Amit Sharma, Former President, ATC Asia, and Former Vice Chairman, Digital Infrastructure Providers Association
The digital infrastructure industry in India has seen significant developments in 2023. Some of these have positioned the industry to support the growth of the telecom sector in the country.
The Indian Telecommunications Act, 2023 is a significant legislation that replaces the Indian Telegraph Act of 1885 and the Wireless Telegraphy Act of 1933. It brings much-needed modernisation of the regulatory framework to support the growth of telecommunications in India.
The Telecommunications Act, 2023 has consolidated laws related to developing, expanding and operating telecommunications services in India. It designates telecom infrastructure as critical infrastructure, prioritising network security and imposing penalties for damage to digital infrastructure.
The act also addresses industry challenges such as multiple levies and taxes at the state/municipal levels and right-of-way (RoW) issues, bringing uniformity across India. It focuses on streamlining and ensuring consistency in applying RoW rules, capping charges, facilitating deemed approval and managing telecom infrastructure deployment on private property.
A key feature of the act is that it excludes telecommunications network infrastructure from the property it is located on for local taxes. All these measures will reduce compliance burdens and create a favourable environment for the speedy roll-out of robust digital infrastructure across the country.
Meanwhile, we have witnessed industry consolidation. Mobile operators have consolidated from 12 in 2012 to four today, and Reliance Jio and Airtel own 75 per cent of the market. Brookfield Asset Management’s offer to buy American Tower’s operations (American Tower Corporation-Telecom Infrastructure Private Limited [ATC-TIPL]) in India will bring about a similar consolidation in the towerco space in India, where Airtel-owned Indus and Brookfield-controlled Summit/TIPL will control 80 per cent of Indian towers. This consolidation will provide a stable platform for the future growth of the industry.
However, the continuing payment crisis has offset positive developments such as the Telecommunications Act, 2023 and industry consolidation. Two of the four mobile operators – Vodafone Idea Limited (Vi) and Bharat Sanchar Nigam Limited (BSNL)–have huge outstandings with towercos. These are holding them back from building the digital infrastructure that will expand 5G cellular and broadband wireless access to every part of the country.
The payment crisis for towercos, unfortunately, is a continuing saga. BSNL has at least started paying its monthly dues and is slowly reducing its past outstandings.
However, Vi’s outstanding payments to the industry are continuing to balloon. Industry hopes rise every time Vi management indicates that they are close to getting new equity, a prerequisite for further bank loans. These are dashed when Vodafone PLC rejects the deal. Without fresh fund infusion, Vi cannot even give its vendors a payment plan for its huge outstandings, nor can it implement its 5G growth plans, which are crucial to retaining its slipping post-paid customer base. Hopefully, the founders will take some positive steps soon to revive growth. The Vi payment overhang has depressed the valuations of towercos in India, and they trade at a 40-50 per cent discount on the Asian towerco average.
Global investors have a tremendous appetite for participating in India’s digital growth, and the digital infrastructure arena presents a great opportunity. The Telecommunications Act has significantly improved regulatory policy and reduced operational impediments posed by municipalities on deploying towers and fibre. Therefore, 2024 should see a marked revival in the valuations of towercos and the foreign direct investment flow into this sector.
The Indian telecom market size is estimated at $48.61 billion in 2024 and is expected to reach $76.16 billion by 2029, growing at a compound annual growth rate of 9.4 per cent during the forecast period (2024-29). The growth potential of the digital infrastructure industry in 2024-25 is huge. The exploding data usage requires network densification in urban areas, expansion in rural areas and an increase in fiberisation of towers from about 40 per cent today to at least 70 per cent, thus fulfilling the lofty ambitions of the Digital India vision.
Additionally, BSNL’s 4G network requires 100,000 sites by the year-end, creating growth opportunities for the sector. About 80 per cent data is consumed indoors, but the 2.3 GHz and higher cellular bands have poor in-building penetration. There will be a tremendous demand for in-building solutions that are best deployed by towercos and shared by mobile operators. This is far more efficient than having each operator wire up buildings independently. In addition, internet of things and edge data will require even more network investment, again best done by shared infrastructure providers.
The outlook for towercos is very positive in 2024 and beyond. They will transition to becoming full-fledged digital infrastructure providers for mobile operators, leaving the latter free to focus on new and better service offerings to consumers; collectively, they will fulfil the vision of a digital India.
