Overview
- The defining features of the Indian telecom markets are
limited coverage/capacity and a significant unserved addressable
market.
- The scale and nature of these demand and capacity imbalances
vary by geography. Most of the existing subscriber base is
concentrated in the major metros, which have significant
potential but limited spectrum.
- In contrast, there is very little telecom infrastructure in
rural India and plenty of spectrum, but the economics are
challenging given much lower per capita GDP and population
density.
- Telecom spending as a % of GDP is significantly lower as
compared to the Asian players and is projected to improve going
forward
- Correlation between mobile spending and GDP per capita is
0.97 and India has the lowest mobile spending to GDP ratio
- Further, India also has one of the highest GDP growth
rates in the world and this is expected to be sustained over
the next few years
- The primary drivers of this explosive growth will be mobile
services with data and fixed line not too far behind. The growth
is expected to come from all quarters and that is why we favour
integrated operators with a strong presence in the mobile space.
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For the next few years, the focus is on an
accelerated roll-out of services in rural and semi-urban areas, where
the network design is different due to lower population density. With
spectrum allocation being a constraint (10 MHz spectrum for 2 mn
subscribers), there is a need for a much denser tower location to ensure
minimum service standards. There are at least two operators rolling out
in rural areas at 1800 MHz spectrum, requiring 2-3 times more towers
than in 900 MHz. A higher capex is envisaged in initial years with focus
on increased coverage (which may be under-utilized) with most operators
seeking to double their population footprint over the next 15-18 months.
With subscriber expansion, the same infrastructure can be scaled up by
increasing radio spending (microwave links) only.
Rationale for Infrastructure Sharing
- Lower purchasing power coupled with low population density
implies higher capex for every incremental ARPU-dilutive
customer in these marginal towns
- Higher capex per subscriber is a direct result of the basic
infrastructure cost which an operator has to incur to commence
operations
- Operators resorting to infrastructure sharing would reduce
their payback time significantly by reducing both their opex and
capex.
- It is estimated that infrastructure sharing would lead to at
least 20% gain in subscriber value in these marginal regions.
Thus, operators which were to adopt co-operative strategies like
infrastructure sharing would have an advantage in penetrating
rural India.
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Service providers are sharing infrastructure at
their own initiative selectively. The available information suggests
that about 25% tower sites are already shared for passive infrastructure
only. This too is predominantly in rural areas and small towns.(Source:
COAI)
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