Telecom Towers: The Towering Effect

The Indian telecom industry has so far provided more than
800 mn SIMs and more than
500 mn users to the country and guess what has helped India the most in achieving this towering figure, yet maintaining the lowest profile among the stakeholders? It is the country's telecom tower industry. More than 4 lakh telecom towers are working day and night in order to make sure that the users get an uninterrupted service. However considered to be the mainstay of the mobile services, the tower industry has since the beginning been facing some daunting challenges, and yet few came forward to resolve it. In a recent meet in New Delhi, the Tower and Infrastructure Providers Association of India (TAIPA) brainstormed over various issues, resolved to escalate those with the right forum, and take some serious actions.

The discussion forum was chaired by Mahesh Uppal, a known telecom analyst and director of Com First, an advisory firm on telecom issues. He said, “We have heard about the huge impact of towers, but sometimes we probably don't appreciate the fact that if towers were not there, probably half of us in the telecom sector could not have their jobs, and the fancy phone that we have in our pockets would serve nothing more than a paper weight, because it is the towers that are the key to the rollout of the wireless infrastructure of the country.”

He also said and believed that it is wireless and wireless alone which is central to the speed and the extent of the telecom revolution that India has seen so far. He said that if it were not for wireless then the country would still be struggling to connect even the urban areas, leave alone the rural India. “So I think towers and ecosystem in which they work are of immense importance to the public policy, and it is important for all of us who believe that telecom is not only important to its sake but important to many other sectors of the country,” he adds. So it is clear that the industry should understand the need to create an enabling environment where towers could reach those areas where currently there is no connectivity and there are a large number of such areas in the country. “We currently have more than 4 lakh towers in the country and perhaps there is a need for another 100,000 and or a lakh more,” he predicted by emphasizing on the needs of the uncovered areas.

Problem of Plenty

Uppal also said that there is whole lot of issues relating to the towers, not only to the fact that they provide this valuable connectivity, there are also concerns like the numbers, the radiations, or the aesthetics. And the good thing about this association (TAIPA) and this business is that this is an association whose job is to utilize this infrastructure well and it is composed of people who are interested in the tower business, and they also have this intent in ensuring that the infrastructure is being utilized in a better way. “So, in a way it is a kind of self-regulatory environment. Business can't run simply because there are millions of towers, but instead the business runs best when they are shared best,” said Uppal, setting the tone for a discussion on the need of tower sharing. “And I think that is something very valuable for us because it also tells us what and how important it is to ensure that this sector grows in a healthy way; that not only the need of this sector is met but the needs of the other stake holders are also met,” he added.

“Tower sharing is a pretty new and an unique concept in India,” said TV Ramachandran, resident director, and regulatory affairs and government relations, Vodafone Essar. Tracking back to the initial days of the Indian telecom industry he said, “I remember in 1995 when I was setting up the cellular network in Delhi, there was one site in Sundar Nagar where Bharti was the only operator apart from Essar, and my own technical people were saying that there is no way where Bharti can come and share the infrastructure, citing various technical snags to it,” he said. But gone are those days and then came the era of late 1990-95 when sharing came. But one thing that we would like to see is improved tenancy and also fewer numbers of towers. He is of the opinion that this may not be good for some businesses, but it is more economical and also beneficial to have fewer number of towers. Supporting telecom minister Kapil Sibal's view, he said that when a country has more than acceptable number of operators, what happens is fragmentation of spectrum and reuse of towers. So one has to look at consolidation in the industry. “So I think this is one of the major things that we need to address,” emphasized Ramachandran.

Giving a completely different view to the topic, Amit Sharma, executive vice president and president, Asia at American Towers Corporation said that the concept of 'less towers, more useful' needs a serious debating. “Right now the tower industry is overbuilt in India-too little spectrum and too many operators. And when you look at sharing, reality is that sharing took off nearly 3 or 4 years back. So the shared infrastructure industry is relatively a newer industry,” said Sharma.

