Therefore, the impact of recent regulatory uncertainty as well as operational challenges faced by service providers has been felt across the telecom infrastructure industry as well. Consequently, the roll-out of greenfield towers and fibre has taken a hit as cash-strapped operators have not been able to earmark significant capex towards network expansion. According to industry analysts, the capital spending for most operators has been 10-13 per cent during the past two years, which is way below the expected 20 per cent based on the current status of network reach in the country.

 

Besides, the introduction of high speed services has increased the demand for tower as well as fibre and backhaul infrastructure. However, given the length and breadth of the country, rolling out huge wireless and wireline networks is not an easy task. Challenges such as overcrowding and high real estate prices in urban areas, difficult terrain, low returns and high energy costs in rural areas have resulted in fewer new tower roll-outs. Similarly, high right-of-way costs and the requirement for multiple government permissions and approvals for laying fibre in cities have made the business case for fibre roll-out unviable for most companies. Moreover, the exit of some players and scaling down of operations by several others following the 2G controversy have affected the operations as well as business prospects of tower companies. The financials of several tower companies have been weakening in the past few years and they are facing a huge debt burden. Further, the government’s stringent targets for green tower operations and mandatory compliance with EMF (electromagnetic field) norms have added to operators’ and tower companies’ challenges. As a result, short-term growth in the infrastructure segment may continue to remain constrained.

tele.net takes stock of the current status, key trends and growth drivers in the telecom infrastructure industry...

Industry size and growth

The telecom tower industry has witnessed phenomenal growth over the years, and currently, about 400,000 towers, 700,000 base transceiver stations (BTSs) and an optic fibre network of 1 million route km help in providing telecom services to about 900 million subscribers across the country. The tower industry is characterised by the presence of operator-owned tower companies such as Bharti Infratel, Reliance Infratel and Indus Towers as well as independent tower operators such as GTL Limited, GTL Infrastructure, the American Tower Company, Viom Networks, ITI Limited and Tower Vision. Indus Towers, which is a joint venture (JV) of Bharti Airtel, Idea Cellular and Vodafone India, is the largest telecom tower company in the world. Recently, it marked a key milestone by achieving a tenancy ratio of over 2x, indicating that each site has an average of two tenants/ operators. Currently, Indus Towers has a total of 229,760 tenants on 112,615 towers in 15 circles. Viom Networks, which is a JV of Tata Teleservices Limited and Srei Infrastructure, has about 42,000 towers and 90,000 tenants at a tenancy ratio of 2.25x. As of December 31, 2013, Bharti Infratel’s total tower base stood at 82,813 (of which 35,000 were its own towers and the rest were operated by Indus Towers), along with 163,370 colocations, while the average sharing factor stood at 1.96x. Reliance Infratel has a tower base of 50,000 and a tenancy ratio of 1.7x, which is likely to increase to 2.6x following tower sharing under the agreement signed with Reliance Jio Infocomm Limited (RJIL).

In the wireline infrastructure space, fibre has been largely rolled out by operators along with independent providers such as RailTel, GailTel and PowerTel, which initially deployed networks for captive use before offering them to state-run operators and government projects. Currently, Bharat Sanchar Nigam Limited (BSNL) owns the largest fibre network of around 650,000 route km. RailTel operates 42,000 route km of cables, PowerTel has 25,000 route km and private players such as Bharti Airtel own 160,000 km of intercity cable networks. Optic fibre has mostly been used for long-haul traffic and fibre connectivity is largely available up to the district and block headquarters in rural areas. However, the launch of the National Optical Fibre Network (NOFN) project has been a key landmark, which is expected to provide fibre connectivity to the panchayat level.

Key trends

Infrastructure sharing

Today, infrastructure sharing has become a norm and has resulted in estimated savings of about Rs 600 billion and a wider footprint as operators have been able to ride on each other’s network – while preventing duplication of infrastructure. The trend continued through 2013 as Reliance Communications signed key infrastructure sharing deals with RJIL to share both tower and fibre infrastructure on a pan-Indian basis. Further, BSNL and Mahanagar Telephone Nigam Limited (MTNL) (which together have a tower base of over 65,000) are realising high dividends by leasing their towers to private operators.

That said, sharing activity has been largely limited to the tower space, with very few instances in the wireline segment. However, the government’s NOFN project would pool in fibre infrastructure from private players to reduce duplication of infrastructure. Also, Vodafone India, Idea Cellular and Bharti Airtel are planning to share their wireline infrastructure and establish a JV on the lines of Indus Towers.

Capacity vs coverage

Having established significant coverage across circles, operators are now rolling out more sites to augment capacity in these areas. Of late, the quality of service and quality of experience have emerged as key parameters for assessing subscriber satisfaction and operators are adding new sites to their circles. For instance, Videocon Telecom decided to not participate in the recent auctions and instead focus on improving network quality by adding new sites and BTSs. Also, Uninor has launched large-scale expansion plans across its operational circles. As for incumbent operators, Idea Cellular rolled out 5,630 2G cell sites and 1,873 3G cell sites during the quarter ended December 2013, taking the total number of 2G and 3G sites to 101,600 and 19,904 respectively. As compared to this, Bharti Airtel added 1,563 3G sites and 94 cell sites for the 2G network during this period.

