Till March 2007, there were around 100,000-120,000 towers in the country of which around 15-18% were shared. Over the next two years, all operators put together will add around 160,000-170,000 towers; even if 35% of these are shared, one is looking at 56,000-59,500 sites. Site sharing is not only limited to mobile, IP-1 players can target users in wireless broadband, broadcasting, DTH, FM radios and WiMax operators.

In the next one year one can expect full fledged competition between service providers and third party players like Essar, GIL, and Quipo. Presently everybody is putting their strategies in place, deploying manpower, and rolling out towers. Once the industry has a sizable number, say of 15,000–20,000 towers operator one can expect a lot of consolidation in this space.

The Players
Formed in 2005, Quipo Telecom Infrastructure is a 100% subsidiary of Quipo Infrastructure Equipment and claims to be the first to pioneer infrastructure sharing in the country. Quipo is a subsidiary of SREI and is focusing on leasing of infrastructure equipment. GIL is part of GTL and has been focusing on the telecom turnkey space for a long time. GIL has an experience of executing 16,000 sites connecting 16 mn subscribers. The company is planning to create a symbiotic relationship with the operator by providing a single window, one stop, shared infrastructure services whereas Essar Telecom infrastructure is a year old company and plans to leverage on telecom activities of the Essar Group.

Presently, Quipo is focusing on contiguous circles like Punjab, Haryana, Delhi, UP(E), UP (W), MP and non-contiguous states like Karnataka. Going forward, in FY 2007-08, the company is planning to expand in Gujarat, Rajasthan, Andhra Pradesh, Tamil Nadu, Bihar and West Bengal. On the other hand, Essar Telecom Infrastructure has so far focused on circles like TN, Kerala, Maharashtra, and Mumbai and has now commenced operations in AP, Karnataka, Chennai, MP, UP (E), and UP (W), and will commence operations in Bihar, Orissa and Rajasthan in April 2007 whereas GTL is focusing on 6 circles of Maharashtra, Gujarat, Goa, MP, Karnataka, UP (E), Rajasthan, Punjab, Delhi and Mumbai and plans are to expand in 20 circles within 6 months.

Essar has completed more than 600 sites till date, and work for 200 sites is in progress. "We plan to close FY 2006-07 with 750 sites and plans are on for adding another 6,000 sites next year so as to close the year with an installed base of 6,750 sites by FY 2007-08," says Ajay Madan. On the other hand, GIL is planning to rollout 1,200 sites by March 2007 and 6,700 by March 2008. Quipo's vision is to be the largest infrastructure service provider globally and plans are for 40,000 towers by 2011. It has till date installed around 1,000 sites.

INFRASTRUCTURE SHARING Operator Plans Bharti Airtel Present sharing is 23%, hiving off tower biz into a 100% subsidiary called Bharti Infratel BSNL Does not believe in sharing of infrastructure, but can use the same towers for both GSM and CDMA Hutchison Essar Presently shares about 1/3rd, plans to share 2/3rd. MoU with Bharti can be threatened by Essar Idea Cellular Presently sharing it with operators and third party players Reliance Comm Demerger of tower biz - Reliance Telecom Infrastructure is in place Spice Comm Presently sharing it with operators and third party players Tata Group Pioneered the concept, presently sharing it with operators and third party players Source: VOICE&DATA

In terms of contract, Essar has signed agreements with Idea, Bharti, Hutch, Tata and BPL and is in discussions with Aircel, Spice and Reliance. Quipo has signed anchor agreements with Bharti, Idea and Spice and is very soon planning to sign a co-locator agreement with other operators. The company has signed master service contracts with Spice, Bharti, and Idea and plans are on to achieve tenancy ratio of 1.9 users per tower.

Today, sharing is at around 1.3 tenants per tower and plans are to increase it to 1.7-1.8 tenants per tower by March 2008, says Ajay Madan. We see an increase in sharing with the coming of new players and release of additional spectrum, he adds.

GIL's strategy involves a mix of greenfield rollouts, acquisitions, and client centric alliances. Quipo is focusing on customer centricity and continuous innovation whereas Essar is focusing on providing delivery on time, quality of service and guaranteed uptime.

In order to have an edge, Quipo is focusing on sourcing, reverse auctioning, green eco based shelters, and renewable source of energy for reducing capex and opex. For improving sourcing, Quipo's R&D team is sitting in China and the Western countries. For supply chain management,
the company has deployed Microsoft Dynavision.

On the other hand, Essar has opted for a project management software called PRIMAVERA. And has taken initiatives to build towers and shelter manufacturing through its sister concern, says Ajay Madan.

In terms of investment, Quipo has invested in excess of around Rs 250 crore by March 2007. GIL has invested around Rs 1,000 crore and plans are on to invest Rs 2,030 crore by March 2008. Till date, Essar has invested around Rs 150-200 crore and is planning for a further investment of Rs 1,200 crore by March 2008. The company has got project approval for 3,000 sites by IDFC and is willing to fund part of the project.

According to Arun Kapur, "The critical success factors will be the cost of capital availability, continuous availability to bring down capex as well as opex through innovation, and the sheer capability to scale up and rollout with right processes and right automation to help meet customer SLAs."

It will depend on the speed of execution, right project management and supply chain management skill sets, meeting service provider SLAs, and the ability to get multiple shares, says Ajay Madan.

The Challenges
Being a nascent industry, infrastructure sharing players need a lot of support from service providers as well as the government. Service providers have to work more in a partnership model and not as a customer vendor relationship, as success and failure of the infrastructure sharing player will have an impact on service provider success.

First, infrastructure sharing players do not fall under infrastructure or telecom player so they do not get any tax benefit under Section 10 23 (G) and 80 (i). They can't even avail any tax holiday as these companies don't fall under infrastructure category and were not formed before 2005. Since they don't fall under 'infrastructure player', they do not get long term funding at a lower rate of interest.

Second, TRAI should extend infrastructure sharing benefit also for backhaul ie fiber and microwave connectivity between MSC and BTS, as it helps in optimum utilization of existing fiber and microwave capacity. And later TRAI can think of extending it even for passive infrastructure, at least for rural areas initially.

Third, single window clearance will help in setting up towers at a fast pace and also common directive or guidance for all states can help in smooth flow of erecting towers.

So, infrastructure sharing players have to focus on expansion and automation. There is enough for all three players plus others as and when they plan to enter the market as cellular services has been growing at the rate of 57% in revenue and 74% in subscription terms.

Pravin Prashant
pravinp@cybermedia.co.in