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With new players rolling out services, the stage set for 3G, and rural areas representing the next level of growth, infrastructure sharing has become crucial for the Indian telecom market. In this scenario, infrastructure providers such as GTL Infrastructure are looking at busy times ahead. In an interview with tele.net, Manoj G. Tirodkar, chairman, GTL Infrastructure, discusses the opportunities, challenges and the future of the telecom infrastructure industry and the future plans of the company. Excerpts...

What are the key growth drivers of the telecom tower-sharing industry?

The company's main customer segment, mobile operators, faces significant challenges and opportunities in the times ahead. Continued strong subscriber growth has caused a tremendous increase in network usage and has resulted in capacity roadblocks on their networks.

Hence, the tower sector is expected to experience sustained growth due to the demand for telecom infrastructure on the whole, and for shared passive infrastructure in particular. The chief drivers of growth are expected to be the expansion efforts of existing and new operators, operators' efforts to improve service quality and network capacity, and the introduction of new technologies like 3G and Wi-Max.

Existing operators who received pan-Indian and dual-technology licences in 2008 are aggressively expanding their networks into the Category B and C circles. They are launching services and expanding at a rapid rate, creating demand for co-location of towers in those areas.

The entry of new operators will create an opportunity for tower sharing in the metros and Category A circles initially, where the first phase of their rollout is expected. These operators are expected to launch their services to meet periodbased targets set by the Telecom Regulatory Authority of India (TRAI) for their rollouts.

Similarly, the fast pace of subscriber additions is adversely affecting the quality of services offered by operators. The transition to data-centric traffic will add further stress on the networks. The implementation of mobile number portability is expected to increase subscriber churn. All these factors will be on the operators' mind when they plan network expansion and this should be favourable for companies like us.

What are the concerns that need to be tackled? What further steps should the government take to address these issues?

As an infrastructure company, we have a substantial role to play in spreading telephony to each and every part of India.
Many government initiatives and policies have been hugely supportive of the industry, but we believe that granting infrastructure status to IP 1 players would also help the industry to raise requisite finances from our investors.

What is the current status of GTL Infrastructure's tower portfolio?

The company owns 10,200 towers at various stages of completion in 20 telecom circles, rolled out in less than three years of full-fledged greenfield operations. Around 90 per cent of the investments in towers are in semi-urban and rural areas. We have signed agreements with leading telecom operators and have Wi-Max operators as tenants on our towers. The contracts are typically for a period of 10-15 years.

What are your future expansion plans? Are you planning to increase the level of investments?

Several of our customers have announced high tower requirements, spanning across 2G/3G rollouts. We have a longer-term goal of rolling out 23,700 towers by March 2011 and are confident of our ability to build on our strengths in the years ahead to have approximately 50,000 towers by 2012-13.

We intend to grow our per tower revenues and cash flows, as many of our towers have significant capacity available for additional antenna space which can be utilised at low incremental costs. The entry of new operators and the introduction of 3G technology deployment are expected to drive tenancy growth.

Our current portfolio has a large component of GBTs. We are also building rooftop towers by rolling out more towers in urban and semi-urban areas than the current year. This has been done to cater to the tenancy demands of new operators and 3G licence winners in metros and Tier 1 cities.

We are also offering value-added services such as energy management solutions at our cell sites, resulting in significant cost savings in the monthly power and fuel charges for operators and a reduction in greenhouse gas emissions as well.

Operator-driven tower companies own sizeable tower portfolios and have the advantage of having captive tenancy on all the cell sites they own. We believe that we complement and not compete with the operator-driven tower companies. We have seen significant tower demand in financial year 2009 from all other operators who own tower companies. We expect this trend to continue. We believe that tower location and capacity, price and quality of service have historically been and will continue to be the most significant factors for operators.

Ultimately, every network-sharing deal requires significant alignment and commitment between operators who typically compete. Each operator has its own unique network layout and tends to follow its own network expansion plan, independent of that of its sharing partner. Network-sharing discussions often fail, even at very advanced stages in inter-operator sharing, because of differences in network layout plans.

Do you expect more consolidation in the tower-sharing industry? What are the advantages of such consolidation?

We believe there is a strong rationale for consolidation among tower companies.
Through acquisitions, we expect to achieve a competitive advantage and higher returns for a given amount of infrastructure provisioning revenue. The key operational criteria for consideration comprise the network footprint, capacity of the towers, the sharing potential of the towers, future rollout commitments, and the existing occupancy.

How will the introduction of mass 3G and WiMax services impact the telecom tower industry?

What are the problems associated with putting up towers in rural areas?

The rural areas have emerged as one of the important markets for telecom operators as they continue to focus on adding subscribers. As part of their long-term strategy, the operators are continuously expanding their network footprint in semi-urban and rural areas where nearly 70 per cent of India's population resides. This leads to cost optimisation challenges for operators, which are further accentuated by low ARPUs in these areas. Shared infrastructure offers a ready solution by reducing the expenditure incurred by the operator on deploying and maintaining the infrastructure. This helps the operators to increase their market share in a cost-effective way.

However, we have been able to gain a significant presence in the rural and semiurban areas because of our strong project management expertise and network rollout capabilities.

In the US and part of Europe, the towersharing model has been successful. Mostly, towers are owned by third-party tower companies. The three leading independent tower companies are American Towers, Crown Castle and SBA Communication.

Unlike the US and India, the passive telecom infrastructure business never really took off in Asian countries due to reasons like one or two operators controlling the market, the lack of large area coverage requirements (urban, rural, highways, inbuilding, etc.), healthy voice pricing and margins, lower minutes of usage and availability of spectrum.

Many of the countries in the AsiaPacific are also actively looking at infrastructure sharing. According to some reports, five Asian regulators have announced policies related to infrastructure sharing this year or to impose price limits pertaining to existing or new networks. Each has its own model for infrastructure sharing aimed at reducing costs and accelerating the development of facilities, no doubt motivated by the different regulatory and competitive climate.