Telecom tower industry poised for rural growth

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Aug 29 2011, 09:22am hrs
Despite absence of new tenants, the telecom tower industry still holds promise for investors, considering the growth potential in semi-urban and rural areas, mostly categorised as A, B and C class cities.

According to the Telecom Regulatory Authority of India (Trai) data for June 2011, rural penetration in the country stands at about 34%.

Circle B shows the highest net addition whereas circle C registered the highest rate of monthly growth in the wireless sector from May 2011 to June 2011, the report added.

Experts suggest that B and C mobile circles are translating into a billion-dollar revenue market and will be the next growth engines for the telecom sector. Our wireless subscriber estimates factor rural penetration at about 50% by 2015. We believe around 60% of incremental towers will be required to serve subscriber growth coming from the rural and semi-urban markets, said Rajiv Sharma, associate director, Telecoms and Media, HSBC Securities.

A tower infrastructure company provides passive infrastructure to telecom operators on a shared basis.

Alok Shende, principal analyst, Ascentius Consulting, is of the view that the tower story in India is promising in the medium to long term. Rise in tariff is a good signal for the industry. Increase in value-added services (VAS) pie to the total revenue asserts that pricing power is coming back to the sector, Shende added.

Industry veterans highlighted that telcos have been consistently lowering their benchmarks to cover these regions. Initially, operators like Bharti were focused on populations of 20,000 and now they are keen to cover any town with a population less than 5,000. Others are not far behind and Vodafone and Idea Cellular, and to some extent, Aircel are next in line.

There is more than 50% of population yet to be connected. The urban rural divide has to be bridged virtually. The paradigm shift has started with mobile broadband, said Hemant Joshi, partner, Deloitte Haskins & Sells India.