With the entry of more international players into the passive telecom infrastructure business as well as the expansion of Indian telecom companies which are hiving off their tower infrastructure business, the rental charges for anchor tenants are expected to come down to the level of Rs 30,000-35,000 from the present level of Rs 40,000-45,000 per month in the near future.
International players like American Tower Corporation, Crown Castle International and Tower Vision are eyeing India as a major hub for their tower business operations. Tower Vision has signed a deal with Spice Communications to build, own and operate 1,000 tower sites .
Rental charges as a percentage of gross revenue stands at 11.6% for GSM operators and 13.4% for CDMA players, which is higher than their networking operating cost (in revenue terms). The major CDMA player Reliance Communications (RCom) network?s operating cost is 13% of its revenue. Mainly, the towers are built as per the specification of the operator, where the operator acts as anchor tenant and pays higher rent than other tenants. As per the data from GTL Infra Ltd (GIL), an anchor tenant is charged around Rs 40,000-45,000, while the second and third tenants are charged Rs 65,000-70,000 and Rs 80,000-85,000 per month.
Sushil Sharma, assistant vice-president-research, Bativala & Karani Securities, says, ?The reason for higher rental charges could be the fact that it includes a part of capex recovery, which appears as depreciation for the operators. Sharing by more than 2 tenants must happen if this kind of rental has to accrue to tower company, while delivering cost advantage to operators as rental charges may come down with the start of operation by more players.?
Indian players like GIL, which is to rollout 6,700 tower sites by March ?08, Essar Telecom Tower Infrastructure, which plans to roll out 18,000 towers by 2010 and Quipo Telecom Infrastructure Ltd, which is to invest Rs 6,750 crore to set up 25,000 telecom towers, are betting big on the industry. The usual life of a tower is around 25 years and the asset is depreciated over a period of 7-15 years.
