Telecom operators’ migration to data networks is creating opportunities for infrastructure providers. Besides providing plain tower services, these companies are now exploring opportunities in the areas of in-building solutions (IBS), fiberisation of sites, microcells and Wi-Fi hotspots. In terms of future opportunities, programmes such as Digital India and the Smart Cities Mission will call for new infrastructure development to enable pan-Indian connectivity. At a recent conference organised by India Infrastructure, “Telecom Infrastructure in India”, experts from leading tower companies shared their views on the opportunities and challenges faced by infrastructure providers and the future outlook. Excerpts…
These are interesting times for the Indian telecom industry, with it witnessing several emerging trends. The industry is going through deep consolidation at present. The sector has at one point in time seen the presence of as many as 12 players. It clearly needs to have fewer players, healthy players that can yield bigger and better dividends for the industry as well as for the end-user. We have finally entered that phase now. Operator consolidation may lead to some de-growth in tower installations over the next 12-18 months but beyond that, we are optimistic of seeing a hockey stick kind of growth.
Second, there is better alignment between what the government wants and what the industry can deliver. There is a significant push from the government through the Digital India and Internet for All programmes. It is a well-accepted fact that higher internet penetration will transform into higher GDP.
Third, sharing of infrastructure has become the norm. The Indian telecom tower industry, through its successful sharing model, has resulted in savings worth $4 billion, while significantly improving the time-to-market. Sharing has become a way of life and eventually, several other stakeholders in the value chain will also embrace this model. For instance, sharing of fibre, IBS and even the manpower deployed on ground are gaining traction.
That said, the Indian telecom sector is experiencing intense competition. The situation that we are witnessing today, where the incumbent players are being challenged in their own game, has been unheard of in the past. It is a war for acquiring market share. This is benefiting customers though, and has heralded an era of hyperconsumption. During the past year, data consumption per user has gone up almost 40 times, choking the networks. However, the flip side to this has been growing industry debt.
Given the mounting price pressure on operators and its resultant effect on us, a new baseline of cost needs to be established in the next one or two years. The tower industry is also seeing a new type of infrastructure roll-out. Often called street infrastructure, it involves the lighter set of sites. Installing as well as maintaining such sites is very different from what has been done in the past. Further, the industry is set to embrace automation and internet of things in a big way. Automating the basic repeat systems ensures that the deployed manpower is up skilled to do higher-order work.
We are currently at a crossroads, which is somewhat unprecedented in the telecom industry. The data demand being witnessed today could not be expected, let alone anticipated, till about three years ago. One gigabit a day will soon become the new industry norm.
In the past few months, consumers have exhibited a strong demand for data but very little willingness to pay for it. So, the turmoil in the market today primarily revolves around the challenge of making unlimited data available to consumers at virtually no price. Given the severe price competition, profitability has taken a hit. The kind of returns that the sector makes today are not sufficient to cover even the normal capex spend of a typical carrier anywhere in the world. And interestingly, we are not at a normal stage. Instead, we are leapfrogging from 2G to a full 4G scenario, and will ultimately move to 5G. As a result, the telecom industry needs to step up its network investments phenomenally over the next five years. In the next three to five years, if the industry has to install about 100,000 towers, excluding small cells and IBS deployment, a minimum investment of Rs 500 billion is required by the telecom infrastructure provider community.
Further, operator consolidation will, in the short term, lead to a reduction in tenancies as carriers will rationalise their networks. However, the resultant carrier is much stronger than the sum of the parts and it thus grows at a much faster rate, creating opportunities for tower companies in the medium to long run.
The sector’s current situation calls for collaborations between carriers, infrastructure providers and the government. The industry needs support from the government to address the issue of onerous fees, taxes, levies and penalties, which are hampering industry growth.