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While the Indian telecom market offers huge opportunities for tower companies, several issues such as low tenancy ratios and tax pressures need to be resolved.In order to meet th challenges, tower companies are making more investments, increasing scalability, adopting new technologies and looking for alternative revenue streams. In a panel discussion at the conference, top officials from major tower companies spoke about their future plans, prospects and the challenges before them. Excerpts...

T.K. Basu, President and CEO, India Telecom Infra Limited
Like any other business, telecom infrastructure provides several opportunities.Moving ahead, we see organic growth taking place along with consolidation.From the operators' perspective, tower companies are still seen as infrastructure providers, but from the investors' perspective and our perspective, we are asset management companies.

In the past two years or so, independent operators have set up approximately 22,000 towers at an investment of about Rs 57 billion. Going ahead, 300 million subscribers are likely to be garnered in the next four years. At a cost of Rs 2,400 per line, this presents a huge market opportunity for infrastructure providers. Net, net, there is a need for partnerships between operators and infrastructure providers, as well as between infrastructure providers.

Policy-makers and regulators should increase their focus on telecom infrastructure providers so that we have a stronger business case. I feel that the licensing authorities and the Telecom Regulatory Authority of India have not been promoting independent tower companies the way they should be doing it. There has also been no support from the Planning Commission or institutions such as the Reserve Bank of India.

However, the fact remains that growth is going to be unabated, whether one talks of 250 or 300 million subscribers, 3G, alternative technologies or a 10 per cent increase in growth. Towers are vital to the business, and so, the presence of independent tower companies is an accepted fact.

In addition, the telecom infrastructure business requires a lot of investments as there are several expectations from the borrower and the investor. Therefore, firming up and honouring of contracts, whether on a 5-, 10or 15-year basis, is very critical for operators and infrastructure providers. There is an urgent need to address this issue, for which synergy is required amongst all parties. Currently, there is a lack of coordination.

Co-location, zoning and grouping, for both active and passive sharing, are the possible future trends, depending on the infrastructure providers' approach.Zoning will be encouraged by the regulators, who might specify norms in a year or two, depending on how fast zoning is implemented. All in all, our assessment is that this is a business for long-term players whose focus is on asset management and effective energy management.

Prem Pradeep, CEO, Bharti Infratel Limited
New telecom operators are rolling out services and looking for integrated deals, and the existing ones are expanding their footprint and even rolling out their own infrastructure companies. The average revenue "Some 300 million subscribers are likely to be garnered in the next four years. At a cost of Rs 2,400 per line, this is a huge market opportunity for infrastructure providers." T.K. Basu per user (ARPU) is declining, subscriber growth is quite high, and there is a lot of pressure on the margins of the operators. The cost of passive infrastructure as a share of, say, revenue per tower, is very high, especially in the rural markets.

Keeping these factors in mind, many new operators will not roll out their own networks. Globally, capital has come under pressure, which is of advantage to tower companies as most operators now want to increase their variable cost component. Moreover, increased competition implies that the operators would focus on the areas of core competence. So, they would want to be tower tenants rather than owners. This would again benefit the tower companies.

With 3G coming, there is going to be greater focus on data and connectivity. At the same time, tower companies would experience consolidation. In fact, consolidation is already under way between operators and tower companies. However, tenancy ratios are still low and there is a lot of pressure in terms of taxes and levies. There is also the lack of synergy as all companies are rolling out towers and there is a duplication of skill sets, costs (including operation and maintenance) and other things. Given this scenario, tower companies have to gear up for more efficient investments, new technologies, scalability and alternative revenue streams.

There is potential for active infrastructure sharing, especially in the rural areas, where it is the only viable option for operators. I believe that new rollouts would happen only due to spectrum constraints; otherwise, it would not make sense to roll out too many towers. Sharing is imperative and we need to have a total cost approach for operators to gain economies fast.

B. Ramanand, COO, Wireless-TT InfoServices Limited
The competition today is not another tower company, but a ready, built tower. The customer has the option of either going for such a tower, or waiting for somebody to build it. Operators are demanding high performance levels, and some tower companies are losing out business to others with ready towers.

There are several reasons behind this.Our delivery mechanisms and the agencies which build the towers are still not geared for this level of competition. As an example, in spite of our company having obtained captive orders from a few of the larger operators, we lost out on some business simply because we did not have a delivery mechanism to cater to the volumes and kind of product required by the operators.

The operator mindset needs to change right away. All the players in the telecom infrastructure business have an allegiance or can trace their origins to operators. We must start looking at telecom infrastructure as a business, independent of any operating company.

We have future plans and are supported by the numerous changes in policy and regulation, all of which are driving our business. On the other hand, customer expectations in terms of delivery, operating service level agreements and cost are getting higher. Municipalities, governments and any organisation connected with any sort of taxation are targeting us for additional revenues. However, we are challenging them; in a few cases, by coming together as an industry, sometimes independently and sometimes by piggybacking on each other. In spite of this, we have observed that in every state, our cost is increasing by a few hundred thousand rupees. This is something we need to fight together; we are not cash cows for municipalities.

Also, a few operators are building their own towers. While 70-80 per cent of the recent network rollout is through shared infrastructure, the remaining 1520 per cent involves operators building the networks themselves. This could become a competitive threat for telecom infrastructure companies somewhere down the line. Another potent competitive development, which has not yet taken place, is Bharat Sanchar Nigam Limited sharing its towers.

In the face of these challenges, one of the first steps that tower companies need to take is to redefine their relationship with the operators. Today, we are being driven by the operators' radio frequency planning, which determines the point at which the infrastructure provider can build the tower. There is a need to redefine the business and offer network coverage rather than just towers. Another challenge is optimisation. We are all building towers to meet our tenancy requirements, and somewhere between 1.7 and 2 is the magic figure. To achieve this target, we have to optimise our portfolios, for which standardisation is the solution.

Power and fuel is another issue. We have to come up with energy-efficient solutions with which we can convince the operators to pass back some of the savings. While it is very easy to say this, the question is how one arrives at a number which indicates the correct consumption.

We also need to look at alternative revenue streams. Rather than treating a tower or a cell site as a single offering, we need to unbundle the product into bandwidth, air conditioning, power, tower, land and space. While unbundling these offerings presents a successful business model, it has not actually been implemented. Generating alternative revenue streams beyond just selling conventional tower space is definitely an area we need to look at.