TELECOM TOWER PROVIDER

Group - 8

Industry Overview
Indian telecom sector is the third largest sector in the world and second largest among the Asian emerging economies. Amongst the 811.6 bn wireless subscribers in India, 66% reside in urban areas and 34% hail from rural areas. India and United States are the prime countries where telecom tower is recognized as an independent industry. The telecom tower industry is expected to grow at 20% during the next 5 years. This growth is driven mainly by the current capacity constraints, increased rural penetration and additional requirement to roll out 3G.

Telecom Tower Industry in India

The tower industry is growing continuously with the active support of the Government. During the early years, the mobile operators were directly involved in the installation and maintenance of the mobile towers. The intense competition in the telecom industry forced all the operators to look for opportunities to reduce the cost of operations by outsourcing network related activities which demand huge capital expenditure and operating expenditure. While some companies created their own captive tower companies, a few others pooled the towers and formed joint ventures. In India even today operator owned tower companies control more than 90% of the market share.

Industry structure
The tower companies in India are of 3 types. 1. Tower companies formed through joint ventures like Indus tower which is a joint venture by Airtel, Vodafone and Idea. 2. Tower companies formed though de-merger like Reliance Infratel which is a wholly owned subsidiary of Rcom. 3. Independent tower companies (pure play operators) like GTL etc.

Operations handled by a tower company

Site planning, site acquisition and obtaining of necessary regulatory approvals, site erection and commissioning of tower and allied equipment. After the site starts radiating, the site maintenance including provision of support services such as back-up power, air-conditioning and security will be handled by the tower companies. Currently the government policies allow sharing of both passive infrastructure and active infrastructure. Passive infrastructure is the non electronic components like tower, antenna mounting structures, BTS shelter, power supply, battery bank, invertors, diesel generator, Air conditioner etc

Operations handled by a tower company

Active Infrastructure or Electronic Infrastructure include components like Spectrum (radio frequency), base tower station, microwave radio equipment, switches, antennas, transceivers for signal processing and transmission, etc. While the Indian tower companies have streamlined the sharing of passive infrastructure, they are yet to operationalize the sharing of active infrastructure.

Types of Tower
Ground based tower (GBT) Erected on the ground with a height of 40 meters to 80 meters. Mostly installed in rural and semi-urban areas because of the easy availability of land. Roof-Top Tower (RTT) RTT is placed on the terrace of high-rise buildings particularly in urban areas. In cities like Mumbai and Delhi where the high rise buildings are available, instead of towers poles are erected for installing antennas.

Regulatory support
In 2005, the DoT issued guidelines on passive infrastructure sharing and in 2008 active infrastructure sharing was also implemented. In 2007 the government under the USO(Universal Service Obligation) fund scheme announced monetary support for setting up towers in rural and remote regions of the country. The IP operators are facing major challenges in obtaining permission for their sites from regulators and government authorities. There is no uniformity in the taxes levied by the government authorities on these towers and it varies from municipality to municipality even within the state. At present there is no centralized regulatory framework which is identified as a key gap.

Key players

Indus GTL Infra Bharti Infratel WTTIL Quippo Reliance Infratel

Competitors Analysis

Name of Company
GTL Infra Indus

Revenue
$ 74.30 Mn $ 2 Billion

Infrastructure
Passive Passive

No of Towers
Over 30,000 Over 110,000

Bharti Infratel
WTTIL Quippo Reliance Infratel

$2.6 Billion
-

Passive
Passive Passive

Over 30,000
Over 18,000 Over 48,000

STRENGTHS
Economies of scale Increasing Telecom Subscriber base Emergence of Solar power as a positive source of energy High growth rate

WEAKNESS
Regular Technological Innovations Government Regulations Huge Capital involved

OPPORTUNITIES
3G and beyond Wireless Tower Expansion Data Services Emerging Markets Data Intensive Applications Digital Media

SWOT ANALYSIS
THREAT
Increasing Pollution and Radiations Entrance of Global Players Risk of Technology Obsoletion and continuous need of up gradation

POLITICAL
Protection & Environmental Laws Tax laws Trade Regulations

ECONOMICAL
GDP Trends Interest Rates Price Control Cost

PEST ANALYSIS
SOCIAL
Land Acquisition for tower setup

TECHNOLOGICAL
New products Emerging technology

Modes of Entry
Through joint ventures Merger

Independent tower company

Mergers and acquisitions in Tower industry

Tower Industry in India is on the path of mergers and consolidation. Some of the significant acquisitions during the recent period are: WTTIL acquisition of TTMLs 2500 towers for a value of Rs 5.2 million (US $ 115,000) per tower. GTLs acquisition of Aircel 17500 towers in a cash transfer worth Rs 8400 cr ((US $ 1.87 billion) ATCs acquisition of Essar Telecom infrastructures 4450 towers and 325 towers of Transcend infrastructure.

Conclusion
The telecom tower industry in India is expected to grow at 20% during the next 5 years. This growth is driven mainly by the current capacity constraints, increased rural penetration strategy and additional requirement for rolling out 3G services. It is advantageous for the mobile operators to tie up with tower companies as it is faster and cheaper to roll out the network by collocating with Infrastructure operators (IP) rather than expanding their own network.

Thank you