The telecom operators have paid large-sums for acquiring 3G and BWA licenses. We believe they will focus on rolling out 3G / BWA services relatively quickly to start getting returns on their investments. Currently, operators are installing 3G/BWA equipments on their current tenancies, which is called loading. Operators have to pay an amount over and above the standard rates to install these equipments. Loading is likely to be the near-term revenue growth driver for tower companies as 2G-ready sites get upgraded to make them 3G/4G-ready.
However, loading alone would not help to roll out seamless coverage since 3G and 4G spectrum is relatively inferior at 2100 MHz and 2300 MHz. To roll out coverage for these services, telecom operators will need to rent more tenancies/sites compared to 2G network, which is at 900 and 1800 MHz spectrum. Hence, the tenancy ratios will likely increase on existing towers. We expect increase in tenancy to be a medium-term (2-3 years) revenue growth driver.
Importantly, the number of tenancies/ towers needed to provide 3G services (at 2100 MHz) is meaningfully higher compared to 2G services (at 900/1800 MHz). Even after putting 3G installations in all the current 2G tenancies, there would be gaps in coverage. Hence, seamless 3G roll-out would require need to install additional towers. Notably, 4G at 2300 MHz requires 1.5x as many towers as needed to cover the same area as one 3G (2100 MHz) tenancy covers. Hence, installation of new towers will be the third and relatively long-term revenue and demand growth driver for tower companies.