9 new players look to enter tower business

The passive telecom infrastructure industry is witnessing action, with at least nine tower companies waiting on their wings to enter the segment.

"The telecom infrastructure business is expected to post an exponential growth similar to that being recorded by the cellular industry. The growth of telecom connections at 7.3 million users per month would require the installation of 330,000 towers within the next couple of years and here lies the opportunity," BPL Mobile CEO S Subramaniam told Business Standard.

Moreover, the opportunity is also due to the fact that mobile operators are hiving off towers into a separate business to concentrate on their core competencies. At present, among all the operators, there are around 110,000 towers in the country.

US-based American Tower Corporation (ATC) and Crown Castle International are among others looking at entering the country, while Israel-based Tower Vision has already commenced operations for Spice Telecom. ATC has received the Foreign Investment Promotion Board (FIPB) approval to set up a wholly-owned subsidiary.

These companies are also looking at buying stakes in Indian operators who have announced hiving off their tower business. ATC and Crown Castle are in talks with Reliance Communications that has recently sold 5 per cent in its tower subsidiary.

Similarly, other domestic majors are also making their presence felt in the country. For example, TVS group had announced its intention to enter the sector through its subsidiary TVS Interconnect Systems (TVS-ICS), while Essar Telecom Tower Infrastructure, Quipo and Xcel have also announced their foray into this business.

Sumit Modi, an analyst with Emkay Shares said: "At present, there are no great barriers in India for entering into this segment, as against the US, where the zoning law acts as a barrier."

The tower sharing business is a very lucrative business especially when there are 6-7 operators present in each service area.

While the tower business benefits the telecom operators by reducing the capex and opex, it generates significant back-ended cashflows by front-ending the capex, he added.

This industry is growing at a furious pace, with Reliance Communications expected to add another 23,000 towers to its existing 16,000 towers this year. Others like Bharti Airtel is adding 30,000 towers, GTL 5,500 and Idea Cellular 20,000 this year.

According to GTL group chairman and managing director Manoj Tirodkar, "The industry would require to hike investments in telecom infrastructure to meet the target of 500 million mobile connections by 2010. The addition of subscribers would be mainly from the rural sectors in the country and telecom companies are already rolling out infrastructure in these regions".

Moreover, with the emergence of 3G technologies and WiMax, the need for setting up infrastructure is increasing, he said.

GTL group has recently entered into this sector by hiving off its tower business into a separate unit, GTL Infrastructure.