Mission 2025: Telecom tower firms to invest Rs 2 trillion in 5G infra

Investment in fiberisation of towers etc could hit anything between Rs 5 trn-Rs 7 trn by 2025, says an industry body

Mobile tower companies are getting ready to invest over Rs 2 trillion by 2025, half of it in the next two years, to help meet the telecom firms’ target to take 5G to 50 per cent of the country.

These are the figures provided by the Digital Infrastructure Providers’ Association (DIPA), the apex body of the tower companies.

While the focus so far has tended to be on the gigantic investment of around Rs 2-3 trillion, which telecom companies have to make for rolling out 5G, less talked-about is the fact that tower companies will also have to spend about the same amount to enable high speed services. The investment by tower companies will include deployment of the crucial small cells, which are key to the success of 5G. The small  cells help in the densification of the network and are mounted on public and residential infrastructure, such as poles, or street furniture, such as bus stands.  

They provide huge bandwidth capacity, especially in highly populated areas. Larger towers will also need to be added to take care of the expected  data explosion. The telecom tower industry, apart from BSNL, is dominated by three players: Indus Towers, which has merged with Bharti Infratel, the American Tower Corporation, and the Brookfield-Reliance combine. Investment in the fiberisation of towers is also needed as 5G requires a large amount of data to be backhauled. The bill will come to Rs 5-7 trillion by 2025,  according to DIPA estimates.

India already has over 727,000 towers and 100,000 small cells deployed commercially. DIPA estimates that the need for network densification for 5G will entail the deployment of 1,000 base stations every square kilometre.

The densification would include backhaul radios, antennas, and tower street furniture, among others. To cover half the country, 500 small cell deployments every square kilometre will be needed.

Small cells come in different shapes and sizes and have the capacity to serve anything between 8-200 users and cater to a vicinity ranging from 50-2,500 metres.  Small cell proliferation can happen, according to DIPA, if public infrastructure is available.

For instance, it has already made representations to the government asking for permission to use electricity poles to reduce capex expenditure.

The Telecom Regulatory Authority of India is holding consultations with stakeholders on the possible use of street furniture for installing small cells.  

Telecom infrastructure players say the business is stable and as everyone signs up long-term tenancy contracts with telecom companies, there will be assured returns on investment.

“The business is break-even at 1.5 tenancy. With consolidation (there are three players in the market), as well as infra-sharing happening, we expect to hit a tenancy of two, which assures reasonable returns,” said an executive with a leading tower company.

Analysts at ICICI Securities say that in the initial stages, Indus Towers expects the 5G roll-out to be large, but it will happen through loading; this means that existing tenants will load 5G equipment at these sites.

As 5G sites are bulky and require more energy solutions, loading charges will go up. But with Bharti Airtel now more or less completing its 4G roll-out and Vodafone Idea facing financial constraints, tenancy exits are possible as many of the contracts come up for renewal for another 10 years.  

Tower company executives also point out that while the government decision to provide e-spectrum to operators in the interim will replace slower legacy microwave backhauls with faster ones and enable 5G, the fact remains that towers with fibre backhaul will still be needed.

Traditional microwaves can provide speeds of only 500 Mbps to 1 Gbps while the e-band is better (1-1.25 Gbps) to achieve capacities of 10-20 Gbps.

THE GREAT EXPANSION 

• Investment in fiberisation of towers could be around Rs 5-7 trn by 2025
• India currently has 0.7 mn towers and 0.1 mn small cells deployed commercially
• Tower companies say it’s a stable business with assured returns due to longterm rental contracts
• In the initial stages of 5G roll-out, existing players will begin loading equipment. However, they expect loading charges to be higher than in 3G and 4G
• Small cell deployments to expand in a big way as networks would require more densification due to 5G