How has the tower segment evolved over the past few years?

The tower industry has played a crucial role in the proliferation of telecom services in India and is an important backbone infrastructure contributing to the growth of the country. The government has acknowledged the importance of the industry and granted it infrastructure status.

The country’s tower infrastructure was established at breakneck speed in order to keep pace with the growth in the telecom space. Today, the industry has matured and all operators recognise the value of sharing infrastructure, instead of setting up their own towers. Therefore, going forward, this industry will offer major opportunities.

The tower industry will witness significant growth on account of 3G and 4G network roll-outs across India. As per Analysys Mason, mobile data will witness a compound annual growth rate of 52 per cent over the next five years. Also, the sector will require 44,000 new towers during this period. In addition, there are large parts of rural India where networks are yet to be set up. The current tower sharing ratio of 1.7 is expected to increase to 2.46 during this period.

How have tower requirements changed with the introduction of 3G and 4G technologies?

There is no change in tower design and the same towers are required for installing 2G, 3G and 4G equipment. We expect rapid growth in tower sharing factors to accommodate the higher volume of 3G and 4G network equipment at existing sites. In addition, several new towers will be needed.

 What are the operational challenges faced by tower companies in setting up infrastructure for operators?

The tower industry needs a single-window clearance mechanism for all statutory permissions. Also, given the power shortages across the country and the lack of grid connectivity, the industry is dependent on diesel-based power solutions. It is working to introduce alternative energy solutions such as solar power and battery-based hybrid models to reduce diesel usage. The industry requires incentives such as tax relief on alternative energy equipment and subsidy to support its green initiatives.

 How will the competitive landscape evolve for the telecom infrastructure segment?

The industry will remain fairly competitive in the short to medium term. Though there is not much room for major consolidation, the market is likely to settle down with three or four large tower operators.

What is your view on the current regulatory environment in this segment?

The tower industry has been awarded harmonised infrastructure status by the government, which is a positive development. We hope that the industry is given a status at par with other infrastructure sectors such as roads, ports and highways and it is provided the same financial benefits. Currently, the industry is working with various ministries and agencies for this purpose. We are also pleased that the proposal to bring IP1 players under licensing has been kept in abeyance after the industry highlighted the possible adverse impact of the move on the telecom infrastructure segment. The move would also have put an additional burden on telecom operators.

 What major trends do you foresee in the telecom sector?

India is poised for massive data growth, led by 3G and 4G services. The data subscriber base and data usage have increased over the past few quarters and this trend will gain further momentum. Going forward, mobile services will reach the next level of utility-based services like m-commerce, banking, education, health and entertainment, in addition to simple voice and messaging. Since data networks – both 3G and long term evolution – have been allotted the higher spectrum bands of 2.1 GHz and 2.3 GHz respectively, more towers will be required vis-à-vis 2G and this augurs well for tower companies as well as telecom operators who will benefit from a higher sharing factor.

 What are your plans for 2013-14?

The plans of tower companies depend on the roll-out plans of telecom service providers. The sector has started witnessing some acceleration in the roll-out of 3G data networks by operators in the wake of rapid data traffic growth, and the pace of roll-out is expected to gather further momentum in the coming years. We are ready to meet the growing demand. We will expand our footprint of solar/renewable energy-powered towers and are prepared to make large investments along with the Ministry of New and Renewable Energy, which is expected to finalise the subsidies required for this in the near future.

 What is the investor perception of the Indian telecom sector?

The environment has been somewhat uncertain in the recent past, given the several pending regulatory issues. This makes it difficult for investors to take an investment call on the sector.

 How have the 3G and 4G service segments performed?

The 3G segment is progressing well and we are witnessing healthy uptake of data services. The response to Bharti Airtel’s 3G services by customers has been positive with an annual traffic growth of more than 100 per cent. 4G services will take some time to be widely available as the technology/device ecosystem is not fully developed yet.

How have Bharti’s African operations panned out? How would you compare the African market to the Indian market?

Overall, the performance has been satisfactory. From where we began in 2010 to where we are three years later, the progress has been satisfactory. But Africa is a market where one has to be patient in terms of witnessing big shifts.

It is a continent where inadequate infrastructure poses challenges in fast network roll-out. As compared to India, the tariffs in this region are six to seven times higher due to very high manpower, transportation and other costs. In comparison to India, the income levels in Africa are low or the same, which is an additional challenge. But improving political and economic prospects and a vast youth population make it a very promising future telecom market – particularly for data and data-linked m-commerce services.

 Some industry analysts are of the opinion that 4G will find more takers than 3G. What is your view on this?

I disagree because the technologies are completely different. 3G does not offer the speeds supported by 4G for accessing broadband, but it is the only practical mobile solution for the common man to access the internet. 3G will offer a narrower broadband than 4G, but the latter cannot be a complete mobile service for a long time because the radius of a 4G signal is significantly smaller than that of 3G (let alone 2G).

To have 4G as a full mobile network, millions of towers will be required. Meeting this requirement is impossible in the current scenario. As a mobile solution, 4G will ultimately have to fall back on 3G in uncovered areas. 3G has witnessed significant traction so far and with the decline in the prices of hand-held devices, it will gain faster adoption. We are already witnessing a good response to 3G in terms of network traffic. Handset prices are falling steadily and I am sure that in the coming years, the price of 3G phones will fall to that of 2G handsets, which should be a good tipping point for the common man to use 3G.