Tower companies have played a key role in establishing a robust telecom network in the country. The tower industry is currently at the cusp of a significant evolution given the growing data con- sumption, increasing competition among operators and the digital push from the government. The accelerated network investments in 4G roll-outs are driving tenancy growth. Further, the govern- ment’s Digital India vision is driving the deployment of telecom infrastructure, which is the backbone for connectivity. In addition, the government’s Smart Cities Mission will create a platform for tower companies to emerge as end-to-end infra- structure providers, catering to all infra- structure connectivity needs of such cities.
A look at the key trends and challenges in the tower infrastructure space, as well as the outlook for the industry…
Key trends
Data drives growth: To cater to the rapid increase in data demand and tap the emerging opportunities, operators have been constantly upgrading their networks. Most of them have launched 4G services in order to provide better customer experience. Moreover, the proliferation of affordable smartphones, the availability of low-priced 3G and 4G services and grow- ing popularity of m-commerce, social media, instant messaging, video entertain- ment, etc., have increased the burden on the existing capacity at tower sites. Therefore, apart from rolling out new ser- vices in new geographies, operators have been adding capacity to their existing net- works. All this has led to an increase in the number of sites being rolled out and ten- ancies on the existing sites.
On the supply side, 3G/4G network expansion by operators is expected to be a key driver of tenancy demand. The infill capacity demand is expected to be gener- ated in the operators’ leadership circles, particularly in the Metro and Category A circles. There will be limited expansion of 2G networks in the future as incumbent operators have already covered a significant population.
Government’s digital push: In the past couple of years, the government’s focus on the digitalisation of the economy has pro- vided a new impetus to the telecom indus- try. The Digital India and Smart Cities initiatives have opened up new growth avenues for the industry. Therefore, it is imperative to have a robust telecom infra- structure for implementing the various services envisaged under these initiatives.
Infrastructure sharing: The telecom business is capital intensive, and needs huge investments for growth and expan- sion purposes. The costs of deploying tele- com networks are expected to rise in the future, with operator focus shifting to rural areas. Moreover, the laying of network infrastructure in India requires regulatory clearances at various stages, which often slows down the pace of roll-out and adds to the costs. In this regard, infrastructure sharing can help reduce the cost of net- work roll-outs, ensure speedy deployments and reduce the risk of network redundancy. In addition, sharing provides a source of revenue for telecom operators as they can monetise their existing assets by leasing them to other operators.
While operators and tower companies have been sharing their passive infrastruc- ture for many years now, active infrastruc- ture sharing in India has picked up only recently. Successful active network sharing requires operators to surrender network autonomy and coordinate operating para- meters. Operators in India can explore sharing models such as basic radio access network (RAN) sharing (sites, masts, an- tennas, feeders and backhaul) and multi- operator RAN sharing (only network equipment, no spectrum) or multi-opera- tor core network sharing (spectrum and equipment), depending on their choice of depth of sharing.
Focus on energy management: With the rising demand for telecom services, the energy consumption of 
telecom network operations has also increased significantly. However, India’s precarious power supply situation due to uncertain grid supply poses a significant challenge. Currently, only about 40 per cent of the power demand is met by grid power while the remaining is met by diesel generators (DGs). Besides posing an environmental threat due to car- bon emissions, the usage of DGs has result- ed in increased energy costs. These account for 30-34 per cent of the total operational expenditure of a telecom tower company.
In a bid to optimise their energy costs, tower companies are shifting to energy- efficient technologies and alternative sources of energy. In 2016, the industry installed 89,000 diesel-free sites in an attempt to reduce their energy costs and carbon footprint. In addition, the industry is increasingly using automation and real- time monitoring solutions, as well as green and energy-efficient solutions. Batteries and storage solutions have also become an important part of a tower company’s ener- gy management strategies.
Key challenges
A key challenge pertains to the poor im- plementation of various government ini- tiatives taken for the industry. For ins- tance, the uniform right-of-way rules released by the government in November 2016 have done little to address the issues associated with the roll-out of telecom infrastructure. Although these rules lay down a clear framework for the grant of approvals and settlement of disputes in a time-bound manner with regard to the installation of mobile towers, and laying of optical fibre cable and copper cables, their on-ground implementation has been dis- appointing. This is because of consider- able differences in execution across states and multiple local bodies within the states. Other major issues faced by the industry include the constant fear among the public regarding electromagnetic field radiations emitted by telecom towers; ex- ternal interference in border circles caused by illegal jammers/boosters/ repeaters that affect network quality; the poor availability of power on tower sites, which affects network uptime and quality of service; restriction on single-window clearances; and multiple fees and levies imposed on the sector.
In order to improve the overall sector performance, the government needs to work in close collaboration with industry stakeholders. Single-window and time- bound clearances for the installation of tower sites must be encouraged. The gov- ernment should grant quick permissions for the installation of mobile towers and in-building solutions (IBS) on government buildings, defence land, airports, railway stations and residential complexes. Further, the government’s announcement of providing 24×7 power supply by 2018 is a positive development for operators as they need 24×7 power availability at indus- trial rates to ensure seamless connectivity on their networks.
In recent times, the sealing of telecom towers by local municipalities without any show-cause notice has wreaked havoc for operators. Thus, the government needs to ensure that no sites are shut down without the Department of Tele- communications’ permission.
Exploring new growth avenues
The ongoing consolidation of operators and the resultant site sharing can lead to potential losses. Further, the intense com- petition in the market is compelling opera- tors to rework their cost models with tower companies. Thus, towercos are exploring opportunities in new areas such as IBS, fiberisation, microcells and Wi-Fi hotspots, apart from providing tower installation ser- vices. They can also assist operators in implementing carrier aggregation, which involves combining spectrum from differ- ent bands to increase network capacity.
As the data surge continues, operators are looking to become future-ready by investing in IBS and fiberisation. Further, the growing adoption of internet of things/machine-to-machine communica- tions, and the rise in indoor data consump- tion will drive the deployment of small cells, which is currently at an early stage. Site fiberisation can also be seen as a key growth opportunity for tower companies.
With new smart city applications, telecom tower providers are set to witness accelerated growth in installations due to the rise in data usage. As per industry estimates, the number of towers is expected to grow at a compound annual growth rate of 3 per cent over the next five years. The industry tenancy ratio is expected to increase from 1.77 in 2014- 15 to 2.48 in 2020, with the overall site tenancies expected to reach 1,487,000 by 2020. The solutions offered by tower companies can be a mix of passive infra- structure, small cells, Wi-Fi, fibre con- nectivity and service level agreement-dri- ven maintenance support.
