Ardom Telecom is engaged in the operations and maintenance (O&M) of telecom infrastructure. Two years into operations, the company offers services in seven circles covering the northern and eastern regions. It plans to expand its footprint across the country through organic and inorganic growth.
In an interview with tele.net.in, Ajit Shankar, managing director and chief executive officer, Ardom Telecom, discusses the challenges facing the Indian telecom infrastructure industry and the way forward.
Excerpts…
What are the company?s focus areas?
In the field of passive telecom infrastructure O&M, power uptime is the biggest deliverable. However, cost optimisation for customers is one of the biggest focus areas for Ardom Telecom. Since energy accounts for one of the biggest cost factors in maintenance of telecom infrastructure, the company is focused on optimising the equipments installed at a site. This measure would ensure that the energy consumption at a site is minimised. Further, with increasing expectations on service levels – real time monitoring of preventive and breakdown maintenance of sites is gaining importance. Ardom has developed an in-house software which facilitates instant monitoring of telecom sites. Since telecom sites are spread over a vast geography across the country ? telecom tower companies have to deal with a great amount of data asymmetry. However, our software collects information and makes it available online for stakeholders to have direct, accurate and real-time access to sites.
Being an unorganised sector, the telecom infrastructure O&M industry faces several challenges regarding statutory compliances, occupational health and safety and environmental norms. We are clearly focused on addressing these challenges through innovative solutions and effective implementation.
Ardom Telecom expects to provide such services under the fixed-cost model.
What are the advantages of the fixed-cost model?
The biggest advantage of a fixed-cost model is that the cost in such a model is predictable which implies quantifiable savings. The predictability of cost involved in a given project helps plan better in terms of the investments required and the returns expected on the project.
In a fixed-cost model, certain capex requirement is necessary at the site which would give returns over a period of five to six years. For this model long-term contracts are required. At present, a majority of the maintenance contracts are of one to three years. Also, long-term contracts facilitate bank financing. At a time when the industry is facing a fund crunch, such an alternative turns out to be advantageous.
How is Ardom Telecom placed vis-?-vis other players?
Amongst the existing players, Ardom Telecom clearly differentiates itself in terms of level of corporate governance that it exhibits, quality of human resources deployed; and transparency in information sharing with customers. These result in good quality of service delivery and customer satisfaction. Consequently, Ardom has been one of the fastest growing companies in the telecom infrastructure O&M space which has extended its footprint to seven circles and about 6,000 sites within a span of only two years since commencement of operations.
The company also differentiates itself from its competitors in terms of services offered. At present, we are a telecom infrastructure operations and maintenance company but we are making efforts to become a single window telecom managed services company excluding only the core network management which is the core competency of original equipment manufacturers like Nokia Siemens Networks and Ericsson. We also have skill sets for better site analytics on issues like monthly diesel/energy consumption and focus on reducing costs for our customers.
How has the industry evolved over the last few years?
The telecom infrastructure O&M sector is undergoing a transformation from being an unorganised sector to an organised industry. In fact, it is only in the last one or two years, that we have seen the entry of a few large players. However, since many of these companies did not have a clear focus on operations and maintenance, many of them have not been successful. Most of the new companies were either project management companies or telecom site related equipment manufacturers who forayed into the telecom infrastructure O&M business to utilise their existing manpower and to augment revenues at a time when the pace of new site roll out was slow. Since telecom infrastructure operations and maintenance was not their core competency, many of them have either ceased operations or exited the industry.
The next few years will see the emergence of a few large professionally managed O&M companies which will ensure that the players will have access to better quality of services.
What are the opportunities offered by the Indian telecom market?
The company is clearly looking at opportunities for consolidation in this highly fragmented market. Over the next few years, the telecom infrastructure industry will see a few players dominating the market. With profit margins at the lowest levels, companies can survive only through volumes and economies of scale. We are also pursuing both organic and inorganic growth opportunities. In the financial year 2013, the company plans to acquire two to three local players.
