American Tower Explores India

American Tower Corp. (AMT - Analyst Report) has geared up to expand its footprint in the emerging market of India. The tower sector in this country is undergoing a wave of consolidation. Smaller players are looking at mergers or complete sell-out to large global tower operators since they lack the wherewithal to take on their large rivals. American Tower has renewed its offer and started fresh negotiations to buy a majority stake in Essar Telecom Infrastructure Ltd, the second largest independent wireless tower operator in India. Industry sources indicate that American Tower has offered a price of $450 million for 4,000 towers of Essar Telecom. 

Last May, American Tower acquired more than 1,700 towers of XCEL Telecom Pvt Ltd in India. Prior to this acquisition, American Tower had entered a build-to-suit agreement with a Tier1 wireless carrier in India to construct 200 tower sites. The acquisition increases the total number of American Tower controlled wireless tower sights to over 26,000 throughout the world. Apart from Essar, the company is also eyeing 12,000 towers of Aircel Cellular. 

At present, India generates approximately 1% of American Tower’s total revenue. Management has fixed a target to increase this level to 5%−10% in the next few years. 

Despite being the largest wireless tower operator in the world, American Tower is facing stiff competition. After China, India is the second largest growth market for wireless services where the subscriber base is expected to reach 737 million by 2012. As a result, the leading global tower players are trying hard for a foothold quickly in this market. At the same time, operations in India will be low-cost for these companies, which will boost their operating margin. Crown Castle International (CCI - Analyst Report), the closest rival of American Tower, is currently in negotiations with two Indian towers operators − Aster Infrastructure and Independent Mobile Infrastructure Ltd. 

In addition to the U.S. companies, existing major tower operators in India are also trying to merge with small players to achieve the required economies of scale to compete with global giants. Tata-Quippo, a joint venture between Tata Teleservices (TCL - Snapshot Report) & Quippo Telecom Infrastructure Ltd; Indus Towers, a joint venture between Vodafone Plc (VOD - Analyst Report), Bharti Airtel, & Idea Cellular; and Reliance Telecom Infrastructure are moving aggressively to increase their size of operations.

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