Around 360,000 Base Transceiver Station (BTS) are expected to be added by 2019 resulting in an increase in tenancy ratio from the current level of 2.6 to approximately 3.5 in 2021, according to an ASSOCHAM-KPMG joint study.
India is home to an infrastructure network comprising of over 450,000 towers and over 1.25 million kilometers of fibre, noted the ASSOCHAM-KPMG study.
The telecom tower industry in India is growing at a steady pace of approximately 6.8 per cent CAGR over the last four years and has reached INR 254 billion in March 2016. Around 66 per cent of India’s 454,521 towers are owned and operated by tower companies, a figure which will rise to 82 per cent when the BSNL tower company is inaugurated. Around 150,000 tenancies and approximately 6,700 new towers were added during 2016-17.
Telecom Service Providers (TSPs)/ Infrastructure Providers (IPs) in India spend significant capex on receiving Right of Way (RoW) permissions from local governments and municipal bodies. RoW permissions are a prerequisite for TSPs to be able to deploy optical fibre, highlighted the study.
Currently, IP-1s have not been included in the purview of the notification and are therefore not permitted to provision duct and OFC. The IP-1 companies are of the view that their inclusion in the RoW rules can streamline tower installations and significantly improve the QoS provided to the customers and are thus seeking support from the government with regard to their inclusion in RoW rules. As per the industry, this can also help in providing necessary infrastructure and services to TSPs and assist in the smooth implementation of various government initiatives under the Digital India program.
Site acquisition is one of the major operational challenges with respect to tower installations. To ease the site acquisition process, the government has rolled out an initiative whereby tower providers will be allowed to install telecom towers on government sites.
Some of the states like Kerala, Andhra Pradesh and Assam have already initiated the process of allotment of government premises for tower installation. The industry is also working with the respective state governments to help with the implementation of these guidelines. While progress has been made in a few states, certain departments have extended and applied the guidelines only to TSPs resulting in IP-1s being overlooked from attaining the benefits of the government initiatives.
Erratic power supplies/ non-availability of power hinders the smooth operations of telecom tower infrastructure. Around 40 per cent of the telecom towers face load shedding for more than 12 hours per day. To ensure a high degree of reliability and availability of telecom services, the tower companies have invested and deployed solution like DG sets, batteries, etc. thereby increasing the cost of services. It is critical to ensure that grid connectivity and availability to telecom towers is increased. The government may consider improving the grid electricity provided to telecom towers by prioritising new electric connections, continuous supply at par with emergency services and clarity on tariff structure.
The tower companies are looking at alternative solutions to power telecom towers such as DG sets, batteries, etc. in order to ensure continuous availability of telecom services. Further, operators can bring about annual savings of 20-25 per cent on fuel cost by using efficient energy storage applications.
Lithium-ion batteries are a preferred source for power back-up due to fast charging capacities, longer life cycle, enhanced safety, low maintenance costs and the ability to
operate in a wide range of environmental conditions for long periods as compared to traditional batteries. However, the import duty on Lithium-ion batteries when used for telecom operations is significantly higher than when it is used to power electric vehicles.
The landed cost for Li-ion module (assuming CIF of INR 100) is INR 106.2 when used in electric vehicles and is INR 129.7 when used in telecom applications. A uniform import duty for Li-ion batteries across applications and industries will help increase use of these batteries in telecom towers. Use of Li-ion batteries will also help in reducing carbon footprints from telecom towers. The government may also look at incentivising production of Li-ion batteries in India thus reducing the reliance on imports from other countries.
Based on the clarification issued by DoT in November 2016, all IP-1s are mandated to seek Unified License or UL-VNO license for provisioning of network elements thereby negating the policy issued earlier which allowed sharing of passive and active infrastructure elements to the licensed Service Providers under Section 4 of Indian Telegraph Act 1885.
This license requirement adds an additional cost burden for the infrastructure providers. Infrastructure sharing elements is critical for implementation of new technologies like In Buildings Solutions (IBS), Distributed Antenna System (DAS), etc. and hence the additional cost burden could potentially bring in cost inefficiencies for infrastructure providers. This cost burden will eventually be passed to the end consumers.
There is a need for defining the security framework for telecom infrastructure assets such as fibre and telecom towers deployed across the country. This framework should allow the assets to be treated as essential infrastructure and stringent penal provisions should be in place to mitigate risk of damage to these assets.
The Indian telecom tower industry has been accorded with ‘Infrastructure Status’ considering its significance in the development of telecom sector and overall economy of the country. However, the benefits derived by infrastructure grantees have not been extended to this sector. The government may consider extend benefits to tower industry which are already provided to other infrastructure players such as roads, ports, airports etc.
The Central government should come up with guidelines to ensure property tax is levied at uniform rates and is consistent across various state and regional authorities.
The current structure of GST tabled on 28 March 2017 has excluded IP-1s from getting benefit on procurement of telecom towers and hence may result in an increase in cost for tower operators. Further, currently, no subsidy is provided by the government on diesel even though it is an operational cost for infrastructure providers. Further, no CENVAT credit is given to the sector for the commercial use of diesel as a power backup.