The information presented in this section has been obtained from

publicly available documents from various sources, including officially

prepared materials from the Government of India and its various

ministries, industry websites/publications and company estimates.

Industry websites/publications generally state that the information

contained in therein has been obtained from sources believed to be

reliable but their accuracy and completeness are not guaranteed and

their reliability cannot be assured. Although we believe industry,

market and government data used in this Red Herring Prospectus is

reliable, it has not been independently verified. Similarly, internal

Company estimates, while believed by us to be reliable, have not been

verified by any independent agencies.

Telecommunication and Power Sector - Turnkey Services Industry:

The telecommunication and power sector turnkey services industry covers

tower manufacturing, allied infrastructure and other services for

setting up and maintaining the telecom towers and power sector

transmission lines. Telecom and Power transmission companies are facing

the challenging task of meeting the growing demand and aggressive

roll-out plans and the burgeoning operating costs. These companies also

rely on specialists to get the signal transmission / power transmission

equipment ready for their roll-outs and also to maintain them. The

companies could be either only tower suppliers or turnkey solution

providers who provide all services from designing to erection of towers

and assisting in maintaining them. These players need to meet stringent

quality requirements and also need to be capable of meeting the

changing requirements of the telecom and power industries.

Transmission towers are one of the pillars of the telecommunication and

the power sector. Both sectors are witnessing strong growth in terms of

reach and user base.

The power sector has been identified by The Government of India as a

key sector of focus. It has embarked on an aggressive mission - "Power

for All by 2012" and has undertaken several reforms to make the power

sector more attractive to private sector investment. Similarly, with

great amount of capacities being set up in power generation by private

sector as well as public sector players, demand for transmission and

distribution would require huge investment in transmission and

distribution sector.

Telecommunications Industry in India

The Indian telecommunications industry has experienced significant

growth in recent years, primarily in the wireless sector. The sector is

regulated by the Ministry of Communications and Information Technology,

DoT. Telecommunications is one of the sectors in India, which has

witnessed the most fundamental structural and institutional reforms

since 1991. India still continues to register a significant growth in

the current fiscal. Indian telecom has become the second largest

wireless network in the world after China. The future progress of

telecom in India is very encouraging. The target of 500 million

connections by 2010 has been achieved in September 2009 itself. The

11th plan target of 600 million connections has already been achieved.

The opening of the sector has not only led to rapid growth but also

helped a great deal towards maximization of consumer benefits as

tariffs have been falling across the board as a result of unrestricted

competition. (Source Annual Report 2009-10, Department of Telecom)

Mobile Services in India

With 635.5 million mobile phone connections at the end of June 2010,

India is today the second largest and the fastest growing telecom

market in the world in terms of number of wireless connections. It is

noteworthy that the Indian mobile subscriber base grew ten-fold in just

4 years (from 7.6 million subscribers in December 2001 to 75.9 million

in December 2005) and then 7-fold over the next 4 years (from 75.9

million subscribers in December 2005 to 525.9 million in December

2009). A significant part of this growth is now taking place in smaller

cities and rural areas. The number of cell phone users is estimated to

be at 1,000 million by 2014/15 (Source: TRAI, Recommendations on

Spectrum Management and Licensing Framework, 11th May 2010)

The Indian telecom market is divided into 22 service areas (23 circles)

categorized as Metros, Category ,A?,

Category 'B' and Category C (Chennai has been included in Category A,

as part of Tamil Nadu)

(1) Metros

There are three Metro service areas and they include the major

metropolitan cities of Delhi, Kolkata and Mumbai. These service areas

contribute 77.6 million to the total wireless subscribers base (12.2%

as of Jun 30, 2010) and have relatively high tele-densities. (Source:

TRAI, Press Release and Performance Report, Mar 2010)

(2) Category A

There are five Category A service areas covering the states of Andhra

Pradesh Gujarat, Karnataka, Maharashtra and Tamil Nadu (including

Chennai). These service areas form a major portion of the total

wireless subscriber base with 229.7.3 million wireless subscribers

(36.1% as of Jun 30, 2010) and have relatively high tele-densities.

(Source: TRAI, Press Release and Performance Report, Mar 2010)

(3) Category B

There are eight Category B service areas which include Haryana, Kerala,

Madhya Pradesh Punjab, Rajasthan, Uttar Pradesh (East), Uttar Pradesh

(West) and West Bengal (including Andaman and Nicobar islands). These

circles are the largest contributors to the total wireless subscriber

base with 243.9 million subscribers (approximately 38.4% as of Jun 30,

2010) and have relatively low tele-densities. (Source: TRAI, Press

Release and Performance Report, Mar 2010)

(4) Category C

There are six Category C service areas and they cover the states or

regions of Assam, Bihar, Himachal Pradesh North East, Orissa and Jammu

and Kashmir. Category C circles account for 84.2 million wireless

subscribers (13.3% as of Jun 30, 2010). These service areas have the

lowest tele-density.

