The Financial Express

Telecommunication: The role of tower cos

| Updated: October 18, 2017 02:38:52

Telecommunication: The role of tower cos

Across the globe, telecommunications are recognised as a necessity to improve the quality of life. Increasingly, mobile telephony and data have been central in making access to information and services available regardless of locale.
However, maintaining seamless connectivity is a challenge for mobile network operators. There is a significant cost involved in the deployment and operations of telecommunication infrastructure. Large amounts of capital expenditure (CAPEX) upfront are required and it takes years to return a profit. Compounding this is the pressure of competition and investment due to the constantly evolving technology.
Considering these conundrums, the logical and most ideal solution is to share infrastructure.
Mobile network infrastructure sharing can happen at two stages - passive and active. Passive infrastructure sharing, which is also commonly known as tower sharing or collocation, involves the putting of equipment of two or more operators on the same site (i.e. towers or poles or masts, and buildings that house network equipment). Active sharing can involve the sharing of transmission, antennas, base stations and even mobile roaming where the network itself is shared with other operators.
In the intensely competitive telecommunication industry, if the edge to win customers is network coverage, the sharing of sites or towers will not be welcomed. On the other hand, operators are also obligated to roll out services in unprofitable rural areas where sharing of infrastructure makes economic sense.
The reluctance of operators to share each other's tower assets for fear of losing competitive or technological advantage is understandable. However, as more operators are driven to strategise growth path, meet regulatory obligations and rationalise cost, the economics of tower sharing become more obvious and attractive.
To counter the competitive issues, independent wireless tower companies (towercos) that take on the responsibility for towers - from planning and investment to deployment and maintenance - hold the answer. These towercos are paid annuities or contractual sum by the operators for the use of the telecommunication infrastructure assets and have every reason to be neutral and provide the most cost-effective solutions.
The regulatory, business, and service case for towercos are compelling. Towercos and the business of towercos are diverse and expansive in nature.
Towercos bring about efficiencies through the sharing of infrastructure and also via the optimisation of operations and maintenance processes. Current business scenarios are increasingly driving the need for efficient infrastructure management. Infrastructure is by far one of the biggest CAPEX outlay for telecommunication companies and managing this is required at all levels.
A competent towerco is built on providing a holistic experience, which combines the best-in-class services with holistic operational experience in a single service offering that is guaranteed to benefit any potential operator keen on rolling out an operational network.  Tower sharing reduces barriers to entry for new operators. It removes the need to put up a network of towers from scratch. This reduction of cost is substantial and can account for more than 60 per cent of a typical network rollout cost.
For established operators and in the long run, sharing towers help reduce the cost of network operations and enable them to achieve market coverage effectively and fast. Site (or land) rental, engineering and maintenance cost such as manpower, fuel, power and monitoring expenses are shared. Operators can also avoid duplicating costs while extracting maximum benefit of scarce resources.
Standardisation of operations and procedures play a vital role in reducing costs and time. As a market leader, the operator has the opportunity to be the first mover in infrastructure sharing and collocation, reducing cost early. For a new market entrant, apart from securing access to a national footprint, the efficiency gain is fast tracked as the harmonisation process can commence immediately.
Responsibility and investment to adopt new infrastructure technologies and innovations have also shifted to the tower companies.
The amount saved can be channelled towards enhancing innovation. With the pressure of network infrastructure rollout and maintenance lifted, operators can focus on service innovation and customer service. In the highly competitive business of telecommunication, a customer-centric mobile network operator would naturally win users' preference.
Overall, tower sharing contributes to operators being able to meet regulatory obligation of rollout and service level while achieving overall smooth-running and deriving maximum benefits on the infrastructure front.
Meeting the evolving demands of the industry that will in turn translate into creating value for the end consumer is a never-ending cycle and is integral for growth.
The reduced cost, improved efficiency and ability to meet regulatory requirements translate to lower cost and better service for users. Network coverage is accelerated, blind spots are addressed and deployment of latest innovation is fostered.
The business of helping operators shift focus back to users also benefits the nation. Job opportunities in an industry that hitherto does not exist, are now created. Employment abounds for positions from field engineers, technicians to office support.
A towerco that has regional presence and emphasises operational excellence will avail skilled and experienced manpower across borders. Knowledge transfer is inevitable as these experts in their respective niche fields share technical know-how on-site.
At the same time, the strategising and planning of sites open up land leasing opportunities for landowners, creating long-term passive income for locals.
At sites located in areas where electricity grids are not available, the electricity generated for the towers can be shared with the community, providing a basic necessity to help progress and development.
At the same time, resources utilisation and infrastructure deployment are managed with foresight to support the telecommunication industry and nation at various stages of growth, be it 2G, 3G or 4G. As a result, connectivity can become prevalent if not, seamless and the digitisation of services and economy can happen, thereby transforming the nation.
The role and economics of towercos transcend the sharing, consolidation and optimisation of telecommunication infrastructure. A dynamic towerco enables cost-efficient telecommunication service offerings by operators to users, contributes to the development of the local community, and stimulates the nation's economy.

The writer is CFO, edotco Group.

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