With increasing competition in the mobile telephony space, competing operators around the world are resorting to cooperation by sharing their telecom infrastructure such as the towers and base station equipment. Telecom infrastructure sharing is already a key enabler of the impressive growth story witnessed in India’s mobile communications industry. This component assumes more significance with the impending introduction of 3G services such as UMTS and HSDPA, and with 4G services such as WiMAX and LTE to follow suit.
Infrastructure sharing can be broadly categorized in to active sharing and passive sharing. While passive sharing refers to the sharing of cell towers, buildings, and power supply, active sharing allows operators to share radio equipment such as the antenna, NodeB (base station in UMTS), and Radio Network Controller (RNC). In addition, there are other forms of sharing such as spectrum sharing, where an operator leases out his spectrum to another, and backhaul sharing.
According to the Telecom Regulatory Authority of India (TRAI), India, the second largest wireless market in the world after China, had approximately 100,000 telecom towers in April 2007 and this is estimated to increase to 330,000 towers by 2010. Because the 3G services to be introduced are likely to operate at higher frequency bands (>2 GHz), the required number of cell towers may be even higher. Also, India, which currently has around six major mobile operators, will see the entry of at least six new operators before the end of this year. All these new operators were allocated 2G spectrum at the beginning of this year. It is possible that up to 15 operators may be offering 2G/3G services in the coming years and this places a burden on the cell tower infrastructure.
The demand for cell towers has prompted the existing mobile operators with their own towers to exploit this golden opportunity. The biggest tower company in India today, Indus Towers, is a joint venture between three major operators – Bharti Airtel (42% stakes), Vodafone-Essar (42%), and Idea Cellular (16%) - for sharing of passive infrastructure. Indus Towers owns around 70,000 towers in 16 telecom circles and is followed by Bharti Infratel with 20,000 towers in seven other circles and Reliance Telecom Infrastructure, which owns around 13,000 towers around the country. Apart from these, the Ruias (Essar group) have also started their own company with 4000 towers. The Tata group has also ventured in to this territory by beginning a new company, while Quipo Infrastructure Equipment is injecting $1.6 billion to deploy 25,000 towers over the next couple of years. The Indian market has also caught the attention of international tower companies such as the American Tower Corporation and Global Tower, who are in the lookout for entering the business.
The enterprise value of Indus Towers is estimated very optimistically to be around $30 billion while Reliance’s business is valued at $5.4 billion. The average occupancy of Bharti Airtel’s towers before the joint venture was around 1.26 occupants per tower as against an occupancy of over 2.5 in the United States. According to a Booz Allen Hamilton report, capital expenditure (capex) savings through simple site sharing in India over the next couple of years can exceed a staggering $4 billion if operators achieve double tenancy.
The Department of Telecommunications (DoT) in India announced, in April 2008, a set of guidelines for active and passive sharing of infrastructure to reduce the telecom tariffs, which are arguably the lowest in the world even today. However, DoT has also specified that spectrum sharing between operators will not be allowed. Active sharing will be limited to antenna, feeder cable, NodeB, Radio Access Network, and transmission system only. Most operators have hailed this move as a positive step forward. Given the increased emphasis on infrastructure sharing, the cell towers business in India is set to grow enormously in the next 3-5 years.
Acknowledgments: Richa Dham, Naveen Arulselvan
Infrastructure sharing can be broadly categorized in to active sharing and passive sharing. While passive sharing refers to the sharing of cell towers, buildings, and power supply, active sharing allows operators to share radio equipment such as the antenna, NodeB (base station in UMTS), and Radio Network Controller (RNC). In addition, there are other forms of sharing such as spectrum sharing, where an operator leases out his spectrum to another, and backhaul sharing.
According to the Telecom Regulatory Authority of India (TRAI), India, the second largest wireless market in the world after China, had approximately 100,000 telecom towers in April 2007 and this is estimated to increase to 330,000 towers by 2010. Because the 3G services to be introduced are likely to operate at higher frequency bands (>2 GHz), the required number of cell towers may be even higher. Also, India, which currently has around six major mobile operators, will see the entry of at least six new operators before the end of this year. All these new operators were allocated 2G spectrum at the beginning of this year. It is possible that up to 15 operators may be offering 2G/3G services in the coming years and this places a burden on the cell tower infrastructure.
The demand for cell towers has prompted the existing mobile operators with their own towers to exploit this golden opportunity. The biggest tower company in India today, Indus Towers, is a joint venture between three major operators – Bharti Airtel (42% stakes), Vodafone-Essar (42%), and Idea Cellular (16%) - for sharing of passive infrastructure. Indus Towers owns around 70,000 towers in 16 telecom circles and is followed by Bharti Infratel with 20,000 towers in seven other circles and Reliance Telecom Infrastructure, which owns around 13,000 towers around the country. Apart from these, the Ruias (Essar group) have also started their own company with 4000 towers. The Tata group has also ventured in to this territory by beginning a new company, while Quipo Infrastructure Equipment is injecting $1.6 billion to deploy 25,000 towers over the next couple of years. The Indian market has also caught the attention of international tower companies such as the American Tower Corporation and Global Tower, who are in the lookout for entering the business.
The enterprise value of Indus Towers is estimated very optimistically to be around $30 billion while Reliance’s business is valued at $5.4 billion. The average occupancy of Bharti Airtel’s towers before the joint venture was around 1.26 occupants per tower as against an occupancy of over 2.5 in the United States. According to a Booz Allen Hamilton report, capital expenditure (capex) savings through simple site sharing in India over the next couple of years can exceed a staggering $4 billion if operators achieve double tenancy.
The Department of Telecommunications (DoT) in India announced, in April 2008, a set of guidelines for active and passive sharing of infrastructure to reduce the telecom tariffs, which are arguably the lowest in the world even today. However, DoT has also specified that spectrum sharing between operators will not be allowed. Active sharing will be limited to antenna, feeder cable, NodeB, Radio Access Network, and transmission system only. Most operators have hailed this move as a positive step forward. Given the increased emphasis on infrastructure sharing, the cell towers business in India is set to grow enormously in the next 3-5 years.
Acknowledgments: Richa Dham, Naveen Arulselvan