Wireless subscribers Tele density (%) (As of March 2010) Subs (MM)

Rural Urban Total March - 09

Andhra Pradesh 23.03 135.98 54.30 30.4

Assam 18.13 91.59 28.97 5.8

Bihar 14.21 122.82 28.98 21.0

Delhi - - 157.41 22.0

Gujarat 32.09 89.13 54.93 24.1

Haryana 37.56 94.38 56.42 9.9

Himachal Pradesh 47.79 288.16 74.04 3.3

J&K 26.41 107.10 47.90 3.5

Karnataka 22.53 132.48 63.09 23.5

Kerala 35.50 177.51 70.31 16.4

Madhya Pradesh 15.00 85.66 33.63 20.6

Maharashtra 30.72* 98.53* 61.96* 31.3

Mumbai 19.2

North East 24.48 92.45 40.71 3.3

Orrisa 19.93 127.54 37.78 8.7

Punjab 39.00 114.97 69.86 14.9

Rajasthan 30.38 114.64 50.48 22.8

TN (Chennai) 36.21 114.85 78.50 37.0

UP (E) 17.84* 99.93* 36.01* 27.1

UP (W) 19.5

Kolkata 23.74* 103.12* 46.28* 11.6

WB 15.6

All India 23.08 112.03 49.60 391.7

Wireless subscribers Total Net Adds Net Adds

March -10 Subs (MM) Share Share

(%)

Andhra Pradesh 45.6 7.8% 15.2 7.9%

Assam 8.8 1.5% 2.9 1.5%

Bihar 37.0 6.3% 16.0 8.3%

Delhi 28.3 4.8% 6.3 3.3%

Gujarat 32.3 5.5% 8.2 4.3%

Haryana 14.1 2.4% 4.3 2.2%

Himachal Pradesh 5.0 0.9% 1.6 0.9%

J&K 5.5 0.9% 2.0 1.1%

Karnataka 37.1 6.4% 13.6 7.1%

Kerala 24.2 4.1% 7.8 4.0%

Madhya Pradesh 32.0 5.5% 11.4 5.9%

Maharashtra 43.5 7.5% 12.2 6.3%

Mumbai 26.5 4.5% 7.2 3.8%

North East 5.3 0.9% 2.0 1.0%

Orrisa 15.3 2.6% 6.6 3.4%

Punjab 20.1 3.4% 5.2 2.7%

Rajasthan 33.7 5.8% 11.0 5.7%

TN (Chennai) 53.7 9.2% 16.7 8.7%

UP (E) 44.0 7.5% 16.9 8.8%

UP (W) 30.6 5.2% 11.2 5.8%

Kolkata 16.4 2.8% 4.8 2.5%

WB 25.2 4.3% 9.6 5.0%

All India 584.3 100.0% 192.6 100.0%

Source: TRAI performance report, Mar 2010, TRAI Press Release

*Population data/projections are available state-wise only.

Notes 1.Teledensity figures are derived from the subscriber data

provided by the operators and the population projections, for urban and

rural areas, of the country, published by the Office of the Registrar

General & Census Commissioner, India. 2. Delhi service area, apart from

the state of Delhi, includes the areas served by the local exchanges of

Ghaziabad & Noida (in UP) and Gurgaon & Faridabad (in Haryana).

Key Indicators

Subscribers

The Indian telecom industry has witnessed high growth in subscribers.

The total subscriber base has increased from 19 million in FY1998 to

671.7 million as of June 30, 2010. The growth has been primarily in the

wireless sector. Wireless has been the preferred technology in India

compared to wireline services due to inherent benefits like mobility,

lower cost etc. In fact, the Indian wireless telecommunications market

is currently the fastest growing market in the world in terms of

wireless subscriber net additions. India added 208.2 million wireless

subscribers during the period June 30, 2009 to June 30, 2010 (Source:

TRAI) implying an average of 17.4 million per month. The Indian

wireless subscriber base has grown to approximately 635.5 million as of

June 30, 2010 as compared to 1 million as of March 31, 1998 (Source:

TRAI).

Shifting focus on Rural Telephones

While the urban subscribers have been growing significantly, similar

growth has not been on the rural front. However, with introduction of

mobile services in rural areas, the rural subscribers recently are

increasing.

* The rural telephone connections have gone up from 3.6 million in 1999

to 12.3 million in March 2004 and further to 123.5 million in March

2009

* Their share in the total telephones has constantly increased from

around 14% in 2005 to 31% as on December 31, 2009

* The rural subscribers have grown to 200.8 million as on March 31,

2010.

