Significance of business
* Passive infrastructure refers to the entire range of equipment such as tower, shelter, power regulation equipment, battery back up, diesel generator set, air conditioner, fire extinguisher, and a security cabin required at sites where telecom towers are installed.
* Mobile operators in India are increasingly looking at sharing their passive infrastructure with a view to manage costs in an increasingly competitive business environment.
* Passive infrastructure sharing also helps in faster rollout of services.
* Two categories of players offer passive infrastructure sharing services currently - Operator-owned tower companies and independent third-party service providers (also known as infrastructure providers-category-1 (IP-1) players).
* Business model of these companies involves putting in place the passive infrastructure at a tower site and leasing it to multiple operators in return for a rental.
Market size and structure
* Stupendous growth in the mobile subscriber base in India requires the creation of massive passive and active infrastructure to cater to the growth and consequent increase in traffic.
* Tremendous potential for telecom towers sharing business in India, given the strong subscriber growth, existence of several operators in each circle, need to undertake large-scale rollouts, and significant capacity needs emanating from high minutes of usage.
* This Research estimates number of towers and base transceiver stations (BTSs) installed at 210,000 and 253,000, respectively as of March 2008.
* The tenancy ratio has increased from an estimated 1.13 times in 2006-07 to 1.20 times in 2007-08.
* In terms of revenues, the size of the telecom tower business is estimated at around Rs 91 billion in 2007-08.
* The business is highly capital intensive with a high degree of operating leverage.
* Profitability is dependent on the ability to increase tenancy on the tower, rentals charged, scale and spread of tower portfolio, and ability to raise capital.
Future growth
* Percentage of tower sharing projected to increase substantially in the years ahead with 75 per cent of the towers in place by March 2012, expected to be used by more than one tenant.
* Number of BTSs installed by mobile operators to shoot up to around 750,000 by March 2012.
* Tenancy ratio expected to be slightly more than 2 times, translating into a requirement of around 400,000 towers by this timeframe.
* Key risk arises from oversupply of towers in relation to demand, and consolidation amongst telecom operators and/or any more pooling of tower assets by operators.
Investment outlook
Investments of around Rs 950 billion is expected in the establishment of passive telecom infrastructure during 2008-09 to 2011-12.
Get more information about this report: Telecom Towers and Allied Infrastructure
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