With respect to any industry or anyenvironment, it would be illogi-cal or contradictory for compa-

nies to collaborate and compete at thesame time. However, given a market likeIndia, where the telecom sector has test-ed several business models, recenttrends in the telecom industry havemade this rather strange notion the onlyconceivable survival tactic. Telecom is atan inflection point; and it is clearly a timeto focus on how the industry, particularlythe tower segment, can take a fresh ap-proach to negotiate its path towards via-bility for all.

With a view to discuss all this andmore with some of the most illustriousnames in the industry and seek a broad-based insight into the industry’s presenthealth and future opportunities, The Economic Times in association with Global Group facilitated an incisive platform in the form of the ET Knowl-edge Forum titled ‘Collaborate To Com-pete-The New Age Survival Mantra.’ MsParomita Chatterjee, Senior Editor, ETNOW moderated the discussion, whereindustry thought-leaders laid bare theconcerns and opportunities pertainingparticularly to the sharing of telecom in-frastructure among a multitude of areasfor collaboration. Here are some high-lights of the discussion.

THE NEED FOR COLLABORATIONWhile 100% collaboration is impossibledue to a requisite to maintain competi-tive edge, the need of the hour is to col-laborate wherever possible. “Currently,for a tower company and in fact for com-panies in general, there are five key fi-nancial parameters; namely, CAPEX,OPEX, revenue, margin and cash flows.These are critical parameters ensuringcollaboration through the entire valuechain of telecom, and involving all the

stakeholders in the due course. It is vitalfor each player to collaborate and devisea strategy across the circles,” directed MrMilind Bengali, COO-Business Opera-tions, GTL Infrastructure Ltd.

With his backend expertise, Mr UmangDas, President, Viom Networks, clarifiedthat the essence of telecom business is in-terconnectivity. When one interconnects,they naturally interconnect one operator

with another who may be competitors.But at the same time, interconnectionsbring the revenue and the business. Inthat context, it is equally relevant for all in-dustry stakeholders. The focus is a win-win platform where tower companiesshould share and work together, or collab-orate to compete as a fundamental partof their business model.

COLLABORATION AS A BUSINESS MODELMr BS Shantharaju, Chief Executive Officer, Indus Towers, who has had theenviable opportunity to oversee three competitive operators function within asingle system at Indus, opined that thefirst principle of collaboration is thatthere has to be a strategic need; thatneed must be strongly felt by the cus-tomer. “What is it that customers want? Customers want our time, which we canmanage independently; they want ener-gy cost reduction, which is only possiblewith sharing; they want speed of deliver-ing, where there is no point putting upsingle tenancy and rather better to share.If you put up infrastructure without asupport system of at least two cus-tomers, the payback period is 11-12

years for single tenancy and the internalrate of return is not more than 3-4%. Insuch a scenario, how do you survive inthis market? There is definite financialcompulsion to ensure collaboration, sothat industry tenancy will exceed 2.25-2.5 in about five years,” he added.

Commenting on the extent of collabo-ration in Indian telecom, Mr Amit Sharma, Executive Vice President andPresident (Asia), American Tower Company stated, “Fiercely competitiveoperators still collaborate in many areasand that has spilled over to the tower in-dustry. Operators now need to disinter-mediate their business and their busi-ness model. They are focussing more onthe front-end, on consumers or the busi-ness customers they serve. Increasinglythey are asking if they need to be even inthe network business, let alone the tow-er business. They are questioning their

real value addition. And if it is not inrunning or maintaining infrastructure,maybe the entire network is best out-sourced. This is where collaborationcomes in. A decision like that cannot betaken if our industry is not working to-gether; so that operator has the confi-dence to take a decision and there willbe someone with the capability to sup-port him. One doesn’t have to find a sin-gle vendor for the whole country.”

THE FRUITS OF SHARINGSharing offers some optimism in the areaof energy consumption, which remainsamong the most pressing concerns foroperators and telcos today. According toMr Das, “This whole business of energy

Achallenging business environ-ment and regulatory hurdleshindering India’s telecom

industry compelled its stakeholders toacknowledge the urgent need to strategise the future course of action.Over the last five years, tower and optic fibre infrastructure coverage

has exponentially widened, but sentiments remain dampened by constrained growth. In this vein, theETIG Knowledge Forum on “Collabo-rate to Compete-The New-Age Survival Mantra,” attempted to dispelsome anxieties and define the roadahead for the industry. The forum’ssuccess was evinced in the manner inwhich it enthralled and enlightenedits audience, while encouraging their participation by way of a Q&A session

with the astute panel.With respect to 2G and 3G, the

internal rate of return of tower companies has not been encourag-ing. However, for tower operators, the requirements are expected to bemuch more with respect to 4G or LTE.A member of the audience inquired

