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The Indian telecom sector, consistently adding more than seven million monthly subscribers, is well on its way to reaching the 500-million subscriber mark by the end of the decade. To maintain the pace of this booming growth, operators need to invest towards network expansion and improved coverage in an effort to acquire newer subscribers. According to the Indian regulator, the country in order to reach its targets would need over 300,000 telecom towers, which is almost twice as many as those that exist today.

However, such proportions of network roll-outs translate into huge expenditures on part of the operators, who have come together to realise that the biggest way of reducing costs is by way of sharing passive infrastructure components. This not only immediately brings down capital and operating expenditures but also positively impacts their margins. The effects of sharing can be further highlighted by the fact that roughly two-thirds of the incremental subscriber acquisition cost of $90-100, is accounted for by the elements of passive infrastructure alone.

Therefore, assuming a 550-million mobile subscriber base by 2012, an average tenancy of 1.8 per telecom tower, and an average cost of $62,500 (Rs 2.5 million) per tower, sharing arrangements can help the industry save a whooping $8.4billion (Rs 33,516crore) in capital expenditures. Apart from the lower capex, the savings on operating expenses at the same levels of sharing is expected to be in the region of $ 1.28 billion (Rs 5, 1 32.4 crore), indicating an industry saving of $ 3 billion in the year 20 12. The overall success and confidence in this business model has today led to the proliferation of several independent and operator -owned tower companies.

With the downward trend of average revenues per user (ARPU), the wider aspects of such savings will be critical for the existing as well as the newer operators. The overall benefits of lower costs and increased competition will enable them to further lower tariffs, leading to the acquisitions of low value users of rural India.

All said and done, better times are ahead for the millions of existing and potential Indian mobile subscribers. It will impact positively costs and tariffs. Telecom infrastructure sharing will have a positive impact on costs and tariffs - the extent and how soon the benefits are realized depends on the underlying environment and business dynamics. With technology enhancements, the relative costs of active infrastructure is falling while that of passive assets rising. This and the relative ease in sharing passive infrastructure have resulted in the focus so far on passive infrastructure sharing. However, increased competition and resultant pressure on tariffs have caused a re-look at the potential I for further cost sharing through active infrastructure sharing.

Active infrastructure sharing is complex and requires significant technological and commercial manoeuvring. Challenges include: agreeing on cost-sharing mechanisms, overcoming technology implementation issues and balancing competitive advantages of being first mover from the operator perspective; prevention of cartelization and anti-competitive behaviour from the market perspective; and ensuring that regulatory levies and taxes do not create a disincentive to move forward on this from an industry perspective.

Globally models exist albeit in varying forms for passive and active infrastructure sharing and even spectrum sharing. This reflects a significant shift in the strategic focus of the operators from thinking of network coverage and land grab as a competitive advantage to considering these merely as a base for service provisioning. The war for customers will be fought on newer platforms like customer service, product quality and product differentiation. To move into new service delivery models, operators will need to significantly alter existing business structures. How these translate into tariffs will depend on the growth of the market and availability of the larger base to absorb these costs and higher margin products that drive up profits.

 Benefits are likely to accrue only in the longer term. An initiative that reduces overall duplication of capital outlay will eventually benefit the industry, the customer and the economy. These would be a combination of better quality service, lower tariffs or more specifically, a differential tariff regime based on market and service differentiation, improved profitability and an overall positive impact on the environment.