Insights of a pioneer of the telecom tower industry: what is the future for India and Myanmar?

Mr Umang Das doesn’t need any introduction as a veteran of the telecom industry in India, Chief Mentor of Viom Networks and Director General of TAIPA. His involvement in the Indian telecom sector dates back to 1987, right after the start of the industry’s privatisation process. He has held a variety of high level positions in several business chambers and industry associations, back in August 1995, he initiated the first mobile call on the subcontinent.

In this exclusive interview, Mr Das shares his priceless insights into the evolution and future of the Indian telecom tower sector as well as perspectives on opportunities and challenges faced by operators and towercos entering Myanmar.

TowerXchange: What where the key phases of the transformation of the telecom tower industry from Day zero to now?

The Indian telecom industry with close to 400,000 telecom towers is the critical support system for the world’s second largest base of mobile subscriptions. A seldom highlighted fact is that the concept of ‘telecom infrastructure sharing’ was pioneered by tower companies in India. This pioneering business model, coupled with the largest base of telecom towers anywhere in the world, gives the Indian telecom tower sector a unique distinction that is unparalleled globally.

The extensive network of telecom towers has ensured the availability of wireless telephony service in every nook and corner of the country and that too at unprecedented low costs. If we chronicle the history of telecommunications in India, the role played by telecom towers can be viewed as one of the key catalysts in the nation’s telecom revolution.

The sharing model of the Indian telecom tower industry encouraged best utilisation of assets with the backbone of the industry being provided by telecom infrastructure providers who have made 70% of network rollout investments. It has resulted in the world’s lowest tariff and in a ubiquitous and robust coverage across the country. Due to this model, the telecom sector reaped rich benefits through innovations in the design of a robust network. This is evident from the fact that India is the second largest market in terms of number of customers served and remains one of the fastest growing telecom markets globally.

Now the tower industry has already started to evolve from a mere infra-sharing proposition to one where it is being viewed by the operators as multi-service specialist rendering support to both passive and active elements. Tower companies are now focusing on managing both costs and quality to win the mindshare of operators for being the sole partner for managed services. With the horizon of offerings broadening to include managed services, customised site planning and alternate energy, tower companies are working toward operational excellence.

With innovation being the key driver behind tower companies to achieve the next phase of growth, we are now looking differently at structural architecture, active equipment integration and energy options. An innovation-led mindset for the industry as a whole may lead to a breakthrough in the concept of single tenant sites. Such sites will provide flexibility of site planning for the operators while ensuring that the capex outflow for the tower companies and the operators provide optimal return on investments.

The Government of India through its US$3.2 billion corpus in the form of the USO Fund (Universal Service Obligation) is already setting up NOFN (National Optical Fiber Network) in the country. NOFN will connect 250,000 villages with high speed broadband connectivity. A plethora of government-to-citizen services is likely to transform the lives of the rural population. Bharat Broadband Network Limited, a special purpose vehicle (SPV), set up by the government for establishing, managing, and operating NOFN has already established connectivity in scores of villages. The tower companies and the CSCs (Common Service Centres) will play a central role in public-private-panchayat partnership model wherein public investment will create the infrastructure and private initiative will give fillip to the ecosystem.

Recently the Government of India has proposed the launch of the Digital India programme to further bridge the divide between digital “haves” and “have-nots”. In addition, incremental allocations have been made towards the Rural Internet and Technology Mission, the development of ‘one hundred Smart Cities’, and setting up virtual classrooms and a programme for promoting “Good Governance”. The Department of Telecom’s 100-Days Plan charts the path for creating an ‘Always Connected Society’ and envisions ‘Right to Broadband’ for all. The Telecom Commission has also decided to allow Private Sector participation in National Optic Fiber Network (NOFN) projects. In light of these significant developments, towers will play a critical role in last-mile connectivity. This will be literally a convergence between the enabling of capacity (wireline) and the delivery of communication services (wireless).

