The entry of several new operators into the telecom sector has given a fillip to the infrastructure sharing segment. In a panel discussion at the conference, top executives of major infrastructure companies spoke about their development plans, future prospects and challenges. The following are excerpts from the discussion...

Sanjeev Chachondia
COO, Essar Telecom Infrastructure
Essar Telecom Infrastructure Private Limited (ETIPL) is a subsidiary of Essar, which is a major player in several fields including telecom, oil and gas, steel, power, shipping and logistics. ETIPL's areas of expertise are implementation of turnkey telecom infrastructure, the operation and maintenance of passive infrastructure, designing, acquiring, building and procuring passive infrastructure for cell sites, radio frequency planning and optimisation as well as active infrastructure sharing.

The Indian telecom space is marked by sharply declining tariffs and handset prices, and an ever-increasing subscriber base. As a result, it is estimated that more than 360,000 towers will be required by 2011. This, in turn, will result in operators spending over $12 billion as capital expenditure over the next three years.The main factors contributing to the rapid growth in demand for towers include the large number of operators in the market (all players aim to step up their networks to accommodate new subscribers), heavy competition, low and rapidly declining average revenue per user, high minutes of usage, scarcity of spectrum and low teledensity.

The main players in the market can be divided into four categories: operators who own towers (such as Bharat Sanchar Nigam Limited [BSNL], Mahanagar Telephone Nigam Limited and Aircel); tower companies set up by a single operator (Bharti Infratel, Reliance Telecom Infrastructure and Tata Teleservices' Wireless TT Info Services Limited); joint venture tower companies (Indus); and independent tower companies (ETIPL, GTL Infrastructure, Quippo Telecom).Today, the main challenge before these companies is to maximise profits while optimising costs. We feel that this can be achieved by systematic planning, operational efficiency, innovation, economies of scale, and incurring the lowest possible cost on various business functions.

Overall, despite the changing market dynamics and operators setting up their own tower companies, there remains a strong business case for independent telecom infrastructure companies.

Prakash Ranjalkar
Director and COO, GTL Infrastructure Limited
In the past two years, GTL Infrastructure Limited (GIL) has demonstrated its potential by simply putting towers on the ground. In 2005, the GTL Group was present in about 25 countries. It notched up a consolidated revenue of around $650 million and had a market capitalisation of around $2 billion, based only on its telecom services and tower businesses. Three years since then, we have been able to raise $2 billion in GIL in a record 14 months through initial equity, a rights issue and foreign currency convertible bonds, besides debt from local as well as international banks and financial institutions.

We believe that the number of towers, combined with tenancy, is going to create value for a tower company. However, as the market gets increasingly competitive, there is a need for infrastructure provider companies to be independent. The service providers have to be transparent and forthcoming in terms of maintaining relationships with tower companies. We would like them to be fair and encouraging towards independent tower companies.

This industry is a long-term one.Whether it is towers, in-building solutions, transmission networks, or any kind of infrastructure that goes into creating a solid, robust and quality network, we should be able to offer a unique solution so that operators come to us, rather than the other way round. Opex is another important factor. We need to move in such a way that the operating costs for operators are at a fixed level. If we don't take up this challenge, innovations will not take place. There has been a concentrated effort to reduce opex, and there is still huge scope to reduce it further. As an industry, we have to take risks, we have to commit, innovate and then work backwards to realise the profits.

GIL's vision is to own and operate the largest number of towers in India, and the company is progressing steadily towards achieving this objective. Within a year, we will have a portfolio of at least 35,000 telecom towers.

V.K. Sethi
COO, XCEL Telecom
XCEL Telecom started operations in July 2007. The company was incubated by QInvestment, a USbased funding company, to compete in the shared telecom infrastructure space in India.

Our business is based on the buildoperate model. As on March 31, 2008, the company had set up almost 1,000 towers, and we have plans for constructing 25,000 towers over the next three years. We are looking to maximise revenue from the towers, essentially through tower sharing amongst wireless operators, including ce lular, Wi-Max and 3G players. In addition to constructing towers, the company is also considering leasing/buying existing towers from operators, or buying hivedoff tower subsidiaries.

XCEL Telecom is also open to mergers and acquisitions. We started operations in Punjab and Karnataka, and currently have contracts with almost all operators, including BSNL, Vodafone, Aircel, Tata Teleservices Limited, Tata Teleservices (Maharashtra) Limited, Spice, Himachal Futuristic Communications Limited and Procall. We have started work in Madhya Pradesh, Tamil Nadu, Andhra Pradesh and Uttar Pradesh, and will add Jammu & Kashmir to our portfolio soon. By the end of the current quarter, the company will be present in almost all circles, except Gujarat and Kerala. By the next quarter, we should be present in all 22 circles.

XCEL Telecom also has plans for tapping the markets in Southeast Asia. In some of these markets, our promoter, QInvestment, is already present. Overall, we intend to invest about $2.5 billion to create one of the best telecom infrastructure companies in the world.

There are huge opportunities in the shared telecom infrastructure market in India. With the telecom industry growing rapidly, infrastructure needs to be utilised optimally. The only way to do this is to share infrastructure to the maximum extent. The customer base has grown enormously over the years and there is a big demand for base stations. These factors, as well as benefits such as capex and opex reduction, are driving telecom infrastructure sharing. Also, due to the increasing concern about the number of towers in cities, it is not very easy to erect new towers in urban areas.

These concerns show that independent telecom infrastructure operators have a very important role to play in the industry.All the major telecom operators have started hiving off their infrastructure businesses.Companies should be able to concentrate on their core areas of expertise, and there is no reason why they should not outsource the other functions.

Considering the current trends, we feel there is ultimately going to be a threetier structure in the industry –­ a network infrastructure partner providing the entire gamut of network infrastructure, be it paSsive or active; a licence or a spectrum holder; and, depending on the regulation, a mobile virtual network operator. This will enable all companies to concentrate on their own areas of business.

Moving ahead, the government should provide a level playing field for infrastructure provider-1 service providers and telecom service providers. The various levies and taxes on the former hamper the setting up of towers.Moreover, each state has its own rules and regulations. In this context, we recommend that there should be a singlewindow clearance system in each circle for all telecom infrastructure operators, so that they do not have to get 35 clearances to set up a tower. Moreover, areas that have architectural marvels or are major tourist spots should be kept clean of towers. There should be restrictions or some form of zoning to ensure that the skyline is not spoilt.

A.D. Singh
COO, Tower Vision
In India, Tower Vision was incorporated in 2006. In less than a year and a half, we have set up 1,000 towers. We now plan to build another 1,000. There are two main business strategies –­ the first is build and operate and the second is lease-back. The business is entirely dependent on the operators and availability of spectrum.

Today, 215,000 towers are required.On the other hand, the process of site procurement for building towers is becoming increasingly difficult. Business for us is ensuring a positive cash flow, winning long-term contracts and retaining customers. All these depend on what kind of business will boom, the availability of spectrum, and the plans chalked out by the new players.

While the market has potential for accelerated growth, it is fragmented, and thus telecom infrastructure companies are not able to address the issues confronting them. We are not recognised as an industry by the government and are perceived as money-making ventures. In fact, in spite of the tremendous potential, we are running risks by investing in this business. There is no concrete regulator to formulate a policy that enables us to build more towers, and there is no uniform fee structure.

The industry's conservative approach is a weakness. Resources are not utilised to the optimum level and there is no innovation in the sector. Therefore, all the companies in this segment have to come together and think about how to add value for the operators by reducing their operational expenditure.