For further details or any customized research requirement, you may visit us at: www.researchonindia.com

1. Telecom Towers ‐
Telecom Towers India
August 2009

2. Executive Summary
 Estimated requirement of 182,000 in 2008 and 554,000 by 2015
Market  Projected growth rate of 17% p.a. in 2008‐2015
 An estimated 36% of towers are shared, which is expected to increase
 Telecom tower companies follow four types of business models:
– Captive: Towers are owned & operated by telecom operators
Business – Operator Controlled: Operator consolidates tower infrastructure and hives it off as a separate company
models – Pool and share: Operators jointly setup an independent company for sharing tower infrastructure
– Build and operate: Independent tower companies operate on a ‘build‐and operate’ model
 Infrastructure sharing in India is currently limited to passive sharing
Infrastructure  Positive TRAI initiatives such as granting subsidies from its Universal Service Obligation Fund
g g g
sharing (USOF) encourage infrastructure sharing
 Estimates indicate significant improvement in profitability as tenancy ratio increases
 Indian telecom tower market includes:
Indian telecom tower market includes:
– Tower infrastructure companies, owned and controlled by telecom‐operator companies like ‐ Indus Towers:
Competition Vodafone‐Essar, Idea, Bharti
– Independent tower infrastructure companies like GTL
 Indus towers is the leading player with 32.4% market share
 New entrants include American Tower Corporation, Tower Vision
TELECOM TOWER – INDIA.PPT 2

3. •Introduction
•Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 3

4. Indian mobile telecom market is driven by subscriber additions
and future growth is expected from rural expansion
Growth in Indian telecom sector Growth in subscribers
• Indian telecom operators’ growth is largely driven by Tele density
mn %
subscriber additions since ARPU (average revenue Subscribers 33.2
450 35
per user) is reducing
)i d i
30
• Increasing penetration for adding new subscribers 19.9 25
300 18.3
becomes essential 20
12.8
• Significant investment is required to expand tower 9.1 15
150 7.0 10
infrastructure, especially in rural areas which cover
infrastructure especially in rural areas which cover
large geographical areas 5
0 0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Falling ARPU (average revenue per user) Teledensity ‐ Urban and Rural
%
INR/month Urban 48.5
-20% 50
400 Rural
340 38.0
40
300 270
220 26.3
30 21.3
200
20 14.3
10.4 12.2
100 10 4.0
0.9 1.2 1.5 1.7 1.8 2.0
0 0
2006 2007 2008 2001 2002 2003 2004 2005 2006 2007
TELECOM TOWER – INDIA.PPT 4

5. •Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 5

6. Demand for telecom towers is high to support a rapidly growing
industry leading to emergence of lucrative tower businesses
Overview Tower requirement estimates1
•The telecom tower market size in India is Towers (‘000s)
valued at INR 775 bn in 2008 800
+17%
•Types of towers 600 527 554
491
 Ground‐based tower 388
446
400 321
 Roof‐top tower 252
182
•All leading mobile service operators are
•All leading mobile service operators are 200
expanding and increasing their coverage by:
0
 Increasing their network 2008 2009 2010 2011 2012 2013 2014 2015
 Increase coverage through tower sharing Level of Tower sharing
U i i d
Using independent tower networks
d k
•Tower infrastructure is increasingly becoming
Shared Towers
independent of telecom operators 36%
•The growing market for towers is also
attracting the attention of private equity funds 64%
to invest in the companies Unshared Towers
1 Based on ABN AMRO normalized subscriber estimates & forecast; Average BTS overlap of 20%; Average tenancy ratio of 1.5 (conservative)
TELECOM TOWER – INDIA.PPT 6

