INDIA 
N TELECOM
E M INFRASTRUCTTURE: THE 
      
 
CONSTRAAINTS AAND OPPORTU
P NITIES 

Am
mit Moryaa
Contents 
EXECUTIVE SUMMARY ................................................................................................ 3 
1. INTRODUCTION .......................................................................................................... 4 
1. CURRENT STATE OF TELECOM INFRASTRUCTURE .......................................... 6 
3. TRENDS IN TELECOM INFRASTRUCTURE SPACE .............................................. 9 
3.1Wireline...................................................................................................................... 9 
3.1.1 Demands from operators .................................................................................... 9 
3.2 Wireless................................................................................................................... 10 
3.3 Demands from operators ..................................................................................... 10 
4. CONSTRAINTS AND OPPORTUNITIES ................................................................. 10 
4.1.1 Inadequate Infrastructure ................................................................................. 10 
4.1.2 High OpEx ....................................................................................................... 11 
4.1.3 Insufficient Spectrum ....................................................................................... 11 
4.2 Constraints or Opportunities? ................................................................................. 12 
4.2.1 Telecom Infrastructure Sharing ....................................................................... 12 
4.2.2 Operation and Maintenance Outsourcing ........................................................ 15 
4.2.3 BPL (Broadband over Power Lines) ................................................................ 17 
4.2.3 Green Solution for Wireless Infrastructure Development ............................... 18 
5. CONCLUSION ............................................................................................................. 20 
REFERENCES ................................................................................................................. 20 

Table of Figures

Figure 1: Region-wise Mobile Subscriber Base ................................................................. 4

Figure 2: Subscriber Growth in Indian Telecom Market .................................................... 5
Figure 3: Revenue Growth in Indian Telecom Market ....................................................... 5
Figure 4: Spectrum Map of India ...................................................................................... 11
Figure 5: Infrastructure Sharing: Opportunities and Challenges ...................................... 14
Figure 6: Outsource to single service provider ................................................................. 15
Figure 7: Outsource to Multiple to Service Providers ...................................................... 16
Figure 8: Outsource to Multiple Service Providers .......................................................... 16
Figure 9: Working of BPL ................................................................................................ 17
 

2
EXECUTIVE SUMMARY 
India is the third largest in terms of subscriber base and number one in terms of mobile
growth. It has overtaken China in terms of subscriber acquisition and is adding around 6-
7 mn lines every month. Adding to it, several compelling economic, demographic and
social factors are also likely to fuel subscriber growth in the country. The high average
real GDP growth of 8% in each of the last three years; a large young, working population
(65% below 35 years by 2011); a fast-growing and progressively richer middle class; and
a huge disparity in affordability of wireless services vs actual mobile penetration, are all
pointers to the potential demand in the pipeline.

But we still have a long way to go, as vast geography is still not covered. Right now,
cellular telecom service providers are present in more than 5,000 towns and cities and
one lakh plus villages across the country. In terms of tele-density there is a wide gap-with
metros at around 40 and rural areas at 2.5. Indian market is also unique as it has the
lowest call tariff in the world, lowest ARPU, and highest minutes of usage.

While the economic and demographic environment in India are conducive to strong
subscriber growth in the coming years, there are three industry-related factors that could
present a challenge to operators either in terms of subscriber growth or profitability at the
cost of growth or both. These factors are: affordability of handsets, high upfront cost of
setting up of own telecom infrastructure in new geographies and shortage of 2G
spectrum.

However, like every cloud has a sliver lining; these constraints forced the telecom
industry to become operationally more efficient and profitable by evolving new business
models like infrastructure sharing and outsourcing of network. These challenges
channelized the energy of telecom service providers in identifying probable technological
solutions and utilizing the other vast established infrastructures (like power lines) to reach
the end customers.

3
1. INTRODUCTION  

Indian telecom market has seen an explosive growth in last five years and Indian market
with 180 million connections has emerged as one of the largest in the world and the
second largest telecom market of Asia. Indian telecom market offer huge headroom for
growth with teledensity at 18 % till now.

