Blogs

Telecom passive infrastructure companies receive a large sums of money from Telecom companies for infrastructure and energy consumption on a monthly basis. In India alone, this number is about $310 million/month (Rs. 2100 Cr) inclusive of infrastructure (physical asset) as well and energy usage (Power) charges. On the surface, it seems it would be easy to calculate and pay – once the Master Service Agreement (MSA) is set. However, in reality there are a number of charges and clauses in the MSA which are easy to set, however really hard to administer and there are number of reasons for it:

Issues in case of Asset/Infrastructure:

a.Lack of visibility – the towers are distributed over a large region – some places are remote and hard to access.

b.A number of them are unmanned and have minimal locking arrangements – Right now a number of tower companies are working to strengthen this.

c.It’s hard to monitor and review what actually happens at site. In case the tenant (Telco operator) removes or adds equipment to site – it doesn’t reflect immediately on the tower co.’s books.

d.Also since a lot of activity is done on the field – the data stored with the field /project teams is different than in the central ERP maintained by finance.

e.Due the complexity of the systems the field teams information is not always in sync with the centralized asset database.

Issues in case of Energy Supply:

a.Today, approximately 1.1 million towers globally are connected to bad grid and off grid combined. This means such towers face power cuts of more than 4 hours a day and in several places it is as much as 16 hours – this means Grid Power is not sufficient to run Telecom Towers and need to be augmented by Batteries and /or Diesel Generators or other sources of energy.

b.India’s tower infrastructure of 450,000 towers alone uses nearly 2 billion liters of Diesel every year which highlights the absence of reliable grid power.

c.Diesel supply is fraught with distribution inefficiencies – leakages, theft and mismanagement. During distribution supply chain from the Oil marketing companies to the DG Fuel tank, there can be losses as high as 25% – 30%. Moreover, equipment service and usage may not be at optimal level which can cause further loss.

d.Besides diesel, even in the electricity supply chain the utility power is often not at the optimal power factor and customers have to resort to battery or DG. The bills for utility power requires validation of tariff slabs as well as of penalties and incorrect connections.

e.The third area is batteries – since energy storage is an important aspect- ensuring maintenance and usage of batteries can bring in significant efficiencies.

There is an imperative need to gain better control on costs, revenue and assets, and rapid ownership changes- consolidation and acquisition, increases this need. There is a large need for different systems to talk to each other and be in sync – once that happens then the tower owner who may own as few as a couple of hundred sites, or a large one with tens of thousands, will be informed of what is happening on ground and can take an informed decision. The need to make it more auditable and induce high levels of scrutiny helps increase confidence in governance – which then reflects in the financial health of the company.

Increasingly the leading companies have started to focus in this and invest resources towards it.