Bharti, Vodafone, Idea in Deal to Share Mobile Infrastructure

Vodafone Essar, the Indian subsidiary of Vodafone Group, Bharti Infratel, a subsidiary of India's leading mobile operator Bharti Airtel, and Idea Cellular have agreed to form an independent tower company, Indus Towers Limited, to provide passive infrastructure services in India to all operators on a non-discriminatory basis. The three companies will merge their existing passive infrastructure assets in 16 circles in India. Vodafone Essar and Bharti will own approximately 42% each and Idea will own the remaining 16% stake in Indus Towers. New passive infrastructure roll-out in the 16 circles will be undertaken by Indus Towers.

Indus Towers will be an independently managed and operated company, offering services to all telecoms operators and other wireless services providers, such as broadcasters and broadband service providers. Indus Towers will have approximately 70,000 sites at inception and will undertake a significant roll-out of telecoms infrastructure. Under the deal announced today (10 December), Vodafone, Bharti and Idea will continue to run their active infrastructure completely independently.

Passive infrastructure includes the towers, shelters, cooling systems, AC and DC power supply, diesel generators, air conditioning, site leases, and other electrical and civil works in relation to a mobile telecoms network that enable a mobile operator to install the active infrastructure, such as base terminal station equipment, associated antennae, and backhaul connectivity to a mobile operator’s network at such telecoms sites.

Separately, Vodafone Essar has also announced that it will outsource all of its information technology operations to IBM Corp. Through a five-year outsourcing deal, IBM India will manage Vodafone Essar's data centre operations, as well as desktop, laptop and IT helpdesk management. Vodafone Essar says that outsourcing will help it keep pace with the rapid growth it expects in the region, while also delivering cost-efficiencies.

Outlook and Implications

• Initiatives: The infrastructure-sharing deal is a major step towards achieving the Indian government’s teledensity targets and the recommendations by the Telecom Regulatory Authority of India (TRAI) for passive infrastructure-sharing, and will create a more cost-efficient and competitive operating environment for mobile operators in India. The primary benefit will be the accelerated expansion of mobile service coverage, especially into rural areas. Mobile operators will also be able to enjoy capital and operating expenditure savings and enhance operational efficiency. TRAI has recommended infrastructure-sharing to increase mobile coverage across the country. The recommendations had focused on passive sharing, but active infrastructure-sharing is now also being examined by the Department of Telecommunications (DoT).
• Growth Prospects: The Indian government has set a teledensity target of 500 million telephone subscribers and 20 million broadband internet subscribers by 2010. The country now has about 213 million mobile users, with a mobile penetration rate of approximately 19%. With a population of 1.14 billion, there is still significant growth potential for subscriber growth in the country, but a large proportion of the new users to be added in the future will be low-income customers. Although low calling prices, a growing economy and increasing disposable income will drive future growth, the country has yet to overcome problems of the spectrum crunch faced by mobile operators and the disputes between GSM and CDMA operators over how to allocate spectrum (see India: 4 December 2007: Disputes over Spectrum Allocation Continue in India).