Indian mobile tower firms to raise tenancy ratios: ASSOCHAM-KPMG

Due to the expansion of 3G and onset of 4G technologies, telecom tower industry’s tenancy ratios will increase to 2.9 times by March 2020 from 1.95 times as of March 2015, according to an ASSOCHAM-KPMG joint study. Tenancy ratio refers to the number of tenants (operators) who have put up their antennae and other active infrastructure on the towers. Increase in tenancy ratios has been the key growth driver for tower companies in India, reveals the ASSOCHAMKPMG joint study.

Growth in telecom sector has helped India emerge as a trendsetter in the tower infrastructure segment. Around 70 percent of India’s 4,00,000 towers are owned and operated by the tower companies. Advent of new technologies, such as 4G by Telecom Service Providers (TSPs), along with expansion in the rural areas is expected to be key drivers for the telecom infrastructure industry over the next five years.

Rapid growth in the sector has also prompted tower companies to invest heavily in capex.

The aggregate capex spend increased from Rs. 8,000 crore in 2013-14 to Rs. 10,200 crore in 2014-15. Net tower additions were also significantly higher at about 6,300 in 2014-15 vis-àvis 3,200 in 2013-14.

One of the key emerging trends in the last few years is emergence of towers running on green energy. In line with the trend, 15 per cent of the total capex spends were incurred by towers running on green energy, noted the study, reports ANI.

“India has been the most preferred destination for investment in the tower sector in the Asia. Since 2008, seven out of the top 20 deals in Asia in tower sector have originated in India. More than 84,000 towers have exchanged hands in India since 2008 (which represent 84 per cent of the total towers sold in top 20 deals in whole of Asia during the period). Deals amounting to Rs. 40,367 crore have been finalized during this period,” said Sunil Kanoria President ASSOCHAM while releasing the study. Telecom tower companies are currently facing multiple fees and levies, in the form of installation fee, annual renewal fee, sharing fees etc. The applicable fee structures vary across states and local bodies. In addition to this, deposits and bank guarantees are also required for tower installation in some geographies. Multiple fees being levied contribute towards higher costs of services for the telecom service providers, and in turn, to the subscribers.

The DoT guidelines for tower installation stipulate only a one-time fee which the states may levy to recover administrative costs for issuing the permission.

These guidelines should be uniformly implemented across states to ease the financial burden on the industry.