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Kripa Raman

Will help cut operator's capex as well as opex costs

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Mumbai Feb. 13 Telecom infrastructure sharing, which can shave the fat off an operator's capex as well as opex costs, is emerging as one of the prominent reasons justifying the large investments that operators are making in the Indian wireless sector.

Vodafone, which has agreed to buy 67 per cent in Hutchison Essar Ltd, has already entered into an MoU with Bharti relating to a comprehensive range of infrastructure sharing options between Bharti and HEL.

Already, a third of Hutch's sites are shared with other Indian mobile operators and Vodafone is planning that around two-thirds of total sites will be shared in the longer term.

Sharing infrastructure

The MoU also recognises the potential for achieving further efficiencies by sharing infrastructure with other mobile operators in India, said Vodafone.

It leads to material change, said Mr Asim Ghosh, Managing Director. "The biggest single cash flow expenditure for operators is capex and two thirds of that consists of infrastructure costs. Sharing could make a difference of 15-20 per cent to an operator's cash flow expense," he said.

Infrastructure sharing is one of the major reasons (the others being low penetration and lower equipment costs) why there is a business case for even the fifth or sixth operator in the Indian telecom scenario, said Mr Sanjeev Aga, Managing Director, IDEA Cellular, at the time of the announcement of the company's IPO.

"The emergence of tower sharing and of independent tower vendors frees a lot of capex and reduces time to market," he said.

Reducing costs

As Indian companies fan out into the smaller towns and villages they must steel themselves for lower average revenue per user figures. Reducing their costs would the only alternative to ensure that they preserve their margins.

The Essar group itself has an independent tower company called Essar Telecom and Tower Infrastructure Ltd. Currently, this company has 600 towers leased out to operators and plans to achieve 3,000 towers by December 2007, said officials.

SREI Infrastructure, another independent tower company, plans 5,000 towers through its group company Quipo Telecom Infrastructure Ltd. Another independent tower company is GTL. Reliance Communications and Bharti Airtel are in the process of spinning off their infrastructure activity into separate businesses.

More Stories on : Telecommunications | Infrastructure | Bharti Tele-Ventures Ltd

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