Predicting the future scenario in the telecom industry in India, he said that in the next 3-4 years the country is going to see relatively 2 opposite trends, one is significant redundancy in the number of towers, where multiple operators covering the same geographical areas with independent towers would get consolidated, inevitable with some operators taking down their towers and moving as tenants to others.

On the flip side, with the growth of data, requirement on infrastructure is going to grow phenomenally, particularly since the original networks were designed in 900 MHz and extended to 1,800 MHz. So the networks plans are not going to tally particularly when you get data crossing double digits. “For us, as a representative of the tower industry, more tenancy is much more important than more towers. So somewhere in this process we will consolidate towers, we will rationalize the number of towers to reduce the numbers, while at the same time catering for growth in the newer areas,” he further added.

On the same issue, Yogesh Malik, Uninor's chief operating officer, said that multiplicity of towers is actually like the 2 sides of the same coin. “We are talking about intra-circle roaming, sharing minutes, trading minutes but looking into active sharing to reduce the footprints on the towers, increasing number of players on it and how do you leverage telecom infrastructure in the full capacity; that needs to be really seen through,” he lamented.

Putting forth his opinion, Arun Kapoor, CEO, Viom Networks and an industry veteran said that infrastructure sharing is almost like a natural evolution of the process that was started off almost around 5-6 years ago. “And in my mind it's basically the compelling value proposition, the very fact that the genesis of shared infrastructure came in was because of the huge cost advantage that you were able to provide to the operators and in term that cost benefit helped the pace of adaption of mobile telephony,” he added.

According to Prakash Ranjalkar, whole time director of GTL Infrastructure, the telecom passive infrastructure was very easy to conceive and prosecute from a model perspective, from an equipment perspective, and also from the technological neutrality perspective. “So independent infrastructure providers could enter from outside and could create infrastructure where infrastructure was not present at that particular point of time and offer it for sharing,” he said adding that as far as an active infrastructure, active transmission backbone is concerned, already there is a huge amount of infrastructure made on the ground.

“Maybe the fiber still needs to be rolled out from a broadband perspective. But for the rest of the infrastructure we already have 7 incumbent operators who are quite penetrated across circles. And whatever consolidation we are looking for from an industry perspective will eventually end up having 6-7 operators for this size of the country,” said Ranjalkar who is also the vice chairman of TAIPA. So he believes that the consolidation has to come from the equipment that is already embedded in the system.

Tower Industry as Infrastructure

The representatives from the association as well as other panelists present unanimously voiced the need of granting key 'infrastructure' status to the telecom tower industry. They all believed that doing this would help the industry grow in a healthy way as well as serve the community in various ways than its core responsibilities.

Akshay Grover, assistant vice president, Ernst & Young said that tower industry in India, compared to other developed tower sectors has significantly lower amount of debts and to a great extent is equity funded. “So net debt to EBITA level in the US would be 7 to 8x and in India initially, it would be 2 to 3x,” he added. So he was apprehensive as to why this is the case in the first place. Answering his own question he said that it is because one, debt capital is not available and second, what is the cost of debt.

“Over there if you look at developed markets, cost of funding is extremely low. An American tower could raise debt at 5-6% on a completely hedge basis, they would have access to an international capital market which would give them that. That's the reason in India, when a tower company borrows, they borrow at 12%. I think that is something that would happen if infrastructure or priority lending sort of status is probably given to the industry and second, more debt is made available not withstanding what the ratios or the financial numbers might speak,” said Grover.

Talking about other value addition that the tower industry could bring to the table, Ranjalkar of GTL Infrastructure said that various experiments are being held in various states in terms of looking around for the tower infrastructure space that can leverage the tower infrastructure in a better way. “We can have a lot of innovative solution around that, so there are various community based services that the tower sector can provide,” he said.

So there are many things that can be done but again looking at the current state of the sector that is more at a chicken-and-egg situation-be it the financial issues, local approval issues, governance issues, or viability of green. Hence telecom tower business is not a one-of-location industry, rather is related to more than 4 lakhs of locations, so the industry stakeholders should look at the various models present and resort to models that appear to be the best from the lot.