Figure 1: Region-wise Mobile Subscriber Base

Source: COAI, AUSPI, 2007

4
 Figure 2: Subscriber Growth in Indian Telecom Market

Subscriber growth
180 164

120
CAGR
98
76
60 44 53

0
2002 2003 2004 2005 Aug-06

Source: COAI, Voice&Data, October 2006

India has the lowest mobile penetration among the top 50 developed and emerging
markets of the world and has a lower wireless spend to GDP ratio than other emerging
markets, confirming the huge latent growth potential.

Figure 3: Revenue Growth in Indian Telecom Market

Revenue growth
20
20

15
15 CAGR
n

11
illio

10
10 9
$B

0
2002 2003 2004 2005 2006

Source: COAI, Voice&Data, October 2006

Indian telecom market present different set of opportunities and challenges to telecom
operators and low ARPU, High capital efficiency, low handset prices, vast geographic
market, and High prepaid user share are the typical characteristics of the market.

5
1. CURRENT STATE OF TELECOM INFRASTRUCTURE  

On the rural spread, India has a total of 638,499 villages out of which about 44,856
villages are uninhabited as per 2001 census. So, 594,000 inhabited villages account for
72.22% of the total population of India. Till date, we have covered only 60% of India's
geography, and a large part of rural geography is yet to be covered. Infrastructure support
for mobile services will act as a catalyst for rural growth. Even in the past, the
government has provided a lot of support to rural people by deploying MARR (multi
access rural radio), and VPT (village public telephones). Presently, around 559,000
villages have VPT, and for the remaining 35,000 villages, VPT are to be set up either on
satellite or on other technologies. The USO initiative of providing mobile services will
help in increasing mobile footprint in rural areas, as till date communication in majority
of the villages has been possible only through community phones i.e. VPT or wireline
phones.

Table 1: Wireless Coverage- Current Status

Area Total No of Towns/ Cellular Coverage

Villages in India No of Percentage
Towns/Villages
Urban India 5,151 4,900 95
Rural India 607,000 350,000 57

Source: COAI, Macquarie Research, August 2006

Presently, 80% of the towers are located in urban areas, and remaining 20% are in rural
India. We are seeing a shift, and it is expected that in couple of years it would be 60% in
urban, and 40% in rural areas, as 70% of the population resides there, and a lot of
coverage is yet to happen. Indian teledensity is at around 19%. Out of this, urban
teledensity is at around 49.53%, and rural teledensity is at around 1.84%. There is a wide
gap between urban and rural teledensity, and the digital divide needs to be bridged. The
latest initiative of DoT will help in covering around 22% of India's population, thereby
providing mobile connections to people residing in remote and far-flung areas.

6
 Table 2: Wireless Network Infrastructure in India

Year ‐end  Base  Base Station  Mobile Switching 

December  Stations  Controllers  Centres 
2001  3,636 169 57
2002  6,322 227 76
2003  10,273 273 86
2004  18,643 456 120
2005  35,165 681 169
2006  *70,000      

Source: COAI, Macquarie Research, August 2006

DoT is planning to set up 7,871 mobile towers across 212,034 villages, covering a 270
mn rural population under the USO initiative. In the latest bid, companies like BSNL,
GIL, Hutchison Essar, Nitel, Quipo, and Reliance Comm infrastructure will set up 7,871
mobile towers in around 500 districts across India and would initially provide voice
services. The tower companies will be provided remuneration on a quarterly basis for a
period of five years from USO fund.

Table 3: Expected Investment in Infrastructure under USO

Financial Bid Results for Part of USO

Company State Districts Towers USO USO
Amount/Tower/Year Amount in 5
(in Rs) Years
(in Rs
Crore)
GTL Andhra 14 287 592,196 84.98
Infra Pradesh
Assam 20 90 265,066 11.93
Uttar Pradesh 13 134 141,333 9.47
(E)
Hutch Andhra 5 200 388,081 38.81
Essar Pradesh
Maharashtra 3 123 197,331 12.14
Sikkim 3 8 162,321 0.65