Telecom operators are also implementing solutions to augment capacity at existing sites by using cell sculpting techniques. Other tools and technologies such as improved antennas and remote radio units can also be installed at existing sites to improve capacity.

Energy management solutions

Erratic power supply at most tower locations has forced tower companies to use diesel to run their tower sites. However, given the rising cost of diesel and increasing fuel pilferage, diesel usage has proved to be an expensive option for operators. Currently, energy accounts for over a third of a company’s tower operation costs. Consequently, operators and tower companies have adopted several innovative solutions in recent years to manage their energy requirements and costs in a better way. Diesel generators (DGs) have given way to batteries as the primary source of power at most tower sites, while DG-battery hybrids are used at several other locations. Significant innovation and research have been undertaken to develop batteries that can be charged faster and offer a longer backup. Other measures include deployment of free cooling units and lithium batteries to optimise energy usage and limit diesel consumption. For instance, Indus Towers has made 20 per cent of its sites diesel-free through the installation of batteries.

While “going green” is the best option to reduce diesel usage at a tower site, operators’ efforts in this direction have not been very noteworthy. Less than 1 per cent of the country’s total installed tower base runs on green power. Huge capex, delayed returns, low commercialisation and an underdeveloped ecosystem are some of the key challenges that have resulted in poor deployment of the majority of renewable or non-conventional technologies.

The way forward

Going forward, the medium- to long-term outlook for the telecom infrastructure industry appears to be bright and growth oriented. Data service adoption is growing rapidly with a large number of subscribers increasingly consuming multimedia content, especially video, on their mobile phones. To cater to this exponential growth in bandwidth demand, operators will be left with little choice but to increase their wireless and wireline capacity. Commercialisation of 4G services, which is expected in 2014-15, will drive network development by operators in the future. Service provisioning in rural areas will become crucial to meet the objectives of the National Telecom Policy, 2012, which envisages 100 per cent rural teledensity by 2020. The need for infrastructure sharing would grow as operators turn to rural areas and data networks to drive business growth. Moreover, the grant of infrastructure status to the industry is a positive move; and with more clarity in the telecom sector and successful conclusion of the recent auctions, the infrastructure industry is set to chart growth in the future.

Over the years, growth in the Indian telecom service sector and subscriber base has been reflected in the expansion of telecom infrastructure across the country. Therefore, the impact of recent regulatory uncertainty as well as operational challenges faced by service providers has been felt across the telecom infrastructure industry as well. Consequently, the roll-out of greenfield towers and fibre has taken a hit as cash-strapped operators have not been able to earmark significant capex towards network expansion. According to industry analysts, the capital spending for most operators has been 10-13 per cent during the past two years, which is way below the expected 20 per cent based on the current status of network reach in the country.

Besides, the introduction of high speed services has increased the demand for tower as well as fibre and backhaul infrastructure. However, given the length and breadth of the country, rolling out huge wireless and wireline networks is not an easy task. Challenges such as overcrowding and high real estate prices in urban areas, difficult terrain, low returns and high energy costs in rural areas have resulted in fewer new tower roll-outs. Similarly, high right-of-way costs and the requirement for multiple government permissions and approvals for laying fibre in cities have made the business case for fibre roll-out unviable for most companies. Moreover, the exit of some players and scaling down of operations by several others following the 2G controversy have affected the operations as well as business prospects of tower companies. The financials of several tower companies have been weakening in the past few years and they are facing a huge debt burden. Further, the government’s stringent targets for green tower operations and mandatory compliance with EMF (electromagnetic field) norms have added to operators’ and tower companies’ challenges. As a result, short-term growth in the infrastructure segment may continue to remain constrained.

tele.net takes stock of the current status, key trends and growth drivers in the telecom infrastructure industry...

Industry size and growth

The telecom tower industry has witnessed phenomenal growth over the years, and currently, about 400,000 towers, 700,000 base transceiver stations (BTSs) and an optic fibre network of 1 million route km help in providing telecom services to about 900 million subscribers across the country. The tower industry is characterised by the presence of operator-owned tower companies such as Bharti Infratel, Reliance Infratel and Indus Towers as well as independent tower operators such as GTL Limited, GTL Infrastructure, the American Tower Company, Viom Networks, ITI Limited and Tower Vision. Indus Towers, which is a joint venture (JV) of Bharti Airtel, Idea Cellular and Vodafone India, is the largest telecom tower company in the world. Recently, it marked a key milestone by achieving a tenancy ratio of over 2x, indicating that each site has an average of two tenants/ operators. Currently, Indus Towers has a total of 229,760 tenants on 112,615 towers in 15 circles. Viom Networks, which is a JV of Tata Teleservices Limited and Srei Infrastructure, has about 42,000 towers and 90,000 tenants at a tenancy ratio of 2.25x. As of December 31, 2013, Bharti Infratel’s total tower base stood at 82,813 (of which 35,000 were its own towers and the rest were operated by Indus Towers), along with 163,370 colocations, while the average sharing factor stood at 1.96x. Reliance Infratel has a tower base of 50,000 and a tenancy ratio of 1.7x, which is likely to increase to 2.6x following tower sharing under the agreement signed with Reliance Jio Infocomm Limited (RJIL).

