Quippo Telecom Infrastructure Limited (QTIL) made early inroads into the telecom tower space and today ranks as a frontrunner amongst the standalone tower companies operating in India.
Providing an efficient way of cost-cutting in telecom infrastructure, QTIL’s business model is based on equipment renting. Says Arun Kapur, group president and managing director: “At the time of site roll out, with a small incremental cost, the tower can be designed to be shared by as many as five operators. Passive infrastructure sharing helps operators to significantly reduce the cost of ownership and operation, as well as time-to-market.”
One of the seven diverse business verticals of the Quippo Group, QTIL currently contributes around 40 per cent to the group’s total revenues. It expects to increase this share to 60 per cent in the coming years. The main source of revenue for the company is the monthly rental, which varies for different sites and the number of tenants per tower. However, given that average monthly rental has been declining, the company is exploring opportunities for alternative sources of revenue.
In India’s booming cellular tower industry, in order to compete with the big three ?? Bharti Airtel, Vodafone Essar and Idea Cellular, who have come together to form a joint venture tower company, Indus Towers ?? and to tap the business potential better, QTIL is now mulling over the idea of a joint venture with several network infrastructure companies. These include Essar Telecom Tower and Infrastructure, GTL, TowerVision and Xcel Telecom. These standalone companies will reportedly not have any merger or financial stake transfers but will coordinate and cooperate amongst themselves.
The move, if it shapes up, is likely to help QTIL cut its capex considerably through jointly resolving issues pertaining to land acquisition and power supply.
QTIL’s client list currently includes almost all telecom majors such as Bharti Airtel, Vodafone Essar, Reliance Communications, Idea Cellular and Tata Teleservices.
Recent developments
Owing to its growth potential, the tower industry has attracted both domestic and international players. Besides independent tower companies, many operators have also begun hiving off their tower infrastructure.
Seizing this opportunity, QTIL bought the tower portfolio (about 1,000 towers) of Spice Communications, which is operational in the Karnataka and Punjab circles, for Rs 6 billion. The acquisition has further provided QTIL with exclusive rights to roll out 12,000 towers for Spice’s existing and new circles.
In February 2008, QTIL signed a memorandum of understanding with ByCell Telecommunications India for technical cooperation to roll out GSM mobile telecom networks in selected regions.
In a move to efficiently manage and implement the telecom venture, QTIL is also forging partnerships in technology, project management, equipment sourcing and operation and maintenance.
To devise automated ERP solutions for its telecom infrastructure network and to speed up its business processes related to site rollout and sharing, QTIL entered into a contract with UK-based software innovator Tarantula.net in October 2007.
The concept of having a web-based ERP solution is relatively new to India.
QTIL can benefit from various ERP applications including site finder, site rollout and sharing project management, supply chain management, operations and maintenance management, asset management, billing management and MIS.
Going ahead
The biggest challenge faced by QTIL is ensuring sustained business with higher efficiencies and lower costs. In order to achieve this goal, it is rapidly expanding its footprint to become a pan-Indian player with greater economies of scale.
Having set up base transceiver stations mostly in urban areas, QTIL is increasing its footprint in remote areas of the country. The tie-up with ByCell to provide telephony in the rural and semi-rural areas of the Northeast is a key step towards this goal.
The company plans to install 5,000 towers by March 2008 and has set an ambitious target of 40,000 towers by 2011. It plans to fund this expansion through a mix of equity and debt, and is also looking at a possible listing in two to three years.
The company reportedly has a debtequity ratio of 1:2.5 and intends to maintain this. While it has already tied up an investment of $200 million, it is planning to invest even larger amounts in future.
Given the entry of about six new players, all of which will be undertaking major network rollout, QTIL’s target seems reasonable. “The more entrants there are, the higher the scope of deployment. We are already in the process of signing agreements with some of them. In fact, these new entrants will also strengthen our business model of having a higher tenancy ratio,” says Probal Ghosal, QTIL CEO.