whether the panellists expect to seecollaboration or consensus on theroad ahead to meet these require-ments for 4G/LTE rollout. Satisfyingthis query, Mr Milind Bengali, COO,Business Operations, GTL Infrastruc-ture Ltd, clarified, “It is not just LTE,but also 2G rollouts where you seedifferent operators come to differenttower companies. So it is alreadythere, nobody wants to invest newCAPEX and it makes sense to share

the tower.”According to Mr Amit Sharma,

Executive Vice President and Presi-dent (Asia), American Tower Company, the telecom regulatory authority had once raised the ques-tion about making sharing mandato-ry. Both, operators and tower compa-

nies unanimously denied it. But asper the present economic model, theonly way they can survive in this busi-ness is by sharing and it need not bemade mandatory. “With respect togrowth of LTE, no one knows howmany urban sites will be required.Nobody will build a tower on a roofwhere there is already another towerpresent. And therefore, we are al-ready collaborating informally; simpleeconomics will drive us towards more

of this,” he further elaborated.Mr BS Shantharaju, Chief Executive

Officer, Indus Towers, further explained that valuation is a pureequation of the cash flow. “If youdon’t see the cash flow, valuation will eventually collapse, and we are see-ing that happen. Now everybodyrecogn ises that there is no value forthe steel and cement, the value is inthe underlying tenancy and cash flow.And hence, in our wisdom, we are

seeing that as long as we don’t haveanother few tenants coming in, thereis no point in putting up a tower. Sec-ondly, if two towers co-exist, over aperiod of time, both will become inef-ficient.

So informal sharing is already hap-pening and our customers are alsorecognising it. My view is that this col-laboration may not be well discussed,but it is happening at a very sublimelevel without too much discussion,”

he said.Through the forum and the Q&A

session, it was established that thereare already several instances of col-laborations taking place in the Indiantelecom industry. Much rests on theoutcomes of the impending 2G spec-trum auctions expected to take placesometime in August this year, redefin-ing not only the fate of towers but anentire gamut of network delivery andnetwork deployment aspects.

Quelling Doubt, Dispersing Hope

Concocting Excellence through Collaboration

Catch the coverage of the ETIG Knowledge Forum on ET NOW on July

28, 2012 at 4:00 pm and repeat telecast on July 29, 2012 at 4:30 pm.

With great ambitions for growth but several regulatory obstacles along the way, the telecom industry and particularly infrastructure providers are increasingly

adopting the definitive mantra of collaborating for growth

Panellists resolved uncertainties raised by the audience regarding the scope oftelecom collaborations and infrastructure sharing in the near future

Collaborate to Compete: The New-Age Survival MantraIn Association with GLOBAL GROUP

hepe Thet Ttee: SuAg SAg Sgee MalPO

Collaborate to Comppeeete TThh No Comppeette: Thhhe New-Ag SS

MR AMIT SHARMA Executive VP & President (Asia), American Tower Company

Standardisation hasalready started to happen,at least in the infrastructureindustry leading to greatereconomies of scale. Thesame must be done on theregulatory front. We haveno zoning in India. No zoning results in non-standard deployment.Zoning standards that arefederal in nature or federalguidelines will lead to anew spurt instandardisation.

The real revolution willhappen in the area of backhaul sharing. 3G and 4Gneed a lot of back haul, inthat situation a newrevolution has to be theeffective use of back haul.Wherever there are towerswe need to ensure thateven the OFC is shared,the back haul is shared.

As we are basically energyconsumers, we need tooutsource this wholebusiness of energygeneration to companieswho have the coreexpertise of generatingenergy. We will simplyhandhold the process,encouraging them to buildrenewable energy modeland will then act as theircustomers.

Now what we need in thiscountry is shareability, andfor that to work we needindependent towercompanies. Shareability,low CAPEX for time being,reduction in OPEX throughgood energy contracts,dismantling of overlappingtowers amongst towercompanies, are a few verybroad-based ideas I wouldsuggest.

MR B S SHANTARAJUCEO, Indus Towers

MR MILIND BENGALICOO (Business Operations), GTL Infrastructure Ltd

MR UMANG DASPresident, Viom Networks

Mr B S Shantaraju, CEO, Indus Towers; Mr Milind Bengali, COO (Business Operations), GTL Infrastructure Ltd; Ms Paromita Chatterjee, Senior Editor, ET NOW; Mr Amit Sharma, Executive VP & President (Asia), American Tower Company and Mr Umang Das, President, Viom Networks

From the Left

Another question raised by the audience queriedwhether given present conditions, can the telecom sec-tor witness a boom in the next 2-3 years. To this Mr Sharma replied, “When I last came across the statistic, about 30 million smart phones or near smartphones were sold, and that market is growing at about100% and doubling every year. What we have seen inother countries, for example, is that a smart phone userhas about 8-10 times the data usage of a conventionalphone user. The next factor is critical mass. There is acertain point of penetration of phones, when it sort ofbecomes ubiquitous and people are then sending stuffto each other, creating a sort of exponential growth in the curve. It is very difficult topredict timing, but if you are an optimist, you may say18 more months, and if you are a pessimist, you maysay 3 or 4 years. But I have rarely heard anyone say thatit will take longer for data to take off in India. My beliefis that fortunes will change with the growth of data andchange the entire value chain as well.”