7
BSNL Andhra 3 94 157,833 7.42
Pradesh
Arunachal 12 62 202,316 6.27
Pradesh
Bihar 37 489 393,908 96.31
Chattisgarh 12 349 310,014 54.10
Gujarat 4 66 73,198 2.42
Haryana 8 14 71,738 0.50
Himachal 9 191 204,642 19.54
Pradesh
Jammu and 12 178 379,465 33.77
Kashmir
Jharkhand 14 189 143,212 13.53
Karnataka 26 427 399,773 85.35
Madhya 45 985 682,840 336.30
Pradesh
Maharashtra 30 894 737,324 329.58
Manipur 9 95 212,185 10.08
Nagaland 7 56 212,185 5.94
Orissa 25 316 255,673 40.40
Punjab 3 13 67,004 0.44
Rajasthan 32 411 447,278 91.92
Tamil Nadu 27 371 284,259 52.73
Tripura 4 147 255,912 18.81
Uttaranchal 13 217 284,070 30.82
Uttar Pradesh 32 371 400,161 74.23
(E)
Uttar Pradesh 10 73 132,714 4.84
(W)
West Bengal 16 167 134,336 11.22
Nitel Chattisgarh 4 211 416,098 43.90
Meghalaya 7 102 223,299 11.39
Mizoram 8 71 274,599 9.75

8
 Reliance Himachal 2 104 156,480 8.14
Comm Pradesh
Infra Jharkhand 4 116 159,000 9.22
Kerala 11 46 98,700 2.27
Orissa 5 116 159,000 9.22
Quipo Uttar Pradesh 11 88 100,000 4.40
(W)
Total 500 7,871 9,775,544 1582.78

Source: Voice&Data, September 2006

3. TRENDS IN TELECOM INFRASTRUCTURE SPACE  

3.1Wireline
According to Research and Markets, the dynamics of wireline service are changing and
these fastest changes in the market dynamics also create new revenue opportunities for
service providers, including managed services, IP telephony, as well as QoS and SLA
offerings. To take advantage of these opportunities, service providers will need to either
acquire resources to provide a wide range of services in order to avoid reliance upon
shrinking individual service silos, or develop strategic relationships and partnerships.

According to infrastructure service providers, the main trends are follows:

ƒ Change in technology platform-xDSL

ƒ Tough competition from OEMs with bundling of product solutions and services
ƒ Price erosion
ƒ Consolidation of services-voice, data and video convergence

3.1.1 Demands from operators 

ƒ Cost efficient network up gradation solutions

ƒ Looking for lowering Capex and Opex
ƒ Higher revenues per subscriber

9
3.2 Wireless 

Consolidation is already taking place in the world in the wireless infrastructure space.
Because of consolidation, major wireless infrastructure players will look at their business
model (following the consolidation) and their manpower base and this will lead into
restructuring globally. This may not be an indication of a slowdown, but their strategy for
pruning costs and improving productivity will see realignment in business.

However, technology will drive the market growth. New innovations will continue as the
entire global telecommunication market is yet to be tapped and there is enough room for
growth, but some geography throws some tough hurdles. In this case, wireless telecom
service providers and infrastructure companies will have to work together to offer
customized solutions.

3.3 Demands from operators 

Telecom operators are looking at curtailing project implementation costs. This can be via
sharing passive infrastructure and selecting one prime vendor to undertake the end-to-end
implementation. Operators are looking for solutions that provide them with
lower Opex and also help them in generating higher ARPUs and taking leadership.
Spectrum allocation by the government is a main concern among operators as well as
infrastructure providers. Another concern for infrastructure providers are dropping prices.

4. CONSTRAINTS AND OPPORTUNITIES
4.1 Constraints

4.1.1 Inadequate Infrastructure 

The growth of telecom service providers is directly connected with the reach of their
network. In terms of market share, growth of service providers is dependent upon there
ability to tap rural subscribers. However, till date 43% of Indian villages lack telecom
network. It is very costly proposition for telecom service providers to install their own
infrastructure in rural areas. Also, due to low population density, high operational cost of

10
infrastructure and low per capita income (leads to low ARPU) of villagers, it seems to be
operationally expensive too for service providers to operate in rural areas.

4.1.2 High OpEx 

Another major issue which is acting as the bottleneck in the growth of telecom is the high
operational and maintenance cost of network. One of the major contributor in the
operational cost of telecom network is the high cost of infrastructure like electricity, land
and human resources.

