Double Bonanza For Telcos

The Government has announced two major decisions over the past one week that will bring cheer to the telecom operators. One, the rural levy called Access Deficit Charge has been abolished and second, operators have been allowed to share infrastructure except spectrum. While removal of ADC is expected to enable operators to save nearly Rs 750 crore every year, sharing of infrastructure will bring them greater savings. With the average revenue per user plunging down, these savings will give the service providers more room to play.

Until now, operators were allowed to share only the passive part of the infrastructure which include towers, power equipment and air-conditioning at various cell sites. Almost 60 per cent of the passive infrastructure is currently on a shared basis bringing nearly 40 per cent reduction in the operator’s capital expenditure. But now, operators will be able to share active infrastructure which is essentially the technical equipment needed to transmit mobile calls such as antenna, feeder cable, radio access network and transmission system. That should bring down roll costs for the operators by another 30-40 per cent. Infrastucture companies are already making plans to take advantage of this move. GTL, for instance, has tied up with Vanu Inc to conduct trails for sharing active infra. The cost of passive infrastructure alone for an operator may work out to Rs 15 lakh for a roof-top tower and around Rs 25 lakh for a 45-meter ground-based tower. These apart, there are several operating expenses such as electricity bills, rentals (between Rs 10,000 and Rs 25,000 per month, higher in some metros) for the space occupied, apart from regular maintenance charges for each tower. This makes it clear why there is a substantial saving in capex and operating expenditure for mobile operators who share these resources. Sharing also opens up a new revenue opportunity as new players roll out their services they will look to buy space on existing infrastructure rathen than start from scratch.
A burgeoning subscriber base and a more stringent spectrum allocation regime may create a higher requirement of cell-sites or tower sites for operators, to accommodate more subscribers and allow greater reuse of the radio frequency allotted to operators. This is especially true in dense urban areas, where finding space may not be easy. Infrastructure sharing could come to mobile operators’ rescue in this context. More than 3 lakh more cell sites are required over the next 3 years and no operator can do this by itself. Infrastructure sharing is crucial in rural areas where the revenue per user is very low. In order to encourage sharing in rural areas, DoT has proposed to give financial support from the USO fund to all operators who share their infrastructure. While all this sounds good for the telecom operators one hopes that the huge savings will be passed on to the consumers in the form of lower tariffs.