Infrastructure sharing is set to have a significant impact on the Indian mobile sector in 2008 as carriers look for ways to expand their coverage as quickly and as cheaply as possible.

In 2007, several of India's major mobile operators made moves to spin off their passive infrastructure -- land, towers, generators, and power supply elements of the mobile network -- into separate companies. This process will make it easier for the carriers to broker partnership agreements and make some extra cash by selling minority stakes in those offshoots.

The operators, meanwhile, will retain ownership of their active infrastructure -- the base transceiver station (BTS), base station controllers (BSCs), antennae, and backhaul equipment.

The new so-called "tower companies" will lease out their passive infrastructure to all operators, generating new revenues and enabling those service provider customers to roll out services more quickly than if they had to develop new passive sites of their own.

In December 2007, Bharti Infratel, which was created earlier in the year to handle Bharti Airtel Ltd. (Mumbai: BHARTIARTL)'s network, announced it would be teaming up with Vodafone India and Idea Cellular Ltd. to form an independent company called Indus Towers. The partnership covers 70,000 towers in 16 telecom regions, and the new company will handle all future rollouts in those areas. (See Indian Carriers Form Co. and Upheaval in India's Mobile Market.)

Bharti Infratel has also announced a $1 billion investment from a group of international firms, including the Investment Corporation of Dubai (ICD), Temasek Holdings Pte. Ltd. , Goldman Sachs & Co. , Macquarie Bank , and Citigroup . That investment values Indus Towers at more than $10 billion. (See Bharti Sells Tower Stake.)

Also last December, regional operator Spice Telecom announced it has decided to sell 875 of its tower sites to Quipo Telecom Infrastructure Ltd. , an independent company, for INR6 billion (US$152.59 million). Spice also stated in an announcement to the Bombay stock exchange that it will borrow up to $400 million from Hong Kong and Shanghai Banking Corp. and an additional $410 million from China Development Bank (CDB) for growth and network expansion.

State-run Bharat Sanchar Nigam Ltd. (BSNL) will reportedly create its own separate tower company in the coming months to share its infrastructure. The carrier's network includes 31,000 GSM towers and 7,500 CDMA towers, and it has issued a tender for the construction of an additional 6,000 towers.

Reliance Communications Ltd. (RCom) created Reliance Telecom Infrastructure Ltd. (RTIL) in January 2007 to manage more than 12,000 towers. (See Reliance Approves Tower Spinoff.)

It sold a 5 percent stake in the company in July to a group of international vendors for $350 million, giving it an enterprise value of $6.75 million. (See Reliance Sells Tower Stake.)

The Telecom Regulatory Authority of India (TRAI) has been encouraging carriers to take advantage of infrastructure sharing to increase the availability of telecom services throughout the country, and the Department of Telecom has invited all carriers and tower companies to submit proposals for the rollout of 11,000 new towers. That's in addition to the 8,000 sites commissioned for the first phase of the project.

The rollout will be financed by revenues from the government's Universal Service Obligation Fund (USOF), which collects 5 percent of all carriers' adjusted gross revenues to fund telecom development in underserved areas.

This year will see operators reaping the benefits of these agreements, as they expand their networks to meet the demands of a growing subscriber base and accelerate their push into low-margin rural areas, where as much as 70 percent of India's 1.1 billion-strong population resides.

Indian mobile subscriber growth is continuing to accelerate; operators added a record 8.32 million new accounts in November to bring the total customer base to 225.46 million.

— Nicole Willing, Reporter, Light Reading