Sudhir Prasad, chief operating officer, Viom Network
The performance of the tower industry is directly linked to the growth opportunities in the telecom sector. Given that 2015 had most operators expanding networks aggressively, the tower industry is also on a growth trajectory. In an interview with tele.net, Sudhir Prasad, chief operating officer, Viom Networks, talks about the company’s as well as the industry’s performance in 2015 and the key emerging trends.
How would you rate the performance of the telecom infrastructure industry in 2015 vis-à-vis 2014? What were the highs and the lows?
In 2015, the Indian telecom industry continued to be dynamic and full of opportunities. It wouldn’t be wrong to say that 2015 was the year of mobile data. With stable economic parameters, the tower industry’s underlying trends are positive, leading to the strong volume growth of data usage. This has certainly set the ball rolling with greater momentum for all telecom tower companies, including Viom Networks. While voice and data over 2G is still the mainstay for the telecom industry, 2015 marked a progressive shift towards data over 3G, whose usage was up by over 100 per cent in comparison with the previous year. What emerged was an indicator of deep entrenched latent demand, with telecom operators shifting gears by simultaneously increasing their focus on 3G and 4G and returning a healthy data growth.
A wide range of opportunities took centre stage, led by data growth and government programmes like Digital India and the Smart Cities Mission to build a nationwide mobile broadband network. Over the next few years, it will fully draw upon the capabilities of sound and robust infrastructure availability. The percolation and impact of such programmes is aimed at the grassroots level, galvanising the consumption of voice and data services for societal development. Overall, 2015 proved that data growth came from not just Tier I cities, but Tier II and Tier III cities as well. The smartphone penetration in even Tier II and Tier III cities in India was a massive driver.
How far has the government resolved issues related to radiation concerns, multiple local levies, RoW, etc.? What more can be done?
We continue to face issues concerning right of way (RoW). We will have to ensure that all towns and cities are subject to standard uniform rates applied across the board and multiple agencies are not involved in issuing clearances as this leads to considerable delays in rolling out telecom infrastructure. It is more important to have a wide network of passive telecom infrastructure to bridge the digital divide for the masses. Rather than dealing with multifarious policy issues, the industry should focus on enabling telecom services and not on dealing with local panchayats and municipalities for RoW for tower installations.
Together as an industry, through the Telecom Tower and Infrastructure Providers Association (TAIPA), we have held many discussions with the Department of Telecommunications (DoT), the Telecom Regulatory Authority of India and several state government functionaries. In addition, we have proactively taken steps to build public awareness through operator-supported localised programmes with state authorities to allay public concerns.
From time to time, it has been reiterated by local, central and global authorities that radiation norms in India are one-tenth of the international norms. The stringent norms mean that telecom operators need to adhere to government regulations, assuring civil society of no health-related concerns. Although tower companies provide only passive infrastructural support and do not own or operate electronic equipment that fall under the category of radiating instruments, companies like Viom have installed public notices across all towers as per the TERM Cell guidelines on behalf of telecom operators.
The honourable telecom minister has gone on record to dispel fears about the health impact of electromagnetic field (EMF) radiation. In addition, DoT and the World Health Organization have both stated that the EMF radiated through the electronic radiating equipment owned and operated by cellular operators is within permissible limits and poses no health hazards. Through TAIPA, tower operators like Viom are continuously building engagement with various constituents of civil society, including resident welfare associations, to understand their perspective and accordingly create awareness.
How has Viom’s performance been during the year? What were the key highlights and the major disappointments?
The past financial year has reinforced that Viom is ready for any challenge to compete in the tower industry and deliver exceptional stakeholder value. Year on year, for three consecutive years, we have delivered profit after tax (PAT) growth and created value in the most dynamic and challenging business environments.
The mantra of ensuring zero tenant sites, the consolidation of 2G tenancies and expanding into 3G and 4G tenancies has augured well. Our competitive advantage, ultra-lite towers and conscientious churn management strategy has resulted in an incremental market share. Owing to the innovative approach on managing operations by initiatives like the use of handheld devices and radio frequency identification tagging, Viom’s uptime has seen an increasingly upward trend. A well-constructed technology roadmap, which leverages data analytics and a mobility platform for informed decision-making, has further elevated our competitive advantage and helped us manage costs, report real-time field incidents and track account receivables seamlessly. We have achieved a sound tenancy market share of almost 24 per cent.
