Telecom infrastructure in India has been largely affected by various factors, making the erection of telecom facilities expensive. The telecom ministry is considering a range of options including grants and concessions for deals with local and Western vendors, to help domestic companies compete with global majors, writes Kumar Ramesh.
Indian Telecom and IT market is one of the fastest growing in the world and has attracted international investors, especially in the last couple of years. Currently, this sector is undergoing a transition; the growth in major cities has slowed down, forcing investors to turn towards smaller cities or Tier II cities and rural areas where penetration is still limited to around 15-20 per cent of the population. Connecting rural India is an uphill task, given the current standards of infrastructure in remote places.
Telecom infrastructure in India has been largely affected by factors such as delays in getting electricity connections, and inconsistent policies at state governÂment levels, making the erection of telecom facilities expensive. The telecom sector is expected to attract an estimated investment of Rs 2,600 billion during the 11th Five Year Plan.
Active and passive infrastructures are likely to be focus areas in the future, with passive infrastructure gaining an extra edge. Passive infrastructure covers about 60-70 per cent of the cost of erecting a wireless network, making it an important area of interest for private investors. India's IT and services sector is growing at a rapid pace and increasing the need for passive infrastructure sharing. In the coming decade, infrastructure sharing is expected to play a major role in pricing and revenues.
Telecommunication security is another vital area that is expected to attract significant attention in the telecom infrastructure investments to be made in the coming years. One of the biggest drivers for telecom infrastructure growth is the time taken to deploy teleÂcom infrastructure is shrinking. This is giving way for increased investment activities over a given period of time. Efficiency in deploying infrastructure with a short turnaround time is determining the pace of infrastructure growth, especially in the rural areas of India. The Government is expected to play a more active role in telecom infrastructure, providing impetus to issues like telecom security, connecting rural India, and monitoring costs and prices.
Recent reports suggest that the telecom ministry is considering a range of options including grants and concessions for deals with local and Western vendors, to help domestic companies compete with global majors. It is exploring options of providing grants simiÂlar to that of the support provided by the Chinese govÂernment to companies like Huawei and ZTE, which offers financing as low as 3 per cent due to the agreements with the China's Banking mechanism. While, the Indian and Western vendors are often charging interest rates of between 12 per cent and 14 per cent.
The telecom ministry recently reported that the total spend on telecom infrastructure to reach up to Rs 5 trillion ($110 billion) over the years 2012-2017. About four-fifth of these investments are expected to come from the private players and the remaining from the state-owned companies. These spending projeÂctions include one trillion on new telecom towers apart from the greenfield roll out of 3G and 4G networks.
Telecom infrastructure is attracting large-scale investments and is expected to continue its growth momentum even during the 12th Five Year Plan. There is now increased focus on telecom security which is expected to provide a boost for the local vendors. Moreover, the government is keen in providing a level playing field for local vendors, and even for European incumbents, to compete against the Chinese players. This is expected to further help the local vendors and improve the investment opportunities in India.