Despite facing a multitude of existential challenges and the ongoing consolidation in the Indian telecom space, tower companies are likely to continue to register a healthy growth, going forward.
In India, for every 10 per cent of the population using basic services such as voice and SMS, the national GDP increases by 0.5 per cent; a similar expansion of Internet and other non-voice communication or data adds 1 per cent to GDP, according to government figures available with the country´s Department of Telecommunications (DoT).
Telecom towers are passive yet critical installations on which the backbone of mobile communication rests. These are essential for realising the vision of inclusive growth. A few telecom industry insiders go so far as to suggest, however exaggeratedly, that the success of federal government initiatives such as Digital India and Smart Cities, which the present dispensation intends to implement aggressively, will largely depend on setting up of more telecom towers.
It is a fact that today the two proverbial India´s, rural and urban, are on the edge of a ´data revolution´. Says Rajan S Mathew, Secretary General, Cellular Operators Association of India (COAI), an industry body representing GSM operators, ´The higher in the band you go, the more towers you will need to provide coverage. This indicates that towers are going to continue to be a component of increasing penetration, coverage and quality.´ Mathew says that the country will probably require 100,000 or so new towers every year for the next two to three years at least. He says that there is a significant amount of demand for towers.
So bullish is a section of telecom experts at this much anticipated boom that Sridhar Pai, CEO and Founder, Tonse Telecom, who runs the Bengaluru-based telecom advisory and consulting firm affirms, ´Rural India is hungry for coverage, while urban India is hungry for both capacity and coverage. Rural India is looking at data availability, while urban India is looking for speed and multi-media broadband. Rural India´s affinity to pay for data may be equal or marginally more than urban India´s affinity to pay for capacity. I am not saying that rural India has a higher ability to pay than urban, but it may be more willing to pay for coverage as in most cases it doesn´t have that.´ Pai says that the number of towers in rural areas is growing and that will bring in more villages and people per village under data signals, while urban towers are growing because some others are either being relocated or removed. As per a report released by the Indian unit of the multinational professional services firm Deloitte, the Indian Tower Industry: The Future is Data, overall site tenancies, including those for 2G, 3G and 4G services, are expected to spike to nearly 1,268,000 by the year 2020. There are nearly 400,000 telecom towers in India at present and these are estimated to increase at a CAGR of 3 per cent over the next few years, with the total number likely to reach 511,000 towers by 2020.
Currently, around 60 per cent of the towers are set up in metros and Category A circles with around 40 per cent catering to Category B and C. Fuelled by the growth in semi-urban and rural areas, share of towers in Category B and Category C circles will increase to around 45 per cent by the year 2020. It is also projected that mobile data traffic in the country will grow twelve-fold from 2015 to 2020 to reach 1.7 exabytes (EB) per month by 2020 from 148.9 petabytes (PB) in 2015. Therefore, the mobile network infrastructure too has to be ready to handle this phenomenal increase in demand.
CHALLENGES BEFORE TOWER COS
Telecom tower firms face multifarious challenges such as restrictions on installation of cell sites, high or multiple levies, lack of unanimity in policies of local bodies such as municipal corporations, delays and lack of single-window clearances, requirement of multiple non-objection certificates from various departments, coercive action by local bodies over purported fears of electro-magnetic field (EMF) emissions from citizen groups (Infrastructure Today, February 2016, Vol. 13, No.7), difficulty in acquisition of new sites or shutting down of existing operational sites, retrospective implementation of state-specific tower policies, complicated and cumbersome procedures, problems in obtaining right of way clearances, concerns pertaining to structural safety and erratic or non-available power supply.
All this resulted in the problem of call drops eventually becoming a malaise. The problem exacerbated to such an extent that at a high-level meeting to review the progress on digital and rural infrastructure held in August last year, Prime Minister Narendra Modi had to personally direct officials to address the issue on an urgent basis as it has a direct bearing on ordinary users.
