Passive infrastructure sharing was started as a cost saving measure by the telecom companies, but soon, all players wanted to get into the business. This led to its rapid transformation into an industry by itself. The entire scenario is worrisome, as it would seriously impact the tenancy ratio of sites, thereby making them non-profitable. A passive infrastructure site or a tower site as is commonly called, needs at least a tenancy ratio of 1.5 to breakeven, and needs 2x tenancy with significant leverage to generate a 15% return on equity (ROE), expressed Vineet Sirpaul, executive director, NuTek India. Infrastructure sharing has gained momentum in FY2008, with most of the major private operators hiving off their tower assets into separate companies. The development is beneficial for entrenched operators in terms of capex savings (capex reduces by 1/3rd), and also for new entrants, as it enables them to expedite their network rollouts.
The current tower population is about 2,40,000. By the year 2010, another 2,50,000 towers will be needed to cater to the demand of over 500 million subscribers and also for services like 3G and wimax, said an industry insider. Also, as the mobile industry continues to expand aggressively, towers are estimated to further increase to about 3,50,000 by FY2011.
Only 40% of the total sites in India are being shared. With these players coming in, operator-owned tower companies would have an advantage, as they would have at least one anchor tenant (the parent telecom) at inception as well as a larger portfolio of towers to offer to other operators, Sirpaul added.