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rating
Telecom Tower Infrastructure
companies
Navdeep
Singh(Telecom & IT)
Roll no-06
ICRA’s Approach to Rating Telecom
Tower Infrastructure companies
The strength of a telecom tower infrastructure
company lies in its ability to generate
sustainable cash flows and to maximize
returns on the capital invested, both of which
in turn are exposed to the risk factors
INTRODUCTION
ICRA Limited (formerly Investment Information
and Credit Rating Agency of India Limited)
It was set up in 1991 by leading
financial/investment institutions, commercial
banks and financial services companies as an
independent and professional Investment
Information and Credit Rating Agency.
The international Credit Rating Agency Moody’s
Investors Service is ICRA’s largest shareholder.
Today, ICRA and its subsidiaries together form
the ICRA Group of Companies (Group ICRA).
ICRA is a Public Limited Company, with its
shares listed on the Bombay Stock Exchange
and the National Stock Exchange.
Sustainable cash flows and the maximization of
returns on the capital invested are exposed to the
following risk factors :
Sponsor Risks
Ownership Structure
Operating Risks
a. Occupancy/Tenancy Level
b. Cost Competitiveness
Execution Risks
Market Risks
Contractual Risks
Counterparty Risks
Funding Risks
Financial Risks
Regulatory Risks
Need for study
Ownership Structure
Cost Competitiveness
Optimization of Capital Costs
Indicative Break-up of the
Capital Cost of Establishing a
Telecom Tower
Steel Tower
26 %
Approvals 01%
100%
TOTAL
Optimization of operating costs
Tenure of agreement
Penalty clauses for
premature exit from the
agreement
Re-negotiation of rentals
Coverage of space/ground
rentals
Funding Risks
The capital structure of the
company
The composition of debt
The nature of interest rate on
the debt.
The average cost of debt.
Financial Risks
ICRA offers Consulting services, IT-based services, Information
services, and Outsourcing services.
Strong brand and competitive strengths
Proven ability to make product and service innovations
Track record of Ratings
Experienced Management team and rich talent pool
Weakness
Threats-
1)Economic slowdown, especially
investment demand
2) Adverse debt and capital market
conditions
3)Stagnation in financial sector volumes
and contraction in structured finance volumes
during Q2.
SWOT Analysis of Tower
companies
Strengths-
Ownership Structure –
In India still there are very few
Independent tower infrastructure companies
(ITICs).
Operating Risks
a. Occupancy/Tenancy
Level – Occupancy level of towers is not
more than 1.7 which is required by a
company to earn reasonable returns.
b. Cost Competitiveness –
Tower companies haven’t reached cost
competitiveness levels.
Opportunities