The present 3G coverage of most telcos even though thin (8% of 2G BTS), is largely via the loading route. At present, telcos are mounting 3G BTS on sites where they already have their 2G BTS and it is not counted as a new tenancy. Telcos pay c8-10% incremental rentals for 3G deployments via the loading route. Separately, given the rising input costs, we believe operators are unlikely to sign up new towers for 3G.
We believe unless smartphone penetration picks up meaningfully, operators will continue the low cost approach for 3G coverage expansion. We believe data revenues will need to cross a threshold ( at least 12-15% of revenues of telcos , at present data revenues are merely 5% of Tier 1 operators) before the service provider have incentive to expand 3G coverage.
To sum up, we believe data is more of a medium to longer term catalyst for the tower companies.