“Sweating the assets” - the Bharti Infratel / Indus case study
As I was travelling to India last month, I came across the news that Bharti Infratel had just IPOed at a $7 billion valuation. The company is a spin-off from the Bharti Airtel telecom operator, set up to independently manage all of their tower infrastructure.
This reminded me of my time at UBS where I spent a year working on a couple of similar projects for African operators, to no avail unfortunately. These deals, especially when they attempt to pool assets from multiple operators together (as is the case with Indus Towers, which owns and manages towers previously owned by Bharti, Vodafone and Idea) are hard to put together (it’s not easy to value a portfolio of thousands of towers across a large area) but incredibly appealing in economic terms.
It is a win-win-win situation:
- the tower company can optimise the occupancy rate of its assets by having more than one operator on each tower (thereby “sweating the assets”)
- the operators can transfer large capex to smaller, more flexible opex. They can also get a faster and broader geographical coverage.
- the public and the environment benefit from less towers being built and cheaper rates if operators decide to pass on their savings
We, at Index, have invested in many consumer-focused “sweating the assets” type of companies: Housetrip and OneFineStay for homes, Voiturelib for cars - but the Bharti Infratel / Indus case study shows that the B2B opportunity can be very large too.