TowerXchange: Which trends are now shaping the Indian tower industry?

The trends clearly indicate that the growth drivers shall be voice, primarily from rural communities, and data for which the emerging integrated solution will hold the key focus area. Data will be the next growth driver for urban India in the coming years as voice was in the last decade. Current contribution of data to total revenue is quite low in India when compared with the contribution of data revenue in other developed markets.  The primary reasons for this lag in data usage include lack of sufficient spectrum, affordable handsets and operator focus. However, with the advent of technology such as 4G, a mobile data boom is expected to usher in India in coming years.

Disruptive solutions like ‘lite anchor sites’ shall play another pivotal role in the growth of telecom tower companies as it will create a compelling business propositions for the operators.  These towers are economically viable even with a single tenant while meeting the requirements of the customers for their growth and efficient networks. Our lite anchor sites are modular in design which allows upgrade of elements of the site as and when a new tenant comes onboard it helps reducing capital expenditure significantly across all the category sites.

Increasingly, tower companies are focusing on energy management. Earlier, power and fuel costs were passed through to operators. Now, the trend is evolving towards a fixed cost model to reduce power and fuel costs which will be shared with operators to create a win-win proposition.

The Indian telecom industry as a whole is imbibing a forward looking perspective that is green in vision with a mix of hybrid solutions that include enhanced battery backups and renewable sources of energy. On the technology front - outdoor BTS are going to be the key rollout strategy for operators from an economic proposition front.

TowerXchange: Given the maturity of independent towercos in India, who own around two thirds of the country’s towers, does the onus for building new towers come more from MNOs’ network extension programmes, or from towercos acquiring attractive locations?

In 2013-14, the Indian telecom tower sector witnessed multiple tenancy drivers as a result of voice and data demand driven by coverage gaps, low rural penetration, continued expansion and investments to address urban capacity bottlenecks and tremendous growth in data.

Telecom penetration in rural areas is still less than 42% and offers tremendous headroom for growth. Urban areas are increasingly facing capacity constraints, with choking of network causing frequent call drops and inconsistent data coverage, thus creating demand for more towers particularly in the form of more infill sites that need to be constructed by the telecom operators to provide the desired end-user experience.

Going ahead, 4G rollouts by incumbent and new operators are likely to enhance popularity of the 4G ecosystem and in turn benefit the tower sector. Besides, the industry is likely to make network investments comprising 2G network expansions, urban in-fills and accelerated 3G rollouts.

The auction of telecom spectrum conducted in Q4 FY 2013-14 with regulatory clarity is expected to be beneficial to tower companies. We expect telecom operators to roll their networks rapidly. Besides, the demand for new towers and tower sharing will maximise the use of existing infrastructure.

The improvement in industry fundamentals has revived investment as operators will expand capacities to stay competitive. The Indian regulatory clarity augurs well for sector participants. Spectrum reframing also has a significant upside potential.  The momentum in the Indian tower industry is undeniable and we believe there is still meaningful upside for the tower operators, given how economically compelling the sector fundamentals are.

TowerXchange: Please give us your views on data growth and the implications for demand for IBS and small cells.

With India being at the cusp of mobile data growth, carrier network infrastructure will witness continued investments, as operators invest in favour of data traffic growth, and 3G/4G technologies gain momentum.

Mobile towers in India are handling a surge in cellular traffic as operators upgrade for a new generation of bandwidth-hungry smartphones and tablets. Some of that anticipated growth may come from additional users and more connected devices, but most of it is predicted to come from an increase in traffic per connected device as users demand more and more wireless data. The new traffic translates into soaring growth prospects for tower operators.

Reports predict wireless network traffic to grow another ten times over the next five years with about 75% of this growth expected to be delivered over traditional macro sites, primarily towers. In-building solutions (IBS), Distributed Antennae Systems (DAS) and other small cell installations are projected to support the remaining 25%.