7. Tower infrastructure is the largest component of setup costs
Ground based tower (GBT) Cost break up GBT
•Towers are erected on ground 100% = INR 3.3 mn
Real estate
•Height of the towers are in between 200 –
g
15%
400 feet
•GBTs are ideally suitable for rural and semi‐
urban areas Site setup 25% 60%
Tower setup
•Capex involved is in between INR 2.4 – 2.8 mn
•Capex involved is in between INR 2 4 2 8 mn
Roof type tower (RTT) Cost break up RTT
•Towers are placed on roofs of buildings 100% = INR 1.6 mn
Real estate
• In terms of height these towers are shorter
than GBTs 15%
•RTTs are ideally suited for Urban areas and
RTT id ll it d f U b d
metros Site setup 20%
65%
•Capex involved is usually in between INR 1.5 – Tower setup
2 mn
TELECOM TOWER – INDIA.PPT 7

8. •Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 8

9. Telecom tower companies operate under four business models
determined by ownership structure and operating model
Business Model Description
• Operator invests in towers, which are managed internally or outsourced to a vendor
• Single tenancy resulting in high capex and operating cost
Captive
• In the Initial years of expansion many operators constructed towers which do not support
In the Initial years of expansion, many operators constructed towers which do not support
multiple mobile operators
• Tower infrastructure is consolidated and transferred to a separate operator‐owned entity
Operator‐controlled
• Allows operator to raise funds by selling shares to external investors
entity
y
• e.g.: Rcom and Bharati Infratel operates on this model
• Operators jointly set up an independent company
• Each operator contributes infrastructure to the joint entity or venture
Pool and share
Pool and share • Owner‐operators enjoy rights to the shared infrastructure
Owner operators enjoy rights to the shared infrastructure
• e.g.: Vodafone Essar, Idea Cellular and Bharti Airtel jointly own Indus Towers, an entity with
over 70,000 towers/cell sites spanning 16 circles from the three operators
• Operator‐independent company builds and manages tower infrastructure
p p p y g
• Towers are leased to operators under long‐term contracts
Build and Operate
• Normally seek multiple tenants to increase profitability
• e.g.: GTL, Aster, Quipo and Tower Vision are independent tower operating companies
TELECOM TOWER – INDIA.PPT 9

10. •Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 10

11. Infrastructure sharing results in substantial savings and is
essential for ‘build and lease’ and ‘pool and share’ models
TRAI initiatives
• Currently, operators who set up infrastructure in rural areas receive a subsidy from the Universal Service Obligation
Fund (USOF) through a bidding process. USO fund value as of March 2009 was INR 140.33 bn
• TRAI R
TRAI Recommendations
d i
 All operators who connect rural areas be given a subsidy provided they share infrastructure
 Amount of subsidy should depend on the number of operators sharing the tower although it was earlier stipulated that the tower
design should have capacity to accommodate at least three service providers
• Time bound Clearances from Standing Advisory Committee for Frequency Allocation (SACFA) and local bodies
Time bound Clearances from Standing Advisory Committee for Frequency Allocation (SACFA) and local bodies
• Lower processing fee/other charges from Local bodies to promote sharing
• Amendment in Licenses to allow active sharing of infrastructure limited to antenna, feeder cable, Node B, Radio Access
network (RAN) and transmission system only
Sample tower profitability matrix
Sample to er profitabilit matri
No. of Tenants 1 2 3 4
Capital Expenditure 2,600,000 2,600,000 2,600,000 2,600,000
Rent per tenant
Rent per tenant 34,000 34,000 30,000 27,000
Sharing Adjusted Revenue 34,000 68,000 90,000 108,000
Operating Expenses 18,250 19,450 20,650 21,850
Contribution 15,750 48,550 69,350 86,150
Contribution as % of Gross Revenues 46% 71% 77% 80%
TELECOM TOWER – INDIA.PPT 11

12. Infrastructure sharing takes place at two levels – passive for non‐
electronic devices and active for network equipment
Types of infrastructure Sharing
Active Sharing Passive Sharing
( Electronic Infrastructure)
( l f ) (Non – Electronic Infrastructure)
( l f )
• Steel tower/antenna
• Base tower station
• Mounting structures
• Microwave radio equipment
• Base tower station shelter
Base tower station shelter
• Switches
• Power supply
• Antennas
• Backup power: Battery bank, inverter, diesel
• Transceivers for signal processing
generator (DG) set
• Transmission
• Air conditioner, Fire extinguisher, Security cabin
Sharing of spectrum is not permitted in India Practice being adopted in India
Benefits of infrastructure Sharing
Benefits of infrastructure Sharing
• Reduces cost involved in infrastructure set‐up
• Optimum utilization of scarce resources
• Faster roll out of service
• Aff d bl
Affordable tariffs for subscribers
iff f b ib
TELECOM TOWER – INDIA.PPT 12