4.1.3 Insufficient Spectrum  

Additionally, in order to achieve a sustainable growth, adequate spectrum is required.

The available bands for GSM spectrum are 900 Mhz and 1,800 Mhz. As of today, the 900
Mhz band has been fully utilized and the 1,800 Mhz band has miniscule availability.
Therefore, government initiative is required to sort out this problem to support the growth
of telecom in India.

Figure 4: Spectrum Map of India

Source: TRAI, Macquarie Research, August 2006

11
 Table 4: GSM spectrum requirement in Metros and A Circles by March 2008

Source: Source: TRAI, Macquarie Research, August 2006

4.2 Constraints or Opportunities? 

Every constraint store bags of opportunities for service providers, telecom equipment
manufactures and newly entrant telecom infrastructure companies. The only requirement
to harness the potential of Indian telecom market lies in innovating at business as well as
at technical front. Some of the business opportunities and solutions are explained in the
following sub-sections.

4.2.1 Telecom Infrastructure Sharing 
Infrastructure sharing has been used by operators to get rid of their non-core activities, so
that they can focus on their core business. Not only does it help in reduction of capex as
well as opex, it also helps in reducing management bandwidth for non-core activities as
the operation is now taken up by IP-1 players. And the IP-1 company charges a monthly
fee from the operator, which includes infrastructure usage and operations and
maintenance charges on a monthly basis.

Till March 2007, there were around 100,000-120,000 towers in India of which around 15-
18% were shared. Over the next two years, all operators put together will add around
160,000-170,000 towers; even if 35% of these are shared, one is looking at 56,000-
59,500 sites. Site sharing is not only limited to mobile, IP-1 players can target users in
wireless broadband, broadcasting, DTH, FM radios and WiMax operators.

12
In the coming years, telecom infrastructure sharing will be the focal point of leading
telecom companies which are on the huge expansion mode. Several telecom companies
have already started expanding their networks by network sharing. The status of
infrastructure sharing and future plans of telecom companies are described in the
following table.

Table 5: Infrastructure Sharing Plans of Indian Teleco's

INFRASTRUCTURE SHARING
Operator Plans
Bharti Airtel Present sharing is 23%, hiving off tower biz into a 100%
subsidiary called Bharti Infratel
BSNL Does not believe in sharing of infrastructure, but can use the same
towers for both GSM and CDMA
Hutchison Presently shares about 1/3rd, plans to share 2/3rd. MoU with
Essar Bharti can be threatened by Essar
Idea Cellular Presently sharing it with operators and third party players
Reliance Demerger of tower biz - Reliance Telecom Infrastructure is in
Comm place
Spice Comm Presently sharing it with operators and third party players
Tata Group Pioneered the concept, presently sharing it with operators and third
party players
Source: Voice&Data, August 2007

Market Players 
Being a nascent industry, only three infrastructure sharing players are present in the
market other than the telecom companies and there subsidiaries. At the rate it is currently
expanding one can expect full fleged competition in this space in five years down the
line.

Table 6: Profile of Infrastructure Companies

Company Profile & Investment Plans

Quipo Telecom A 100% subsidiary of Quipo Infrastructure Equipment and claims
Infrastructure to be the first to pioneer infrastructure sharing in the country.
Quipo has invested in excess of around Rs 250 crore by March
2007.
GIL GIL is part of GTL and has been focusing on the telecom turnkey

13
 space for a long time. GIL has an experience of executing 16,000
sites connecting 16 mn subscribers
GIL has invested around Rs 1,000 crore and plans are on to invest
Rs 2,030 crore by March 2008.
Essar Telecom It is a year old company and plans to leverage on telecom
infrastructure activities of the Essar Group.
Essar has invested around Rs 150-200 crore and is planning for a
further investment of Rs 1,200 crore by March 2008
Source: Voice&Data, August 2007

The Innovation Mantra in infrastructure sharing  
In order to reduce Capex and Opex, tower subsidiaries and IP-1 players should focus on a
lot of innovation activities including site design, shelter design, power management, use
of non-conventional energy, and others as in the coming days telecom players will have
to grapple with a lot of engineering, business and technology complexities as and when
they talk about coexistence of 2G, 3G, and WiMax under the same roof.
Figure 5: Infrastructure Sharing: Opportunities and Challenges

