Arun Kapur, CEO, Viom Networks
In today's hyper-competitive market, telecom service providers across the world are looking at options to solve some long-term challenges. While it is imperative to expand passive infrastructure for future growth, the capital expenditure involved and social and environmental resistance pose major challenges.

The sharing of passive infrastructure has been considered as an option to resolve this issue. In the present changing business and regulatory environment, service providers have seriously started pursuing this option. The need for expansion of services as well as for cost effectiveness in operations, limited infrastructure availability, and regulatory pressures have driven service providers in this direction.

Infrastructure sharing practically started in 2005 with Quippo Telecom taking the lead and creating a demand for this new concept in the market. In the initial years when the concept of infrastructure sharing was not so popular, operators created and managed their own infrastructure. As the industry evolved and international best practices were adopted, operators started realising the advantages, including cost benefits, associated with infrastructure sharing. Since then, the concept of telecom infrastructure sharing has gained momentum in the country.

Lately, telecom operators' margins have been severely impacted, as is evident from the recently announced financial results of the various listed operators. While the minutes of usage (MoUs) have been increasing with the reduction in prices, the average revenue per user (ARPU) has been witnessing a sustained downward trend quarter after quarter. This, coupled with the global economic slowdown, has forced operators to curtail their capital expenditure (capex) and operating expenditure (opex). The result is that telecom operators are increasingly opting for innovative and cost-effective business models such as infrastructure sharing. This has further resulted in the evolution of specialised companies providing passive infrastructure to operators, including tower-sharing facilities.

For a telecom operator, the total money spent on setting up the entire network runs into billions of dollars. Today, telecom infrastructure provisioning costs account for 65-70 per cent of an operator's opex. According to various independent studies undertaken on the benefits of infrastructure sharing, a telecom operator offering wireless services can save up to 30 per cent of capex and around 15 per cent of opex by sharing telecom infrastructure.

Prospects in India
Having pioneered the concept of telecom infrastructure sharing with less than a hundred towers with single tenancy, Quippo-WTTIL has today become the world's largest independent telecom infrastructure company with a portfolio of over 38,000 towers and the highest tenancy (over two) in the industry. These facts basically highlight the opportunities that the Indian market offers to telecom infrastructure companies.

Meanwhile, the sector has also witnessed the formation of various tower companies hived off by telecom operators as well as independent telecom infrastructure companies. From less than 150,000 towers in 2007, the industry today has grown to over 320,000 towers.

Today, India is among the largest and fastest growing mobile markets in the world. A voluminous and sustained increase in the subscriber base month after month has put immense pressure on the existing telecom infrastructure. With an average of 16-18 million new subscribers being added every month and with a comparatively large untapped geographical area, an extensive network footprint is key to maintaining the current high growth rates. Post the auction for 3G and wireless-integrated multiple access (Wi-Max) spectrum, the requirement for more sites to support the launch of new products and services by operators will put additional pressure on the existing infrastructure. It will be a major challenge for operators to support the subscriber growth momentum by matching the growth in telecom infrastructure across the country.

This challenge also offers a great business opportunity to the existing infrastructure companies. It is estimated that the Indian market will require between 350,000 and 400,000 towers by the end of the current financial year. In addition, the tower companies may see a jump in tenancies to support the entry of new players and also the launch of new products and services on 3G/Wi-Max spectrum.

Benefits of telecom infrastructure sharing
Telecom infrastructure sharing offers various cost and social benefits. These include:

• Benefits to end-consumers - Sharing of telecom infrastructure offers tremendous benefits to end-consumers due to reduced costs for operators and hence, lower cost of services provided to the consumers. Infrastructure sharing also helps in increased and easy availability of telecom services to consumers, as more players are able to launch their services across a wider geographical area. This results in larger consumer choices through increased competition and therefore, better services to customers.
• Benefits to new operators -­ Infrastructure sharing helps new market entrants to launch their services rapidly across the length and breadth of the country by providing them readymade infrastructure for faster rollouts at much lower costs, which may otherwise have taken them years to build. The sharing model not only eliminates their infrastructure spending (capex) but also gives them an opportunity to reduce their opex. The existing operators also benefit from the sharing process, as the rental they pay for a particular site reduces with the addition of a new operator, while increasing the overall income for the infrastructure provider. This is a win-win situation for all the parties involved.

The reduced capex also releases cash for companies, which, in turn, can be used for strategic purposes. With the complexities of managing the infrastructure being handled by a third party, telecom companies can focus their attention on improved innovations, better customer services and other customer-centric activities.

• Bridging the digital divide -­ Infrastructure sharing has an important role to play in achieving the government's objective of bridging the digital divide. Telecom infrastructure sharing is an important tool to enhance mobile broadband penetration in rural India. Unless infrastructure is shared, the rollout of telecom services in the rural areas of the country will not be a viable option for most operators. This has been highlighted by the low level of telecom penetration in rural India when compared to the higher teledensity in urban areas. Propagating the concept of infrastructure sharing among operators will lead to better connectivity in the hinterland while keeping operations economically viable for those players.
• Benefits to the environment -­ Environmental concerns have gained significant importance in recent years. Infrastructure sharing can play a vital role in achieving broader environmental goals by reducing the overall requirement of telecom companies; for instance, the total number of telecom towers needed would come down. Other benefits such as reduced energy and maintenance bills would help operators reduce their opex, at the same time benefitting the environment with reduced carbon emissions.

