Infotel Broadband had invited bids earlier this year from tower operators for leasing around 26,000 towers across India for the first phase of its wireless broadband foray. But those plans are on hold, and according to three people familiar with the development, the company has sought quotes and samples from equipment vendors for carbon fibre telecom towers.
The estimated outlay for the company's launch, which is expected later this year or early next year, has been nearly doubled to $8-9 billion, from the originally stated $4 billion in 2010, said one of the three persons.
A Reliance Industries official, who asked not to be named, said the company may partly use its own towers while it may rent the rest from existing tower companies. But if Infotel Broadband does meet its target of building 1,00,000 towers, there might not be any need for it to rent further capacity. Indus Towers, the country's largest tower company, owns around 1,10,000 telecom towers.
Infotel Broadband, 95%-owned by RIL, has all along been expected to lease towers from Reliance Infratel for its 4G rollout. The lease was to mark the first major collaboration between companies owned by the Ambani siblings after they carved out the Reliance empire between themselves in 2005. It was also supposed to boost the valuations of both Reliance Infratel and Reliance Communications, the company that owns a 95% stake in the tower unit.
Reliance Communications has been looking for an equity partner for the tower arm for some years now. Reliance Communication's net debt at the end of third quarter of 2011-12 stood at Rs 36,700 crore. Emails sent to both RIL and Reliance Communications went unanswered.
In May 2010, the Ambani brothers terminated a non-compete agreement that had been in place for five years, paving the way for RIL's re-entry into telecom. Subsequently, Reliance Industries bought 95% stake in Infotel Broadband for Rs 4,800 crore, in addition to paying Rs 12,848 crore for 20 MHz of spectrum in all 22 service areas in India - the only company to do so.
Carbon fibre towers are 25-40% more expensive than traditional steel ones but are ecologically friendly as well as easier to camouflage and relocate. They are also believed to have lower maintenance and base equipment requirements. At present, tenancy levels in existing towers are low and with Uninor, Loop, S-Tel and others shutting operations because of the Supreme Court order, the current overcapacity in the tower market will get further exacerbated. While this has led some to question the wisdom of creating more capacity, a telecom analyst said there could be some justification for RIL's strategy.
"This strategy could make sense if the towers were set up in semi-urban or rural areas for faster rollout in remote areas. If there is little overlap with existing tower companies, this would make sense," said an analyst, who did not wish to be quoted.
Fourth-generation, or 4G, networks will offer Internet and data services at much faster speeds as compared to existing 3G services. Their initial demand will be more in metros and big cities, which are adequately covered by existing tower companies.
At the time of Infotel's acquisition, RIL Chairman Mukesh Ambani had said the company would follow an 'asset-light' telecom deployment strategy, meaning it would not set up its own towers or rollout optic fibre cables to carry calls. But the thinking has changed a little along the way, said a source.
By : The Economic Times