Opportunities
Huge numbers are throwing up new opportunities for IP-
1 and tower subsidiaries
There is a vast rural opportunity which needs to be
tapped by the operator as we are presently covering only
60-65% geography
Lowering of Capex and Opex will help operators to
focus more on marketing and customer services thereby
outsourcing towers to infrastructure players
A pan-India presence will provide a lot of cost
advantages vis-à-vis localized presence
Apart from organic growth, IP-1 players are also looking
at inorganic growth
An open player policy in the mobile space will lead to
more players resulting in more sharing
Challenges
Is the market big enough to accommodate more than a dozen
players?
Tower subsidiaries and IP-1 players will have to focus on
significant reduction of Capex and Opex
Tower subsidiaries and IP-1 players have to share towers
with as many players as possible to keep rentals significantly
lower
Tower subsidiaries will face problems since mobile
operators will not be comfortable sharing their business plan,
and finally towers
IP-1 players should constantly focus on quality of service
and cost reduction
DoT is yet to give a final go ahead on backhaul sharing

14
The players also should do a lot of balancing to provide error-free service in both urban
and rural areas. In urban areas, the focus would be more on providing interference-free
service irrespective of technologies. Whereas in rural areas, the focus would be more on
providing increased coverage. So the players will focus on design, power management,
and shelters, and this will decide who will top the table. For cost reduction, telecom
companies should focus on optimum design for multiple users and cost reduction on the
power front.

4.2.2 Operation and Maintenance Outsourcing 
O&M outsourcing is a business model, under which telecom carriers, enterprises or
institutions outsource the tasks of maintenance and management related to their telecom
networks, mainframe systems, and service platforms to professional outsourcing service
providers. The execution of O&M outsourcing is divided into three categories:
• Outsource to single service provider

Figure 6: Outsource to single service provider

15
• Outsource to Multiple Service Providers
Figure 7: Outsource to Multiple to Service Providers

• Outsource to Outsource to service provider offering secondary vendor

management
Figure 8: Outsource to Multiple Service Providers

Source: O&M Outsourcing, http://www.huwai.com

16
O&M outsourcing will help Indian teleco’s lower their cost and increase their core
competence.

4.2.3 BPL (Broadband over Power Lines) 
In the Indian scenario BPL can be used by the wire line service providers to increase
penetration of telecom network and reduce operational expenditure.

Defining BPL  
Broadband over Power Line (BPL) is a technology that allows Internet data to be
transmitted over utility power lines. In order to make use of BPL, subscribers are not
dependent on a phone, cable or a satellite connection. Instead, a subscriber installs a
Figure 9: Working of BPL
modem that plugs into

an ordinary wall outlet

and pays a subscription
fee similar to those paid
for other types of
Internet service.

BPL works by
modulating high-
frequency radio waves
with the digital signals
from the Internet. These
radio waves are fed into
the utility grid at
specific points. They
travel along the wires
and pass through the
utility transformers to
subscribers' homes and businesses. Wires and sockets are used simultaneously for
electricity and data transmission, without causing disruption to either

17
Global Experience in BPL   
Broadband over power lines has already made its presence in the United States and the
Europe. This has significantly reduced the overall wireless infrastructure cost for telecom
companies in these regions.

BPL in India & Add on features  
India offers huge opportunity in terms of broadband over power lines implementation.
Sooner or later, transferring voice and data through power lines will be a reality in India
as well.BPL technology can also be used for smart grid application control using data
transfer over an existing electric grid, and improving their control of energy reserves.

It can detect real-time theft detection, Detection of any malfunctions or service

distribution disorders, alert on misuse of any utility service, real-time power usage
detection. Security and surveillance issues can also be handled by this technology by
placing audio and video devices at strategic point and transferring the data through power
lines

Various Challenges in BPL implementation in India 
The biggest challenge for wide scale use of this technology is the opposition from users
of the same spectrum. They fear interference from BPL in their radio signal. In both
access and in-house high-speed BPL technologies, multiple carriers spread signals over a
broad range of frequencies that are used by other services.

