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Scaling Up: Building an all-inclusive infrastructure to drive digital growth

February 19, 2019
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The year 2018 witnessed noteworthy developments in the telecom infrastructure space. All industry stakeholders put in considerable efforts to build a digital infrastructure in order to deliver improved connectivity and quality of service across the country. The year also saw prominent policy and regulatory developments aimed at strengthening the telecom infrastructure in the country.

The announcement of the National Digital Communications Policy (NDCP) was a major milestone. It laid the groundwork for 5G and other emerging technologies. The policy includes numerous provisions for infrastructure providers (IPs) aimed at extending the incentives and exemptions for the construction of telecom towers, fiberising 75-80 per cent towers, increasing the scope of IP-1s, setting up a national fibre authority and scaling up the deployment of satcom services. The policy also proposes to allow active infrastructure sharing, which would lead to cost savings, besides opening up new opportunities. Another key development was the inclusion of IP-1s under the purview of the Right of Way Rules, 2016, through a memorandum dated May 22, 2018.

On the regulatory front, the Telecom Regulatory Authority of India released recommendations for telecom service providers to gain access to in-building facilities on reasonable terms. This would ease the deployment of in-building infrastructure.

Further, the year marked the beginning of consolidation in the infrastructure space with two leading towercos, Bharti Infratel and Indus Towers, announcing their merger. In addition, progress under the government’s Digital India initiative and the Smart Cities Mission presented several opportunities for telecom infrastructure players. tele.net takes stock of the key developments in the telecom infrastructure space during 2018 and the way forward for the segment...

Surge in tower deployments

There was a surge in the deployment of telecom towers in 2018. The industry installed 40,000 new mobile towers during the year as per the Tower and Infrastructure Providers Association. It also reached a milestone with the installation of 0.5 million mobile towers and 2 million base transceiver stations in November 2018, according to the Cellular Operators Association of India.

The massive data demand and the need for ubiquitous connectivity prompted towercos and telecom operators to ramp up their investment in infrastructure expansion. In a recent development, Reliance Jio Infocomm Limited, American Tower Corporation (ATC) and Bharti Infratel placed orders with a Kolkata-based company, Skipper Limited, for installing and upgrading 2,500 telecom towers. The bulk of these orders entailed the installation of towers in eastern India.

Meanwhile, there was a renewed focus on providing telecom connectivity to remote locations, such as the Northeast and left-wing extremism (LWE) affected areas. In May 2018, the government announced that Phase I of the project aimed at providing 2G connectivity to LWE-affected areas was nearing completion. As per the government, 2,335 sites were operational as of May 2018 (out of a total of 2,355 sites). The cabinet has now approved Phase II of the project, which aims to install 4,072 towers to provide 2G as well as 4G connectivity in 96 districts across 10 LWE-affected states. In addition, the cabinet has approved a project for the installation of 2G and 4G mobile towers in the unconnected parts of Meghalaya.

New growth avenues

The telecom infrastructure industry underwent significant transformation in 2018. Many tower companies transitioned to holistic network service providers. Declining profitability from the traditional tower tenancy business pushed towercos to explore new business avenues. Further, the emergence of technologies like 5G and internet of things (IoT) urged them to look beyond conventional business models. As a result, towercos started adopting new methods such as small cells, distributed antenna systems, in-building solutions (IBS) and Wi-Fi services for enhancing network coverage and improving revenues.

During the past year, Smartx Services Limited, a wholly owned subsidiary of Bharti Infratel, deployed IBS across airports, hotels and other buildings. Smartx also set up Wi-Fi hotspots across the country. Further, Bharti Infratel completed several pilot runs for offering small cell solutions and is hopeful of undertaking large-scale deployment in the future.

Deployment of digital infrastructure

Another area that remained in the spotlight during 2018 was digital infrastructure. The government’s thrust on digitalisation through initiatives like Digital India and the Smart Cities Mission fuelled the demand for a robust telecom infrastructure. This opened up new business opportunities and revenue streams for towercos.

Bharti Infratel secured the Bhopal smart city project. The project involves the setting up of intelligent street poles across the city. In August 2018, Indus Towers entered into a public-private partnership with the New Delhi Municipal Corporation to install 55 smart poles, which will provide Wi-Fi access, live CCTV monitoring, LED lighting and air quality information. Further, Indus Towers partnered with Vadodara Smart City Development Limited, a special purpose vehicle for the implementation of smart city projects in the city. The Vadodara Municipal Corporation aims to provide Wi-Fi services at 450 locations in Vadodara, which will be enabled by Indus Towers. The project also involves the installation of 220 intelligent poles across Vadodara, of which 50 have been deployed as of December 2018.

Focus on fibre

With high speed internet connectivity and seamless data flow becoming a necessity, fibre emerged as the buzzword in the industry during 2018. In fact, the government announced that it was aiming to increase India’s fibre backbone from 1.5 million km at present to 2.5 million km by 2022 to support the roll-out of 5G services.

During the past year, fibre roll-out was primarily driven by operators and independent fibre companies. Among operators, Jio announced its plan to add about 600 km of optical fibre cable (OFC) every day. Further, Sterlite Tech, a fibre company, is doubling its cable capacity to 33 million fibre km at a capital expenditure of Rs 3.20 billion through brownfield expansion in Silvassa. Meanwhile, Jio has already fiberised 70 per cent of its towers in Delhi. In fact, 50-60 per cent of the sites leased from other operators have also been fiberised. Other telecom operators such as Bharti Airtel have announced plans to double their fibre-to-the-tower (FTTT) deployments.

Among towercos, ATC has strong plans of venturing into the fibre business. In the past, ATC has invested in fibre networks in Mexico. It is now planning to use this experience to deploy fibre in India.

