Spectrum auction fuels rush for cell towers

Tenancy seen growing 20% in next 2-3 quarters, 8,000-10,000 new towers likely over next one year

The recently concluded auction of telecom spectrum is a bonanza for tower companies as cellular service providers try to roll out their networks fast.

According to sources, tenancy on cell towers is likely to rise 20 per cent in the next three quarters, and 8,000-10,000 towers should spring up over the year. This will require tower companies to invest Rs 5,000 crore. Cellular service operators that have bought spectrum are planning to complete network roll-out before the second instalment of the fee is due. Companies get a two-year moratorium after paying the government the first instalment, about a third of the amount bid.

If networks were in place, operators could pay from the new income streams. “If completed early, they would not need to invest their own money for spectrum charges. So, the only burden for the operators is just about one-third of the total amount, about Rs 18,000 crore for the whole sector this year,” said an analyst with an equity brokerage firm. Reliance Jio, which bought spectrum for nationwide services in the 1,800-MHz band, will need about  40,000-50,000 towers even after tying up with Reliance Communications, which has 50,000 cell towers, said experts. Uninor might just have added a new circle in Assam but nominated Chief Executive Officer (CEO) Morten Karlsen Sorby said it would need 5,000 network sites in Uttar Pradesh (West), UP (East), Bihar (including Jharkhand), Andhra Pradesh, Assam, Gujarat & Maharashtra and Goa.

“We are experiencing the highest tenancy growth in the past two-three years. The sector is at the start of the next phase of growth and the first reflection is in the order pipeline. After the auction, there has been a spike in demand for new cell sites,” said Syed Safawi, CEO, Viom. Over three years, Viom plans to add 12,000- 15,000 towers. It is looking at private equity and strategic investors to raise the Rs 1,500 crore this would cost. Among old operators, Idea Cellular, which has bought 900-MHz spectrum in the Delhi circle, will need to make new investments in infrastructure. Bharti Airtel has bought 900-MHz spectrum in Mumbai but it might not need towers beyond the 500 it gets from Loop Mobiles, which it bought last month for Rs 700 crore.

“With auctions complete and clarity emerging on regulations, we expect the momentum to pick up as cellular operators strengthen their third- and fourth-generation (4G) networks and launch new services. With liberalised spectrum, operators now have the opportunity to launch LTE (4G) services on 1,800 MHz. We expect all these factors to translate into higher tower tenancies,” said D S Rawat, CEO, Bharti Infratel.

“Growth is now led by data services, growing at 100 per cent annually. Investment in infrastructure will also be driven by the data strategies of operators. There will be more sharing of towers to maximise use of old infrastructure. We expect tenancy to go up to two a tower from 1.5 now,” said Umang Das, director-general, Tower and Infrastructure Providers Association.