Gearing Up for Second Inning

The next leg of growth is about to follow, and would mostly be driven by telcos’ need to grow coverage for their data services

The India telecom tower industry is logically at the cusp of a second phase of evolution. The first phase saw installations of towers to facilitate voice communications, but a decline in voice usage has for some time affected cash flows of tower companies. Thanks to the rising smartphone penetration and an explosion of data services that require more sites, the tower companies can look forward to a new phase of growth.

Indus Towers, ATC and Bharti Infratel are the market leaders with a dominant chunk of sites under their fold. Overall, there are over four lakh towers, and are projected to grow at a CAGR of around three percent over a period of five years. Right now, most of the existing sites cater to 2G services, but with the growing share of data, the number of 3G and 4G sites is expected to rise in an accelerated manner and grow manifold over coming years. This would particularly be the case in urban markets, where the penetration of smartphone and demand for data continues to grow at an exponential pace.

Interestingly, smaller towns and cities are expected to witness more tower rollouts as currently, 61 out of every 100 towers in the country are already in tier 1 circles. Next in line are tier-2 and tier-3 cities, from where a sizeable chunk of data demand is coming.

To tackle this, the tower companies are expected to take a twopronged approach: one, focus more on increasing the tenancy ratios of the existing towers; and two, grow the number of new sites.

Indus Towers, which leads the market with around 120,000 across 15 circles by the close of fiscal 2016, saw its tenancies grow at a healthy rate of more than 12 percent to cross the 270,000-tenancy mark as compared to 242,000 tenancies in the preceding year.

The immediate competition for Indus, however, is no longer Viom Networks but American Tower Corp. (ATC), which acquired a majority stake in Viom last year. ATC India now has over 56,000 towers in its fold, which include the 42,000 towers of Viom.

Bharti Infratel, which also holds a 42 percent stake in Indus Towers, owned and operated 38,458 towers on a standalone basis by the close of fiscal 2016 with 81,632 co-locations in 11 telecommunications circles. While growth slowed down for the company during the year, partly due to consolidations among its telecom customers, the company is poised for a new phase of growth on the back of an mega network expansion drive by group company Airtel alone.

New technologies and models

There is likely to be a greater uptake of small cells, given that these are particularly suited for the ensuring data coverage within the buildings and other premises. This could very well mark the beginning of a new deployment trend. While small cells have been around for year now, their use has been quite limited in India so far. Historically, mobile services have mostly been offered through macro cells mounted on towers.

It has been estimated by the industry that around 75 percent of mobile usage happens within the buildings, where the mobile coverage suffers due to various issues including propagation of signals or losses due to walls and other obstructing objects. In building solutions (IBS), by making use of small cells, can help overcome the problem to a large extent, but are yet to become a mainstream vehicle of delivery by tower companies. However, that is changing and companies are increasing the use of small cells to overcome coverage-related issues, especially in the wake of growing consumption of mobile data.

Small cells are smarter, cheaper, less obtrusive, and easier to install than traditional macro cells, which typically need towers for mounting. Small cells can be used in congested urban areas as well as in remote locations with equal ease. Given that telcos are faced with the challenge of deploying more sites in a given location, in order to address data bandwidth issues, they are increasingly looking at small cells as a solution, also because the right-of-way issues limit the installation of new towers and macros cells. Moreover, small cells are more amenable to Wi-Fi data offloading and hence help reduce congestions on the mainstay 3G and 4G networks.

Tower companies are also exploring new tower designs, materials and rapid erection techniques, as part of their efforts to speed up the deployments and also reduce THE operational and maintenance costs. For instance, they have been developing ultra-light sites by in partnerships with municipal corporations and other civic bodies, to achieve street-level coverage. For instance, Indus Towers recently won a contract from New Delhi Municipal Corporation to set up a digital network comprising dual-use 18,500 street light poles, of which at least 3,000 poles would be fitted with cellular equipment over a period of three years. Poles would also be upgraded with power efficient LED lights, CCTV cameras and Wi-Fi access points.

Lowering the carbon footprints

Telcos and tower companies have also been working to reduce their carbon footprints and use of fossil fuels like diesel. They have been incorporating alternate energy sources like solar photovoltaic, wind turbines, biomass power and fuel cells as part of their efforts.

For instance, Bharti Infratel’s Green Towers P7 program has commissioned over 1,200 solar powered towers, integrated power management systems and free cooling units, among other things. Similarly, over 42 percent towers of Indus towers have already been greened and at least 50 percent of Viom sites were under- stood to be diesel generator-free, before its acquisition by ATC. Such measures have reduced costs of fuel, maintenance, estate management and even security.

While replacing diesel is one part, careful monitoring of power consumption can help identify and contain energy man-

agement inefficiencies. Inefficiencies are found to be higher in areas with limited grid power resulting in high pilferage and leaks. Improvements could come by through better execution, correct temperature settings, and proper equipment maintenance. Similarly, use of new technologies in antennas and base station equipment could reduce loads on structures as well as on power generation units. By making use of these and other such measures, power requirements per site can be lowered and carbon footprints of tower companies could be reduced further.

Tower companies are also tapping into the Digital India initiative, to build, operate and lease a mix of offerings like OFC networks, surveillance systems, and so on.

Going forward, a mix of site acquisition and other offerings’ models will differentiate industry leaders from also-rans. Players are also experimenting with various sharing models, under which operators outsource or share resources with other players. It includes sharing transmission network between BTSs and base station controller for 2G; and between Node B and radio network controllers for 3G networks.