Apart from the FTTT space, the fibre-to-the-home (FTTH) space was abuzz with activity during 2018. In July 2018, Jio announced its entry into the fixed broadband space by launching Jio GigaFiber, an FTTH broadband service, which will reportedly offer speeds of up to 1 Gbps. The company plans to operate in 1,100 cities and target 50 million households, almost thrice the country’s total current fixed line subscriber base. Besides, Bharat Sanchar Nigam Limited (BSNL) has big plans to foray into the FTTH space and is upgrading its FTTH network across 100 cities in the country.

Another factor driving the expansion of the country’s OFC network was the government’s ambitious BharatNet programme. From 358 km of optic fibre in 2014, India now has close to 305,824 km of OFC in place owing to the BharatNet project. Further, network utilisation is being done by rolling out FTTH services. Free FTTH service has been provided to all gram panchayats.

Mainstreaming satcom

Satellite emerged as an ideal technology for extending communication services to remote and rural areas in 2018. The Indian Space Research Organisation (ISRO) launched several satellites to improve connectivity in underserved areas. In November 2018, it launched the GSAT-29 satellite to improve telecommunication and internet services in Jammu & Kashmir and the Northeast. The most recent satellite, GSAT-11, was launched in December 2018. It is a high-throughput satellite, which will help in providing high speed internet connectivity in the north-eastern states and hilly regions of the country.

Further, the idea of using satellite technology for backhauling 4G networks was introduced in 2018. Jio was the first operator in the country to announce its plans to use satellite backhauling for 4G. The operator has acquired bulk capacity on two ISRO satellites and is using satellite technology provided by Hughes Communications India Limited. Further, it is reportedly setting up two earth stations in Mumbai and Nagpur, and two mini hubs in Leh and Port Blair for satellite backhaul-based services, which will provide connectivity in the Northeast, Jammu & Kashmir, Uttarakhand, Andaman & Nicobar Islands, and Lakshadweep.

Traction in subsea cables space

There was significant activity in the subsea cable space in 2018. State-run operator BSNL signed a contract with NEC Technologies to build a subsea cable network between Chennai and the Andaman & Nicobar islands. The total cable length will be approximately 2,300 km and it will carry 100 Gbps optical waves.

In April 2018, the first phase of the Indian Ocean Exchange submarine cable system, connecting Mauritius and the Rodrigues Islands to South Africa and India, was officially launched in Port Louis. The 8,890 km long cable system, being built by Alcatel Submarine Networks, will provide an open access alternative path for connecting Africa, Asia, Europe and the US.

Meanwhile, in June 2018, Global Cloud Xchange, a subsidiary of Reliance Communications (RCOM), announced the completion of the India data centre for the Eagle Subsea Network, which represents the fastest submarine cable route between Mumbai and Hong Kong.

Consolidation and M&As

The year 2018 was marked by key merger and acquisition (M&A) deals in the infrastructure space. The most remarkable among these deals was the merger announcement of Bharti Infratel and Indus Towers in April 2018. The merged entity, with over 163,000 towers across 22 sectors, would be the largest tower operator in the world outside China. Besides this, ATC India bought 10,200 stand-alone towers of Vodafone India and 9,900 stand-alone towers of Idea Cellular, while Jio acquired Reliance Infratel’s 43,000-unit tower portfolio. Post completion of these deals, the passive infrastructure industry will be driven by two large independent tower companies, Indus-Infratel and ATC India.

In the fibre space, Reliance Industries Limited (RIL) recently acquired majority stakes in DEN Networks and Hathway Cable and Datacom Limited to strengthen its position in the FTTH space. This move will help Jio, RIL’s telecom venture, replicate its wireless broadband success in the fibre broadband space.

In the subsea cable domain, Bharti Airtel acquired the Indian leg of the India-Middle East-Europe submarine cable owned by Gulf Bridge International (GBI). Apart from this, it will also acquire significant capacity in the Middle East-Europe leg. According to the company, this will complement Airtel’s existing global network spanning 250,000 route km in 50 countries.

Monetisation of infrastructure assets

Intense competition in the telecom services segment prompted many operators to step up investments in their core business. The divestment and monetisation of infrastructure assets emerged as a key trend in the industry. Several telecom operators are seeking to offload their towers and use the proceeds to fund their capex and reduce debt. In addition, operators are hiving off their fibre assets into a separate entity for better asset monetisation, and faster and more efficient deployments.

For instance, Bharti Airtel recently sold a 32 per cent stake in Bharti Infratel to its wholly owned subsidiary Nettle Infrastructure Investments Limited. Further, Airtel formed an independent fibre company in August 2018. Meanwhile, Jio recently hived off its tower and fibre assets into two separate units, a move that will help the operator in monetising these assets in the future. State-run operator BSNL also hived off its tower assets business to form a separate subsidiary. The move will enable it to divest its tower assets in the future. Further, Vodafone Idea Limited recently spun off its fibre assets to a separate unit with the intent of monetising the assets in the future.

Going forward

Given the hypercompetitive market situation and the explosive data demand, the need for network infrastructure is only going to increase in the coming years. The industry needs at least 100,000 towers in the near future to support new technologies like 5G, artificial intelligence and IoT. According to industry experts, the tower industry would require a significant investment of around Rs 200 billion over the next few years to cater to the growing data demand and support the upcoming technologies.

In addition to towers, fibre, satcom and subsea cable infrastructure will have to be rolled out to build an all-inclusive communication infrastructure. Further, timely implementation of the NDCP, 2018, investment inflows and collaboration between private and public sector entities would be instrumental in creating the desired ICT infrastructure that can drive digital growth in India.

By Kuhu Singh Abbhi

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