us to grow our EBITDA and grow out profitability much more than many other operators.
Latha: Because of this deal you tenancy ratio could improve to how much?
A: It could cross 3 in next two years time.
Anuj: I want to understand what the exact shareholding pattern of Viom Networks is because that is an unlisted company. We know you have18 percent because you are a listed entity and that is the disclosure which is available but the rest 82 percent, if you could tell us who owns this 82 percent?
A: Tatas still own about 54 percent and 46 percent is a group of shareholders led by SREI and Kanoria family where we have other private equity investors within this 46 percent and 54 is Tatas and that is how the construct was when this joint venture was formed in 2008-09 when we bid and put out Quippo businesses into Viom and Tata has retained 54 percent. Out of the 46 percent 18 percent is with us and rest is within the private equity investors like IDFC Private Equity, GIC Singapore, SBI Macquarie, Oman Investment Fund, these are the other private equity investors and along with that we own combined as a group 46 percent.
Latha: When will you list or when is Viom likely to get listed?
A: We are still in the exploratory stage. We have appointed advisors to look at which are the markets where we can list, what are the opportunities, where we can get best capital at the best value perspective. The government has allowed foreign listing also, so our doors are open to both international and domestic. Therefore, at the moment the advisors are doing their studies. We hope that in the next couple of weeks we will get their feedback and based on that we will take a decision. Therefore, whatever may happen, it would be post elections.
