As the telecom revolution is now slowly but surely moving towards rural India, passive infrastructure is what the operators are focusing on as the most crucial factor that will help them achieve the desired rural penetration even while consolidating in the ever-lucrative urban markets. With the government’s firm push towards increasing rural teledensity as a means to achieve the overall teledensity goals, coupled with the prospect of a good market in rural areas that are beginning to discover the benefits of mobile telephony, the service providers are now very keen to develop passive infrastructure, particularly the telecom towers. And if in urban areas, each company can afford to have towers exclusively for their own use, because of widely-dispersed population in rural areas, it makes economic sense to share the infrastructure among service providers. 

No wonder when on December 8, 2007, Bharti Infratel Ltd, Idea Cellular Ltd and Vodafone Essar Ltd jointly announced the formation of a company Indus Towers, to provide passive infrastructure services to all operators on a nondiscriminatory basis, no one was surprised. Aiming to erect around 70,000 telecom towers in the next two years, Indus Towers has been formed with the mandate to help the mobile sector to achieve the government’s teledensity goals and broader rural coverage. Interestingly, since towers under this company will also be available to operators who are not among the three partners, the new company will help many in optimising efficiency and reach without spending on capital expenditure.

Greater reach

Indus Towers said in a recent announcement that the towers would help the consumers through improved network reach and quality, apart from being a major step towards achieving the government’s vision and TRAI’s recommendations for passive infrastructure sharing. It will lead to lower cost and more competitive operating environment for operators.

Under the agreement, the three companies will merge their existing passive infrastructure assets in 16 telecom circles in India, with Bharti and Vodafone Essar owning approximately 42 per cent each and Idea the remaining 16 per cent stake in Indus Towers. “Indus Towers will be an independently managed and operated company, offering services to all telecom operators and other wireless services providers such as broadcasters and broadband services providers,” says Bharti Airtel Joint Managing Director Akhil Gupta.

This was not the first case in tower sharing. Reliance Communications TowerCo has also started an ambitious programme to set up around 25,000 tower sites across the country this fiscal, taking its total to 40,000. To focus on what it calls the world’s largest tower site acquisition programme, Reliance TowerCo has even launched a portal called http://btssite.relianceada.com so that it can have a direct interface with site owners across the country. The site acquisition process happens largely through aggregators/intermediates who identify sites and are the interface between the company and site owners, but Reliance officials say a direct interface like this would enable the site owners and the company to avoid middlemen, resulting in a faster, transparent, hassle-free deals at an optimum cost.

Searching through internet

Any site owner can log on to the portal and fill in the required fields about his site location including the geographical parameters, site topography, commercial offer, etc, and based on the strategic fit,  the company would get in touch with the site owner for further processing. In a bid to make it easier for those offering sites for towers to Reliance, the company offers the option of “master tenancy agreement” to cut down on the costs. This exercise, according to Reliance sources, would cut down the overall cost of site acquisition as well as time required by 25-30 per cent.

Tata Teleservices (TTL) is another mobile operator planning to divest up to 49 per cent stake in its tower infrastructure company Wireless TT Infoservices limited (WTTIL). The company is hoping to erect around 10,000 towers by March, 2010. Why are service operators hiving off key infrastructure in a separate companies? Giving the logic behind forming Indus Towers as a separate entity, Akhil Gupta said, “The purpose is to ensure that it is common infrastructure to be shared, so that all the operators can pool the infrastructure.”

According to Mr Gupta, the company’s board will decide exactly how many towers to construct in the next two years. “The infrastructure will be available to all operators with absolutely the same terms and conditions that will be available to the promoter companies, in the form of common master service agreements,” he adds.
While the company would move according to future requirements, since more roll out is expected to happen in rural areas, a significant amount of towers are likely to be set up in rural areas. “Passive infrastructure can be shared by all. Even CDMA (a rival technology to GSM) operators are welcome to share them,”Mr Gupta says. Most of the tower operators, in fact, could be expected to operate broadly with a similar philosophy.

R-Com the pioneer

According to a Reliance Telecom Infrastructure Limited (RTIL) spokesperson, Reliance Communications was the first telecom operator to demerge its Tower Assets in a separate subsidiary. “The move was aimed at keeping the balance sheet of RCOM asset light and to have a strategic focus on creating operator-neutral tower infrastructure in the country,” the spokesperson said. RTIL says it would become the world’s largest tower company in tenancy ratio terms with over 1,00,000 tenancy slots available by the end of this fiscal. Incidentally, RTIL’s offer to place a 5 per cent stake with financial investors evoked tremendous response, and according to the spokesperson, seven of the world’s leading financial investors picked them up valuing the company at Rs 27,000 crore in July 2007.

Technically, RTIL’s towers can host at least four tenants and most of the towers are being upgraded to host seven tenants, and can host electronics for 2G, 2.5G, 3G, 4G and any future technology. RTIL says that its towers are connected over one lakh km of domestic long distance and over 65,000 km of international long distance fully IP-enabled optic fibre. “RTIL’s Tower Infrastructure expansion would result in 97 per cent of the Indian population coming under the RCOM Network, spread across 23,000 towns and six lakh villages,” the spokesperson informs. Industry experts say that the developments in the telecom sector are happening only according to the growth pattern, particularly as individually-erected new towers particularly in the semi-urban and rural areas might not be cost-effective because of sparse distribution of population.

In such a scenario, it makes sense to share the infrastructure, thus bringing down costs in direct proportion to the number of users. According to one estimate, a tower erected on ground could cost up to Rs 25 lakh while one on a roof could involve expenditure of around Rs 15 lakh. Add to that the rental to the owner of the land or premises, the power charges and maintenance costs, and the total figure would not seem very appetising for a single operator at all, particularly if the tower is to be located in a sparsely-populated area.

Even in urban areas, the required number of towers is growing because of the frenetic growth in the number of subscribers of each operator, which has put immense pressure on the current number of towers leading to complaints of call drops and what not. Bigger telecom players, while utilising their own towers to maximum advantage, can, in fact, earn additional revenue by hiring out the remaining capacity to smaller operators. Incidentally, apart from the big Indian operators, specialist companies like Quipo, GTL and American Towers have also entered the fray.

While the volume of the business can be guesstimate from the recent decision by Reliance Communications to offload some stake in its tower business, leading to valuation of its 14,000 towers at Rs 27,000 crore. Bharti Infratel Ltd, which has reportedly transferred about 29,400 towers to Indus Towers, is also said to be exploring the possibility of divesting some stake of the 20,000 towers it still owns in the seven circles of J&K, Orissa, Bihar, Assam, North-East, HP and MP.