Devender Singh Rawat, managing director and chief executive officer, Bharti Infratel Limited
Bharti Infratel reported a healthy operational and financial performance during 2016. The expanding reach of 4G and the surge in data demand have opened up new opportunities for the telecom tower company. During the past year, the company continued to contribute significantly towards its green telecom vision. Going forward, data will be central to the company’s growth strategy. Devender Singh Rawat, managing director and chief executive officer, Bharti Infratel Limited, talks about the company’s key achievements and plans, industry trends and outlook for the sector…
What were the key growth trends and drivers for the telecom infrastructure industry during 2016?
Data continues to be the biggest growth driver for the telecom industry and thus operators continue to roll out mobile broadband networks across the length and breadth of the country. In 2016, the roll-out of 4G networks came to the forefront as the ecosystem continued to develop with the increasing penetration of handsets at affordable prices. We expect operators, both incumbents and new entrants, to focus on both 3G and 4G. This focus was also demonstrated in the spectrum auctions during the second half of 2016, when 960 MHz of data spectrum was sold in the 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands. The year 2016 also saw the launch of nationwide 4G mobile services by Reliance Jio Infocomm Limited (RJIL), which accelerated data consumption. There would be a need for operators to monetise this large investment through new tenancies or cabinet expansions.
Apart from this, the government’s Smart Cities Mission gained momentum during the year. Under this initiative, the consortium led by Bharti Infratel became the first tower company to sign the concession agreement under the build-own-operate-transfer model.
What are your views on the recently released right-of-way (RoW) policy? What are the other areas where regulatory and policy actions are required?
We welcome the Department of Telecommunications’ (DoT) recently announced RoW policy, which will simplify and streamline the process of approvals and eliminate unnecessary paperwork. The states need to adopt this policy to increase the ease-of-doing business. Taxation uniformity, policy clarity and implementation speed are some of the other areas that need attention. More public-private partnership models need to be explored to fulfil the Digital India vision.
The policy will ultimately lead to better connectivity and coverage, and will enhance the end-user experience. It should also be extended to subcontractors and to IP-1s. IP-1s are formed with the sole mandate of servicing telecom operators and providing shared infrastructure on a non-discriminatory basis.
What were the key operational and financial highlights for Bharti Infratel during 2016?
Overall, the company’s financial and operational performance remained healthy. Our average sharing ratio per tower stood at 2.27 at the end of December 2016, up from 2.2 at the beginning of the year. The revenues for the quarter ended December 2016 stood at Rs 34.01 billion, a growth of 10 per cent over the corresponding period in 2015. Consolidated earnings before interest, taxes, depreciation and amortisation stood at Rs 14.96 billion, a year-on-year increase of 9 per cent, representing an operating margin of 44 per cent. Meanwhile, the consolidated profit after tax increased by 25 per cent year on year to Rs 6.2 billion for the quarter. An operating free cash flow of Rs 8.01 billion was recorded for the quarter ended December 2016. The year-to-date net profit was Rs 21.5 billion as of December 2016, up 41 per cent year on year.
What has been the impact of 4G service roll-outs on the company’s business? What are the 
major deals that it has signed in the past few years?
The roll-out of data networks has led to strong growth in our business as is evident in the increasing number of towers and tenancies. In addition, lower quantities of spectrum and spectrum in higher bands have fuelled the demand for base transceiver stations, both for capacity and for coverage, which is also reflected in higher loadings and, subsequently, revenues for the company. However, with 4G coverage still lagging behind 2G and 3G, the industry has a long way to go to fully realise the 4G potential.
As a company that provides services on a non-discriminatory basis, all operators are our customers and we continue to work with all of them as they expand their networks. In fact, in the last quarter of 2016, we recorded the highest tenancies ever since our initial public offering.
What are the key energy management trends in the telecom infrastructure space? What initiatives has Bharti Infratel taken to address the energy management challenge at tower sites?
At Bharti Infratel, being environment-friendly is a part of our vision. Our business model of sharing infrastructure with all operators drives an inherent efficiency by reducing energy costs with a new tenant on the same site. Bharti Infratel has institutionalised the GreenTowers P7 programme, aimed at minimising the dependency on diesel consumption and reducing the carbon footprint. The GreenTowers P7 programme was initially based on seven innovative clean energy technologies; we have implemented over 15 technologies now.
We have adopted a three-pronged strategy to run this programme:
- Utilising alternative sources of power
- Improving energy efficiency
- Reducing power consumption
Through these efforts, we have managed to make over 38 per cent of our towers green or diesel-free at a consolidated level as of March 2016. We have also been able to reduce our diesel consumption per tenant by more than half in the past six years.
What are the key challenges currently being faced by the industry?
The roll-out of towers and other telecom infrastructure faces hurdles with regard to approvals, procedures and levies that vary from one location to another. Overall, while the government is trying to resolve these problems, as is evident from the recent RoW policy, more efforts are required to ensure that the benefits are realised. The state governments need to incorporate these guidelines into their respective policies.
On the operator side, data monetisation is the key focus area, with the industry having spent over Rs 3.58 trillion on spectrum alone in the last few auctions. Stretched operator balance sheets and intensified 4G competition are also driving consolidation.
A lot of capital is needed for building infrastructure. The IP-1 model has been hugely successful in meeting this need; however, its scope is limited to towers only. Through this model, the tower industry has managed to attract investments of over Rs 1.25 trillion and has also reduced both rental and energy costs by sharing vital infrastructure on a non-discriminatory basis. This successful model can be replicated for fibre, Wi-Fi and in-building solutions as well. The government could look at a similar registration as IP-1 for fibre and Wi-Fi and call them IP-2 and IP-3 to ensure faster reach as envisaged in the government’s Digital India vision and to reduce costs for all operators.
What are the company’s expansion plans? What will be the mix of greenfield and brownfield roll-outs?
In the quarter ended December 2016, the company saw a healthy year-on-year growth of around 7 per cent in tenancies. Going forward, we will see a healthy mix of new tower deployments along with improving tenancy additions, given that the country needs both coverage and capacity augmentation, especially for data. The huge investment by operators in spectrum and the increase in the intensity of 4G competition will create huge demand in the future.
What is your outlook for the tower industry in 2017? What will be the company’s key focus areas?
We expect 2017 to be another year of data network roll-outs as operators compete for market share in the 4G domain. We will continue to focus on opportunities created by data growth in the areas of small cells, in-building solutions, fibre, Wi-Fi besides our organic growth of macro sites. Further, we expect an increased pace of roll-outs for tower companies as operators look to monetise their recent investments in spectrum.
As part of the Digital India initiative, we are looking at the smart cities coming up and we are eager to participate with the government in creating world-class shared infrastructure for all operators to leverage. In line with our vision statement, we will also continue to promote environment-friendliness through our Green Towers P7 and zero-emission-network programmes.
