Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Telecom: Infrastructure sharing - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Apr 13, 2007

    Telecom: Infrastructure sharing

    Currently the number of mobile subscribers in India is approximately 175 m. This massive subscriber base is supported by an equally massive infrastructure. There are currently about 1,00,000 telecom towers in the country and in order to support the targeted figure of 500 m subscribers by 2012, we would need about 3,30,000 towers. The largest telecom player in terms of number of subscribers Bharti Airtel presently has approximately 40,000 towers to support a customer base of a little over 37 m (as on March 2007). Thus the telecom companies currently spend huge sums for putting in place the requisite infrastructure.

    Consider this, in order to support its targeted subscriber base of 125 m by 2010, Bharti Airtel would require to have in place about 1,00,000 towers. This will mean huge capex plans, which in turn will also translate into large maintenance capex in the years to come (assuming the tower company is still on its consolidated balance sheet) Besides this, setting up such an infrastructure would also entail execution risks.

    In the light of these factors, it makes great sense for the company to turn asset light and a similar corollary can be drawn for the remaining telecom companies as well. Looking at the opportunity that awaits the telecom companies in India and also considering the targets set by the government, the Telephone Regulatory Authority of India (TRAI) has proposed the sharing of passive infrastructure (telecom towers and power backup) and active infrastructure (antennas, feeder cables and transmission systems) by the telecom companies.

    Advantages of infrastructure sharing:

    • Asset light model: The most simplistic fallout of the move is that it will lead the companies to embrace an asset light model, as they will now be able to provide their services by leasing out the requisite infrastructure. The move will lead to lower capex for all players as also lower operating expenditures. To put things in perspective, the biggest single cash flow expenditure for the operators is capex and about two thirds of it comprises of infrastructure costs.

    • Allow for faster roll outs: The sharing of infrastructure will not only reduce duplication but it will also allow faster roll out of services as companies can utilize the existing infrastructure of another player to roll out its services. This will reduce the time to market for the companies.

    • Additional coverage: The telecom companies can now bring under coverage areas that it earlier thought were unviable owing the involvement of high capex. This will allow an increased coverage of India's vast geography.

    • Lower ARPUs, not a problem: As the CMSPs (cellular mobile service providers) go deeper into the Indian territories with their offerings, they are sure to face the problem of lower ARPUs (average revenue per user) and low MOUs (minutes of usage). The only way for them to insulate against the downward pressures on their overall ARPUs would be by way of lower costs that can be assured only by reduction in government tariffs or by infrastructure sharing.

    The move will provide a shot in the arm to CMSPs who are keen on sharing their infrastructure owing to the above-mentioned factors. It will also help to improve their performance ratios in the longer run as the benefits of an asset light model begin to trickle in. Also, the optimum utilisation of assets/resources will lead to increasing the cost effectiveness of the services offered and also expedite the roll out to rural areas affording more choice (in the hands of the consumers) and intensifying competition in these areas that are presently serviced by only a few operators.



    Equitymaster requests your view! Post a comment on "Telecom: Infrastructure sharing". Click here!


    More Views on News

    Bharti Airtel: A Good Quarterly Performance (Quarterly Results Update - Detailed)

    May 6, 2016

    Bharti Airtel has reported a8.4% YoY growth in the topline and an increase of 2.8% YoY in the bottomline for the quarter ended March 2016.

    Bharti Infratel: Ends the Year Positively (Quarterly Results Update - Detailed)

    Apr 27, 2016

    Bharti Infratel has reported a 7.3% YoY growth in the topline and an increase of 18.7% YoY in the bottomline for the quarter ended March 2016.

    Bharti Infratel: A Good Quarter (Quarterly Results Update - Detailed)

    Apr 8, 2016

    Bharti Infratel has reported a 4.9% YoY growth in the topline and an increase of 11.5% YoY in the bottomline for the quarter ended December 2015.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)