R-Infratel sees serious competition from BSNL, Railways

Planning to hit the market with an IPO to raise about Rs 5,000 crore, Anil Ambani group firm Reliance Infratel has said it could face serious competition from government-owned Bharat Sanchar Nigam (BSNL) and the Indian Railways in the telecom tower business.

"If BSNL ...Begins to engage in significant amounts of site sharing with other operators or otherwise offer passive infrastructure sharing availability, this could create a significant new competitor to our Company," Reliance Infratel said in its draft prospectus filed before the market regulator Sebi.

The company proposes to raise money through the public issue to expand its telecom tower business by setting up 16,000 telecom infrastructure sites at an estimated cost of Rs 4,623 crore.

Besides BSNL, the largest service provider in the country, Reliance Infratel expects competition from the Indian Railways which offers mass communication facilities to the cellular and broadcast operators through its dedicated telecommunication infrastructure arm.

Reliance Infratel also expects tough competition from its private sector rivals, especially from an alliance of the major national telecom infrastructure players.

"Certain of our competitors are larger and may have access to greater financial resources than we do, or may act in unison with each other to our disadvantage," the DRHP said.

Besides, increasing competition is also expected to make acquisition of high quality telecom tower assets, and securing rights to land for its telecom towers, more costly, the DRHP said.

"Further, we believe there may be large international passive infrastructure operators that are considering or have taken steps toward entry into the Indian market," it added.

"We believe that other Indian wireless service providers may be considering spinning off their passive infrastructure networks as well, which could further increase competition within our industry," the DRHP said.

On December 8, 2007, Bharti Infratel, Idea Cellular and Vodafone Essar announced the formation of an independent tower joint venture company, Indus Towers, which will provide passive infrastructure services in India to all operators on a non-discriminatory basis.

The growth and demand for cellular telecommunication services in India will lead to an increased impetus to the sharing of passive telecommunications infrastructure, as cellular telecommunication operators will increasingly need to outsource their passive telecom infrastructure needs.