13. •Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 13

14. Major telecom operators have hived off tower divisions into
separate entities to benefit from favourable capital structure
Type of companies Major tower companies in India
•Market is dominated by tower companies, Independent tower company
owned or controlled by operators Operator controlled tower company
Operator‐controlled tower company
 Indus Towers: Vodafone‐Essar, Idea, Bharti
 Reliance Infratel – Reliance Communications Indus Towers 32.4% 85,000
 Bharti Infratel – Bharti Reliance Infratel 27.5% 72,000
•Independent tower infrastructure companies
Independent tower infrastructure companies Bharti Infratel 10.3% 27,000
(ITICs) are more recent entrants with GTL
being the largest WTTIL+Quippo 6.9% 18,000
GTL Infrastructure 3.6% 9,500
New entrants
Essar 1.5% 4,000
•American Tower Corporation with the
acquisition of Xcel Towers Xcel 0.6% 1,500
•Ramboll Aster 0.4% 1,000
•Tower Vision Other 27.5% 72,000
•Crown Castle
% indicates share of total towers
Note : Xcel Towers has been recently acquired by American
Tower Corporation
Tower Corporation
TELECOM TOWER – INDIA.PPT 14

15. Majority of telecom operators are using shared telecom
infrastructure
Tower Infrastructure Suppliers
Telecom Operator Subscribers (mn)*
Own 3rd Party/Others
Bharti Airtel 93.92  Bharti Infratel ( 7 circles); Indus Towers (16 circles)
Reliance Communications 61.11  Reliance Infratel (All circles)
Vodafone Essar 68.76  Indus Towers
BSNL 46.68  MTNL; Others
Idea Cellular/ Spice 43.02  Indus Towers
Tata Teleservices 35.12  WTTIL
Aircel Cellular 18.47  Others
MTNL 4.17
4 17  BSNL; Others
BSNL Oth
BPL Mobile Communications 2.16  Others
HFCL Infotel 0.38  Others
Sistema Shyam TeleServices
Sistema Shyam TeleServices 0.58
0 58  Others
* As of March 2009
TELECOM TOWER – INDIA.PPT 15

16. •Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 16

17. Standalone players finding it difficult to compete in the telecom
towers market
Telecom tower sector is witnessing consolidation
Scale of Operations
• Over the past two years, major telecom operators have hived off their tower related infrastructure into separate firms
 Standalone players with 3,000 ‐ 5,000 towers find it difficult to compete with tower arms of the telcos in terms of scale
 New entrants require at least 20,000 towers across the country for a decent roll‐out and a complete coverage needs 60,000 towers
 New entrants in the mobile phone business prefer to tie up with these larger established players rather than standalone tower companies
as it reduces risk as well capital investment. Thus smaller players are seeking mergers and sellouts
Capacity surplus
• Tower addition has resulted much ahead of the aggregate minutes of usage (MoU), putting pressures on incremental margins of tower
companies
 Capacity surplus is likely to result in longer pay‐back periods and reduction in rentals
 Only those companies that have tenancy ratios of two and above will be profitable
Economic Downturn
Economic Downturn
• India’s standalone telecom tower companies are facing a severe a credit crunch owing to global recession:
 The new orders which smaller players were banking on did not arrive owing to global recession
 Smaller players are finding it difficult to raise funds in this investment‐intensive sector
TELECOM TOWER – INDIA.PPT 17

