Towercos have played a pivotal role in the unhindered growth of India’s telecom sector. By building, buying and leasing macro towers they have helped strengthen the infrastructure backbone needed to scale up services. While the tower lease model has flourished over the past decade, burgeoning data growth and massive infrastructure deployments to support future technologies have propelled towercos to explore new business models and revenue streams. In this backdrop, EY has released a report titled, “Next-gen infraco: Unlocking new business opportunities”. The report outlines future business landscape for the Indian telecom infrastructure industry and presents an in-depth analysis of the emerging opportunities. Excerpts…

Industry overview

Currently, 71 per cent of the towercos’ portfolio in India is held by infrastructure providers that are either directly controlled by telecom operators or are independent tower companies. However, the ongoing price war in the industry and tapering  telco top lines have led them to either reduce their stake in tower subsidiaries or divest captive tower assets to pare debt and focus on their core business. Going forward, independent towercos are expected to own the majority of the towers in the market.

Evolving business model

Over the years, towercos have gained extensive experience in managing distributed assets. Their current business model has helped them build core assets and strengths that can be further leveraged for revenue gains. The physical assets – site locations, tower structures, power-backed sites, air conditioning and fibre – can be cross leveraged for varied use cases. Further, towercos have well established relationships with telcos, experience in managing long-term master service agreements (MSAs), and know-how of right of way (RoW) clearance processes. These skills and assets taken together give towercos a unique value proposition to broaden their portfolio and explore new business avenues. As a result, towercos have started shifting their focus from macro tower-driven business to new business models hinged on fibre, small cells, data centres, Wi-Fi, smart cities, etc. Globally, tower companies are already reaping the benefits of these new areas of investment, which have proved to be successful for multiple global infrastructure companies (infracos).

Exploring new opportunities

Among these new areas of investment, fibre presents a significant opportunity. Towercos can consider becoming a neutral host for fibre deployment, which would enable them to play a larger role in the value chain. Small cells are another booming segment and towercos are well placed to tap it. 5G roll-out will scale up small cell deployment. Towercos’ know-how in securing contracts from municipalities for small cell sites would enable them to strengthen their value proposition. Further, towercos can explore the provision of fiberised small cells, as it would position them as integrated players. Towercos are also well positioned to play the role of a neutral host in Wi-Fi deployments. This would help telcos avoid considerable cost on the installation of individual infrastructure. They can also venture into building IoT networks in unlicensed bands by collaborating with IoT technology providers, and installing low power wide area (LPWA) base stations and related hardware at their sites. Smart cities are another area that is being targeted for potent business expansion by infracos to not only enhance revenue but also gain access to street furniture for future telecom infrastructure. Towercos can also explore opportunities in the data centre space as there are synergies in the business model of a towerco and a data centre service provider. Additionally, tower sites with distributed and widespread location network are well suited to co-locate edge computing infrastructure. This opens up new revenue streams for towercos, as they can lease the space at their sites to data centres. Towercos are in a compelling position to place themselves as energy/power management solution providers and can explore opportunities for providing power as a service.

Transforming into shared digital infrastructure providers

In the long run, towercos can play a much larger role by becoming shared digital infrastructure providers. This role would include the management and sharing of active elements as well as passive infrastructure. By assuming the role of a shared infrastructure provider, a towerco can offer wholesale services to digital service providers, which, in turn, can focus on their core business. However, exploring this opportunity would be subject to regulatory approvals and a much more evolved ecosystem.

Key recommendations

Net, net, the future seems promising for the telecom infrastructure industry. The ongoing transformation in the industry is expected to open up revenue potential of Rs 215 billion-Rs 310 billion in 2023. Tapping this opportunity would require an investment of Rs 660 billion-Rs 930 billion within the 2018-2023 time frame. In order to drive these investments, it is pertinent to undertake steps for improving ease of doing business in the telecom infrastructure domain. To this end, delays in getting approvals from municipalities and clearances for RoW, lack of uniform charges, and multi-body approvals are the key concerns that need to be addressed for faster infrastructure roll-out.