‘Tower biz to fly on 3G/4G, in 2 years’

Ahead of an IPO to raise funds for expansion, telecom towers company Bharti
Infratel has pinned its hopes on rollout of 3G and 4G services by telecom operators for the next wave of growth, Rakesh Bharti Mittal, chairman of Bharti Infratel, told
K V Ramana in an interaction. Excerpts:

What’s your business model?
All the operators in the country are our tenants at this point of time. In fact, no operator in the country is building any new towers on his own and is coming to the tower company for the requirements. The sharing is non-discriminatory and we offer our services to everyone.
Where does growth come from?
Our growth is linked to the growth of the telecom operators and also the improvement in the tenancy. The first tenant pays Rs35,700 per month. When the second tenant comes in, the tenancy rates will go down to Rs32,000. While both the operators share the benefits in terms of lower tenancy charges, we have a 180% benefit in the form of higher revenues. There are also 15-20% savings on energy costs. This is passed on to the operators. Keeping all these benefits in view, we don’t think any telco will go and build its own towers since it does not make commercial sense anymore.
What’s the next big opportunity for you?
3G and 4G services are going to be the next big thing for the towers business. We expect the active rollout of these services in the next couple of years.
Won’t that bring additional competition?
There are huge entry barriers in this business. Towers business is highly capital intensive. No small company can afford to come and set up the tower infrastructure. We have covered almost 80% of the geography by setting up about 1.45 lakh towers. For any global company to come and start towers business in India, the biggest barrier is in the form of power availability.
How do you plan to improve your tenancy levels?
We have the three top telcos with us. Having covered 80% of the network, we are the largest tower company in the country. BSNL is not sharing the towers and other tower companies are at different tenancy ratios. The industry average is 1.7 and we are at 1.9. We believe that we are well-positioned to take this to 2 and beyond. Going forward, there is going to be a huge requirement of towers, particularly to take the 2G services to B and C cities and rural parts of the country. As we improve our tenancy ratios, there is going to be a direct and positive impact on the revenues as well in addition to the return on equity and the return on capital employed.
Will the recent regulations on radiation levels affect you as well?
There has been a regulation on the radiation levels. We believe most of the tower sites are meeting those standards... Instead of going beyond the stipulated radiation levels using the same tower, the operators would look at setting up additional towers. This is going to be a good opportunity for us.