Bharti Infratel shares surge on company's infra sharing agreement with Reliance Jio Infocomm

Bharti infratel Ltd's stock has reacted positively to the Reliance Jio's deal with the former for sharing tower infrastructure. The stock has risen 5.6% to Rs. 202.25 on BSE in the morning as the deal is likely to nearly 20% rise in its absolute tenancy and nearly 11% to its expected annual operating profit for this fiscal.

Reliance Jio Infocomm, a subsidiary of Reliance Industries (RIL) on Tuesday announced the signing of a Master Services Agreement for infrastructure sharing with Bharti Infratel.Under the agreement, Reliance Jio would utilize the telecom tower infrastructure of Bharti Infratel to launch its services across the country.

This follows the earlier comprehensive telecom infrastructure sharing arrangement between Bharti Airtel and Reliance Jio Infocomm in December 2013 under which they would share the whole infrastructure created by both parties.This deal is likely to benefit Bharti Infratel as its tenancy ratio or tower sharing factor would see significant improvement once Reliance Jio starts full fledged roll out of its 4G services.

The agreement mentions that the pricing would be at ‘arm’s length,’ based on prevailing market rates. Considering the average rental received by Bharti Infratel per operation per month of Rs 34,124 in third quarter of this fiscal, this would amount to Rs 1,100 crore of incremental annual revenue at full utilisation (45,000 towers) by Reliance Jio. This amounts to additional 10-11% revenues for the firm who's expected consolidated revenue for fiscal 2014 is likely to come in.