While tower industry itself represents a type of outsourcing (where telcos outsource the management of passive infrastructure assets to specialist towercos), we believe a second wave of outsourcing is under way within the tower industry.
In an industry conference focused on the Telecom Infrastructure space, we observed that an interesting near / long term trend in the sector – massive emergence of specialist companies to whom tower companies outsource operations and maintenance of towers in a given geography. This involves outsourcing of day-to-day services—including site management, energy management, remote monitoring, operations and maintenance, etc. The value proposition of such service providers is similar to other outsourcing analogies (these SPs take over the management of towers, and are able to function on lower costs as they spread out their costs over multiple towers across multiple towercos in any given locality). This could, over the longer term, lead to cost savings and improved efficiency for the telecom industry in general and tower industry in particular. Some of the SPs include ARDOM and Essential Energy.
Towercos such as Viom and Indus appear to be fairly open to taking help from such SPs (we came across some SPs who have already won contracts from these customers). Among operators, we met with SPs who have already won contracts from RJio for maintenance of their own towers (and sites rented from RCOM).
Tower Companies Focus on Other Services
Indus Towers has started looking at adjacent business models around using street lamps for light infrastructure deployment such as Wi-Fi hotspots, CCTV cameras, etc. We see this as an interesting new opportunity for tower cos.
Why is the Leader of Outsourcing Sunil Mittal’s Bharti Infratel Lagging ?
Sunil Mittal Founder Chairman of Bharti Airtel was the one who started the outsourcing model in the Telecom Industry and the rest all have followed. However, Bharti Infratel is yet to take to outsourcing in a significant way. Infratel indicated that they are waiting for actual costs of the SPs to come down to levels lower than Infratel’s own costs levels before considering these options. As the hunger for Entrepreneurship in India is more than in any part of the World, we are confident someone will satiate Sunil Mittal’s demands 🙂