Amit Sharma, Executive VP and President, Asia, American Tower

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Amit Sharma, Executive VP and President, Asia, American Tower

March 15, 2009

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With infrastructure sharing emerging as a key thrust area as operators roll out services, particularly in the rural areas, Amit Sharma, executive vice-president, and president, Asia, American Tower Corporation (ATC), sees huge opportunities for telecom infrastructure companies. Sharma, who has been associated with the telecom industry for over a decade, including a long stint with Motorola, discusses the issues and challenges of infrastructure sharing and its growth potential. Excerpts from the interview...

How important is India's telecom market for ATC?

India is one of the fastest growing wireless telecom markets, with a rapidly expanding subscriber base and numerous wireless carriers that are building networks to serve them. To support this growth, the tower market is expanding, which makes the Indian market an attractive one for us. India's political stability and economic fundamentals have made it our entry point into Asian markets.

From an ATC perspective, we have a long-term vision and strategy for the Indian market.As an organisation, it is critical for us to enter any market with a sustained growth strategy. We have demonstrated this in the US and Latin America, and believe we can replicate the same success here as well.

What are the main advantages of infrastructure sharing and to what extent can capex be reduced in rolling out networks?

Infrastructure sharing is perceived as one of the most costeffective and fastest means of expanding and enhancing a carrier's network of antenna sites. The challenge is to optimally utilise the available resources. India is on the threshold of advanced services like 3G, which will require a sound telecom infrastructure. Also, for these services to be priced competitively, an effective low-cost solution like infrastructure sharing would suit operators' needs best.Moreover, it works best in a scenario where the falling tariffs are squeezing operators' margins. Hence, as networks grow and ultimately mature in India, many components of the network can be shared. Talking just about towers, an operator can reduce the capex and opex substantially, depending on how many parties are sharing the tower. As a rule of thumb, capex and opex can be reduced by approximately a third or more on a shared site.

What are the international trends in this space?

I would look at the US for trends as it is the oldest market for independent tower companies. Once the market for telecom operators reaches maturity, it is seen that they tend to focus on their core competence – providing high quality wireless service to consumers – while leaving passive infrastructure sharing to independent tower companies such as ATC. This is good for market growth and profitability as it eliminates the need for operators to depend on their competitors' towers and results in a higher level of sharing on the towers of independent providers.

In India, we are at the first stage of the tower market where operator-owned tower companies dominate. The Indian wireless telecom industry is still at a dynamic growth stage and we should see a lot of changes in the tower industry in the years to come when the wireless market matures.

How would you place ATC amongst its rivals?

ATC Tower Company of India Private Limited is a 100 per cent subsidiary of the American Tower Corporation, which is one of the largest independent tower companies worldwide. Founded in 1995, ATC is a leading wireless and broadcast infra-structure company with a portfolio of over 23,000 communication sites, including wireless communication towers, broadcast communication towers and distributed antenna systems. Its portfolio of wireless and broadcast sites consists of towers that it owns and towers that it manages pursuant to long-term lease arrangements, including over 19,500 tower sites in the US and approximately 3,500 tower sites in Mexico and Brazil. ATC's portfolio also includes approximately 150 in-building distributed antenna systems that it operates in malls, casinos and hotel resorts in the US. In addition to the communications sites in its portfolio, it manages rooftop and tower sites for third parties in the US, Mexico and Brazil.

Though on a global level ATC is one of the largest and most mature tower companies, we are still in our infancy in the Indian market in terms of size. But on the ground, we are building towers for multiple operators and our focus on customer service, quality, strong processes and staying power will differentiate us from our competitors over time.

With service providers pooling their resources to get into infrastructure sharing, how would primary infrastructure companies be impacted?

The impact of operator-owned tower companies on independent tower companies is indeed substantial. But sheer market demand gives independent tower companies an opportunity to serve various segments.

What has been the high point of ATC's performance in the past year?

We do not focus on quantity but on quality. We might have fewer towers, but we plan to provide the most efficient service to our customers and lead the industry in the number of tenants per tower. Though we entered the industry late, we are already on par with the industry average on collocations.

Which are the areas in which the company can improve?

As a new entrant in a vibrant market, the major focus for us is on building our team and our processes. We are looking to leverage this to win new build-to-suit and collocation orders from both existing and new operators.

What are ATC's thrust areas and targets for the future?What role will India or emerging markets play in this?

With mobile penetration increasing rapidly, the Indian wireless telecom industry is certainly going through some exciting times. A number of firms from across the globe are showing interest in capitalising on the emerging opportunities in this market, thereby delivering efficient communications services to the Indian population.

With our long-term vision and strategy for the Indian wireless market, ATC continues to be interested in participating in this growth as an owner and operator of wireless communication sites. We look forward to leveraging our core competencies, which have garnered us success in the US, Mexico and Brazil over the past 10 years. These core competencies include focusing on maximising the collocation potential of our towers, best-in-class customer service, the fastest cycle times in the industry and, in turn, the highest revenue and cash flow per tower amongst our industry peers.

What are the likely future trends in this space, both in India and abroad?

The government plans to achieve a mobile subscriber base of 500 million by 2010, up from about 360 million at present, through improved coverage of rural areas. The telecom regulator has estimated that the industry will require 300,000 towers by financial year 2011, but this level of building will likely keep collocation rates low. The situation should lead to longer payback periods for tower companies and trigger consolidation in the sector.

We have been building towers with collocation in mind and believe that this would be an increasingly important trend in the future. This means that the emphasis will shift from the number of towers to the number of tenants per tower.

What are the key issues and concerns in the Indian market?

A major challenge is that operatorowned tower companies are currently the major players in the shared infrastructure segment. This means that our largest potential customers are also our biggest competitors. Until the industry structure changes, we will be forced to compete with certain customers and will be limited in our ability to collocate these customers on our tower sites. The other issue is that lease rates have not adjusted to reflect the sharp increase in cost of capital that occurred at the end of 2008. Some tower companies are likely to change their pricing behaviour or they may face economic Darwinism.

What level of investments are you looking at over the next two-three years for India?

We are looking to grow significantly, but profitably, in the tower market in India and believe that we have the financial resources needed to achieve this goal. We aim to strengthen our team in India and replicate the success we have achieved in other markets. However, our specific plans are highly dependent on the evolution of the market and the opportunities for both organic and inorganic growth. "Collocation would be an increasingly important trend in the future. This means that the emphasis will shift from the number of towers to the number of tenants per tower."