18. M&A Deals 1/2
Year Tower Company Deal Type Details
• It is planning to offload 51% to 100% of its tower business
Aug‐2009 AirCel Spin‐off
• It has shortlisted four firms for the sale
Tata Teleservices
• TTML is considering selling upto 49% stake in its tower subsidiary,
Aug ‐2009 Maharashtra Acquisition
21st Century Infratel, to potential investors
(TTML)
• Essar plans to sell a part of its stake in ETIPL
Essar Telecom
Essar Telecom
• It has appointed Barclays Capital to manage this sale
Aug‐2009 Infrastructure Acquisition
Pvt Ltd (ETIPL) • ETIPL plans to use the funds to grow its tower portfolio organically
as well as for buyouts of smaller players in the sector
Idea cellular • Idea Cellular received shareholders’ approval to hive off its tower
pp
Jul‐2009 Towers Spin‐off business into a subsidiary company Idea cellular Towers
Infrastructure Infrastructure
Mahanagar • MTNL is considering the demerger of its telecom tower operations
Telephone
May ‐2009
May ‐2009 Spin‐ off • It is also planning to enter a tower sharing deal with Essar
It is also planning to enter a tower‐sharing deal with Essar
Nigam Ltd
(MTNL) Telecom Infrastructure Pvt Ltd (ETIPL) for its Mumbai circle
Independent Acquisition • American Tower Corporation (ATC) is reportedly in talks with a
May‐2009 Mobile Gurgaon‐based tower company Independent Mobile
Infrastructure
f Infrastructure which has a presence in 10 circles with 400 towers.
f h hh l h
TELECOM TOWER – INDIA.PPT 18

19. M&A Deals 2/2
Year Tower Company Deal Type Details
• American Tower Corporation (ATC) has acquired the Mumbai‐
Mar‐2009 Xcel Tower Acquisition
based independent tower company, Xcel Telecom
Spin‐off • Vodafone hived off Telecom Infrastructure business into a
Mar‐2009 Ortus Infratel
separate company named Ortus Infratel
• SREI Group‐promoted Quipo Telecom Infrastructure Ltd (QTIL)
Jan‐2009 Quipo Telecom Merger merged with Tata Tele's tower arm Wireless Tata Telecom
Infrastructure (WTTL)
• Reliance Communication hived of its tower company into a
Sep‐2008 Reliance Infratel Spin‐off
separate company named Reliance Infratel
Reliance Tower • Reliance Communications offloaded 5 % of its equity share capital
q y p
Jul‐2007 Infrastructure Acquisition in Reliance Tower Infrastructure Ltd. (RTIL) to international
Ltd. (RTIL) investors across the U.S., Europe and Asia for INR 14 bn
• Bharti Airtel hived off its tower business company into a separate
Dec‐2007 Bharti Infratel Spin‐off
company named Bharati Infratel
• Three leading GSM operators, Bharti, Vodafone‐Essar and Idea
Dec‐2007 Indus Towers Joint Venture Cellular, jointly set up Indus Towers as an independent tower
company
• Quipo Telecom Infrastructure's acquired 875 telecom towers of
Quipo Telecom Infrastructure s acquired 875 telecom towers of
Dec‐2007
D 2007 Quipo Telecom
Q i T l Acquisition
A iii
Spice Telecom spread over the two states of Punjab & Karnataka
TELECOM TOWER – INDIA.PPT 19

20. Private Equity participation is also increasing with major funds
investing in tower companies
Private Equity firm Deal description
Morgan Stanley Morgan Stanley picked up a stake in independent telecom infrastructure firm Tower
Vision for about INR 15 bn
Kohlberg Kravis Roberts & Co Kohlberg Kravis Roberts & Co (KKR) paid INR 9.9 bn for a 2.5% stake in Bharti Infratel,
a telecom tower subsidiary of Bharti Airtel
Temasek Holdings and others Temasek Holdings, along with ICD, Macquarie, AIF Capital, Citigroup and India Equity
Partners acquired a 10% stake in Bharti Infratel, a telecom tower subsidiary of Bharti
Airtel for INR 41 bn
Capital Partners Acme Tele Power Ltd has raised INR 6 ‐ 8 bn in a pre‐IPO private equity placement.
The investors include Capital Partners and a Delhi‐based industrialist. The investors
are believed to have picked up 5 ‐ 7% stake in the company
Zamil Industrial Investment Zamil Industrial Investment Company a Gulf‐based manufacturing and fabrication
Company company, has picked up a 51% stake in its joint venture with telecom infrastructure
provider New Delhi Tele‐Towers Pvt Ltd. The venture will be called Zamil New Delhi
Infrastructure Pvt Ltd
New Silk Route Private Equity New Silk Route Private Equity is buying a majority stake of 72.5 % in Secunderabad
based telecom infrastructure company Aster Infrastructure for INR 2.32 bn
TELECOM TOWER – INDIA.PPT 20

