Growth in data consumption coupled with government initiatives such as Smart City and Digital India are likely to provide much-needed impetus to India's tower industry, according to new research from Deloitte.
The total number of mobile towers in the country is likely to reach 511,000 by 2020, up from 439,000 today, according to the company's research, growing at a compound annual rate of 3% over the next four to five years.
While this increase may be modest, the number of towers dedicated to data services is likely to see much sharper growth, as rising usage of data services forces operators to expand their 3G and 4G networks dramatically. Indeed, according to Deloitte's research, the number of standalone data towers will increase from just 700 today to as many as 30,000 by 2020.
"3G site growth will accelerate over the next two years before stabilizing," says the report. "3G site stabilization will happen as data consumption rises and 4G starts … cannibalizing 3G growth."
Deloitte expects 4G sites to account for 14% of the total number of sites by 2020.
Unsurprisingly, nearly 61% of the towers are currently set up in metros and so-called "Category A" circles -- those with the greatest revenue potential for service providers -- while only 39% are in Category B and C circles.
But this is likely to change as growth picks up in smaller cities. "The share of towers in Category B and Category C circles will increase to 45% by the year 2020 indicating impetus in sub-urban and rural growth," says the Deloitte report.
Even so, the reduction in voice usage in India has raised valid concerns about the growth of the independent tower business in the country. Many tower companies are now looking at alternative revenue opportunities, including energy management, the provision of fiber backhaul services and WiFi and small cell offloading. Nearly 44% of mobile traffic is likely to be offloaded to WiFi and small cells by 2020, according to Deloitte.
Relatively new government initiatives such as Digital India and Smart City should also provide new opportunities. For tower companies, two components of the Digital India initiative will attract interest: the Universal Access to Mobile Connectivity program, which seeks to plug coverage gaps in 42,300 villages by 2018; and the Public Internet Access program, whose aim is to provide connectivity in 250,000 villages and 150,000 post offices.
In spite of these opportunities, however, tower companies also face a number of challenges. Key among these is operator consolidation, which is bound to reduce the need for additional sites. Service providers could also enter into network-sharing agreements, as they have done in other parts of the world, to lower their costs, further limiting the demand for new towers. And spectrum sharing, once allowed, is likely to have a similar impact.
— Gagandeep Kaur, contributing editor, special to Light Reading