Quadrangle has Asian debut with Indian towers

The deal aims to tap into opportunities created by capacity issues, technology changes and growing demand, by targeting India’s self-styled second largest independent tower management company.

Quadrangle acted as lead investor for consortium of seven other financial institutions, none of them apparently having the same TMT industry depth as the private equity firm, which also secured the largest stake. The total value does, however, include a
a separate bank debt raising by Tower Vision.

“We’re really pleased to be making this investment in Tower Vision. The tower sector is one with which Quadrangle is very familiar globally, and the industry dynamics in India are very unique and attractive,” Edward Sippel, Managing Principal with Quadrangle in Hong Kong, told AVCJ.

Industry structure

According to its materials, Tower Vision currently operates 5000+ sites across 14 Indian cities, each of them managed by the company but shared between a number of wireless operators. The business is therefore highly scalable, both in terms of further expansion of coverage and potential for low-cost incremental revenue increases by bringing in more operators to share sites.

“The tremendous growth in the tower industry in India is being driven by the intersection of three common themes in the Indian market – growing consumer demand, upgrading infrastructure, and increasing use of outsourcing,” noted Sippel. The investment case for the Tower Vision deal is very much more than just a consumer story – as pressure on existing tower capacity is being driven by regulatory restrictions on available bandwidth for wireless carriers and the poor existing fixed-line infrastructure as much as it is by rising consumer incomes. Furthermore, the Indian carriers, like many other industry sectors in the Subcontinent, are completely conversant and comfortable with outsourcing important parts of their business platform to third parties.

India’s tower infrastructure, though easier to build out and less restricted than the local fixed-line market, still has its own quality issues, with most sites requiring backup power and facilities at risk from vandalism and theft. Operating costs are hence quite high, and companies need capital.

Towering opportunity

However, there are great longer-term opportunities for the business area. For one thing, official restrictions are taking up capacity that could potentially be released to the private sector – India’s Ministry of Defence apparently still reserves spectrum against the possibility of a confrontation with Pakistan. Also, cellular tower infrastructure across India is due for upgrade, with WiMax and 3G license auctions due this year. And, given the continuing quality and developmental challenges of India’s fixed-line sector, any future growth of Internet broadband penetration in India is likely to be driven nationwide over wireless networks.  

Quadrangle’s industry expertise in the sector was therefore instrumental in closing the deal, and – according to AVCJ industry sources – appears to have helped the firm secure an attractive entry valuation.

“This deal was a true global effort that leveraged the tower & wireless sector expertise and experience across the firm,” Sippel said of the investment process. “We had two of my partners and several colleagues in the US, together with a US-based senior operating executive from the tower industry, all working, including extensive time on the ground in India, in helping the Hong Kong office analyze the sector and this deal.”

 Asia Pacific’s TMT sector has lately been more distinguished for problem deals and partnership difficulties, with the departure of former MD and ex-Star TV Asia CEO Michelle Guthrie from Providence Equity Partners in Hong Kong only the latest instance. However, Quadrangle’s latest success with the deal suggests that the sector is far from barren, and likely to yield more opportunities in future – provided the GP can bring a significant value add, and preferably deep sectoral experience, to the table.

“We are pleased with the quality and breadth of our deal flow in Asia which is broad-based across geographies, across various subsectors within the communications and media industries, across the lifecycle of businesses, and across deal types,” Sippel concluded.

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• Topics
• South Asia
• Technology
• Expansion
• Quadrangle Group Asia