The past year was a significant one for the telecom infrastructure industry. There were several positive developments on the policy front, the key among them being the release of right-of-way (RoW) rules. The government also allowed the sharing of active infrastructure among operators in a bid to lower operational costs and enable faster roll-outs of networks. Meanwhile, telecom operators committed to invest over Rs 120 billion over 100 days in the installation of 60,000 additional base transceiver stations (BTSs) to improve network quality and address the call drop issue. They, in fact, crossed that target, installing 130,000 additional base BTSs between June and October 2016. Further, in a key financial move, Reliance Communications (RCOM) signed a binding agreement to sell a majority stake in its tower business.
A look at the key developments in the infrastructure industry during 2016 and the way forward…
Release of RoW policy
A major development on the policy front during 2016 was the release of RoW rules for the roll-out of communication networks to facilitate the installation of mobile towers, and laying of optic fibre and copper cables. The rules, which came into effect on November 15, 2016, lay down a framework to provide approvals and settle disputes in a time-bound manner as well as improve the coordination between telecom companies and government authorities. In addition, the new rules allow online filing of applications to ease the process of telecom infrastructure roll-out in the country.
The rules require the local and state authorities to appoint nodal officers for enforcing the laid down provisions. Further, these authorities as well as the central government are required to start an electronic application process for telecom companies interested in setting up telecom towers or fibre infrastructure within one year of the implementation of the RoW rules. The state governments can also establish a single application process for all the appropriate authorities under their control. In addition, the rules mandate operators or tower companies to pay a one-time fee of Rs 10,000 with their applications for meeting administrative expenses. Meanwhile, the companies laying optical fibre will have to pay Rs 1,000 per km.
The concerned authority will need to examine the applications based on parameters defined under the rules such as mode of execution, duration of the project, estimated expenses, and responsibility for damage and public safety in the area being considered, and then take its decision within 60 days of receiving the application. Further, no application can be rejected unless the applicant has been given a chance to explain its position.
For several years, RoW has been the biggest hurdle in the expansion of telecom infrastructure across the country. Tedious application processes made obtaining RoW difficult for telecom service providers while exorbitant administrative charges discouraged them from undertaking significant network roll-outs. Meanwhile, the absence of a standard administrative cost structure resulted in significantly high costs for obtaining RoW. The new rules released by the government are likely to resolve these issues and help cable and tower companies as well as telecom operators realise the Digital India, Smart Cities Mission and BharatNet targets.
Approval of active infrastructure sharing norms
In February 2016, the Department of Telecommunications (DoT) amended the unified licence provisions to allow active infrastructure sharing among telecom operators. This included sharing of antennas, feeder cables, Node B, radio access networks and transmission systems. Earlier, operators could only share passive infrastructure such as towers. The move is expected to lower the costs for telecom operators and lead to faster network roll-outs.
Policy initiatives by state governments and local bodies
State governments were proactive in introducing/adopting industry-friendly policies in order to foster the development of communications infrastructure in their states. For instance, Jharkhand announced a new telecom infrastructure policy, recognising telecom installations as critical infrastructure for mobile communications. The policy provides a single-window clearance system for all new and pending applications for installing new mobile towers. It also allows mobile towers to be set up at all types of government and semi-government buildings, residential, industrial and institutional buildings, and on open lands. The state government also allowed telecom service providers and infrastructure providers to share towers for deploying their respective antennas.
Rajasthan released its draft infrastructure policy in February 2016. The policy proposes a one-time registration charge of Rs 100,000 per ground-based mast (GBM) for the state capital, Rs 75,000 per GBM for divisional headquarters, Rs 50,000 per GBM for other towns with a population of more than 100,000 and Rs 25,000 per GBM for the remaining towns as well as rural areas of the state. The policy also allows telecom operators to share towers for installing their respective antennas. However, they are required to meet the prescribed technical standards to curtail the multiplicity of towers and optimise the use of existing ones. Further, recognising the need to address the adverse impact of radiation from telecom towers, the policy states that mobile towers cannot be installed on any premise that are at 15 metres or less distance from the boundary of any school (excluding colleges and universities), hospital or sports ground, within a 500 metre radius of a jail campus, or 300 metres from the notified boundary of any protected monument.