21. •Introduction
•Market Overview
•Business Model
B i M d l
•Infrastructure Sharing
•Competition
•M&A and PE Deals
•Key Developments
TELECOM TOWER – INDIA.PPT 21

22. Key Developments
Date Development
22 – Jul‐2009 Etisalat‐RCOM signed INR 1000 bn Tower Sharing Deal for the 15 telecom circles in India
25‐Mar‐2009 Independent Mobile Infrastructure Pvt. Ltd (IMIL), is exiting the business after competition intensified
in telecom t
i t l tower b i
business.
24‐ Mar‐2009 Bharat Sanchar Nigam (BSNL) has decided to lease out its passive infrastructure, including towers, to
other telecommunication companies in semi‐urban areas in India
20‐Mar‐2009 Ericsson has designed an innovative tower for the Indian Market. These towers have tubular
construction & do not require feeders & cooling systems, thus resulting in upto 40% lower
consumption of power
12‐Feb‐2009 Unitech Wireless, the telecom arm of realty company Unitech, announced leasing towers from
Wireless‐TT Infoservices Ltd (WTTIL), the tower arm of Tata Teleservices Ltd, and Quippo Telecom
Infrastructure Ltd (QTIL), across India.
Infrastructure Ltd (QTIL) across India
20‐Dec‐2008 Bharti Infratel has finalized a INR 25 bn plan to expand capacity in India. The company plans to build
additional telecom towers across Himachal Pradesh, Assam, Jammu & Kashmir, Madhya Pradesh,
Orissa, Bihar and the Northeast
23‐Sep‐2008 Bharat Sanchar Nigam Ltd (BSNL) has proposed a two‐pronged business restructuring strategy for
(BSNL),
growth. The company, which owns about 35,000 telecom towers, proposes to demerge them into a
separate tower company, which will be a 100 percent subsidiary of itself
16 ‐Apr‐2008 Bharat Sanchar Nigam (BSNL) has awarded the contract for hiring telecom towers across India to six
independent tower companies these are Quipo Telecom Infrastructure, Xcel Telecom, Essar Telecom
Infrastructure, GTL, TVS and Aster Teleservices
TELECOM TOWER – INDIA.PPT 22

23. Thank you for your time
For an updated report or any customized research requirements, please contact:
Gaurav Kumar
E‐Mail: gaurav.kumar@netscribes.com; sales@netscribes.com
Phone: +91 33 4064 6214; +91 983 030 9715
Netscribes’ Services:
RESEARCH & ANALYTICS
RESEARCH & ANALYTICS MARKET INTELLIGENCE
MARKET INTELLIGENCE CONTENT SOLUTIONS
CONTENT SOLUTIONS
Investment Research Market Monitoring & Competitive Social Media Marketing
Enterprise Market Research Intelligence Marcom Support Services
Patent Research Sales & Prospect Intelligence Content Management Services
Syndicated Market Research
S di t d M k t R h Listening & Media Monitoring
Li t i & M di M it i Book Packaging Services
B kP k i S i
Brand Surveillance
For further details, visit us at: www.netscribes.com
About Netscribes
Netscribes supports the organic and inorganic growth objectives of global corporations through a combination of Enterprise Market,
Investment & Patent Research, Market & Sales Intelligence, Social Media Monitoring & Management and Custom Publishing solution.
Disclaimer: This report is published for general information only. High standards have been used for preparing this market research report;
Disclaimer: This report is published for general information only High standards have been used for preparing this market research report;
however, Netscribes, Inc. or “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole
property of Netscribes and prior permission is required for guidelines on reproduction.
TELECOM TOWER – INDIA.PPT 23