The Hindu Business Line : Telecom tower cos hit by rising steel prices

According to industry estimates, the average cost of a single tower has increased by Rs 11,000 to around Rs 61,000 now compared with Rs 50,000 in October 2007 due to rising input costs.

This is forcing tower companies to increase their rental prices, which in turn is driving up the operational cost of telecom service providers.

Structural steel angles and plates contribute to around 60 per cent of the cellular tower cost.

Average basic cost of angles has increased from Rs 28,000 per metric tonne in October 2007 to Rs 43,000 in March 2008. Similar price trend is seen on the plates also.

“This increase of Rs 15,000 on steel angles and plates alone has an effect of Rs 10,000 per tower,” said a tower company.

Prices of galvanised hardware have also increased from Rs 55,000 per metric tonne to Rs 75,000.

The impact of this is around Rs 1,000 per tower, according to industry experts.

Impact on capex

Mobile subscriber base is expected to touch 500 million by 2010 for which at least 3 lakh more towers are required.

Rising steel price may increase the capital expenditure required by Rs 330 crore on towers alone.

There are a number of companies offering tower infrastructure in the country.

While GTL, American Tower Company and Quippo are the major stand-alone tower firms, mobile operators including Bharti Airtel, Idea Cellular, Tata Teleservices and Reliance Communications have formed their own tower infrastructure companies in a bid to unlock its value.

Mobile service providers said that operators will increase the number of shared towers in order to cushion the impact of rising costs on mobile tariffs.

“Most operators already share about 60 -70 per cent of their towers already. The increase in tower cost will only drive operators to intensify the sharing arrangement,” said a Delhi based operator.

However the biggest impact will be on new players who are beginning to roll out their network. Companies such as Unitech, Datacom, Shyam Telelink are betting big on taking capacity from telecom tower companies rather than set up their own infrastructure in a bid to deploy the services faster.