With over 70% of data consumption in urban India happening indoors, in-building solutions (IBS) in the form of micro-cellular technologies such as picocells and femtocells that create small-footprint cell sites within buildings, enable more effective coverage within the premises. With the growing demand for anywhere connectivity, IBS is gaining momentum. Operators use DAS and/or IBS to address issues related to poor wireless reception in indoor environments.

TowerXchange: What would be your suggestion to tower companies’ executives in emerging markets such as Myanmar? What does it take to succeed as a tower business?

Tower companies are uniquely positioned to help the Government of Myanmar to create the desired impact in building Myanmar’s telecom infrastructure and supporting the Government to realise its target of raising telecom penetration to 80% by 2016.

For tower companies to succeed in Myanmar, they should aim at supporting the telecom industry in building a widespread shared telecom infrastructure, with the objective of an accelerated coverage buildup, lower costs and lower consumer prices. Tower companies can do so by developing local partners and enhancing their capability, establishing a meaningful local ecosystem and manufacturing base by leveraging the strength of the large vendor base that international tower companies possess and, most importantly, bringing cost efficiency in equipment procurement and construction services through indigenisation. Tower companies should adopt a long-term commitment approach in Myanmar with the intent of culturally integrating local talent into their teams and skilling the local population in the field of telecommunications.

Tower companies must remain focused on improving the efficiency of tower operations and maintenance, with the objective of improving uptime, reducing energy and operating costs, and creating additional income from sharing with other operators. For the greenfield opportunity that Myanmar presents, tower companies should foster the establishment of telecom-information technology-citizen service centres at tower locations across Myanmar, with the objective of improving Government services, education and healthcare and helping propel Myanmar into the digital age.

TowerXchange: With regards to Myanmar, can you give us a brief overview of what is happening and what are your expectations for the future of the local tower industry?

Through Quippo Telecom, the telecom initiative of Viom Network’s joint-venture partner, Srei Infrastructure Finance Limited, we have established Irrawaddy Green Towers (IGT) in a strategic partnership with Alcazar Capital.  As Viom Networks is one of the founding partners of IGT, we certainly have long-term strategic interest in Myanmar. Independently, Viom Networks is pursuing EPC rollouts as there is an urgent need for the rapid capacity enhancement of telecom infrastructure in Myanmar.

We are currently working towards integrating Myanmar within the regional ICT framework at the earliest.  IGT has signed a contract with Telenor in Myanmar. We envisage being a participant in building 10,000 towers in next few years across operators and throughout Myanmar.

The rolling out of the telecoms network in Myanmar is a defining moment for the country and the region. Myanmar’s telecommunications sector is about to explode. Myanmar’s late entry into the information and communications market means it can leap directly to low-cost and high-connectivity options. It also means connecting Myanmar’s small businesses to new opportunities and its citizens to each other, and to a world of online information.

TowerXchange: How realistic are Myanmar MNOs and towercos goals in terms of infrastructure and network rollout?

Myanmar presents itself to us with a once in a lifetime opportunity to be part of a nation’s infrastructure buildup that will connect over 50 million people. Not often are you in midst of such a transformational juncture in the history of a nation. Hence, both operators and tower companies are equally and yet realistically excited about their prospects in Myanmar.

According to analysts, the number of new mobile subscribers in Myanmar will grow at a compounded annual rate of nearly 30 percent to reach 32.3 million people by the end of 2019. Indeed, it will be a challenge for operators to create a modern 3G network in Myanmar that reaches 90% of the population, including rural villages, in five years. But that is where tower companies and telecom operators will form of synergistic association to convert this challenge into an opportunity for themselves.

While the goals are very much in place, there are uphill challenges in the overall ecosystem and when it comes to local skills development and training challenges. However, with Myanmar being regulated within a single regulatory framework, licensing nationally, and spectrum allocations in line with this, the business environment is congenial for both tower operators and telecom service operators to concentrate on their core deliverables.