Sharing Of Telecom Infrastructure
Sharing Of Telecom Infrastructure
The growth in wireless mobile subscribers in last one year has been phenomenal and over 7 million new mobile customers are being added every month. Due to intensive growth, intra-site distance of base units are reducing drastically and the formation of such cluster of base units opens a new opportunity of sharing the infrastructure which could be passive as well as active. The benefits or pay off are listed as under-
• To reduce the capital expenditure.
• Quick rollout of the network and thereby inflow of revenue.
• To reduce the operating cost.
• To improve the city skyline.
• Optimum utilization of national resources and hence improved economic efficiency.
In view of stated importance of passive infrastructure, Reliance Communications, which is the country’s second largest mobile telecom company, became the first to demerge its tower operations, christening it Reliance Telecom Infrastructure Ltd (RTIL). Bharti Airtel, Tata Teleservices and Idea Cellular followed suit.
Telecom Regulatory Authority of India (Trai) also supported infrastructure sharing. “Mobile operators will require a large number of towers to sustain this growth pattern, which will need huge expenditure and time to roll out services. It is likely to further deteriorate the skyline by erecting more towers. Passive infrastructure sharing will help reduce the growth of towers,” Trai observed.
Infrastructure sharing may be new to India, but it’s a standard practice, globally. Though tower sharing has not been very successful in most European and Asian countries, experts believe India will do a US, because no other country in the world has 12 operators. Currently, there are 1.1 lakh towers in the country. To meet the government’s target of providing 500 million telephones by 2010, nearly 3.3 lakh towers will be required in the next three years. Moreover, 3G will also require denser coverage.
According to Cellular Operators’ Association of India, erecting one cell site costs about Rs 30 lakh. “To set up 2.2 lakh more towers in the next three years, an investment of Rs 66,000 crore will be required,” and therfore, hiving off tower infrastructure is an Indian innovation.
While telecom companies are hiving off their tower infrastructure to cut capex and opex in the wake of declining average revenues per user, third-party companies like GTL Infrastructure, Quipo, and Essar Telecom are setting up independent tower companies. Analysts predict tower sharing can reduce cost of ownership by 16-23%. Kotak values the telecom tower business opportunity in India at around $23 billion. According to a report by HDFC Securities, tower sharing will help Bharti increase Ebitda margins by 50-150 basis points.
The DoT approved Trai’s recommendations on allowing active infrastructure sharing in the country which is likely to result in cost savings of around 50 % to operators. However the government made it clear that as of now it will not allow sharing of spectrum.
Active infrastructure sharing will allow operators to use all key electronic components including antennas, feeder cables, nodes, radio access network, transmission systems and backhaul.
The development is likely to result in further drop in tariffs for the consumers. Also new players are the most likely to benefit from this development since they can now look forward to faster rollout of their services.
“Active infrastructure sharing will be limited to antenna, feeder cable, Node B, Radio Access Network (RAN) and transmission system only. Sharing of the allocated spectrum will not be permitted. The licensing conditions will be suitably amended wherever necessary to permit such sharing,” said DoT.
