A Crisil Ratings report says Indian telecom tower companies are heading for stronger growth over the next two fiscals, driven by renewed capital expenditure from telcos for 4G expansion and 5G rollouts, which will lift tenancy ratios.
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.
Improved Financial and Operational Metrics
"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.
Future Investments and Funding
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)
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