Thinking micro seems to the flavor of the season. I always thought that it’s only the insurance industry which makes the most out of fear in the minds of people. But that drastically changed after I entered the new phase of my life. If Insurance industry is thriving on people’s fear, I never believed that such a sound business model can be built on fear (/uncertainty) factor among Organizations. Well, for my own good, its better that I don’t dwell on it for too long.
It is true that I’m struggling to find time to update my blog but no worries because I wont go down so easily. The petty projects and tight schedules cannot hold me back for long. The reason “lack of internet access to update my blog” seems to the flavor of the season, just like the tower hive-off’s in the Indian Telecom sector. The article is about these tower infrastructure companies and how they are helping/will help the growth of the Indian Telecom sector.
Don’t remember who started it all, but the project MoST (Mobile Operators shared towers) was the one which helped operators realize the wonders of passive infra sharing. Project MoST itself was a “towering” failure mainly on the account of unclear and incorrect revenue share arrangements. Lack of clarity from the government over financial support to passive infrastructure sharing only helped hasten its downfall. But it managed to accomplish what it was setup for. Within months, operators started saving on huge capex, opex and manageability costs of network. All this happened on the sidelines of the ongoing Great Indian real estate boom which were driving land prices and stock markets alike.
With the (so-called) intent of increasing shareholder value, companies started hiving off their tower infrastructure into separate companies. Models started to develop around passive infrastructure alone (Quippo, GTL infra etc.). Global majors like American Towers(ATC) were not the ones to be left behind. Infrastructure sharing agreements and Tower company hive-off’s became the order of the day.
Then something dramatic happened. Never before had any industry entered the consolidation phase so early in its life. The Top 3 private GSM operators Airtel, Vodafone and Idea decided that its better to fight a common enemy than to fight each other. A Tower company named Indus came into existence. 42% each in Indus Towers is held by Vodafone & Airtel respectively with the rest (16%) held by Idea. The existing tower infrastructure of the 3 companies will henceforth be transferred to Indus Towers.
Indus Towers today is world’s biggest tower infrastructure company overtaking the world’s leading tower company, ATC (with most of its assets in the Americas) at one go. Indus Towers approximately has around 60000 towers in its network. This along with the tower arm of RCOMM will take the total figure to a staggering figure of 1, 00,000 towers in India alone. Compare this with almost 30000 towers owned by ATC worldwide. ATC has been scouting for to buy a stake in an Indian operator for quite some time now.
With the consolidation of Indus towers, the only possibility for ATC at the moment is to either buy a company much bigger than its original size (Reliance tower infra) or buy into Tata’s tower business(around 16000 towers throughout India). They have already walked out of a stake buyout in Tata’s tower arm due to valuation concerns and only a wild one will believe that RCOMM is will let go of its Tower infrastructure company. Will the much smaller “leftovers” like Quippo, GTL infra etc suffice their ambitions?
The Aggressive plans of new entrants and the expansion plans of the existing ones is music to the ears of these tower companies. But things don’t look all that hunky dory. The new entrants like Unitech, Swan, Videocon etc have to counter not only the existing players with years of expertise but also high access rates that the tower companies charge. Indus has still not made it clear whether they’ll share their towers with the new entrants and Reliance has always maintained that the excess capacity on its tower will be used primarily to cater to its own expansion plans. That leaves the new entrants with only Tata’s to approach for a pan-india access of towers because the smaller tower players are still just that – smaller.
Keeping the aspect of spectrum dearth aside, a sustainable business model (especially for smaller tower firms) would have been the building and leasing of both active and passive infrastructure. But can we actually keep that spectrum dearth aspect aside? What was more disappointing was that none of the smaller players were interested in applying for telecom licenses. It would have been great if a GTL won a telecom license in at least some of the circles. A Telecom license would do a lot more than just complement its tower infrastructure. With the government in a hurry to allow active infrastructure sharing (to avoid more “Virgin” scenarios in the future), the demand from MVNO’s, 1-2 years down the line will be for real. The Issuance of telecom licenses was one great opportunity for these players to counter the scale of established players like Indus, RCOMM etc.
