Back to top

Image: Bigstock

Brookfield (BIP) to Acquire Indian Telecom Tower Company

Read MoreHide Full Article

Brookfield Infrastructure Partners L.P. (BIP - Free Report) along with its institutional partners recently signed a binding agreement to acquire 100% stake in a telecom tower company in India from Reliance Industrial Investments and Holdings Limited (“RIIHL”). The completion of the transaction is subject to regulatory approvals. RIIHL is a wholly-owned subsidiary of Reliance Industries Limited (“RIL”).

Benefits of the Acquisition

The deal is valued at $3.7 billion, of which the firm has made a commitment of $375 million. The remaining amount will come from its institutional partners. The firms’ Data Infrastructure segment offers services and critical infrastructure to global communication companies.  RIIHL telecom tower company comprises 130,000 communication towers, which are located in throughout India for 4G coverage. The towers provide a platform to capitalize on 5G rollout and upcoming technologies. Brookfield Infrastructure is expected to generate significant revenues from RIIHL post completion of the deal. Also, Reliance Jio is an anchor tenant of the tower portfolio under a 30-year Master Services Agreement. It is also expected to provide a secure source of revenues for the new owner of the telecom tower company.

We believe that investing in India’s high-growth data industry is an appropriate decision by Brookfield Infrastructure. It is in line with the partnership’s idea of investing in high-quality telecom business. Through a tower build-out program, the partnership is expected to increase tower portfolio to 175,000. The company can also rent its towers to other telecom service providers in India and generate more revenues.

Experience in Indian Market

This is not the first time that the partnership is investing in the Indian market. In March 2019, Brookfield Infrastructure invested $2 billion to buy East West Pipeline Ltd from Reliance Industries.

Long-Term Plans

The firm’s Funds From Operations (FFO) from data infrastructure segment amounted to $94 million in the first nine months of 2019, up 65% on a year-over-year basis. The upside can be attributed to contribution from recent investments that expanded its global presence. Notably, Brookfield Infrastructure targets Europe, North & South America and Asia Pacific for its Data infrastructure services.

The recent acquisition is expected to support the partnership’s plans to execute a margin improvement and commercialise 5G services in the near future.

Price Performance

In the past 12 months, units of Brookfield Infrastructure have surged 46.8% compared with the industry’s growth of 13.7%.



Zacks Rank & Key Picks

Brookfield Infrastructure currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks from the same industry are FirstEnergy Corporation (FE - Free Report) , Southern Company (SO - Free Report) and The AES Corporation (AES - Free Report) . All the three stocks hold a Zacks Rank #2(Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth of FirstEnergy, Southern Company and The AES Corporation is pegged at 6%, 4.5% and 8.49%, respectively.

FirstEnergy, Southern Company and The AES Corporation delivered an average positive earnings surprise of 2.87%, 8.21% and 4.68% in the last four quarters, respectively.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”

Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.

See 7 handpicked stocks now >>

Published in