Towering Business

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value for the shareholders as well as improve EBITDA margins through sharing of towers.

Will the new cost equation, saving close to 20% of ownership costs to telcos, bring in goodies for mobile subscribers too? According to Bharti Enterprises managing director Akhil Gupta, when the mobile operators are talking of passing benefits to the customers, it includes two kinds of benefits.

“First, it will expand coverage very quickly, especially to the rural areas. Secondly, tower sharing brings down operational costs for the operator,” says Gupta.

He believes that it is for the individual operators to decide how and when they pass the benefits to the consumer. Sardana of TTSL says service providers would like to monetise the assets and plough the cash into the core business of providing mobile telephony service.

“Sharing of infrastructure reduces both capital and operating costs for mobile service providers, and with this we would like to optimise our operational efficiencies,” he adds.

So while Reliance Communications Ltd created a 100% subsidiary Reliance Telecom Infrastructure, Bharti, Vodafone and Idea have agreed to merge their towers in 16 circles, where Vodafone has its operation. Indus Towers—the new company with a 42:42:16 shareholding pattern—will manage the passive infrastructure business for these telecom companies for 16 circles.

But, in the rest of the seven circles, Bharti will build the infrastructure through its 100% subsdiary Bharti Infratel. Gupta says Bharti, Idea and Vodafone are just promoters of Indus Towers.

“They won’t get any special benefits as the towers will be shared with all operators, including CDMA players, on a non- discriminatory basis. And we are expecting a good response,” he asserts.

The Indian telecom service providers have developed a unique business model for creating the passive infrastructure, hiving off of tower business into an independent unit and selling a stake to interested parties. While companies like Bharti do not have any immediate plans of sharing other kind of passive infrastructure, independent companies like GTL have plans to diversify to other areas of wireless applications to encash more revenue opportunities.

Sardana sees the future in more involvement of the foreign companies in the telecom infrastructure services. The foreign investment rules in the telecom infrastructure services allow 49% FDI without any prior approval and 100% with approval from the Foreign Investment Promotion Board.