With this solid foundation, Viom will continue to drive double-digit revenue growth and strong cash earnings before interest, tax, depreciation and amortisation growth. Having delivered PAT at a compound annual growth rate of over 40 per cent in the past three years, we should be doubling our profits in 2015-16.
What steps were taken by Viom in the past year to manage finances?
We changed our model a couple of years ago by making it light on capex and opex and focusing on cash and customers. We brought in operational excellence and fiscal discipline, which helped us drive operational and financial leverage. Financial leverage has started coming in as a result of the way we manage our fund flows, working capital and the cost of borrowings. With these changes, Viom now has healthy cash revenue growth with nearly-doubling net profits year on year.
Not only did we have double-digit revenue growth in 2015, we also increased our net profit. This is the third year that Viom has had profitable growth. A strong operational and financial performance has helped us reduce debt by 30 per cent; our cost of debt has come down, too. We have reduced our net debt by over Rs 25 billion to sub-Rs 55 billion levels from over Rs 80 billion three years ago.
What initiatives has Viom taken to address the energy challenge at tower sites? What are the upcoming energy management technologies?
The telecom industry has been adopting various solutions for meeting its energy needs, reducing dependence on diesel through the deployment of alternate energy initiatives and optimising operating costs.
Our energy strategic business unit (SBU) has been at the forefront in developing Viom as a benchmark in energy management. The focus is on site-level energy cost benchmarking, increasing electrical connectivity and deploying innovative alternate energy solutions, combined with the rapid use of remote technological initiatives. By the end of 2015, over 35 per cent of Viom’s sites did not use diesel. Our aim is to make more and more sites free of diesel generators. We keep evaluating energy storage and energy generation solutions and have successfully piloted close to 50 such ideas.
What opportunities are likely to emerge for telecom infrastructure providers in 2016? How are they planning to leverage the same?
Mobile towers are handling a surge in traffic as operators upgrade to a new generation of bandwidth-hungry smartphones and tablets. Some of this growth could come from additional users and more connected devices but most of it is predicted to be from an increase in traffic per connected device as users demand more wireless data. The new traffic translates into soaring growth prospects for tower operators.
In line with market dynamics, we are offering integrated data solutions and in-building solutions (IBS) while using our towers as core assets and building around them. Like passive infra sharing, the concept is directed towards buildings, malls and airports where we go as a neutral host and build plug-and-play platforms for telcos, who come in as customer and share the infrastructure. As a telecom infrastructure solutions provider, Viom is leading the way in coming up with innovations like lite-anchor sites that are enabling operators to establish their presence with significant capex reductions. In this way, operators are able to set up their presence through the rapid establishment of towers in congested urban sites and remote rural locations to ride over spectrum constraints. Getting approvals for installing new towers still continues to be a challenge. But, with a concerted industry effort supported by congenial policy and close coordination with state bodies, the challenges can be eased.
What will be the company’s key focus areas in the near term?
With a wide national tower portfolio, Viom Networks has over 42,000 sites with more than 100,000 tenancies. It enjoys the highest tenancy ratio of 2.3 in the industry. We have more than an 11 per cent share of towers and close to a 15 per cent share of tenancies in the Indian telecom tower industry.
Therefore, as one of the leaders, it is imperative that we stay ahead of the technology curve and maintain our competitive advantage. Hence, playing on strengths like IBS and small cells and pursuing new deployments like Wi-Fi hotspots will be the key to success in 2015-16. By virtue of being an independent and agnostic tower company, we are in a better position to push the charter of sharing and connected towers and plug the gap as managed service providers. Reporting three consecutive years of profitability with established sustainable profitable growth, Viom is now moving to a quality growth-led future. The company has clear focus in terms of establishing its emerging business vertical, offering technology as a service, and inorganic growth.
Going beyond telecom towers, Viom’s emerging business SBU is continuously catering to the exponential growth in data used. Through innovative data off-loading solutions like IBS, distributed antenna systems and Wi-Fi, Viom is striving to address the indoor data delivery mechanism as over 50 per cent of data consumption takes place indoors. It has increasingly been felt that without fiberised backhaul for towers, it will not be possible to cater to the demand for high speed data connectivity in today’s age when we are focused on national programmes like Digital India and Smart Cities. Therefore, we will continue to encourage the industry in creating fibre networks with mobile towers as last mile connections. This will also be instrumental for the success of the Digital India initiative.