This spectrum is also used for public safety and law enforcement, and government
aeronautical radio navigation and radio navigation satellite. Each of these authorized
services in the spectrum can get harmful interference. The close proximity of access BPL
equipment on utility poles may affect the operation of cable television service and high-
speed digital transmission service, such as DSL.

4.2.3 Green Solution for Wireless Infrastructure Development  
In the present Indian scenario we propose Green solution for the improvement in the
wireless infrastructure in India.

18
Defining Green Solution 
This 'green' solution provides a feasible and efficient alternative to using fuel generators
when a main grid connection is not available or it will take months or years to connect or
finally, where electricity tariffs are expected to rise sharply in the next few years.

Once installed, the cost of power is almost zero, and wind and solar powered cell sites
require minimal maintenance unlike a diesel driven generator which generally requires, at
a minimum, a monthly visit for refueling and they can also be heavily prone to theft. This
translates into added savings in operating expenditure (OPEX), a key factor to emerging
market network operators.

Global Experience on Green solution   
Motorola has implemented wind and solar solution at an operational MTC Namibia cell
site where the solution has become the electrical power source for the site to help telecom
infrastructure.
Telecom companies are
framing strategies to
produce portions of the
Reach GSM equipment
locally in order to
provide low-cost
solutions for rural and
urban cell site
deployments. As part of
this initiative, Motorola
announced a new commercial and production strategy that aims to reduce initial network
rollout costs by having elements of its Reach GSM portfolio manufactured locally.

Learning’s for India & how Indian companies can benefit 
The green solution can be implemented in Indian scenario. As part of its business strategy
Motorola has already started working on it and phased deployments of over 1,300 units
have been started in India to serve major cellular operators in the local market. The reach

19
strongbox, a DC outdoor enclosure for Motorola's Horizon II macro BTS, will be the first
product delivered under this strategy.

5. CONCLUSION 
The growth of the telecom industry in the past few years has been unimaginable. Indian
telecom market has emerged among the fastest growing markets worldwide in last couple
of years and amidst rumors of a possible slowdown in the wireless infrastructure market
in the world (excluding India) in 2007-08, India has shown sustainable growth in net
additions of mobile subscribers in the past one year.

Present rapid growth has necessitated significant amount of investment in building up

wireless infrastructure in country but several bottlenecks like low spectrum, high cost of
infrastructure deployment etc. has made the task daunting and challenging for telecom
service providers. Newer and innovative means like broadband over power lines, green
solutions and infrastructure sharing can be used for cost effective telecom infrastructure
building in India.

REFERENCES 
1. Subham Majumdar & Sunaina Dhanuka (August 2006), India Telecom Sector,
Macquire Research Equities
2. Song Jiuang (January 2007), Operation and Maintenance Management Outsourcing,
Road to Telecom Service Outsourcing, Issue 1, Huwai Service
3. Babu Ranjan K, Mobile Jam, [available at:
http://voicendata.ciol.com/content/top_stories/407091001.asp], [viewed on:
November 26, 2007]
4. Overall Analysis: Basic Services Struggle as Mobile Shines, Voice & Data, Issue
July 2007, [available at: http://voicendata.ciol.com/content/vNd100/2007vol-
II/407070626.asp], [viewed on: November 26, 2007]
5. Network Management Services: In-house Vs Outsourcing, Voice & Data, Issue July
2007, [available at:

20
 http://voicendata.ciol.com/content/goldbook/goldbook07/107031308.asp], [viewed
on: November 26, 2007]
6. Wireline Infrastructure: Awaiting Broadband Push, [available at:
http://voicendata.ciol.com/content/goldbook/goldbook07/107031308.asp], [viewed
on: November 26, 2007]
7. Power Management: Critical Focus, [available at:
http://voicendata.ciol.com/content/goldbook/goldbook07/107031236.asp], [viewed
on: November 26, 2007]
8. Outsourcing Trends: Eye on the Globe, [available at:
http://voicendata.ciol.com/content/goldbook/goldbook07/107031234.asp], [viewed
on: November 26, 2007]
9. Ibrahim Ahmed, MOST Appropriate, [available at:
http://voicendata.ciol.com/content/columns/editorial/107020701.asp], [viewed on:
November 26, 2007]

21