As is evident, one of the reasons for call drops is unavailability of new sites for installation of mobile towers in a region due to several restrictive conditions placed by the authorities concerned. Says Tilak Raj Dua, Secretary General, Tower and Infrastructure Providers Association (TAIPA), ´Inadequate number and location of cell sites leads to customer inconvenience and call drops. Shutting down of operational cell sites leads to serious connectivity issues for customers that result in coverage gaps, call drops, network congestion, poor quality of service, increase in overall cost and complexity of telecom network. Furthermore, there are issues related to EMF from telecom towers that often arise from misplaced public perception.´
The resident welfare associations (RWAs) in the country´s mega cities currently restrict tower installations in residential areas, citing certain studies on perceived health hazards from EMF radiation, which interest groups such as TAIPA point out, often run contrary to research findings by leading international bodies such as the World Health Organization (WHO). Of late, the industry has initiated measures such as installation of pole-sites, micro-base transceiver stations and in-building solutions to enhance coverage in key locations. However, installation of rooftop towers in residential as well as business districts continues to pose a gargantuan challenge in India´s big cities.
The government has already put in place strict limits for EMR emissions from base transceiver stations (BTS) through DoT, which is one-tenth of the international norms and is amongst the toughest in the world. Regular monitoring of radiation levels is done by the 34 local Telecom Enforcement Resource and Monitoring (TERM) cells of the DoT and any violation is strictly dealt with. DoT and the independent telecom regulator, the Telecom Regulatory Authority of India (TRAI), have been continuously striving to address the issues related to radiation from mobile towers. Shutting down of mobile towers in an area due to EMF-related concerns markedly affects the quality of service.
Recently, TRAI wrote a letter to the Commissioner, South Delhi Municipal Corporation (SDMC), that only a TERM Cell of DoT is empowered to take action on mobile towers in case of radiation. Also, DoT has launched countrywide EMF awareness programmes to address and allay public concerns regarding EMF emissions from mobile towers. Telecom industry insiders allege that in the last couple of years, city municipalities have shut down towers in a bid to arm twist tower companies into paying higher rentals for sites. Between January and March 2016, around 400 and 250 towers have been shut down in Delhi and Mumbai, respectively, by municipal bodies on the ground that they were ´illegal´. Ironically, some of these infrastructures are located in slums that have been around for decades and whose residents enjoy uninterrupted access to public utilities such as power, water and healthcare.
Needless to say, this hikes the operational costs for tower companies. Says Dua, ´Exorbitant fees are charged by local bodies, which range from Rs.5,000 to Rs.5,00,000. There are multiple levies that are being imposed for installation of telecom towers and (they) include high one-time installation fees, sharing fee and annual renewal fee.´
When quizzed on this issue, Sameer Sinha, Chief Sales & Marketing Officer, Indus Towers, told Infrastructure Today, ´We are working with the government to rationalise such costs. All our costs have to be recovered from our customers, i.e., the mobile operators.´ Setting up a tower takes anywhere from 10 to 60 days. Presently, the average tenancy per tower works out to roughly around three at the moment. The infrastructure is leased out to users for a period of 10 years. Therefore, any increase in rentals will also directly impact telecom tariffs in India that are otherwise among the lowest globally.
Meanwhile, ever since the Prime Minister´s intervention, the DoT and TRAI have also been keeping a close tab on voice services provided by telecom carriers. Although this has considerably helped improve the situation, a lot still needs to be done. TRAI has been monitoring the issue of call drops by conducting drive tests across various cities. This involves moving around a city on a predetermined route in a vehicle with call-measuring instruments, at speeds ranging between 30 to 40 km per hour. Sudhir Gupta, Secretary, TRAI, says, ´During that drive we make calls from SIM cards of all mobile carrier networks to measure call drops, voice quality, time taken for a call to get through and other such parameters.´ The information is then shared with the public on the TRAI website.
Tonse´s Pai points out to a unique aspect related to the problem of call drops in India. ´Data coverage is already the number one driver for tower growth in both rural and urban India. While users in urban India do complain of call drops, many a times telecom service providers get away with consolation messages sent via SMS often leading users not to try calling again. This actually helps conserve network resources.´ He adds that in rural markets, if a call fails, there will be six more redial attempts in the next 30 seconds, which is bound to bring down a whole sector covered by a Base Transceiver Station.
