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Scope for Sharing: NDCP 2018 a win-win for towercos and operators

February 11, 2019
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By Umang Das, Vice-Chairman, Tower and Infrastructure Providers Association

Impact of NDCP on towercos

The National Digital Communications Policy (NDCP), 2018 is an overarching, forward-looking and reformative policy aimed at transforming India into a digital society and is thus extremely welcome. Perhaps its most significant aspect is that it has expanded the scope of sharing.

Sharing has been the hallmark of our telecom tower and infrastructure industry. Enhancement of its scope to include active elements such as towers, fibre, radio access network and backhaul equipment augurs well for towerco and operator partnerships. Thus, it is a win-win for all.

However, the key to NDCP’s success lies in its time-bound implementation through actionable strategies. While the vision, mission and strategies have been outlined in some detail, the outcome will depend on the implementation on the ground across the country. It will be indeed challenging to ensure coordination among the ministries of telecom and urban development and the Department of Industrial Policy and Promotion.

Moreover, it will be vital to make the states key stakeholders for achieving the objectives envisaged in the NDCP policy document. States and municipal bodies must see the 100 per cent digital connectivity and “Broadband for All” vision as their own programme, which will bring increased investments in their respective states towards overall development, competitiveness and leadership. Industry associations too can play a very important role by serving as the “bridge” between the centre and the states, and explaining the advantages of the policy to various stakeholders.

Key growth drivers and emerging business models

The tower industry has emerged as a key engine of growth for the telecom sector with the development of a robust network infrastructure. It has invested over Rs 2.5 trillion so far in setting up over 500,000 towers and 1.7 million base transceiver stations with a tenancy ratio of more than 2.

Accelerated investments in 4G networks have spurred tenancy growth in the tower industry. In a bid to increase their 4G coverage, operators have set up new tower sites in uncovered areas and enhanced their existing network capacity as well as tenancies. Owing to the surge in data consumption, the demand for infill sites in metro cities and Category A circles has also increased multifold. Further, key incumbent operators have started rolling out their voice over LTE networks in the country, which will further fuel the demand for tower sites.

The rapid deployment of 4G networks and the exponential growth in data consumption are also driving operators to connect their tower sites with fibre. With the launch of advanced technologies like artificial intelligence, 5G and internet of things, more towers will have to be connected with fibre as microwave-based solutions alone will not be able to handle the increasing traffic.

Emerging trends in 2019

Operating margins are expected to contract owing to co-location exits and a decline in rentals per tower. Vodafone Idea Limited is in the process of exiting co-location sites, and there has been a loss in tenancies of smaller players like Aircel and Telenor. Meanwhile, the industry’s rental per tower is expected to decline by 7-9 per cent year on year owing to co-location exits and lower tenancies. However, the increase in the number of towers and master service agreement-linked lock-in terms will limit the decline in rent revenues.

Further, the introduction of new and faster technologies like 5G will open up opportunities for the tower industry. The current ecosystem will have to be revamped for the development of state-of-the-art and robust digital infrastructure for 5G.

No doubt, the consolidation among operators has led to a short-term negative impact on the tower industry in terms of loss of tenancies and reduction in co-location sites. But in the long term, such consolidation is going to see the emergence of fewer and stronger independent tower companies. According to independent research, the tower industry will have three to four players in the next two years.

In addition, an accelerated push to drive connectivity in rural areas will boost the deployment of telecom infrastructure. With 70 per cent of the population living in rural areas, the rural market would be a key growth driver in the coming years.

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