In the wireline infrastructure space, fibre has been largely rolled out by operators along with independent providers such as RailTel, GailTel and PowerTel, which initially deployed networks for captive use before offering them to state-run operators and government projects. Currently, Bharat Sanchar Nigam Limited (BSNL) owns the largest fibre network of around 650,000 route km. RailTel operates 42,000 route km of cables, PowerTel has 25,000 route km and private players such as Bharti Airtel own 160,000 km of intercity cable networks. Optic fibre has mostly been used for long-haul traffic and fibre connectivity is largely available up to the district and block headquarters in rural areas. However, the launch of the National Optical Fibre Network (NOFN) project has been a key landmark, which is expected to provide fibre connectivity to the panchayat level.

Key trends

Infrastructure sharing

Today, infrastructure sharing has become a norm and has resulted in estimated savings of about Rs 600 billion and a wider footprint as operators have been able to ride on each other’s network – while preventing duplication of infrastructure. The trend continued through 2013 as Reliance Communications signed key infrastructure sharing deals with RJIL to share both tower and fibre infrastructure on a pan-Indian basis. Further, BSNL and Mahanagar Telephone Nigam Limited (MTNL) (which together have a tower base of over 65,000) are realising high dividends by leasing their towers to private operators.

That said, sharing activity has been largely limited to the tower space, with very few instances in the wireline segment. However, the government’s NOFN project would pool in fibre infrastructure from private players to reduce duplication of infrastructure. Also, Vodafone India, Idea Cellular and Bharti Airtel are planning to share their wireline infrastructure and establish a JV on the lines of Indus Towers.

Capacity vs coverage

Having established significant coverage across circles, operators are now rolling out more sites to augment capacity in these areas. Of late, the quality of service and quality of experience have emerged as key parameters for assessing subscriber satisfaction and operators are adding new sites to their circles. For instance, Videocon Telecom decided to not participate in the recent auctions and instead focus on improving network quality by adding new sites and BTSs. Also, Uninor has launched large-scale expansion plans across its operational circles. As for incumbent operators, Idea Cellular rolled out 5,630 2G cell sites and 1,873 3G cell sites during the quarter ended December 2013, taking the total number of 2G and 3G sites to 101,600 and 19,904 respectively. As compared to this, Bharti Airtel added 1,563 3G sites and 94 cell sites for the 2G network during this period.

Telecom operators are also implementing solutions to augment capacity at existing sites by using cell sculpting techniques. Other tools and technologies such as improved antennas and remote radio units can also be installed at existing sites to improve capacity.

Energy management solutions

Erratic power supply at most tower locations has forced tower companies to use diesel to run their tower sites. However, given the rising cost of diesel and increasing fuel pilferage, diesel usage has proved to be an expensive option for operators. Currently, energy accounts for over a third of a company’s tower operation costs. Consequently, operators and tower companies have adopted several innovative solutions in recent years to manage their energy requirements and costs in a better way. Diesel generators (DGs) have given way to batteries as the primary source of power at most tower sites, while DG-battery hybrids are used at several other locations. Significant innovation and research have been undertaken to develop batteries that can be charged faster and offer a longer backup. Other measures include deployment of free cooling units and lithium batteries to optimise energy usage and limit diesel consumption. For instance, Indus Towers has made 20 per cent of its sites diesel-free through the installation of batteries.

While “going green” is the best option to reduce diesel usage at a tower site, operators’ efforts in this direction have not been very noteworthy. Less than 1 per cent of the country’s total installed tower base runs on green power. Huge capex, delayed returns, low commercialisation and an underdeveloped ecosystem are some of the key challenges that have resulted in poor deployment of the majority of renewable or non-conventional technologies.

The way forward

Going forward, the medium- to long-term outlook for the telecom infrastructure industry appears to be bright and growth oriented. Data service adoption is growing rapidly with a large number of subscribers increasingly consuming multimedia content, especially video, on their mobile phones. To cater to this exponential growth in bandwidth demand, operators will be left with little choice but to increase their wireless and wireline capacity. Commercialisation of 4G services, which is expected in 2014-15, will drive network development by operators in the future. Service provisioning in rural areas will become crucial to meet the objectives of the National Telecom Policy, 2012, which envisages 100 per cent rural teledensity by 2020. The need for infrastructure sharing would grow as operators turn to rural areas and data networks to drive business growth. Moreover, the grant of infrastructure status to the industry is a positive move; and with more clarity in the telecom sector and successful conclusion of the recent auctions, the infrastructure industry is set to chart growth in the future.