With over half a billion users and revenues in excess of $28 billion (as of 2009), India is the world’s largest telecom market.
While it has largely been a voice-centric market, factors such as price wars, 3G licensing and the need to differentiate one’s services from the rest have been fast changing the outlook for the sector.
Aggressive price wars, triggered by schemes such as per-second billing, have resulted in a very low tariff per minute.
This has forced the operators to look at alternative revenue streams such as valueadded services. The next level of growth is anticipated from Category B and C circles.
The subscriber base is expected to grow at a compound annual growth rate of 16.4 per cent between 2008 and 2015. This growth, along with upcoming technologies such as 3G and Wi-Max, and increasing rural connectivity, is expected to drive the demand for infrastructure and infrastructure sharing in the country.
About 487,869 towers are expected to be deployed to support an anticipated 807.6 million subscribers by 2015. This makes for a perfect business case for infrastructure sharing. The liquidity crunch caused by the global economic downturn, which impacted the expansion plans of various companies, has provided a further impetus for infrastructure sharing. Moreover, falling ARPUs, coupled with escalating capex and opex, are expected to increasingly encourage telecom operators to opt for infrastructure sharing. Also, the existing regulations under the Universal Service Obligation (USO) Fund require all telecom operators to share infrastructure in rural areas.
The government, too, has done its bit to promote infrastructure sharing. It has set up projects such as the Mobile Operator Shared Towers and the USO Fund, which facilitate infrastructure sharing in the country. Initially, only passive infrastructure sharing was allowed; subsequently, the government gave its approval for active infrastructure sharing as well.
Over the past year, the tower industry has witnessed a wave of consolidations, with several major deals being signed. GTL acquired 17,500 of Aircel’s towers for Rs 84 billion to emerge as one of the world’s major independent tower companies.
Similarly, WTTIL-Quippo acquired Tata Teleservices (Maharashtra) Limited’s entire portfolio of 2,535 towers in Mumbai, Maharashtra and Goa.
The increased competition in the infrastructure space has become a key driver for both existing and new players to rapidly roll out services. Several new partnerships have come into play. For instance, Reliance Communications is planning to share infrastructure with Etisalat, which translates into better tenancy ratios for Reliance, and lowers the capex and timeto-market for Etisalat. This works especially well for new entrants, who primarily focus on Category B and C circles, where they can achieve higher penetration rates through infrastructure sharing.
Some key trends that are likely to emerge in the telecom space include mergers and acquisitions of telecom companies, high investments in 3G, value-added services and broadband wireless access, emergence of next-generation networks, deployment of network optimisation solutions, and adoption of green technologies.
In fact, infrastructure companies are already considering deploying various green technologies. The erratic power supply in rural areas has necessitated the use of diesel generator sets, which has increased opex. This has led operators to opt for greener fuel options such as biodiesel, which can bring down the opex.
Similarly, operators are keen to deploy wind-powered radio base stations that do not require feeders and cooling systems, resulting in 30-40 per cent lower consumption of power. Also, with an abundance of solar energy, operators are likely to deploy solar-powered base transceiver stations (BTSs) in the near future. Operators are also considering outdoor BTSs as a highly efficient and reliable solution in off-grid areas. These BTSs have a lifespan of as high as 15 years.
In the longer term, major growth in the telecom sector is expected to come from Category B and C circles. There is clearly a need to enhance infrastructure in these areas in order to support this growth. Also, as competition intensifies, the business models will change, leading to more strategic alliances. Finally, the endeavour of tower companies will be to support infrastructural growth, which will likely make a strong business case for further investments.
