Indus Towers Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Indus Towers Limited (INDUSTOWER) Q4 FY24 Earnings Concall

• 5G Rollout
  • Accelerated 5G rollout by major telecom operators continued in Q4.
  • Over 435,000 5G base transceiver stations (BTS) deployed so far.
  • Large 5G rollouts added to loading revenues and drove strong growth.
  • Wider 5G adoption expected to spur demand for new sites for network decongestion.
  • Company confident in leveraging 5G opportunity given leadership in passive infrastructure space.
• Subscriber/Data Usage Growth
  • 5G subscribers expected to grow from 131 million in 2023 to 575 million by 2026.
  • 17% of active 4G devices now capable of operating on 5G networks.
  • 5G’s contribution to total data traffic increased from 1.7% in 2022 to 15% in 2023.
  • Average data consumption per user per month for top 3 operators grew 14% YoY to 24GB.
  • Total data consumption grew 24% YoY in Q4 2023.
• Record Tower Additions
  • Company achieved highest ever quarterly and yearly tower additions.
  • Added 7,961 macro towers and 7,909 co-locations in Q4.
  • Full year macro tower and co-location additions were 26,862 and 25,757 respectively.
  • Industry-leading tenancy ratio at 1.68.
• Strategic Priorities
  • Focused on improving time-to-market, partner ecosystem, resource planning, product offerings.
  • Initiatives to reduce diesel consumption – energy storage, renewables, site conversion.
  • Added over 8,000 solar-powered sites in Q4 to expand renewable energy portfolio.
  • Achieved 100% collections from major customers, made some overdue collections.
• Financial Performance
  • Q4 reported gross revenues grew 6.5% YoY to INR71.9 billion.
  • Core rental revenues grew 7.7% YoY to INR45.8 billion, aided by tower additions and 5G loading.
  • Q4 reported EBITDA up 19% YoY and 13.3% QoQ to INR41 billion.
  • EBITDA margin improved 6% YoY and 6.7% QoQ to 57%.
  • FY24 reported gross revenues up 0.8% YoY to INR286 billion.
  • FY24 reported EBITDA up 50.4% to INR146.3 billion, PAT up 3x to INR60.4 billion.
  • Collected over 100% of average monthly billing, resulting in write-back of provisions.
  • Trade receivables increased by INR4.3 billion due to timing difference in collections vs provision write-back.
  • Cumulatively provided INR5,500 crore for doubtful debt, collected INR370 crore in Q4.
• Market Share Gains
  • Increased market share across all customers for new tower rollouts.
  • New tower rollouts primarily driven by one major customer.
  • 5G rollouts on existing towers counted as loading, not new rollouts.
• Future Business Outlook
  • Expect momentum of strong tower additions to continue for some more quarters.
  • High capex phase likely for some time due to accelerated customer rollouts.
  • New business from Vodafone Idea post fundraise likely incremental tenancies, not new towers initially.
  • Clarity on incremental business, dues clearance expected soon after customer discussions.
• Rental Outlook
  • Average rental per tenant (ARPT) expected to remain fairly stable.
  • Existing towers get annual rental escalations as per contract, around 2.5%.
  • New rollouts leaning towards lower rental but agile/nimble tower designs, creating some ARPT mix impact.
• Capex Visibility
  • Strong visibility for next few quarters based on customer forecast/order book.
  • FY25 expected to be high rollout year, aiming for additions higher than FY24 levels.
  • If additions moderate to pre-FY24 run-rates, capex could see sharp 50-60% decline in H2 FY25 or FY26.
• ARPT Outlook
  • Average rental per tenant (ARPT) expected to remain broadly stable.
  • Upward pressure from 5G loading revenues offset by downward mix impact from new lower-rental tower additions.
  • Around 8-12% of tenancies come up for renewal every year at discounted rates, creating downward pressure.
  • Renewal discounts part of framework agreed with customers in FY22.
• Lean Tower Strategy
  • Lean tower rollouts will continue alongside macro tower rollouts to cater to different customer needs.
  • Added close to 4,500 lean towers in FY24, expect higher share going forward.
  • Lean towers suitable for dense areas requiring capacity enhancement, while macro towers better for wider coverage.
• New Business Opportunities
  • Continue to evaluate potential new business opportunities beyond towers.
  • However, current focus remains on capturing strong tower market share growth.