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Interview with D.S. Rawat, managing director and chief executive officer, Bharti Infratel

November 03, 2014
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The introduction of 3G and 4G technologies, together with the surging demand in data, has opened up new opportunities for telecom tower companies. In an interview with tele.net, D.S. Rawat, managing director and chief executive officer, Bharti Infratel, talks about growth drivers and the way forward for the telecom tower infrastructure industry in India…

How has the telecom infrastructure segment evolved over the past few years?

The telecom sector as a whole was going through a difficult phase over the past few years mainly because of the uncertain regulatory environment and immense competition leading to lacklustre financial performance. As a result, operators had limited their network roll-outs.

Today, all this is behind us. We are seeing the beginning of another S-curve. The uncertainties in the regulatory and policy environment are giving way to enhanced clarity and positivity.

The year 2013-14 was a constructive one for telecom, beginning with the government’s nod for 100 per cent foreign direct investment, followed by successful spectrum auctions in February 2014, when operators bid over Rs 610 billion primarily for the future roll-out of data networks. This development has now encouraged the industry to take the next step in establishing an ecosystem for LTE technology. Large players are eyeing a national 3G and 4G footprint by offering 4G services on existing devices. 4G frequency division duplexing LTE will be a reality sooner than expected.

Regulatory developments in the form of unified licence guidelines, recently announced merger and acquisition rules, and guidelines on spectrum sharing are all likely to facilitate consolidation in the debt-ridden sector leading to a better competitive environment.

Pricing power is now returning to operators, leading to an improvement in the sector’s health and viability. The quest for quality, profitability and viability on the operator side is a welcome sign for the long-term growth of the sector.

All this augurs well for tower infrastructure providers.

How have telecom infrastructure requirements changed with the arrival of 3G and 4G technologies? What initiatives have been undertaken by Bharti Infratel in this regard?

With a 100 per cent growth in data on a year-on-year basis, and it becoming a meaningful part of operator revenues at 17 per cent, the industry is adapting to the reality of data fuelling the next level of growth.

The industry is witnessing three key drivers of data-led growth. The first is the coverage requirement in big cities, primarily in the form of equipment loading on existing towers; this is almost done. The second is the need to bridge coverage gaps, considering the high frequency spectrum on which data technologies currently operate; we see early demand for this. The third driving factor is capacity constraints, considering the limited spectrum of 5 MHz available; operators have started discussing this.

A large part of the 3G and 4G demand will be met by new tenancies on the existing towers. With our vast network coverage across the country as leading infrastructure providers catering to at least one 900 MHz and one 1800 MHz operator, we believe we are well positioned to seize this opportunity.

In addition, in the case of new tower roll-outs required for coverage or capacity, lower-height towers will be key, especially in urban territories with infill site requirements. We already have a compelling offer of a 30 metre tower to address this.

Also, as most of the data requirement is indoors, we have initiated the deployment of in-building solutions. We also believe fibre has a lot of synergy with our business and is the next best shareable asset. We are evaluating the deployment of fibre to connect our sites within a city.

What is your view on the current regulatory scenario in the telecom infrastructure space?

The regulatory environment is improving, particularly after the successful spectrum auctions earlier this year. Overall, investments by operators in various bands since 2010 now stand in excess of Rs 1,800 billion. Since spectrum in these auctions was allotted for 20 years, it has provided operators much-needed certainties on spectrum, business continuity and long-term viability. We believe operators will make incremental investments in the aggressive roll-out of networks, particularly data networks.

Bharti Airtel has already implemented 4G data in more than 11 cities. Reliance Jio is joining our network as a full-blown co-location.

Last year, the Department of Telecommunications (DoT) recognised telecom towers as lifeline installations and critical infrastructure in its guidelines pertaining to clearances for tower installation. States are working towards framing policies, which are in alignment with these guidelines, recommending key benefits in the form of single-window clearances and priority electricity connections, among others.