According to certain estimates, the Indian telecom tower industry consumes 2.5 billion litres of diesel annually and, as such, has a significantly high carbon footprint. A 2011 report by the environment group Greenpeace had claimed that in the mid-2000s, the Indian telecom industry had even overtaken Indian Railways as the leading consumer of diesel in the country for some time. In 2012, TRAI had recommended tower companies to reduce their dependence on the fuel and cut carbon emissions by running half of all rural towers and 20 per cent of urban towers on hybrid power by 2015. Says TAIPA´s Dua, ´Telecom towers need to be operational 24x7, to provide uninterrupted service to consumers. Nationally, the electricity grid currently does not meet the needs of the telecom infrastructure. Therefore, they are forced to address the deficit by other energy sources available to them, primarily diesel.´
Adds Gupta, ´TRAI is not a licensing authority. It only has recommendatory powers. A couple of years ago, DoT had asked TRAI to frame guidelines on carbon emissions and green telecom. We had given our recommendations to the government on that issue. Those were accepted and the government issued guidelines to telecom operators. Some benchmarks were fixed. I believe the operators are working on them, but there are a few issues, like power supply in our country is very erratic. If there is no power supply, they have to perforce depend on diesel generators.´
The tower industry has taken many initiatives including adoption of the renewable energy service companies (RESCO) model. The RESCO set up renewable energy-based power plants near the telecom towers and sell power to the telecom tower companies at a predetermined cost on a pay-per-use basis. The industry has also commenced use of efficient battery banks and free cooling units. Simultaneously, realising that the amount of capex required by tower companies to meet some of the benchmarks would be huge, DoT has asked TRAI to revise targets.
WILL DIGITAL INDIA BE A GAME CHANGER?
Some telecom experts attribute poor quality of mobile services, including call drops, on low investment in optic fibre for telecom backhaul deployments. For instance, compared to 80 per cent of telecom towers in China, South Korea and the US, less than 20 per cent of the towers are back hauled on fibre in India.
But COAI´s Mathew feels such an assessment is blatantly simplistic. He says, ´There is a large amount of fibre available because China and the US have been providing services for a much longer time than we have. Landline infrastructure is how they started. We, of course, skipped that whole generation. But because they started with providing telecommunication services through landline, they had landline infrastructure right up to homes, kerbs or buildings.´ Mathew says that in India, because the country had not developed its landline network, mobility became the default carrier.
He adds, ´Both in China and the US, operators have a lot of bandwidth. In the US, the average operator has upwards of 55 to 60 MHz of bandwidth, in China it´s close to 100 MHz. While it´s only three companies in China and only four companies in America, here we have eight to ten companies. So we have extremely narrow amounts of bandwidth. The issue is less bandwidth, more towers.´
Says TAIPA´s Dua, ´India is about to see the digital revolution which will rely on an efficient and robust mobile backhaul network that will ensure seamless voice and data connectivity across regions. One of the reasons for a low percentage of fiberised backhaul towers are issues related to the right of way, grant of permissions and high fees being levied by local authorities. In some cases, the fees range in millions of rupees.´ He is however optimistic about the future on the back of the federal government´s BharatNet project that aims to connect 250,000 village gram panchayats across the country through fibre by 2020.
CONSOLIDATION AND ITS AFTERMATH
The ongoing consolidation in the Indian telecom space has left only Bharti Airtel, Vodafone, Reliance Communications (RCom), Idea, Bharat Sanchar Nigam Ltd (BSNL), Mahanagar Telephone Nigam Ltd (MTNL) and Telenor in the fray. Of these Telenor India (subsidiary of the Oslo-headquartered Telenor Group), with a presence in only select regions in the country, has indicated that it is not looking to buy any more spectrum for the moment. With the entry of the Reliance Industries-promoted Reliance Jio expected anytime soon, it and RCom are likely to play as one.
´In most developed markets you will find that you can have perfectly robust competition with four to five players,´ says Mathew. Jio has invested close to $10 billion in launching the country´s fastest 4G network with focus on providing data services. It plans to offer up to 80 times faster Internet to users. For his part, Dua says, ´The telecom tower companies may see a rise in tenancies on their towers due to the entry of a new player in the competitive telecom market.´ According to industry sources, Jio has been holding parleys with tower companies for anywhere between 30,000 to 60,000 tenancies.
So how will the business of telecom towers pan out, going forward? With no dip in demand foreseen despite consolidation, the coming data revolution will ensure that the business continues to clock growth.
Talking about the future, TRAI´s Gupta observes, ´With newer technologies coming in, you will find that we will be moving from macro towers that we see today to micro or HetNet (heterogeneous networks) where we have micro towers, femtocells, micro cells and in-building solutions. With the growth in data, you need smaller cells or else you won´t get the kind of speeds that these technologies are able to provide.´ Simply put, this implies that telecom tower infrastructure will undergo a transformation not only at macro, but also micro sites. In the not too distant future, the towers won´t necessarily be on buildings alone but could also be mounted atop electricity poles and walls. This will also make them appear less obtrusive than what they are today.