India is witnessing a rapid digital transformation. Since 2015, there has been a sharp increase in the number of 4G subscribers, who currently stand at around 642 million. It is estimated that between 2010 and 2020, around 12 subscribers were added every second and nearly 23 internet users came online every second.
In this scenario, there is an immense load on mobile networks and the Covid-driven digitalisation has added to this. As trends like video streaming, videoconferencing and online classes get more deeply embedded in the day-to-day lives of people, it is clear that towercos will play a critical role in sustaining the increased data traffic.
A look at some of the major trends dominating the telecom infrastructure space, the key opportunities, challenges faced and the way forward…
Growth of towers and tenancies: Between 2007 and 2020, there has been a 2.4x growth in the number of towers. At present, India has the second-largest towerco penetration globally, after China. The Indian towerco penetration stands at 83 per cent. The current tower tenancy ratio in India is 2.2. Despite a reduction in the number of telcos, it is expected to grow further.
- Passive infrastructure sharing: Passive infrastructure sharing has grown in a big way in India, enabling 16-35 per cent capex and opex savings. In fact, the Indian telecom infrastructure industry has set a global precedence in infrastructure sharing and divestment of non-core assets into separate entities. Many other countries are now following India’s example. Today, 70 per cent of towers globally are owned by operator-led towercos.
- Industry-wide innovations: The industry is fast moving towards innovative solutions in an effort to drive operational efficiency. These include IoT for asset management, drone-based tower inspection, and mobile applications for O&M and workforce management. Further, towercos have started setting up tower operations centres, which offer real-time monitoring of sites, digitalisation of field operations, predictive analytics on operations, and real-time GPS-based mapping for disaster management. Smart rental and energy billing is also fast gaining popularity in the sector. This approach offers higher accuracy and reduced billing time, customised invoice formats and ease of tenancy movement for telcos. In addition, towercos have started adopting innovative tower designs, which help in optimising the cost of buildout. For instance, smart poles give towercos the opportunity to monetise various adjacencies.
Towercos can unlock new growth opportunities by monetising existing assets and exploring business adjacencies. For this, they need to transition to the role of shared digital infrastructure providers. This will come with the dual advantage of better access to capital and being better suited for 5G. There are both near- and long-term opportunities that are expected to surface in areas such as small cells, Wi-Fi, edge computing, fibre backhaul, data centres, smart cities, IoT and electric vehicle (EV) charging. Of these, fibre deployment and backhaul through fibre and microwave are expected to offer the maximum growth opportunity.
Further, the government and the industry have collectively announced various key targets that are expected to drive the digital opportunity for towercos. For instance, the top three telcos have set a capex target of Rs 2.1 trillion for 5G roll-out by 2025. This calls for site fiberisation and widespread small cell deployment. The industry has set the target of fiberising 60 per cent tower sites by 2022 and taking outdoor small cell deployments to 250,000 by 2023. Moreover, the government is planning to connect 600,000 villages with fibre connectivity in 1,000 days. All these factors will enable the transition of towercos to shared digital infrastructure providers.
In fact, the size of upcoming opportunities for towercos is estimated to be Rs 215 billion-Rs 310 billion by 2023, which would require an investment of Rs 660 billion-Rs 930 billion.
Key challenges and the way forward
To leverage these opportunities, there is a need to mitigate key challenges and hindrances. The industry continues to face hurdles such as delays in getting RoW approval, and non-uniform and exorbitant charges levied across states. As such, there is a need to streamline the approval process, bring in uniformity in the type and value of charges levied, and promote the ease of doing business.
The telecom infrastructure space has been pivotal in driving the digital revolution in India and will continue to do so if adequate regulatory policy support is provided.
Based on a presentation by Swapnil Srivastava, Global Technology, Telecoms and Media & Entertainment Analyst Leader, EY