The unprecedented growth in the telecom sector has been achieved on the back of a robust tower and fibre infrastructure. Of late, the telecom infrastructure industry has witnessed the emergence of new growth drivers, the key among these being the increasing roll-out of 3G/4G networks to address the surge in data demand. In addition to network expansion, telecom operators are looking at acquiring additional spectrum in order to meet the increased coverage and capacity requirements on their networks.
tele.net recently organised a conference, “Telecom Infrastructure in India”, covering the key trends in this space as well as emerging needs and requirements. In this section, we bring you the highlights of the conference.…
Demand-side drivers
Over the past few years, there has been a steep decline in the prices of 3G- and 4G-enabled devices. The entry-level price for a 4G handset has dropped by as much as 50 per cent due to the entry of several low-cost devices from Chinese players such as Xiaomi and Lenovo. This has resulted in a significant increase in the penetration of 3G and 4G devices. 3G device penetration in the country was around 32 per cent in 2015 and 50 per cent in the metro cities. Meanwhile, the 4G device base reached 45 million in 2015. As a result of declining device prices, there has been an exponential growth in data consumption. The per subscriber data usage on 3G networks was above 700 MB per month in 2015. Further, as 3G/4G adoption picks up pace, the blended data usage in India is expected to reach 1.5 GB per month, in line with global benchmarks.
The growth in data traffic has generated demand for increased capacity on data networks. This, in turn, is driving demand for infill sites and backhaul networks.
Supply-side drivers
On the supply side, the accelerated roll-out of 3G and 4G services by incumbent operators like Bharti Airtel, Idea Cellular and Vodafone India is likely to drive tenancy demands. The operators are expected to expand 3G/4G coverage across all circles, but the infill capacity demand, which could convert into full tenancies, is expected to come only from their leadership circles. Meanwhile, Reliance Jio Infocomm Limited will be the single largest driver of tenancies as it does not have any existing network to co-locate its time division-long term evolution (LTE) base transceiver stations. Further, the shift of capex investments from 3G to 4G and the narrowing of the price differential between 3G- and 4G-enabled devices are likely to result in the direct transition from 2G to 4G networks.
As average data throughput becomes a critical determinant of users’ choice of network, more and more operators will deploy carrier aggregation networks to gain market share. The recent 3rd Generation Partnership Project guidelines have defined a clear roadmap for carrier aggregation, especially 4CA and 5CA. Advancements in carrier aggregation will enhance the user experience on data networks and further increase capacity investments.
Spectrum scenario
An adequate amount of data (3G and 4G) spectrum is likely to be made available in the next round of auctions in July 2016. Further, the government has already announced its plans to harmonise 1800 MHz spectrum in seven circles by 2016 and in the remaining 15 circles over the next one to two years, which will make a significant amount of spectrum available for operators to launch LTE services.
The recently approved spectrum trading guidelines have allowed operators to further increase their spectrum holdings by acquiring spectrum from other players. While this presents an opportunity for weaker operators to “trade out” their underutilised spectrum, it also allows stronger operators to strengthen their position in the data market. Meanwhile, spectrum sharing has enabled operators to pool their spectrum, jointly expand their networks and offer new technologies. Although spectrum sharing depends on a number of factors, including operators’ market positioning, the use case of the spectrum and opex/capex sharing arrangements, it appears to offer a strong business case for both the operators involved.
Future outlook
Further growth in telecom infrastructure will be driven by a mix of operator-led demand and public sector investments. The expansion of 3G coverage beyond cities, 4G network roll-outs by all major operators, and the deployment of in-building solutions and microcells for increasing capacity will drive significant telecom infrastructure demand.
The acquisition of additional spectrum will drive network expansion by incumbent operators as well as investments in telecom infrastructure. Further, high speed data networks will drive backhaul fiberisation. Meanwhile, the government’s BharatNet and Smart Cities projects will be the key enablers for investments in broadband infrastructure.
Based on a presentation by Kunal Walia, Associate Director, Analysys Mason
