The Indian telecom industry has witnessed a roller-coaster ride in the past decade. In 2010, the Department of Telecommunications (DoT) successfully auctioned 3G spectrum, immediately fol- lowed by 4G time division long-term evolution (TD-LTE) spectrum. Telcos’ aggressive competitive bidding generated revenues of about Rs 1 trillion for DoT. The call rates were reducing day by day in the face of stiff competition. As a result, Indian subscribers started enjoying perhaps the world’s lowest tariffs.
In 2012, the cancellation of 122 telecom licences was a major event that shook the telco industry and also towercos. There- after, telcos focused on 3G data network growth and conditions seemed to be improving. That was the time when many other countries had already commenced large deployment of 4 LTE networks. Notably, TD spectrum was assumed to be non-suit- able for voice telephony when VoLTE trials were at a nascent stage. Till 2015, 2G voice calls formed the major revenue source for telcos and the average Indian telecom subscriber’s appetite for monthly data usage was limited to about 250 MB. Then in 2016 began another level of disruptive competition with the entry of a new operator offering state-of-the-art 4G only network. With free trials by the telco, subscribers’ data consumption grew multi-fold in a matter of less than two years. The combined effect of all these events, investment decisions and competition strategies generated a negative spiral of profitability. In the past three years, some telcos have merged and others have closed down. This reduction from over 11 to just three private players and the government-owned BSNL and MTNL in each telecom circle undoubtedly changed the telco market conditions. Redundant or low utility of network infrastructure is a concern for telcos and business loss for towercos. Understandably, at present, network expansion plans are not telcos’ priority.
The collective tower site count in India is in excess of 450,000 and majority are own- ed or operated by towercos. In the past two years, tenancy ratio, the key metric of all towercos reduced from the peak. As a direct consequence, a sizeable number of towers were rendered non-operational. At this stage, towercos’ primary focus is on controlling and optimising costs rather than rolling out new sites.
Telcos’ network consolidation has impacted towercos and resulted in loss of tenancies and stunted opportunities of incremental revenue on account of additional loading and energy provisioning. The redundant passive infrastructure is being cannibalised by towercos to conserve refurbishment capex for operational sites.
The telecom industry has reached a stage where telcos’ future growth and quality of service (QoS) will require a stronger support from infrastructure partners, especially towercos/infracos through innovative street furniture solutions. In the next four to six quarters, it is expected that the commercial roll out of 5G full scale solutions will take place, marking the next phase of growth for the towerco industry.
Emerging trends in energy management
Energy management has already been established as a revenue source for tower- cos. The challenges of profitability continue due to an uneven distribution of load conditions, diesel pilferage and capex constraints for towercos.
Despite all the challenges, it is worth- while to mention the improved power sup- ply position through aggressive efforts of the Ministry of Power. The recent data fr- om the Central Electricity Authority indicates an aggregate power deficit of less than 0.8 per cent. This has translated into electrification of over 85 per cent of telecom towers. Diesel cost reduction is an important target in the energy management initiatives of towercos. To facilitate this, various solutions are deployed such as replacing diesel generators of higher capacity, increasing battery backup and solar power generation.
Among other off-grid solutions tried and tested in other geographies, the use of micro turbine generators (MTGs) is promising. It has several major differentiators:
- MTG does not require lubricating oil. Hence, service intervals of over 5,000 hours (as against 300-500 hours for diesel generators).
- It can reduce fuel pilferage by using a mixture of diesel and
- Low noise level and small carbon foot- print.
Role of towercos in 5G
While the tower infrastructure is as such agnostic to telecom technologies, there are key differences to be addressed while moving from 4G to 5G era. 5G technology standardised globally by 3GPP, indicates radio access will utilise sub 6 GHz and over 25 GHz (millimetre wave) frequencies. In India 3.3–3.6 GHz band is identified by DoT. Compared to the current use of 900/1800/2100/2300 MHz of 2G/3G/ 4G networks, propagation losses are substantially higher for 5G networks. Hence, 5G will require larger number of sites than currently available on ground. This indicates densification, acquisition of new site locations and, hence, reduced inter-site distance.
Another difference is that microwave radio links transmission capacity might not be adequate for the backhaul of 5G networks and fibre connectivity will be essential. In urban areas, 5G will require deployment of massive multiple input multiple output antennae as co-location or on stand-alone new sites.
As a result of the above conditions, 5G networks will require deployment of street furniture and new masts of 12–15 metre rather than rooftop and tall ground-based towers. Towercos and various other stakeholders have repeatedly made representations to the telecom ministry and state governments for a uniform policy in this regard. For supporting 5G roll-outs, the Government of India will necessarily be required to act on work- able policy reforms and their effective implementation for right-of-way and site clearances.
The role of towercos/infracos will emerge with a win-win approach by telcos for partnering and risk sharing. This will also be an opportunity for innovative site designs and operations and maintenance service providers.
It goes without saying that towercos in India have played an important role in increasing the teledensity from about 25 per cent (in 2007) to over 88 per cent at present. This was achieved through investments in tower and power infrastructure in urban, semi-urban and rural areas for facilitating telcos’ requirements. Proliferation of towerco sites in remote and rural areas not only helped reduce the digital divide but also complemented the role of the Universal Service Obligation Fund besides improving the rural economy.
While telcos have made representations for the bail-out in the wake of DoT’s demand for adjusted gross revenue (AGR) dues, perhaps towercos’ difficulties and business losses went unnoticed. Thank- fully, telcos acknowledge that towercos have stood by them in difficult times and that for success in the 5G era, due consideration would be given to the increasingly important role of towercos.
Towercos, in spite of their operating efficiencies, have suffered due to the capital intensive nature of the business. Future trends will emerge through rational pursuit of solutions to present challenges.
Undeniably, telecommunication infrastructure as an important pillar of economy will continue to contribute to the GDP growth of the country in several ways, be it digitisation, e-commerce, cashless transactions, IoT-enabled devices, or the convergence of telecom and broadcast entertainment.
The cut-throat tariff competition among telcos is now reaching an end. Telcos and investors have realised that for sustainable business, it is necessary to create a new normal of engaging with tower- cos and other partners in the ecosystem.
India has the right demography and talent potential for faster economic growth. But to tackle the challenges of raising capital for growth, the industry requires innovations not only in the technology space but also in financing large infrastructure projects. Envisaging these challenges, the government, through the Securities and Exchange Board of India, has amended the relevant financial regulations for setting up infrastructure investment trusts. This model would help large towercos to focus on growth and at the same time have freedom to quickly fulfill their debt obligations.
The Indian telecom industry has now reached a fairly balanced competition among a few telcos. Assuming that the outstanding AGR and spectrum usage charge issue of each telco gets amicably resolved with DoT, the industry will soon stabilise and create a conducive environment not only for attracting investors but also for enabling the much awaited 5G era. Towercos will be able to enhance their offerings in active infrastructure sharing and backhaul on their own or through partnerships with technology companies, energy service companies and managed services entities. Agile thinking will lead us into a better future.