Driven by consolidation in the operators’ space and changing market dynamics, the telecom tower industry is undergoing a transition. While tenancy correction has adversely impacted their revenues, tower companies are positive regarding growth coming in from new focus areas such as in-building solutions (IBS), small cells and Wi-Fi. Exploding data usage and the roll-out of next- generation data networks continue to be the biggest drivers for the industry. Leading infrastructure providers shared their views on prospects and challenges for the industry at tele.net’s conference on “Telecom Infrastructure in India”…
Tejinder Kalra, CEO, Indus Towers
India is today the largest mobile data traffic consuming country in the world, ahead of the US, South Korea and other advanced markets. We have moved from a situation of sub-500 MB of data per subscriber per month to about 9 GB (including mobile data and Wi-Fi traffic). Almost 40-50 per cent of the traffic on devices is video, which is very similar to the data consumption patterns of advanced markets. As per industry projections, in the next four or five years, data traffic in India will touch 1 GB per subscriber per day. Needless to say, the networks have to be prepared to support such massive data traffic.
In the past two years, operators’ ARPUs have dropped significantly, which essentially means that their revenues were either flat or declining. This in turn, has been causing a lot of cost stress. Almost 40-50 per cent of operators’ costs comprise network opex and, unfortunately, what the tower industry calls revenue, they call cost. Consolidation has brought in a lot of cost rationalisation from the operators’ end. As operators consolidate from an 18-player to a four-player market, the tower industry too is consolidating. There are certain cost pressures on our side too, but while every transition is painful, it also throws up several opportunities. Certainly, there is a loss of tenancies but that does not necessarily mean that all tenancies and all towers are shutting down. The entry of a new greenfield player has brought more business. Reliance Jio Infocomm Limited (RJIL) started out by putting up its own sites but later, it decided to turn to tower infra companies (towercos). While we did lose a lot of tenancies on account of operator shutdowns, RJIL compensated to some extent. Secondly, even though operators are scaling back operations or closing up shop, the number of subscribers is not going down. This essentially means that the data usage and continued growth need to be supported. Even in cases where tenancies are merging, the equipment is not going to go away.
On the technology side, spectrum has become technology-agnostic, which means that all the spectrum can be used for 4G if operators want it that way. But currently there is no equipment that is merging these spectrum bands; an operator would need separate radios for 900 MHz and 1800 MHz bands. So, the loading will continue for some time, which represents both an opportunity as well as a challenge. The opportunity is the loading revenue that tower operators can make. The challenge is that a lot of these towers were originally not built to withstand a massive load, such as almost five radios per technology, per operator.
The task at hand for towercos is to engage in a lot of innovation on the engineering side, from a technology as well as a site solutions and design perspective. For instance, at Indus, we have developed camouflage sites. These allow us access to locations where we were earlier not allowed to install towers. Camouflage towers merge with the cityscape. Further, through site design innovation, we are able to minimise the rental cost because lean structures need less real estate.
Secondly, the way data networks function is quite different from voice networks as they are extremely coverage sensitive. As data capacity grows with the growth in 4G and the introduction of 5G, more sites will be required to fill the coverage gaps, as well as enhance the capacity. We also need to account for massive multiple input, multiple output deployment, small cell requirements and smart poles under the Smart Cities Mission.
Thirdly, we are going in for institutional acquisition and are tying up with institutions that have a large number of sites available. Indus, for example, has tied up with Indian Oil Corporation Limited and Hindustan Petroleum Corporation Limited and we thus have close to 35,000 petrol dispensing sites available to us across the country. This gives us a big portfolio of sites at the right locations, where operators would need to host sites in future.
Emerging opportunities for towercos
Small cells and IBS are major growth areas. The Smart Cities Mission also presents opportunities. Towercos can get access to strategic locations and fiberise these locations to help municipal corporations roll out smart services. We have so far rolled out almost 55 smart poles for the New Delhi Municipal Council. Fibre is certainly one key area where there is a big opportunity for us. Currently, less than 20 per cent of sites are fiberised. Going forward, about 90 per cent of the 4G and 5G sites will be fiberised. A lot of intercity fibre exists, but intra-city fibre is where the big opportunity lies. For these opportunities to fructify, a policy and regulatory impetus is necessary.
“Data traffic is projected to touch 1 GB per subscriber per day in the next four or five years. As such, networks will have to be prepared to support this massive data traffic.” Tejinder Kalra
Amit Sharma, Executive Vice-President and President, Asia, ATC
The unprecedented data growth being witnessed at present is driving the Indian telecom story. On the one hand, these are testing times for operators, who are declaring negative returns and are shutting down; on the other, the country is seeing 40-50 per cent growth in data uptake quarter on quarter. Interestingly, 90 per cent of internet usage in the country is on mobile phones, a trend that is unique to our country. We have seen incredible growth in the past two years, from 600 MB per subscriber per month to almost 6 GB today, and this is likely to go up to 16 GB in the coming years.
This massive data growth poses significant challenges for telecom networks, which are already incredibly constrained. While the industry is talking about single radio access network (SRAN) and frequency aggregation, practical on-ground deployment of these technologies may still be a few years away. Further, the kind of network that is needed to meet future data demand and speeds does not exist at present.
Industry stakeholders talk about loading on towers, but in urban areas, unfortunately, the ability to add capacity on towers is neither a matter of money nor of technology. There are several situations where the landlords of buildings or resident welfare associations (RWAs) are not interested in undertaking capacity enhancements. We have people who want better and bigger telecom coverage but, at the same time, they do not want towers near their premises. Deploying camouflage sites does not help because when the industry talks about a gigabyte of data per second worth of capacity from a site, camouflage sites do not meet the requirements. Such data capacities require strong structural macro sites. Interestingly, this is only the beginning of the problem as over time macro sites will also not solve the problem. Today, urban networks are designed with a majority of macro sites and a small portion of IBS, Wi-Fi and small cells. Over time, this mix will change as more micro sites will be required for data offloading. That said, the inability to upgrade urban sites is going to be a big issue. Getting infill sites in urban settlements is a daunting task, mainly on account of issues with landlords and municipalities’ hesitance. While we will have innovative designs, the ability to get the desired number of infill sites to make the network function effectively will be a much bigger challenge. The Supreme Court’s landmark property tax judgment has opened a sea of litigation, where every municipality now has a legal right to treat towers as buildings and charge exorbitant and arbitrary rates. At present, the tower industry’s return on investments is not great. It is certainly better than that of telecom operators, but that does not help. The kind of investments that are needed today cannot be supported by current rents. The networks of today will not even support a decent 4G nationwide network in the next few years, let alone a 5G one.
“The industry expects enabling provisions from the government, particularly in the areas of power availability, right of way, and right to use government land parcels and space for infrastructure development.” Amit Sharma
Policy and regulatory impetus
The industry expects some enabling provisions from the government, particularly in the areas of power availability, right of way, right to use government land parcels and space for infrastructure development, and the development of street infrastructure. Also, there should be a better financing system, with longer-term debt availability. Although the sector has been given infrastructure status, it is not a beneficiary of any substantial tax benefits. There are no relaxations of terms while borrowing.
Going forward, we have a socio-economic regulatory challenge staring at us. Industry stakeholders must collaborate to make Digital India and Broadband for All a sustainable reality.