The tower industry has been the backbone of the Indian telecom sector. While the industry was initially based on a captive model, which offered a strategic advantage earlier, it has now transitioned to an operator-independent model. The change in tower ownership unfolded after a series of initiatives undertaken by the regulator as well as the industry. Tower companies have been building up their asset base and leasing it to multiple operators. This has enabled operators to value tower assets in isolation, helping them bring in financial investors or sell their assets to independent tower companies.

The concept of telecom infrastructure sharing was pioneered by tower companies in India. Today, the model has matured considerably. Operators can now focus on subscriber acquisition instead of tower infrastructure operations and management. Independent tower companies are focusing on passive infrastructure through innovative process management, ensuring high uptime and other cost-effective solutions.

Managing close to 400,000 towers, the industry has witnessed phenomenal growth in a short span of time. The sector can play a pivotal role in increasing rural teledensity and broadband penetration. Towers can be used for distributing a range of services at the grassroots level.

A key development has been the grant of infrastructure status to the tower industry by the government. This will encourage greater investment in the sector. Today, the entire revenue of tower companies is coming from telecom-based services. However, this dependence on a single sector can be converted into a lucrative mix. As per industry estimates, tower companies can plan around 15-20 per cent of their revenues from the non-traditional mobile services business. In order to ensure this turnaround, it is important for tower companies to build a strong strategy focused on alternative revenue generation models.

 Tower sharing business model

Globally, passive infrastructure sharing continues to attract significant interest from both operators and tower companies. In India, the tower sharing business model has demonstrated its value in the telecommunications delivery chain. Between 2008 and 2011, the tower industry went through organic growth as well as mergers and acquisitions.

At the current stage of sector development (asset-based management), there is a focus on asset sweating by increasing efficiencies, and streamlining systems and processes. The next phase of growth, beyond 2014, is expected to be driven by knowledge-based management.

The most effective way to facilitate the spread of mobile telephony in India is through a wider geographic footprint and an extensive product portfolio. Tower companies are aiming at holistic operational excellence by broadening their offerings to include managed services, customised site planning and alternative energy resources.

There is an urgent need to re-evaluate emerging businesses, managed services, active equipment integration, and energy options. The key focus areas for the future will include tapping managed service opportunities in emerging markets; and evaluating passive and active managed services models, integrated business solutions, in-building solutions, distributed antenna systems and Wi-Fi hotspots. Green energy management will also be an important focus area.

With rapidly evolving technological and structural requirements, the tower industry is continuously striving to find appropriate and cost-efficient solutions. Given that the sector is capital intensive, businesses have to be made sustainable for both telecom operators and infrastructure providers.  Deployment of cell sites can be a major challenge for operators in situations where there are space constraints or lack of reliable power supply. Other issues concerning telecom players worldwide include efficient power management, infrastructure sharing, use of renewable energy sources and cutting down carbon emissions, while reducing both capex and opex.

Changing business requirements have translated into cutting-edge innovations for the telecom industry such as ultra-lite rooftop and ground-based towers. These towers have significantly lower capex requirements and ensure faster roll-out of services. Base transceiver stations at these lite-anchor sites consume less power and function efficiently in a non-air-conditioned environment.

Lite-anchor sites are modular in design, enabling easier upgradation of site elements when a new tenant comes on board. These sites have lower capex and opex requirements, and less complexity due to reduced antenna load, integrated cabinets for electrical equipment, batteries with enhanced backup (removing the need for diesel generators) and outdoor compatible site equipment.

 Deploying green solutions

The Kyoto Protocol, signed by over 160 countries including India, mandates the reduction of greenhouse gas (GHG) emissions by 5 per cent by 2012. Many governments have taken steps to reduce energy consumption and emissions.

Telecom networks are still driven by fossil fuels and energy costs represent a significant portion of mobile service providers’ opex. Given the increasing energy consumption, rising cost of fossil fuels and grid power deficiency, it is important that operators focus on energy efficient technologies and alternative sources of energy.

Telecom tower companies alone consume around 2 billion litres of diesel per year, which accounts for about 2 per cent of India’s total diesel consumption. This is due to a lack of viable alternatives. Diesel is expensive, difficult to transfer and store, prone to pilferage, and has a considerable carbon footprint, yet the industry has been compelled to depend on it due to the lack of grid power.

The telecom tower industry is deploying green solutions to ensure a cleaner environment and improved bottom lines. Going green has also become a business necessity for telecom operators, with energy costs accounting for as much as 25 per cent of their total network operation costs. A typical communications company spends about 1 per cent of its revenue on energy.

In India, telecom tower companies intend to convert 10 per cent of towers from diesel to renewable energy in the near future. To encourage the establishment of renewable energy service companies (rescos), the Tower and Infrastructure Providers Association has issued letters of intent to set up renewable energy plants near tower sites. In addition, telecom tower companies have plans to deploy renewable energy technologies of their own. As the number of green sites attains critical mass, the pay-per-use model deployed by rescos can be extended to provide energy to surrounding communities as well.

Today, there is a policy push for the industry to move towards renewable energy. In January 2013, the Department of Telecommunications issued directions to service providers to frame a carbon credit policy detailing methods to reduce GHG emissions. According to the directive, at least 50 per cent of all towers in rural areas and 20 per cent of towers in urban areas are to be powered by hybrid energy (renewable and grid connected) by 2015. Further, 75 per cent of rural towers and 33 per cent of urban towers are to be powered by hybrid power by 2020.

In addition, the Jawaharlal Nehru National Solar Mission is targeting the installation of 20 GW of solar capacity by 2022. However, this must be taken forward in a measured manner as organisations such as The Energy and Resources Institute have expressed their reservation about the viability of meeting the first-phase target of 1,500 MW of solar power that far exceeds the current non-captive solar capacity.