Mr Shantharaju further pointed out, “The unfortunate thing about data is that it needs muchmore CAPEX compared to the voice model. I think inthat, the economics will change. Coming to tower companies, only people who can invest in data networks and improve network quality and customerexperience will survive in the data arena. This is the

case around the world. Most of the time, operators willfirst go on lower led 2G network within a 3G and 4G.With that we will earn an extra 10-20%. But after theoptimisation stage, real expansion happens wherepropagation is low. That is when we will get extra tenancy. You may not see a tenancy model like 2-3years ago. You will never see that type of tenancy increase even in the data revolution model. But it willbe better than what we have seen in the last year.”

According to Mr Bengali, in the US market, the spurtin tenancy took place exactly around data growth. Hestated, “One can easily assess something similar in ourmarket. Secondly, all of us know that the rollout of BaseTransceiver Station (BTS) is faster than many towers to-day. Previously, this was not the case, which means wehave sufficient towers and limited CAPEX. Growth of tenancy is imminent since thenumber of new BTSs are higher compared to towers.” However, Mr Shantharaju countered this viewand elaborated on the unique Indian scenario, “The dif-ference is, in western models, the moment a BTScomes in, it is added as a tenancy, which is unfortunately not our model. Hence, you will not seetenancy improvements, except some improvements inloading charges. Yet, some amount of tenancy improvement will take place after the first wave of dataexplosion.”

Preparing for an Imminent Boom

ADVERTORIAL AND PROMOTIONAL FEATURE

Expert Speakgeneration must be outsourced becausewe are basically energy consumers andnot generators. Where does the core ex-pertise lie? It lies with the people gener-ating the energy. So, we are handholdingthe process, encouraging independentenergy companies to use the renewableenergy model and we will then becometheir customers.”

Mr Bengali elaborated that there arefixed energy contracts which exist between tower companies and telcos,but on a pan-India basis they are not standardised. One needs to look at standardising energy contracts since cashflow is important, and it helps to creategood, visible, strong cash flows for the tower companies. When there are goodcash flows available for a tower compa-ny, outages due to power failure would automatically reduce for the operator,leading to better uptimes. There is morebusiness generation for the telco, bene-fiting subscribers as well.

However, there is another revolutionon the cards, back haul sharing, which will be driven by 3G and 4G use. Mr Shantharaju pointed out, “Let us look at our cities, we don’t have much Optical Fibre Cables (OFC) underground; compared to any part of the Westernworld our OFC infrastructure is pathetic.Now digging to install the OFC is not going to work. How do we ensure thatOFC is shared where there are towers, orshare the back haul; how do we helpcustomers to really leverage the power ofthe tower beyond what they have alreadyseen?” Collaboration seems to answerthis question as well.

SUMMING UPThe forum threw up several erudite ideasthat could be beneficial for the industryin charting its way forward. It is time forthe Government to take a broader lookat the subject of national telecom infra-structure, especially for rural penetration,and provide guidance as well as create aviable taxation regime. However, the fu-ture lies in the growth of data and there-fore, all stakeholders will have to think interms of what makes data deploymentmore efficient. For instance, analysing thetrade-off between using a big tower on aroof or using an in-building system whichcan provide better coverage. These arethings that the industry needs to work onto enable networks to meet high qualitystandards. These improvements will re-quire collaboration among different par-ties as opposed to a drive to outdo.

Companies can exercise more ‘share-ability,’ maintain low CAPEX and reduceOPEX through good energy contracts. Dismantling of overlapping towersamongst tower companies wherever possible is also advised. Also, it is be-lieved that some consolidation is in-evitable and healthy for the industry con-sidering current oversupply. Given thesefactors, it is only natural that collabora-tion is vital for remaining competitive inthe present times of turmoil.

A rapt audience interacts with telecom honchos

THE ECONOMIC TIMES, TUESDAY, JULY 24, 2012

Product: ETNEWMumbaiBS PubDate: 24-07-2012 Zone: MumbaiCity Edition: 1 Page: ETMCPG7 User: kailashk0106 Time: 07-23-2012 20:56 Color: CMYK