Earlier, in 2012, the government included telecom towers in the infrastructure sub-sector list. While we are yet to see any concrete advantages of this classification, we, along with the Tower and Infrastructure Providers Association (TAIPA), are working to see that the benefits enjoyed by other infrastructure sectors are soon made available to tower infrastructure providers.

What were the key highlights for Bharti Infratel over the past one year?

By the end of March 2014, our sharing factor breached the 2x mark on a consolidated basis, a significant milestone for a tower company.

  • We signed a tower sharing agreement with Reliance Jio. All operators in the country are our clients.
  • We added over 10,500 co-locations on a consolidated basis and over 5,500 co-locations on a stand-alone basis.
  • We had revenues in excess of Rs 108 billion, earnings before interest, taxes, depreciation and amortisation (EBITDA) of Rs 44.12 billion with growth of about 16 per cent and profit after tax of over Rs 15 billion with a growth of 51 per cent.
  • The special efforts our people made to ensure vital telecom connectivity when supercyclone Phailin hit Odisha were appreciated by all our customers as well as the telecom secretary.

What are the operational challenges faced by Bharti in setting up telecom networks?

Two key operational challenges we face are:

  • Need for multiple approvals: We, along with TAIPA, are working to ensure that state policies are revised to align with DoT’s guidelines.
  • Energy management: Non-availability of grid power leads to dependence on diesel. In this regard, we have institutionalised a Green Towers P7 programme focusing on energy conservation.

Other challenges are posed by the fact that we also operate in some of the remotest and toughest terrains in the country.

How is the company coping with rising energy costs?

The Green Towers P7 programme is aimed at minimising the dependence on diesel, thereby reducing our carbon footprint. We have adopted a three-pronged strategy to run this programme:

  • Use of renewables
  • Improving the energy efficiency of tower infrastructure equipment
  • Reducing equipment load on tower infrastructure equipment.

What has been Bharti Infratel’s progress towards meeting the government’s green telecom mandate?

Telecom towers account for roughly 1.5 per cent of the total diesel consumption across the country, as per a recent all-India study done for the Ministry of Petroleum and Natural Gas. Industry associations have taken up the reassessment of long-term targets with DoT, to address the fact that we are forced to depend on alternative sources like diesel only because of the unavailability of grid power supply.

Having said that, the industry is making huge efforts towards reducing diesel dependence by deploying large capex, despite there being no support at all from the government. At Bharti Infratel, the Green Towers P7 programme is a big step in this direction. We operate over 2,200 solar-powered towers with an installed capacity of about 9 MW. We have deployed additional battery banks at about 13,000 tower sites to ensure that diesel generator sets run in the optimum load range to minimise its consumption. We have also shut air conditioners at another 13,000 tower sites by using free cooling units. Nearly 19,500 towers across our network are diesel-free.

To what extent is the company using data analytics to improve system efficiencies? What have been the results so far?

Data analytics is a core aspect of our company. We have a state-of-the-art Tower Operations Centre (TOC) for 24 x 7 monitoring of towers on a real-time basis. The TOC also acts as a centralised data repository for analysis, particularly with regard to energy management at towers.

Beyond this, we have one common IT system integrating all value streams and the TOC as one unit. We believe the next level of operational excellence can only be achieved via automation.

How will the competitive landscape pan out for the telecom infrastructure segment?

As per a 2012 report, Bharti Infratel and Indus Towers command about 38 per cent of the tower market share and about 43 per cent of the tenancy market share. On a consolidated basis, we are one of the largest pan-Indian tower infrastructure providers in terms of number of towers.

Given our relationship with the top three operators by revenue share and a vast network of 150,000 towers, we believe we are in a strong leadership position.

What is your outlook for the industry over the next three to four years, especially under the new government? What trends do you foresee in the telecom tower space?

We are entering an exciting phase as data plays a significant role in defining the future of the telecom industry. We expect an increased demand for telecom towers as operators speed up the roll-out of data networks and their efforts towards building voice coverage networks.

 
 
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