With passive infrastructure sharing gaining momentum and approximately 330,000 towers required to achieve the government’s target of 500 million subscribers by 2010, the mobile tower business in India is expected to witness remarkable growth. This has paved the way for the emergence of standalone tower companies.
These companies lease out their passive infrastructure to service providers, enabling them to roll out services more quickly than they would have if they had to develop new passive sites of their own. “With multiple tenants on towers, it makes sense to separate the towers from the provision of mobile services,” says Mahesh Uppal, director, ComFirst.
XCEL Telecom is one such company that intends to capitalise on the lucrative tower and shared infrastructure business opportunity. The company was incubated in October 2006 by Q Investments. With a significant capital commitment, XCEL Telecom has the ability to quickly deploy infrastructure and meet the immediate needs of the sector. It is looking to make huge investments for expansion over the next three years.
The company provides passive infrastructure at locations that fit into operators’ radio frequency plans. It also provides 24×7 operations and maintenance services. Recognising the importance of site uptime, XCEL has consistently maintained a power uptime of 99.99 per cent. The company claims differentiation from its competitors “through better compliance of service level agreements and accelerated collocations”, says Ajit Shankar, chief business development officer, XCEL Telecom. This leads to considerable opex savings for its customers.
XCEL’s key clients include Vodafone, Aircel, Bharat Sanchar Nigam Limited, Spice Communications and Himachal Futuristic Communications Limited.
The company commenced operations in the Punjab and Karnataka circles in July 2007. Since then, XCEL has steadily ramped up its presence and is now operational in 17 circles, including Rajasthan, Maharashtra, Orissa, the Northeast and Haryana. It intends to gain a pan-Indian presence before the end of the year. Currently present in most of the highgrowth telecom circles, the company intends to maintain its focus on these areas, given the aggressive network expansion plans of telecom operators in these areas. In fact, some of the company’s sites are located in extremely remote areas like Beltali, Khanpur, Bamniabad and Gangasagar in the South 24 Parganas district of West Bengal, which are neither electrified nor connected by road.
As of March 2008, the company had a portfolio of 1,000 towers. “No other infrastructure service provider has been able to roll out 1,000 towers in a short span of nine months,” says V.S. Sethi, chief operating officer, XCEL Telecom. According to Sandip Basu, managing director and CEO, the company has built up capabilities to roll out 100 towers per circle per month.
XCEL has adopted a two-pronged strategy of both organic and inorganic growth. It intends to roll out towers and has chalked out an aggressive acquisition-led growth strategy. The company is targeting small players with 100 to 200 towers. It acquired TICS Telecom, a Punjab-based telecom tower company, in November 2007 for an undisclosed amount. This was the first inter-sector buyout in the independent telecom tower companies’ arena. The company is also keen on picking up stake in hived-off infrastructure arms of telecom operators and then leasing the infrastructure back to them.
However, while the tower business presents immense opportunity, independent tower companies like XCEL Telecom will find it difficult to hold their own in the face of competition from the hived-off tower subsidiaries of telecom operators.
According to industry analysts, standalone tower companies need to work together and consolidate in order to compete with the hived-off independent infrastructure arms of large telecom companies which have considerable advantages due to their size and spread. For instance, Indus Towers, the recently announced joint venture between Bharti, Vodafone and Idea, has over 72,000 sites, Bharti Infratel has over 21,000 sites while Reliance Infratel is slated to end this fiscal year with 40,000 towers. In comparison, among the independent tower companies, only a few have more than 5,000 towers.
With shared infrastructure poised to become a big business, the company faces stiff competition from other tower companies like TowerVision, GTL Infrastructure Limited, Essar Telecom Infrastructure and Quippo Telecom Infrastructure Limited.
These challenges notwithstanding, the company has charted ambitious growth plans. Among other things, the company is planning a portfolio of approximately 25,000 towers by 2010 both by building towers as well as by acquiring smaller tower companies. The company is also targeting to become a one-stop solutions provider and is actively considering moving into the active infrastructure sharing space. Intending to position itself amongst the top three telecom infrastructure providers by 2010, XCEL is clearly aiming for a hockey-stick growth curve.
