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Tower Sharing Trends - Experience of leading telecom operators

February 15, 2010

With new operators launching services and existing operators accelerating their push into low-margin areas, infrastructure sharing has gained momentum. While passive infrastructure sharing has become an industry practice, active infrastructure sharing is likely to pick up pace. tele.net speaks to key operators about their experience in the passive sharing space, the bottlenecks in active infrastructure sharing and the future of the tower industry...

What has been your experience in the passive infrastructure sharing space?

Vijoy Kumar
Though passive infrastructure sharing is a very good business in itself, we have not been able to foray into this in a big way.

While we have a portfolio of around 50,000 towers, these have not been leased out significantly to the other operators. As far as leasing infrastructure from other infrastructure providers (IPs) is concerned, we have leased around 7,500 towers from other IPs.But in this case as well, it has been seen that the other IPs are not willing to share their towers at the rates that we think are suitable. They demand higher rates. So, on the whole, though it is a very good business per se, Bharat Sanchar Nigam Limited's (BSNL) experience in the same has not been very positive so far.

Samaresh Parida
Our experience of sharing passive infrastructure has been positive. We have a very structured vehicle in the Indus Tower Company, through which we share towers with Airtel and Idea. Sharing of towers sweats the assets further and reduces the overall investment and operating costs of the industry. As reported in our third quarter results, the occupancy has gone up to 1.7 operators per site for Indus, which points to the benefits tower sharing is bringing to all partners.

Anil Tandan
Recognising the need to save capex, we were one of the initial players to start sharing at a bilateral level, first with Vodafone and then with Bharti Airtel. By and large, despite the reluctance of the business, it went off very well, and we were able to achieve a fair amount of sharing. Post the emergence of the tower industry towards end-2006, we were again one of the first companies to support that model. These companies were initially not so well established in their operations and maintenance, but over time they have developed expertise in that area. Also, with consolidation, these companies have now been able to achieve economies of scale. However, the issue of energy charge continues to be a matter of concern. Overall, our experience in this space has been very satisfactory.

What are your initiatives in the active infrastructure sharing space? What are the key bottlenecks in its uptake?

Vijoy Kumar
In the area of active infrastructure sharing, new technologies are now coming up where the same antenna can support twothree frequencies, thereby enabling twothree operators to share the same antenna.However, in the already established networks, the antennas being used do not have the ability to support different frequencies, and will need to be replaced in order to implement active infrastructure sharing. This will increase the capex, thereby leading to higher costs vis-à-vis the savings incurred by implementing active infrastructure sharing.

In addition, sometimes the power plants are built into the base transceiver stations rack. Currently, BSNL and other private operators tend to have their own battery and power plant, because if an operator installs a larger capacity battery and power plant assuming that two-three more operators will be sharing the same, then there will be a risk element if the load does not come. So, in this space, if four operators opt for active sharing, then, from the beginning, they will have to dimension the capacity of the battery and power plant, taking into account the total requirement of all the operators.

Samaresh Parida
Active infrastructure sharing is more difficult. The steps required to make it work are more complex. Technical feasibility, legal interception-related issues, on-screen branding and rollout obligations are someof the bottlenecks in the way of active sharing. We explore all possible ways of sharing, including active sharing, to achieve maximum utilisation of assets on the ground.

Anil Tandan
In active infrastructure sharing, we cannot share spectrum. Only antennas, base transceiver stations, feeders, cables and the backhaul can be shared. If two operators are rolling out their networks together, there is a better probability for active infrastructure sharing as both the companies can source equipment from the same vendor. This is because compatibility of equipment is a key issue. For instance, Idea and Vodafone Essar have implemented both active (limited to transmission) and passive infrastructure sharing on a large scale in the Bihar circle, as both companies were rolling out their networks at the same time. This is, so far, the only deal of its kind in the country and has been very successful. In my opinion, there are more technical issues and not so much of a cost benefit in active sharing in the case of operators with already established networks. The other offshoot of active sharing is intra-circle roaming. A number of operators are currently working on this and we are also in the process of ironing out the details for intra-circle roaming in our new circles.

What are the back-up power solutions that your organisation is experimenting with?

Vijoy Kumar
Currently, the company has been using only generators. However, we have been conducting an experiment that is already at an advanced stage, where we have installed 12-14 BTSs that work only on solar power and are virtually maintenancefree. Also, the opex is virtually zero. These BTSs are good for rural areas where one does not require any electricity connection. This experiment is at the third stage and has been yielding good results.

Samaresh Parida
The need for a back-up power solution arises as the power supply from electricity boards is either unavailable or unreliable.Running of diesel generator sets is not only more expensive but also creates a logistical burden. Apart from the use of battery storage and fossil fuels as back-up power solutions, we are experimenting with design improvements to reduce our power requirements, especially in running air-conditioning for radio equipment at sites. We are also experimenting with nonconventional energy sources that are more capital intensive. The government needs to step in to support these initiatives in addition to increasing the supply of grid power. This is the only way to enhance penetration of telecom services in rural and even some urban areas.

Anil Tandan
When the towers were under our control, we experimented with alternative power solutions such as biofuels and windmills to power base stations. We used biofuels in collaboration with Ericsson and separately installed a small windmill to run a repeater site in Maharashtra. With Idea Cellular hiving off most of the towers to Indus, our focus on this area has reduced slightly.This is because our impact is minimal, since we own a limited number of towers.In this field, we are now hoping to pick up from the learnings of the tower companies. We are also focusing on this area as part of the Indus Tower Company.

What is the future outlook for the Indian tower industry? Is there likely to be an oversupply situation with so many companies rolling out towers?

Vijoy Kumar
As of now, the tower industry is doing well. But with companies rolling out towers rapidly, the industry will soon approach a stage of saturation. If there is a tower in a radius of 1-1.5 km in a city or even in rural areas where towers have been slowly spreading, there will be no more space to install further towers, and one tower will be sufficient to meet the demands of that area. That's what I call saturation point. In a city, in particular, one tower is enough to serve an area with a radius of 1.5-2 km.The cities may soon face situations of oversupply. However, village areas are relatively untapped and, therefore, present a huge potential market. They will become as saturated as the urban areas only in the next five-seven years.

Samaresh Parida
We are optimistic about the future of the tower-sharing industry since it provides the fundamental benefit by minimising capital investment and operating expenses for the telecom industry as a whole. Since the tower sharing industry is capital intensive, it is critical for companies to build the infrastructure carefully after balancing demand and supply positions across geographies.Tower companies that can achieve this will have a sustained economic advantage.

Anil Tandan
We never expected all the operators to roll out independent networks. Rural rollouts are going to be limited, and sharing, either through intra-circle roaming or some other form, will need to be implemented. The tower companies may not feel the need to build any more towers. The challenge for these companies will be to increase the tenancy, as profitability depends on a good tenancy ratio (of two) on the existing sites. In rural areas, most of the existing towers are with Indus because of the highest level of rural deployment by Bharti Airtel, Vodafone Essar and Idea Cellular. The challenge for the tower companies will be to raise the tenancy ratios on their towers in these regions, unless they need to roll out more towers in case of demand.


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