Telecom Towers

March 2012

TELECOM TOWER

Indian Telecom Tower Industry... Towering Dreams & Ground Realities...

Indian telecom tower industry is a vital component of telecom value chain. Telecom Tower industry acquired its identity when government introduced Infrastructure Provider Category – I in the middle of 2000 to craft telecom infrastructure as a separate business model. Wireless telecom in India has seen stupendous growth in last few years with wireless subscriber base growing at a CAGR of more than 50% in last 5 years. As a result, telecom tower industry was also pushed into the higher growth trajectory. There was astonishing growth in tower capacity addition at a CAGR of above 30% during FY 2006 to FY 2011. Number of towers in the country increased from ~85,000 in 2006 to ~400,000 today. Rapid growth in 2G subscribers and the expectations of 3G and 4G network expansion led to massive capacity build up in the tower space. However, the last couple of years witnessed a slowdown in the tower capacity addition due to oversupply in urban markets and lack of viability in most of the rural areas. As the revenue for tower business primarily comes from tower rentals, a slowdown in telecom services impacted telecom tower industry. Tower industry is dominated by operator owned tower companies though there are few independent tower companies as well. Though the tower industry is highly capital intensive, operating profitability of the industry is good as most of the costs are fixed in nature and variable costs like energy costs are passed on to the tenant. Operating profitability increases directly with tenancy ratio as the fixed costs are shared. Tower industry in India has an average tenancy of 1.6x and is expected to improve marginally over the next couple of years as there will be new Base Transceiver Station (BTS) addition on the existing towers, to cater to demands of 3G and 4G services. CARE Research expects new tower addition to happen at a much slower pace. Growth in...