GTL Infrastructure Ltd GIL

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GTL Infrastructure Ltd (GIL)
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Telecom scenario in India

• Growth of telecommunication in India is driven by
  wireless telephony
• Explosive Growth
• Current approx 85 million subscribers
• Target by 2008 approx 250 million subscribers
• Category C circles continue to witness the
  highest rate of growth

Feb 2006 data source COAI
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Does shared infrastructure makes sense?
To reach the rollout targets, approx capex
required in telecom infrastructure alone is to
the tune of US 20 Bn in next 3 years
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Does shared infrastructure makes sense?
Average Revenue Per User(ARPU) Rs.374 expected to
be less than Rs.200 (ltUS 5) per month once the
Rural India is covered Capex per
Subscriber/connection should come down at least
by 30 - 40 if Operators have to be profitable
in Semi-urban/Rural segments of the market Cost
of electronics in per line cost has come down and
cost of infrastructure has gone up and
constitutes up to 65 of the per line cost today
Depending on number of operators sharing the same
cell site infrastructure for housing their
electronics, effective cost of cell site for each
operator reduces by 30-40
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Shared Telecom Infrastructure

• Telecom Infrastructure consists of
• Passive Infrastructure
• Tower
• Shelter
• Foundation/Civil Work
• Outdoor/Indoor Electrical
• Power Supply/DG sets
• Optical Cables/Ducts
• Active Infrastructure
• Electronic Equipment
• Antennas

• Third party - Infrastructure sharing will be more
  effective as the Telecom Operators competition
  will not hamper co-operation.
• High leverage of assets will ensure good early
  revenue streams and consequently the ability to
  finance rapid roll-out

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Benefits of Sharing

• Sharing model provides cost, scale and time
  benefits to the Telecom operators
• Conserves CAPEX and allows Telecom operators to
  enhance coverage and penetration
• Reduces OPEX and eliminates the need for Telecom
  Operators to manage the issues related with real
  estate and maintenance
• Facilitates Telecom Operators to meet the
  mandated coverage requirements in low density
  areas such as rural and suburban.
• Saves Time to Market by providing an existing,
  telecom ready facility, with consistent quality
• Freeing of capital for core areas like technology
  and new services

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Challenges

• To be considered as core infrastructure
  developers
• Extremely capital intensive
• Attractive terms of investment needed to source
  equity/debt funding
• Cost effective solutions to attract Telecom
  Operators

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Our Proposal

• To extend Income Tax benefits under section
  80 - I A
• Granting Infrastructure status under section
  10-23(G) to developers of Telecom Infrastructure
  as a separate entry under sec. 80-I A (4)

Extending benefits to developers without any loss
to the exchequer
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Justification

• The Income Tax Act under sec. 80-I A(4) (ii)
  extends Income tax benefits to
• The telecom operators who are developing their
  own telecom infrastructure.
• The developers of other infrastructure like
  roads, ports,highways, water supply projects etc.
• Government of India is committed to provide Rural
  telephony at affordable prices

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Justification

• Whilst prices of electronics as well as rate of
  customs duty is coming down, prices of passive
  infrastructure comprising of land, steel, cement
  etc. is going up.
• Income Tax rules allows each operator to claim
  depreciation benefits on their capex. Common
  network on shared basis thus would reduce overall
  depreciation benefits.
• Shared infrastructure service provided to the
  operators would generate additional service tax
  revenue

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Benefits

• Benefits to the Revenue and economy
• Overall depreciation allowance by the department
  will be reduced
• Efficient use of capital in the economy
• Additional service tax revenues
• Benefits to the Consumers
• Lower cost of operations to reduce tariffs
• Penetration in the rural areas as sharing is the
  only viable alternative

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Thank You