The telecom revolution is one of the biggest success stories post liberalisation of India, which has improved the country’s visibility in global markets. Today, India is the second-largest telecom market and the largest data consumer globally. The Indian tower industry has laid a strong foundation of growth for the telecom sector and has supported the sector in keeping pace with fast-paced technology advancements. During 2007-20, the number of towers has grown over 2x at a compound annual growth rate of 7.1 per cent to reach more than 600,000 towers. Over the years, the telecom tower industry in India has emerged as a trendsetter in infrastructure sharing. In the coming years as well, IP-1s will play a prominent role in the growth of the digital economy, Industry 4.0, and successful implementation of government programmes such as Digital India, Make in India, Start-up India and the Smart Cities Mission.
The Department of Telecommunications (DoT) is further targeting 100 per cent broadband connectivity in villages, 55 per cent fiberisation of mobile towers, average broadband speeds of 25 Mbps and 3,000,000 km of optic fibre roll-outs by December 2022. The government has emphasised the strengthening of India’s domestic telecom manufacturing capacity. The union cabinet has also given its approval to introduce the production-linked incentive (PLI) scheme in the telecom and networking products domain for enhancing India’s manufacturing capabilities and enhancing exports.
Due to consolidation in telecom, the tower industry faced tenancy exits in financial years 2018 and 2019. Tenancy levels started improving in 2020-21 and are likely to sustain in the future as well. In case of no further consolidation in the telecom industry, the tenancy ratio, at an overall industry level, is expected to stabilise at the current levels of 1.3-1.5 times.
The Covid-19 crisis has not only highlighted the critical role of telecom infrastructure and digital applications for continued functioning of societies, but has also brought to our attention the digital inequalities that still exist between and within countries.
Digital transformation has helped us in pandemic management. The proactive implementation of platforms such as Aarogya Setu and Co-Win, backed by a robust and resilient information and communication technology (ICT) infrastructure, is helping in the ongoing vaccination drive in the country.
There have been significant improvements to enable digital transformation. These include the creation of digital infrastructure, electronic delivery of public services, financial inclusion, and improvement in digital awareness and literacy. However, there is still a lot to be achieved. Roadblocks like poor infrastructure, low internet speed, lack of coordination among various government departments, and taxation need to be removed to realise the full potential of digital transformation.
The robust telecom infrastructure laid by IP-1s has played a key role in digital transformation and has stood the test of the times. The demand for telecom and internet/broadband services has increased manyfold with the rise of trends like work from home, online education, videoconferencing and online entertainment.
However, the Covid-19 pandemic has exposed a clear digital divide. While it has created several opportunities for digital transformation, there are also some associated challenges. This digitalisation accelerated by Covid-19 will, in all likelihood, permanently change people’s lifestyles, even after normalcy is restored, that is, in the post-pandemic era. It would translate into the need for more infill capacity in dense urban areas, and further strengthening of the digital infrastructure. In order to achieve this, governments across the world, including the Indian government, need to be proactive in supporting further investments in digital infrastructure.
Some of the challenges in the sector that remain unaddressed are:
- A robust telecom infrastructure is vital to address the constant data surge. Therefore, gaps in infrastructure need to be addressed as we embark upon the journey of digital transformation with 5G as the driver.
- Rapid network expansion and densification will be needed to support the full range of 5G services for end-users, enterprises, etc. On account of higher frequency spectrum, the coverage range of macro cells will not to be sufficient. Therefore, macro cells have to be supported through mushrooming of small cells in order to avoid dark spots.
- Fibre connectivity is one of the key enablers of 5G, but there are gaps visible on ground. Fibre connectivity of towers in India stands at 30-35 per cent in comparison to countries like the US, China and Korea, where it is close to 80 per cent. There has been a big push from the government to increase the extent of fiberisation, but a lot of ground remains to be covered owing to the high cost of right of way (RoW) and the time taken in obtaining the approvals.
- The Telecom Regulatory Authority of India (TRAI) has proposed recommendations to enhance the scope of IP-1 registration and incentivise infrastructure sharing among operators including towers, radio sites, antennas, transmission system, in-building solutions (IBS), small cells, etc. In order to realise the cost saving potential of network sharing, there is an urgent need to approve the TRAI recommendations regarding “Enhancement of Scope of IP-1 Registration” without any further delay.
- DIPA has been pursuing the government to have one single nationwide policy on RoW. While DoT notified the Indian Telegraph RoW Rules in November 2016 and advised all states/UTs to follow the same, some of the states/UTs are still reluctant to adopt the rules. Some of the key states/UTs such as Delhi, Gujarat, Tamil Nadu, Andhra Pradesh, Kerala and Telangana are yet to adopt the RoW Rules, 2016. Further, in states/ UTs where the DoT Rules, 2016 have been adopted, there were severe implementation challenges at the district/local level as local bodies want to follow their own by-laws.
The growth of macro sites is expected to be modest in the coming years, largely driven by capacity expansion of 4G data services in the immediate term and later the 5G launch. Going further, the enhancement of the scope of IP-1s to include active infrastructure will prepare the towercos to embrace emerging opportunities in small cells, Wi-Fi, IBS, IoT, FTTH, etc.
Globally also, telecom infrastructure players are witnessing a transition from macro tower sites towards the inclusion of small cells, fibre, Wi-Fi solutions and IBS, etc. With strong fundamentals, Indian tower companies are well positioned to expand their infrastructure portfolio and tap into adjacencies.
Moreover, with the industry leaning towards data-heavy consumption and 5G services on the anvil, towercos are aligning their business priorities with the changing sector needs. Globally, new business models and revenue streams have opened up for towercos, and the Indian infrastructure market is ripe to explore these diversified business streams. As the telecom infrastructure industry aligns to the changing infrastructure needs of telcos, new business models have started emerging for infrastructure providers.
Further, as the economy grows, the low-hanging revenue opportunities can come from capitalising the real estate rights of infrastructure providers – opening up growth avenues in advertisements, electric vehicle infrastructure, security solutions and traffic control, among others. By focusing on the right mix of competencies and business opportunities, the tower industry can drive the next phase of th