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Infrastructure sharing was introduced by Tata Teleservices way back in FY �03-04, when the company announced plans to use Bharti�s long-distance network and also other operator networks for its second phase of expansion in the country. Presently, Tata Teleservices has the highest ratio of shared towers in the country. Service providers also do some sharing with other operators, which is more on a bilateral basis.

The model got a further boost with the IT Ministry�s MOST (Mobile Operators Shared Tower) project launched on July 5, 2006 by Dayanidhi Maran, former minister for communications and IT, government of India. Till date MOST is still in single digits, whereas it had a potential of around 1,800 towers in 3-4 years. Though the project was a failure, it helped in establishing infrastructure sharing as a model in the country.

India is the third largest in terms of subscriber base, and number one in terms of mobile growth. It has overtaken China in terms of subscriber acquisition, and is adding around 6-7 mn lines every month. However, the country still has a long way to go, as several vast regions are still not covered. Currently, cellular services are present in more than 5,000 towns and cities, and one lakh plus villages across the country. In terms of tele-density, there is a wide gap�with metros at around 40 and rural areas at 2.5.

Therefore, a lot needs to be done for the rural population. Presently, 80% of the towers are located in urban areas, with rural India having around 20%. However, a shift is visible; it is expected that in a couple of years, this ratio would be 60% in urban and 40% in rural areas. As 70% of the population resides in rural areas, a lot of coverage is yet to happen.

The Indian market is also unique in that it has the lowest call tariff in the world, the lowest ARPU, and the highest minutes of usage. It makes all the more sense to go for infrastructure sharing if service providers plan to connect 500 mn people by 2010. Service providers are exploring all possibilities of reducing cost and time to rollout services in rural areas. The creation of infrastructure like erecting towers and backhaul connectivity account for about 50-60% of cost; infrastructure sharing helps in reducing capex by around 25-40%. In rural areas, it is all the more important, as the majority of towers are ground based and per tower costs are high.

The need of the hour is to rollout telecom services at an affordable price to ensure higher penetration in rural areas. Hence, it is all the more important to share infrastructure. Infrastructure sharing helps in reducing capex, opex, and the time required to rollout services.

THE BUSINESS MODEL
In the US, infrastructure sharing is an established industry and after 12 years of existence the average tenancy ratio is at around 2.5 plus. 87% of towers are outsourced, with only 13% owned by operators. American Towers started in 1995, presently has around 30,000 towers and has a marcap of around $19 bn. On the other hand, Crown Castle with 15,000 towers has a marcap of $14 bn.

Infrastructure sharing has been used by operators to get rid of their non-core activities, so that they can focus on their core businesses. Not only does it help in reduction of capex as well as opex, it also helps in reducing management bandwidth for non-core activities as the operation is now taken up by IP-1 players. IP-1 players, for whom this is a core area, have to focus on doing all things right, right from RF planning, site acquisition, site preparation, soil survey, municipal clearances, pollution clearance, site construction, power connection, battery backup, air conditioning, shelter, cable tray, and others. The company charges a monthly fee from the operator, which includes infrastructure usage and operations and maintenance charges.

On the other hand, service providers are hiving off their towers into a separate subsidiary, as they plan to unlock shareholder value and also focus on core competencies. It will take around 3-6 months to put the structure in place before the rollout begins. Hiving off also helps the subsidiary, as they can start with a sizable number from day one. One does not see a lot of competition between third parties and service providers� subsidiaries, as a majority of the towers have not been built on the sharing model. The shelter cannot accommodate more than two operators; tower loading also does not allow more than two operators. Moreover, some of the operators are not planning to share their towers, as they plan to use them for 3G services as well as 2G.

According to a government directive, companies planning to hive off their tower business before March 31, 2007 can avail of tax benefits. There have been a lot of announcements in this regard. For instance, both Bharti and Reliance are forming separate subsidiaries called Bharti Infratel and Reliance Communications Infrastructure, respectively. Recently, even Tata Teleservices has floated an RFP for outsourcing 3,000 towers.

Infrastructure sharing is based on the BOOL (build, own, operate and lease) model. Until 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 year, one can expect full-fledged competition between service providers and third party players like Essar, GIL, Quipo, TowerVision, and XCEL. Presently everybody is putting their strategies in place, deploying manpower, and rolling out towers. Once the industry has a sizable number, say 15,000�20,000 tower operators, 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.

Essar Telecom infrastructure is a year old and plans to leverage telecom activities of the Essar Group.