State-owned Bharat Sanchar Nigam Ltd (BSNL) is hiving off its 66,000-odd mobile tower assets into a separate, fully-owned, company, as the loss-making telecom service provider seeks to boost revenue generation.
The union cabinet chaired by Prime Minister Narendra Modi on Tuesday approved the hiving off mobile tower assets of BSNL into a separate company, fully owned by BSNL.
The approval authorises BSNL to monetise its telecom tower infrastructure with the formation of a separate subsidiary company.
There are around 4,42,000 mobile towers in the country out of which more than 66,000 mobile towers or roughly 15 per cent are owned by BSNL. An independent, dedicated tower company of BSNL with a focused approach will help the company increase the number of external tenancies and consequentially realise higher revenues.
BSNL, which has been making looses for years, is now struggling to compete with private players out to annex market at any cost. Its financials, however, have improved steadily with its losses narrowing to Rs4,890 crore for the nine-month period ended December 2016 from Rs6,121 crore for the year-ago period. It had reported a loss of Rs3,880 cror for the 2015-16financial year against losses of Rs7,019 crore and Rs8,234 crore, respectively, in 2013-14 and 2014-15.
Telecom tower business has emerged as a separate industry with several companies in the private sector hiving off their tower assets to harness the potential for sharing of infrastructure. The business model arose from the need to achieve economies of scale and to reduce capital investment costs for providing mobile services.
The Department of Telecommunications (DoT) policy allows sharing of passive infrastructure, ie, the tower structure, diesel generator sets, battery units, power interface unit, air-conditioning etc, which has facilitated the growth of the telecom infrastructure industry.
A tower infrastructure company essentially owns the passive infrastructure asset and leases it to telecom service providers enabling them to minimise duplication of investments and economise on costs of operation and maintenance (O&M), thereby improving profitability.
Besides the captive model in BSNL and MTNL where the service provider owns their passive infrastructure also, there are three different business models within the telecom tower industry:
- Companies created by hiving off the tower assets portfolios of service providers into subsidiaries;
- Companies established as independent joint venture entities by service providers jointly; and
- Companies promoted by specific service providers but established as independent entities with the promoter being the anchor tenant for the tower company.