The local bodies also took a number of encouraging steps. For instance, the New Okhla Industrial Development Authority (Noida) amended its Mobile Tower Installation Policy, 2013, paving the way for installation of more towers, including at hospitals and parks. According to the amended policy, a 25 square metre area must be allocated in green belts and parks for the construction of towers. This space is to be allotted for five years at a licence fee of Rs 25,000 per month with an annual increment of 5 per cent. Further, towers can be constructed on the roofs of institutional, industrial and commercial buildings. The Lucknow Development Authority (LDA) also amended its building by-laws to facilitate the installation of telecom towers on residential units. As per the new rules, the tower company can directly seek approval from the LDA for the installation of towers without approaching the resident welfare associations. The Delhi Development Authority, too, amended the unified building by-laws to allow the installation of mobile towers in residential areas.
Radiation concerns remain
The issue of call drops was strongly debated in 2016 and it brought the tower industry’s role into sharp focus. While the government pulled up telecom service providers for the deteriorating service quality, the latter blamed the lack of mobile towers for the increasing call drops. This can be attributed to the resistance of the general public as well as local authorities to the installation of mobile towers. Even though India has one of the most stringent electromagnetic field (EMF) radiation standards in the world, the general public continues to be wary about new tower installations.
During 2016, DoT tried to allay public concerns regarding EMF radiations by organising extensive awareness programmes across the country. DoT also advised the state governments to permit the installation of telecom towers on government buildings. However, a major blow to DoT’s efforts came when the Supreme Court dismissed the claims made by telecom operators that radiation levels from cellular towers are within permissible limits. The apex court asked the central government if there were ways to independently monitor emission levels from these towers. The court also asked the government what the international emission standards were and whether any Indian government agency was monitoring the adherence to these standards in the country.
DoT, in its response, told the Supreme Court that there is no conclusive proof to establish the adverse effects of tower radiations on human health. It also assured the court that research studies have been commissioned to further examine the issue. Meanwhile, DoT is planning to launch a portal on mobile radiations named Tarang, which will contain data on all mobile towers and transmitters across the country. The portal will allow users to check the radiation compliance status of their area. A fee of Rs 5,000 will be charged for the test to be conducted by the government. Currently, the government conducts radiation tests randomly. Tarang will allow the government to test specific towers.
Monetisation of tower assets
The monetisation of tower assets, either by sharing or fully offloading them, emerged as a key strategy for debt-laden operators in 2016 to seek fresh capital. In a major development, RCOM signed binding agreements, in December 2016, with Brookfield Infrastructure and its institutional partners to sell 51 per cent stake in its tower business at Rs 110 billion. As per the terms of the deal, RCOM’s telecom towers will be demerged into a separate company that will be wholly owned and independently managed by Brookfield Infrastructure. This will be the second largest independent and operator-neutral tower company in India. Further, RCOM will receive Class B non-voting shares in the new tower company. RCOM and Reliance Jio Infocomm Limited (RJIL) will continue as major long-term tenants of the new tower company, along with other existing third-party telecom operators.
Meanwhile, Brookfield Asset Management was reportedly in talks with Bharti Airtel for acquiring a 51 per cent stake in Bharti Infratel. Brookfield and a consortium of Blackstone, KKR & Co. and Canada Pension Plan Investment Board (CPPIB) were in the race to buy a stake in Bharti Infratel. Brookfield reportedly submitted the highest bid for the stake. Meanwhile, Bharti Airtel divested its tower assets in Africa as part of an ongoing deleveraging exercise.
Idea Cellular was also reportedly planning to sell its entire stake in its tower subsidiary for an estimated $1 billion. The operator had approached the American Tower Corporation, Bharti Infratel and Brookfield for the same.