As far as the bigger ones are concerned, there is only one way for them to go - upwards. Sitting on a huge subscriber base, with access to crucial real estate and expertise, they are best positioned to make a killing out of any market condition.
It is true that I’m struggling to find time to update my blog but no worries because I wont go down so easily. The petty projects and tight schedules cannot hold me back for long. The reason “lack of internet access to update my blog” seems to the flavor of the season, just like the tower hive-off’s in the Indian Telecom sector. The article is about these tower infrastructure companies and how they are helping/will help the growth of the Indian Telecom sector.
Don’t remember who started it all, but the project MoST (Mobile Operators shared towers) was the one which helped operators realize the wonders of passive infra sharing. Project MoST itself was a “towering” failure mainly on the account of unclear and incorrect revenue share arrangements. Lack of clarity from the government over financial support to passive infrastructure sharing only helped hasten its downfall. But it managed to accomplish what it was setup for. Within months, operators started saving on huge capex, opex and manageability costs of network. All this happened on the sidelines of the ongoing Great Indian real estate boom which were driving land prices and stock markets alike.
With the (so-called) intent of increasing shareholder value, companies started hiving off their tower infrastructure into separate companies. Models started to develop around passive infrastructure alone (Quippo, GTL infra etc.). Global majors like American Towers(ATC) were not the ones to be left behind. Infrastructure sharing agreements and Tower company hive-off’s became the order of the day.
Then something dramatic happened. Never before had any industry entered the consolidation phase so early in its life. The Top 3 private GSM operators Airtel, Vodafone and Idea decided that its better to fight a common enemy than to fight each other. A Tower company named Indus came into existence. 42% each in Indus Towers is held by Vodafone & Airtel respectively with the rest (16%) held by Idea. The existing tower infrastructure of the 3 companies will henceforth be transferred to Indus Towers.
Indus Towers today is world’s biggest tower infrastructure company overtaking the world’s leading tower company, ATC (with most of its assets in the Americas) at one go. Indus Towers approximately has around 60000 towers in its network. This along with the tower arm of RCOMM will take the total figure to a staggering figure of 1, 00,000 towers in India alone. Compare this with almost 30000 towers owned by ATC worldwide. ATC has been scouting for to buy a stake in an Indian operator for quite some time now.
With the consolidation of Indus towers, the only possibility for ATC at the moment is to either buy a company much bigger than its original size (Reliance tower infra) or buy into Tata’s tower business(around 16000 towers throughout India). They have already walked out of a stake buyout in Tata’s tower arm due to valuation concerns and only a wild one will believe that RCOMM is will let go of its Tower infrastructure company. Will the much smaller “leftovers” like Quippo, GTL infra etc suffice their ambitions?
The Aggressive plans of new entrants and the expansion plans of the existing ones is music to the ears of these tower companies. But things don’t look all that hunky dory. The new entrants like Unitech, Swan, Videocon etc have to counter not only the existing players with years of expertise but also high access rates that the tower companies charge. Indus has still not made it clear whether they’ll share their towers with the new entrants and Reliance has always maintained that the excess capacity on its tower will be used primarily to cater to its own expansion plans. That leaves the new entrants with only Tata’s to approach for a pan-india access of towers because the smaller tower players are still just that – smaller.
Keeping the aspect of spectrum dearth aside, a sustainable business model (especially for smaller tower firms) would have been the building and leasing of both active and passive infrastructure. But can we actually keep that spectrum dearth aspect aside? What was more disappointing was that none of the smaller players were interested in applying for telecom licenses. It would have been great if a GTL won a telecom license in at least some of the circles. A Telecom license would do a lot more than just complement its tower infrastructure. With the government in a hurry to allow active infrastructure sharing (to avoid more “Virgin” scenarios in the future), the demand from MVNO’s, 1-2 years down the line will be for real. The Issuance of telecom licenses was one great opportunity for these players to counter the scale of established players like Indus, RCOMM etc.
As far as the bigger ones are concerned, there is only one way for them to go - upwards. Sitting on a huge subscriber base, with access to crucial real estate and expertise, they are best positioned to make a killing out of any market condition.
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