As India strides forward on the path of digitalisation, several opportunities are emerging for telecom infrastructure companies. A robust telecom infrastructure network is critical for the success of the Digital India programme. In an interview with tele.net, Amit Sharma, executive vice-president and president, Asia, ATC, shares his views on emerging trends in the sector, key growth drivers, new business opportunities and the industry outlook…
What were the key trends that shaped the Indian telecom tower industry during 2020?
Covid-19 highlighted the critical role of the telecom sector. Data demand surged to around 15 GB per subscriber per month. This is expected to grow further to 25 GB over the next three years, which will put a huge load on networks. This will require a significant increase in the number of towers and tenancies on existing tower sites.
The Supreme Court’s verdict on the adjusted gross revenue (AGR) case has imposed a huge burden of $20 billion on an already overburdened telecom industry. Fortunately, the Supreme Court has granted the industry 10 years to pay its dues, thereby spreading out the shock. However, capex spends dropped across the board in 2020 and hit some players particularly hard. This had a negative impact on tenancy growth.
During the year, Reliance spun off its towers to Brookfield with a commitment to deliver a certain number of towers. This target has not been met and has resulted in a sharp drop in Jio’s tenancies allocated to external towercos.
What were the key business highlights for ATC India during the year? How did ATC respond to the Covid crisis?
As a critical service provider, ATC continued to maintain and run the telecom infrastructure required to support the growing demand for wireless data services. Despite overwhelming odds, ATC teams worked round the clock to maintain network uptime.
Given the Indian telecom market potential, we will continue to invest in India. In November 2020, we received approval to invest about $300 million to acquire the Tata Group’s 12 per cent stake in ATC TIPL. We are looking to build about 4,000 new towers in India in 2021.
What are some of the key business opportunities presented by Digital India to the towerco industry?
Technology plays a pivotal role in the government’s vision for Digital India. It will create numerous opportunities for towercos to expand their digital infrastructure competencies. The country will see 5G deployment over the next decade, and towercos will play a significant role in supporting the roll-out. 5G and IoT will require complementary technologies such as in-building solutions, ubiquitous small cells/Wi-Fi, edge data centres and fibre. This will create new revenue streams for towercos, helping them evolve into “digital infracos”.
ATC will examine opportunities to extend its core value proposition from macro tower offerings into creative products and service offerings. Our goal is to extend our core digital infrastructure capabilities to further encapsulate neutral-hosted wireless connectivity, transport and compute functions. We can then offer tenants an integrated suite of complementary solutions to fit seamlessly into their complex network designs.
For several years, ATC India has been running a programme called Digital Villages, which is in sync with the government’s initiative to provide broadband-enabled services to villages. ATC has developed community infrastructure/physical assets around its tower sites and is leveraging space, security, power supply and broadband links to deliver digital literacy and e-health services to villages. We intend to move to Digital Village 2.0 through a quantum jump in the number of villages covered. We will also broaden the range of broadband-based service offerings by partnering with other like-minded corporates in their CSR efforts.
What are the key challenges that continue to plague the Indian telecom tower and infrastructure industry? How can these be addressed?
Towerco-friendly regulatory regimes are critical for the success of this industry. We have seen significant progress on this front, but a lot more needs to be achieved. Given the cataclysmic impact of the pandemic on economies and societies, there is an urgent need for collaboration and cooperation among the mobile industry, infrastructure providers and policymakers.
The telecom sector has been financially stressed for a while now because of the industry’s competitive situation. The industry has not been able to meet the capex requirements to expand 4G networks, let alone make them 5G-proof. India’s mobile industry remains one of the highest taxed in the world. The Department of Telecommunications (DoT) needs to put into action the reduction of licence fees and USO obligations.
The Telecom Regulatory Authority of India has already recommended that towercos’ role should include the creation/sharing of active infrastructure. DoT must consider this and also implement in full spirit the National Digital Communication Policy, which recommends enhancing the scope of IP-1s within the existing registration framework.
Towercos have also been facing serious issues in building towers and laying fibre. While these activities come under the central mandate as part of the right of way (RoW) policy, the actual implementation depends on support from the state governments and urban local bodies. States need to understand the importance of the telecom sector and support the implementation of RoW/tower rules.
We also face major challenges at our telecom sites. These include the levy of arbitrary, ad hoc and exorbitant property tax on telecom towers at different rates and by different local authorities. Also, coercive actions such as sealing of towers, disconnection of power supply, and damage to telecom sites result in service disruption.
The lack of availability of suitable wireless techno-economic backhaul is a significant constraint in the proliferation of small cells/Wi-Fi hotspots and 5G. The key challenge here is spectrum availability and pricing; huge chunks of unlicensed spectrum are needed to enable wireless backhaul.
What are your views on the sector’s readiness to launch 5G services? What will be the role of towercos in this regard? What are ATC India’s plans on this front?
5G deployment depends on spectrum auction timing and operator readiness to invest in new networks. This is a challenge given that the huge investments made in 4G networks have not yet provided significant returns. The pricing for 5G spectrum needs to be realistic.
5G will enable IoT and edge computing, which will accelerate data usage and demand, putting pressure on the already stretched networks. Network propagation will require a significant number of new sites and capacity enhancement of the existing sites. In a funds-constrained scenario, the sharing of active and passive networks assumes great significance for 5G roll-out.
At ATC, we believe we are in a strong position to harness the 5G potential to serve carriers and other customers in providing ubiquitous low latency wireless data across urban areas. Enormous amounts of data will have to be cached at the edge of the network and our towers are the ideal place for this, provided they are fiberised. In addition, India will probably need half a million small cells and microcells over the next three years, and no one stakeholder group has the capability to provide this capacity. Collaboration among key players will be critical.
We have partnered with cloud edge platforms such as Microsoft’s Azure Edge Zones programme. We are currently exploring the capabilities of carrier-grade 5G, Wi-Fi, 4G and CBRS spectrum to build converged networks that aim to provide a broader array of venues compared to the traditional DAS solutions.
What will be the key growth drivers for the telecom tower industry in the coming years?
The number of towers need to grow from about 550,000 to 800,000 and will require towercos to invest $5 billion-$6 billion in capex. The key industry players are well equipped to do this; however, the financial health of our customers has to improve before we can make these large investments. This will not happen until the long-awaited reduction of the licence/tax burden on the mobile industry becomes a reality and ARPUs are raised to generate an economic rate of return on investments.
What will be ATC India’s key focus areas during 2021?
We continue to believe that there is a tremendous long-term opportunity in India. We have a very large population, a significant demand for mobile services and a wireless sector that has now been reorganised into a viable framework, with three large carriers and a smaller government-owned entity. The government is committed to its Digital India policy, and the AGR issue is now largely settled. To facilitate growth, the government should support the telecom sector to become stronger.
Going forward, the surge in digital consumption, the push for new technologies such as IoT and 5G, and the need for edge data centres augur well for the telecom infrastructure sector and organisations like ours. In the medium term, I expect tremendous growth in demand for tower sites and tenancies. The tower industry will evolve into the digital infrastructure industry, and play an increasingly greater role in the country’s growth.