Energy management initiatives
“Go green” remained the buzzword during the past year as players tried to reduce their diesel usage and cut fuel costs by deploying renewable energy solutions. In February 2016, Bharti Airtel announced that it has deployed green technological solutions at around 40,000 of its network sites. These green network sites are designed to operate largely on battery-hybrid, lithium-ion and solar hybrid solutions with very little diesel consumption. The migration to renewable energy technologies is a part of the operator’s ongoing network transformation programme “Project Leap”, which is focusing on a series of fresh initiatives to build a greener environment and a sustainable network for the future. Under the programme, Bharti Airtel has committed to establish a future-ready network and bring down its carbon emissions footprint by 70 per cent by 2018.
Meanwhile, Bharat Sanchar Nigam Limited (BSNL) completed the installation of 2,199 solar-powered mobile towers in left-wing-extremism-affected areas across 10 states. The move was part of the project conceived by the Ministry of Home Affairs along with DoT to strengthen security mechanisms and combat insurgency in the regions affected by left-wing extremism. BSNL partnered with domestic vendors Vihaan Networks Limited and Himachal Futuristic Communications Limited (HFCL) for the deployment of towers. RJIL also installed green telecom towers at some of its network sites. According to the company, these towers with rooftop and ground-based masts are designed to consume 600-700 W of power, which is one-fourth of the power consumed by existing conventional towers. Further, RJIL’s towers operate on lithium-ion batteries, thereby reducing the dependence on diesel generators.
Amongst tower operators, Bharti Infratel has around 3,070 solar-powered towers with an installed capacity of 11 MW as of end-September 2016, as per the company’s investor presentation in November 2016. Further, over 30,000 towers are green, which is around 33 per cent of the company’s tower portfolio. Meanwhile, Indus Towers has 50,461 green sites as of end-March 2016, accounting for 42 per cent of the company’s tower portfolio.
On the policy front, DoT urged the Telecom Regulatory Authority of India (TRAI) to review the rules concerning renewable energy technology deployment at mobile towers sites. As per the National Telecom Policy, 2012 all operators are required to migrate 50 per cent of their cell towers in rural areas and 20 per cent in urban areas to hybrid power by December 2015, and to 75 per cent and 33 per cent, respectively, by December 2020. However, given the financial and technical challenges faced by carriers, DoT asked for a recalibration of these targets. In response to this, TRAI is planning to issue a consultation paper, which would review issues related to reduction in the carbon footprint of telecom infrastructure, including mobile towers.
The way forward
Driven by strong data uptake, the total mobile services market in India is expected to reach $37 billion in 2017, registering a compound annual growth rate of 5.2 per cent between 2014 and 2017, according to research firm International Data Corporation. To support this expansion, additional tower sites will be required to prevent the existing networks from being strained.
It is therefore imperative for both the government and the industry to work in tandem to further improve the telecom infrastructure in the country. The government on its part needs to put in place a more fair and proactive regulatory framework to facilitate telecom network installation. Meanwhile, telecom operators and tower companies need to take steps to improve and expand their network coverage. In this context, the industry committed to install more than 150,000 additional BTSs by March 2017. Further, RJIL plans to install around 45,000 mobile towers in the country over the next six months to strengthen its 4G network. Indus Towers is planning to invest Rs 1 billion in setting up 500 new sites across the country within a year. The new sites will be camouflaged, that is, towers will be constructed in a way that they look like palm trees or electric poles, thereby improving the aesthetics of the site. Meanwhile, the Andhra Pradesh government is planning to install 10,000 smart telecom towers in the state during 2017-18. The towers will enable the installation of smart cameras, Wi-Fi access points and conventional lighting platforms.
In the coming few years, the infrastructure industry is likely to emerge as the fulcrum of growth in the overall telecom sector owing to a strong explosion in data services. It is therefore essential that sufficient attention is paid to strengthen the state of the communications infrastructure in the country.
Puneet Kumar Arora