In a country with 3,85,000 towers, 6,25000 BTS?s and more than 12,00,000 km of optical fibre, significant growth opportunities clearly exist for a new company focused on infrastructure management. In this industry before awarding a contract to a vendor, an infrastructure provider prefers to be sure of the geographical presence of the vendor in the areas for which the contract is being signed. However, as of now we have a presence only in the northern and eastern region. This is a huge challenge for us as it restricts us from picking up projects in the eastern and southern region. Therefore, we are exploring inorganic growth particularly in the southern and western parts of the country.
At present, Ardom Telecom is maintaining 6,000 sites and 4,000 kms of optic fibre. By the end of 2014 we plan to have a portfolio of 20,000 sites and 10,000 km of optic fibre. We are also trying to optimise our existing resources by playing an active role in the government led National Optical Fibre Network project. The company would be laying 200 kms of optical fibre cable in 2013.
To benefit from the synergies between various services, the company is already involved in maintenance of transmission infrastructure. By end-2013, we are planning to have a portfolio of 2,500 sites for first line mintainance of active telecom infrastructure. In 2012, the company had a turnover of Rs 500 million and in 2013 we are targeting a turnover of Rs 1.8 billion.
What are the key challenges faced by the industry?
Following the Supreme Court?s judgement which led to the cancellation of 122 2G licences, the number of operators in a particular circle has reduced from close to 13 to 7. This development has led to a decline in tenancies and enhancing the same is a major challenge. At the time of 2G and 3G services rollout, infrastructure was established, assuming certain tenancies. However, with few of the players either shutting down their operations or scaling down their services, a lot of the existing equipment at various tower sites remains underutilised.
In the backdrop of such developments, infrastructure companies and service providers are under pressure to reduce their opex. To achieve this, the industry needs to focus on optimisation of manpower, reduction of diesel pilferage and elimination of power theft.
The second main challenge before the industry is linked with compliance with the Telecom Regulatory Authority of India?s (TRAI) guidelines on renewable energy. The targets set by TRAI are very ambitious and funds required for achieving these targets are unavailable. The third challenge is getting statutory clearances and approvals from regulatory and local bodies particularly for new roll outs. The industry is also struggling with exaggerated threats associated with radiation hazards etc.
What are the emerging key trends in the industry?
Collaboration is the way ahead for the industry. The Indian telecom market is unique as it supports the lowest average revenue per user (ARPUs) in the world. Low ARPUs coupled with intense competition has necessitated infrastructure sharing. Earlier, market dynamics resulted in leading operators collaborating to form a tower company. Now, the Tower and Infrastructure Providers Association (TAIPA) is pushing forward the concept of renewable energy service companies for powering towers with renewable energy sources. Through TAIPA, tower companies are collaborating with each other and other stakeholders to explore new sustainable energy solutions. The association is working towards minimising the operations and maintenance cost of telecoms infrastructure.
More importantly, discussions have commenced for the industry to adopt the concept of clusterisation of telecom sites. Over the next few years, a single technician may be involved in maintaining telecom sites owned by two different operators or infrastructure providers. Further, the telecom market in urban areas has reached saturation point. Therefore, the growth in the telecom market would be driven by new subscribers in rural areas. Over the next few years, data usage will also grow at exponential rate.
What is the way forward for the industry?
With high operations and energy costs, there is an urgent need for the telecom infrastructure companies to reduce opex.
Telecom infrastructure management involves maintaining passive, active and transition infrastructure. Currently, these aspects are being managed by different sets of vendors because in India, the ownership of telecom infrastructure lies with different stakeholders. By and large, active infrastructure is owned by tower companies, passive infrastructure by telecom operators or original equipment manufacturers and the transmission infrastructure is owned by either companies like Tata Communications or operators.
However, significant savings can be realised if the three different components of telecom infrastructure are managed by a single vendor.
Clearly, the way forward is ensuring increased operational efficiencies through O & M of sites at a reduced and fixed cost. This may include energy costs and multi-tasking by involving passive infrastructure maintenance teams in activities related to the fault level management of active and transmission infrastructure. Also, owing to the involvement of a large number of grassroot personnel, companies involved in telecom infrastructure operations and management can also play a key role in giving a positive direction through appropriate social engineering measures.
