New Delhi, May 2: Providing towers to telecom operators is emerging as a big stand-alone business, thanks to booming mobile telephony in India. With an estimated requirement of 220,000 new towers in the next three years, the total investment in this business is expected to be over Rs 50,000 crore.

At present, telecom service providers set up their own towers. In some locations, they share them with their competitors on a barter system. Now that telecom operators are expanding in category ‘B’ and ‘C’ circles, they have to make huge investments to sett up passive infrastructure such as telecom towers and power supplies. Operators are also expecting lower average revenue per subscriber (ARPU) from new subscribers.

The industry is now realising the importance of independent tower providers. GTL Infrastructure Ltd (GIL) has already set up 1,200 towers and counts all the big service providers, including Airtel, Idea, Tata, Hutch and Spice as its customers. Global players like Crown Castle and American Towers are planning to enter the Indian towers market while Quipo, TVS Interconnect Systems and Acme are among the Indian players interested in this segment.

Industry observers say that three major operators - Reliance Infocomm, Bharti and Tata Teleservices — are planning to hive off their tower divisions into separate entities to unlock the value from these assets. However, independent tower providers will always have an edge over tower companies of telecom operators as far as credibility is concerned.

“Setting up towers is not the core competency of telecom operators. Therefore, specialised companies which have domain expertise in this area should take up this activity to enhance the cost effectiveness of this element for service providers,” said T V Ramachandran, director general, Cellular Operators Association of India (COAI).

According to the Telecom Regulatory Authority of India (Trai), India has a mobile subscriber base of 150 million. There are about 90,000 towers set up by all mobile operators. The government has targeted a subscriber base of 500 million by the end of 2010. Assuming the same level of sharing, the industry would need 220,000 additional towers.

“The cost of setting up one tower is Rs 22-25 lakh at present,” said Prakash Ranjalkar, chief operating officer, GIL. “Therefore, the total investment in the tower business would be to the tune of Rs 50,000 crore.” The two factors that make independent towers a viable business in India are high competition and low ARPUs. With up to seven players providing mobile services in a circle, India is the most competitive market in the world. “At Rs 330 per month for GSM services, India has one of the lowest ARPU in the world,” said Nripendra Misra, chairman, Trai.

Moreover, it is falling by 10 per cent per annum. In other Asian countries, there are only two or three players in the field and their ARPUs are higher compared to those in India. Therefore, independent tower providers could not develop in these countries.

In the US, there are about six players in the field and, hence, independent tower companies have emerged as big players. There are three big companies in this space — American Tower, Crown Castle and SBA Communications. Recently, Crown Castle bought Global Signal, another major tower company, for $5.8 billion.

Observers feel that though there may be more players in this field in the beginning but finally three to four players will remain.