Challenges facing the industry
While the telecom infrastructure industry has witnessed immense growth during the past few years, it has its own set of challenges that players in the space are struggling with. Capital and operating expenditure related to telecom infrastructure is becoming unmanageable under falling profitability. Maintaining a high tenancy ratio becomes extremely crucial in the sharing business. The higher the tenancy, the greater and faster will be the return on investment. With a large number of infrastructure players competing for a greater market share, achieving higher tenancy becomes a challenge.

Telecom infrastructure sharing works on a business model with a dependence on multiple operators rolling out networks simultaneously against aggressive timelines. An infrastructure provider needs to understand the implications of the operators' growth strategy in the market and align its business accordingly. With a major demand for simultaneous rollouts coming from new operators, there is an urgent need to invest in the network rollout programme. However, following the global financial crisis and its serious implications, raising funds in the current market scenario has become a herculean task for infrastructure players.

The government has a strong focus on rural coverage. The rollout of new sites in rural areas and their maintenance is an arduous task. While a major chunk of the new subscribers are coming from the rural areas, the falling ARPUs in these markets are a deterrent for telecom service providers to enter these geographies. Even if an infrastructure player sets up a site in a rural belt, recovering costs by procuring tenants in these markets is a big challenge.

Likely future trends
Globally, during various stages of growth, the telecom markets have adopted different forms of infrastructure sharing -­ site sharing, network sharing, intra-circle roaming, etc. These models facilitate a speedy rollout and allow the new entrant to significantly reduce time-to-market. As the market matures, other forms of sharing also become relevant, for example, spectrum sharing, mobile virtual network operators (MVNOs), etc., which further promote growth in the sector while enhancing the efficiency of telecom operators. Some of the trends that we may see in the future are:

Active infrastructure sharing -  ­ While passive infrastructure sharing is permitted in the Indian market, permission for active infrastructure sharing is currently under deliberation. Once permitted, this may reduce the investment costs for new operators. However, network sharing requires additional planning and deployment efforts to accommodate each participating operator's capacity requirements.

Spectrum sharing -­ Spectrum sharing is a model that has recently been developed in mature markets, and involves operators leasing their spectrum to other operators on a commercial basis. Given that spectrum is a scarce resource, which is often underutilised by an individual operator in a given area, sharing is a viable option that can take shape in the near future.

MVNOs -­ MVNOs are another business model prevalent in many developed countries. MVNOs typically do not have the network and rights to spectrum. While some advanced MVNOs may build parts of their core network requirements, they typically rely on infrastructure sharing to access subscribers and offer services. This concept showcases the benefits of infrastructure sharing with intensified competition in the market, leading to more innovations and better customer service.

Intra-circle roaming -­ This is a form of infrastructure sharing that allows new operators to provide national coverage by sharing the networks of incumbent operators in the areas where they don't have their own network. Intra-circle roaming accelerates competition by allowing new players to launch their services in shorter time-frames.

Innovations in the infrastructure business -­ In addition to telecom towers, various research and development (R&D) initiatives undertaken by telecom infrastructure companies have resulted in the evolution of new solutions such as inbuilding solutions (IBS) and base transceiver station (BTS) hotels. IBS offer improved coverage and connectivity inside a building, resulting in increased revenues for the operators. Shared IBS also reduces the total cost of ownership since both the investment cost and maintenance expenses are shared among several operators. With only one set of antennas and faster rollout, it offers tremendous benefits to the operators without compromising on the aesthetics of the building. Most airports and large buildings in the country have already deployed IBS successfully.

BTS hotels is another concept that is aimed at providing network coverage in densely populated areas where the setting up of towers is not practical. It involves placing a BTS at a remote location and connecting it through fibre cables on which signals can be carried to the coverage area. Thereafter, coverage can be provided by distributed antennas deployed at suitable locations in the area.

These are some of the innovations that are going to transform the telecom infrastructure landscape in the future. Infrastructure companies are also investing huge amounts in various R&D initiatives to reduce energy costs by leveraging solar energy, fuel saver catalysts, CNG, etc. Investments being made in the installation of energy storage platforms and CNG generators will certainly reduce energy costs and, in turn, benefit operators.

Conclusion
The telecom sector has played a key role in the overall growth of the economy. The concept of infrastructure sharing has further provided an impetus to this sector by reducing costs for operators and benefiting customers. However, the success of infrastructure sharing depends primarily on two factors: the cost benefits derived by the operators through sharing and the policies that promote the concept of infrastructure sharing among operators while providing a level playing field for all.

In the current scenario, where there is cut-throat competition among operators, it makes immense economic sense for operators to adopt infrastructure sharing as a model to reduce both capex and opex, leading to the strengthening of their balance sheets. This is the time when they should focus all their energies on customer-centric activities, including innovations and other initiatives that help them differentiate themselves in the marketplace. At the same time, it is important for policy-makers to come up with laws that can be practically implemented at the grass-roots level; encourage the adoption of infrastructure sharing among operators; provide them cost benefits; and at the same time, let customers enjoy the benefits of their progressive policies.