{"id":22818,"date":"2017-11-14T21:34:58","date_gmt":"2017-11-15T02:34:58","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/bharti-infratel-telecom-infrastructure-in-emerging-markets-has-consequences-for-the-environment\/"},"modified":"2017-11-14T21:34:59","modified_gmt":"2017-11-15T02:34:59","slug":"bharti-infratel-telecom-infrastructure-in-emerging-markets-has-consequences-for-the-environment","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/bharti-infratel-telecom-infrastructure-in-emerging-markets-has-consequences-for-the-environment\/","title":{"rendered":"Bharti Infratel: Telecom Infrastructure in Emerging Markets Has Consequences for the Environment"},"content":{"rendered":"

Power Management Emerges as a Focus Area as Networks Densify <\/u><\/strong><\/p>\n

As mobile data usage explodes India, environmental implications resulting from network densification are becoming increasingly prevalent. In a country with ~400,000 towers (33% more than in the US), telecom tower companies in India have deployed thousands of diesel-generators to provide power in off-grid and bad-grid environments [1]. However, due to the increasing costs of managing power and because of regulatory pressure to move to more sustainable sources of energy, tower companies are being forced to go green. This will have economic and operational implications.<\/p>\n

Bharti Infratel (\u201cInfratel\u201d), one of the largest tower companies in India, provides passive infrastructure to telecom carriers on ~100,000 sites spread geographically across the country [5]. Due to the unreliability of the grid, and the stringent service levels that are required by carriers, Infratel has to manage diesel generators on many of its sites to keep them running ~99% of the time. Yet under pressure from the public and regulatory bodies to reduce carbon emissions, Infratel has moved towards replacing diesel generators (\u201cDGs\u201d) with cleaner energy solutions [3]. Exacerbating the issues with DGs, ongoing operating expenses required to manage power systems continue to rise due to power and fuel expenses; currently these make up 63% of Infratel\u2019s annual operating budget [2].<\/p>\n

Adopting an ESCO Model<\/u><\/strong><\/p>\n

By 2020 it is estimated that 390,000 towers will be off-grid and 790,000 will be bad-grid, respectively [2]. As a result, 45 million tons of carbon-dioxide will be released per year [2]. Recognizing the issue of both cost and environmental implications, Infratel needs to deploy renewable energy solutions via an Energy Service Company (\u201cESCO\u201d) model.<\/p>\n

The business model of an ESCO is one where the ESCO replaces diesel generators with renewable sources (e.g. solar) and a back-up battery, and sells power on a per kilowatt-hour basis to the telecom operator, reducing ongoing operating expenses and carbon emissions [4]. Because solar-powered generators require upfront investment, the trade-off for tower owners is whether to invest the capital expenditure today versus sustaining high operating expenses with the current systems.<\/p>\n

Infratel has so far focused on three primary pillars for the \u201cimplementation of green initiatives\u201d, namely solar installations and diesel free towers, hybrid battery solutions, and free cooling units [5]. However, this has only appeared to impact less than 50% of its sites [5]. As battery technology evolves from the commonly used lead-acid and lithium-ion, Infratel and other tower companies have begun to use diesel generators purely as a last-resort backup option [1].<\/p>\n

In the long-term, there are several opportunities for Infratel to explore whether to continue to make these investments in-house, or to outsource their power solutions to a third-party ESCO such as CCE [6]. Today, power-focused ESCOs in India are estimated to manage 10,000 sites, which would prove to be a viable option for Infratel [1].<\/p>\n

Sale and Leaseback versus in-house Capital Investment <\/u><\/strong><\/p>\n

Infratel should consider outsourcing its power in a fashion similar to the sale-and-leaseback transactions that occurred when the tower industry was created between carriers and tower operators. This model allows a third-party ESCO to purchase existing power equipment from Infratel, freeing up cash for Infratel shareholders. The ESCO then makes the capital investment required to upgrade diesel generators to solar and battery solutions, with minimal operating expenses required to service the solar panels [1]. Because it is their core competency, they are able to better estimate the costs and ideal timing for upgrading to solar and battery solutions. The ESCO would also undertake issues such as diesel pilferage or fluctuating fuel prices.<\/p>\n

Should Infratel choose to make the equipment upgrades in-house, there are ancillary opportunities from clean power generation. With over 240 million people lacking consistent electricity in India, Infratel can use their hybrid and solar towers as mini-grids, employing an Anchor-based mini grid model [7]. In rural areas these mini-grids can sell excess capacity to nearby villages and their businesses. This could go a long way to appeasing local government agencies, who continue to push back on electro-magnetic field emissions they claim local towers cause, for example [3]. It also provides additional non-core revenue streams.<\/p>\n

Tower Company or Power Company?<\/u><\/strong><\/p>\n

Bharti Infratel is facing the challenge of providing back-up power to its sites in a sustainable manner without having to make significant investments today. It\u2019s possible that Infratel is waiting for battery technologies to mature and solar panel costs to come down even further. Infratel will also have to grapple with moving towards and ESCO model or allowing a third-party ESCO to take over its existing assets. Perhaps the catalyst will occur once Infratel has depreciated most of its existing power equipment on its balance sheet. Until then, the question worth asking is whether Bharti Infratel is truly a telecom tower company or a power management business.<\/p>\n

[Word Count: 798]<\/p>\n

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[1] Osmotherly, Kieron. \u201cAn Introduction to the Indian tower market,\u201d Towerxchange<\/em>, April 16th<\/sup>, 2015, https:\/\/www.towerxchange.com\/an-introduction-to-the-indian-tower-market\/, Accessed November 2017<\/p>\n

[2] GSMA, \u201cGreen Power for Mobile: The Global Telecom Tower ESCO Market,\u201d December 2014, \u00a0https:\/\/www.gsma.com\/publicpolicy\/wp-content\/uploads\/2016\/09\/GSMA2014_Report_The_Global_Telecom_Tower_EscoMarket.pdf, Accessed November 2017<\/p>\n

[3] Deloitte, \u201cIndian Tower Industry: The Future Is Data,\u201d June 2015, https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/in\/Documents\/technology-media-telecommunications\/in-tmt-indian-tower-industry-noexp.pdf, Accessed November 2017<\/p>\n

[4] International Finance Corporation, \u201cEnergy Storage: Business Solutions for Emerging Markets,\u201d November 2016, https:\/\/www.ifc.org\/wps\/wcm\/connect\/2d518b74-32f7-4fdc-b06b-9c070a52d6be\/EM+Compass+Note+23+-+Energy+Storage+11-16+FINAL.pdf?MOD=AJPERES, Accessed November 2017<\/p>\n

[5] Bharti Infratel, Investor Presentation 2017.<\/p>\n

[6] Osmotherly, Kieron. \u201cCCE Case Study: Proof of concept for Energy Management Solution as a Service,\u201d January 22nd<\/sup>, 2015, https:\/\/www.towerxchange.com\/case-study-proof-of-concept-for-energy-management-solution-as-a-service\/, Accessed November 2017<\/p>\n

[7] Smart Power India, The Rockefeller Foundation, \u201cExpanding Opportunities For Renewable Energy-Based Mini-Grids In Rural India\u201d, April 2017, http:\/\/www.smartpowerindia.org\/documents\/SmartPowerIndia_report_April_2017.pdf, Accessed November 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

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