Indian Telecom Tower companies indicated a perceptible pick-up in 3G and 4G tenancies after the spectrum auctions in February 2014. Besides, rentals have been steady and there has been no discount offered to Reliance Jio Infocomm.
The pace of 3G site additions have picked up and monthly demand was up 4-5x YoY in the First Half of 2014. While most of the tenancies are still for additional loading on 2G; After the initial 3G coverage on existing sites tower operators have indicated that the standalone “full” 3G tenancies have started coming. Already, the utilisation of 3G networks in Delhi and Mumbai has reached 60-70% in some pockets (these may now start yielding full tenancies). Telcos have earlier indicated that the average capacity utilisation for 3G sites in India is currently at 25-30%.
Additional rentals on 3G tenancy loaded with 2G are c.15% of the base 2G rentals. However, one of the operators indicated that it is close to 10%; other operator indicated 3G loading rentals of c.15-20% of the base rentals, which is higher than that for the operator-owned towercos.
4G tenancy orders have started to flow, with one of the independent towercos booking revenues from Reliance Jio in Q2 FY15. However, significant increases in tenancy and hence revenues are expected only in FY16.
2G tenancy additions have accelerated after the recent spectrum auctions in February 2014, with certain tower operators expanding coverage in the rural areas. This is also because the highly competitive industry demands quality service and seamless coverage, leading to higher rollouts and hence higher tenancy.
Rentals have remained steady and operators did not indicate any significant downward pressure on rentals. Given the high leverage of the independent towercos, they are not looking to undercut on rentals to gain additional tenancy.