State run telecom operator BSNL's mobile tower assets will soon be hived off into a separate company as approved by Union Cabinet earlier today. The Union Cabinet today approved hiving off the mobile tower resources of Bharat Sanchar Nigam Ltd (BSNL) into a separate company, fully owned by BSNL.
An official press statement from BSNL said that the company can monetize its telecom tower infrastructure with the formation of a separate subsidiary.
Currently, BSNL owns 66,000 telecom towers in the country, out of the total 4.4 lakh towers. “An independent, dedicated tower company of BSNL with a focussed approach will lead to rising in external tenancies and higher revenue for the company,” said the official release from BSNL.
A look at the background:
The telecom tower industry has emerged as an independent business 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 i.e. 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 minimize duplication of investments and economize 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.