Telecom tower companies turn to small cells and fibre networks

KOLKATA: Telecom tower companies such as American Tower Corp (ATC) and Bharti Infratel are exploring investments in fibre optic networks and small cells to create additional revenue opportunities as their primary rental revenue from mobile operators slows.
Analysts and industry experts estimate that tower companies will need to spend $10 billion, or about Rs 68,000 crore, on fiberising networks and small cells over the next five years to get into new businesses in an increasingly data-centric arena. Small cells are short-range mobile base stations to complement large macro-cell towers.

ATC, which has invested in fibre networks in Mexico, is looking to bring those learnings to India, its Asia president Amit Sharma has said.

“Tower cos will have to invest in new growth areas amid exponential data growth and spectral scarcity, and ATC is currently testing fibre and small cells opportunities in India,” he told ET.

Bharti Infratel, the tower arm of Bharti Group, declined comment on upcoming investments in fibre optics or small cells.

Its managing director D S Rawat had said during an earnings call, post-second quarter results, that the company sees emerging growth opportunities in fibre deployment and small cells, especially for boosting indoor data coverage.

Market leader Indus Towers did not reply to ET’s queries on potential investments in fibre networks or small cells as of press time Tuesday.

Rajiv Sharma, telecom analyst at HSBC, said tower companies will need to spend at least $8 billion in fiberising networks across the country and another $2 billion in small cells over the next five years “to get into new businesses like fibre leasing”, failing which they run the risk of “getting stuck in a low growth rut”. Their primary lifeline, rental revenue from telcos, is slated to grow at a modest 9% a year over the next five years, he said.

Sharma feels tower companies need to urgently tweak their business models from being plain vanilla infrastructure operators to full-blown network service companies by moving into growth areas like fibre optics and small cells.

The $8 billion, or about Rs 55,000 crore, investment projection is based on an HSBC estimate that 6,00,000 route km of fibre will need to be deployed in India at an average Rs 9 lakh per km to cater to the data surge propelled by the 4G boom over the next five years.

Fiberising, in this case, means converting existing backhaul networks from microwave to fibre-based to optimally handle surges in data flows since microwave is considered less effective in a 3G/4G environment.

Backhaul is the wireless communications infrastructure that transports telecom signals, including data and video, from a base station to the core mobile network which processes the traffic.

Former Viom Networks CEO Syed Safawi agreed that tower companies need to “reposition themselves as network solution providers”, but expects them to invest aggressively in fibre only if they can monetise such assets. Tower companies, he said, are likely to take investment calls relating to fibre jointly with telcos who will actually determine where such resources are required.

According to Mohit Rana, an independent telecom expert, that is because fiberisation is more imperative for a telco than a tower company. Historically investments in fibre optic networks, he said, have been directly made by telecom operators as they viewed it as a strategic asset.