* The mobile connections have contributed substantially to total rural

telephone connections

* During 2009-10, the growth rate of rural telephones was 41.4% as

against the growth of 26.6% of urban telephones. The private sector has

contributed to the growth of rural telephones as it provided more than

81% of rural telephones as on December 31, 2009. (Source: DoT Annual

Report 2009-10, TRAI Performance report March 2010)

Potential for further Growth

Indian telecom market has still large untapped potential to grow

further. With large population yet to have access to telecommunication

and teledensity still being 53% and rural tele-density 24% (as of March

2010), potential for the sector remains large especially in urban areas

where wireline and internet services are yet to make significant

inroads. Even the mobile services space, which has seen exponential

growth in urban areas, has not reached the vast majority in rural

areas. The focus of the stakeholders is now shifting to these untapped

rural areas which will provide engine for the second phase of the

growth in Indian Telecom. Rural teledensity target is upgraded to 40%

by 2014. There are talks about one billion telephones in the country by

2015. (Source: DoT Annual Report 2009-10)

Industry Growth Drivers

India?s economic growth, favorable demographics, deregulation,

increasing affordability etc. fuelled the growth of telecommunication

industry in India. The Indian wireless industry has experienced

significant growth in recent years. The following factors are expected

to contribute to growth of the wireless industry:

* Favorable economic and demographic factors

In the recent past, India has seen robust real GDP growth. Amongst

other things, large young and working population, increasing

affordability are positives towards increasing demand for wireless

services.

* Fixed to mobile substitution

Wireless services have distinct advantages over wireline services which

include mobility, low cost, geographical coverage etc. In India,

wireless subscribers have grown from 1 MM in FY1998 to 635.5 MM as of

June 30, 2010. At the same time, wireline subscribers have increased

from 18 MM in FY1998 to 36 MM as of March 2010, though it has reduced

from 41 MM in FY 2003 to 36 MM currently (as of June 2010)

India's population is geographically spread out across semi-urban and

rural areas and the high capital intensity of providing connectivity to

wireline subscribers makes it economically un-remunerative to provide

wireline services to a large section of the population.

* Declining tariffs and reduced handset costs

Increased competition and regulatory changes have led to tariff

declines. Factors including introduction of innovative tariff plans,

launch of services by new service providers are expected to reduce the

tariffs further. Entry of low cost handsets has reduced the entry

barriers for new mobile subscribers. All these factors are contributing

significantly to the increase in the subscriber base.

* Savings in costs and capital expenditure

Economies of scale in terms of high utilization of fixed costs and

negotiation will benefit the operators. This will result in lower

costs for fresh roll - outs to expand coverage and capacity. Passive

infrastructure sharing results in lower upfront capital expenditure.

* Low existing teledensity levels and increasing focus on rural areas

India's mobile teledensity is significantly lower especially in rural

India. As of Mar 2010, the total mobile teledensity is at 50%, while

the urban teledensity rate is at 112% and the rural India teledensity

rate is at 23%. This indicates that Indian market has considerable

potential for growth especially in rural India. With high teledensity

in urban India, mobile operators in India are expanding further into

rural India.

* Launch of services by new operators

Over the last few months, a number of mobile operators have launched

mobile services in India. These include Tata DoCoMo, Uninor, STel,

SistemaShyam, Videocon Mobile etc. The launch of services has resulted

in an increase in uptake of mobile services.

* Uptake of new technologies like 3 G and Broadband Wireless Access

('BWA')

Recently, the spectrum auctions for 3G and BWA services were concluded

in India. While Bharat Sanchar Nigam Limited (BSNL) and Mahanagar

Telephone Nigam Limited (MTNL) had already been allocated spectrum and

are offering these services, the auction was for the private operators.

Once the spectrum is received, private operators are expected to start

providing services soon. 3G services allow high speed data transfer

resulting in an increase in the uptake of data services.

Indian Telecommunications Passive Infrastructure Industry

The most important requirement for offering quality mobile services is

the presence of a robust mobile network. A typical network can be

divided into three parts: (a) Mobile Station (equipment carried by the

subscriber), (b) Base Station Subsystem (which controls the radio link

with the Mobile Station) and (c) The Network Subsystem (which is the

Mobile Services Switching Center). Along with performing the function

of switching calls between mobile users, and between mobile and fixed

network users, Mobile Services Switching Center also handles the

mobility management operations. The Base Station Subsystem is composed

of two parts, the Base Transceiver Station (BTS) and the Base Station

Controller. The BTS serves a cell, which could be a few kilometers in

diameter and houses radio transceivers that are mounted on towers. The

BTS defines a cell and handles the radio link protocols with the Mobile

handset. A mobile service area has a large number of BTS?s deployed

that define and divide the service area into hexagon shape cells (known

as cell sites). The infrastructure requirement for wireless

telecommunications can be classified into passive and active

infrastructure:

The active infrastructure sharing can broadly be defined sharing of the

active elements in the network amongst service providers. Active

infrastructure sharing is complex and need thorough understanding

between the service providers. Though active infrastructure sharing is

beneficial for the service providers because it considerably reduces

the cost and time to roll-out networks by the service providers, the

issues involved are more complex as compared to passive infrastructure

sharing. (Source: TRAI Consultation Paper No 17/2006 - Consultation

Paper on Infrastructure Sharing)

Passive Infrastructure Sharing: Sharing of passive infrastructure means

sharing of physical sites, buildings, shelters, towers/masts, power

supply and battery backup, etc. Usually, the space on masts is shared.

Passive infrastructure sharing though simplest but still requires

consideration of load bearing capacity of the tower, azimuth angle of

different service providers, tilt of the antenna, height of the

antennae, before executing the agreement. While new towers can be built

taking into consideration the ultimate load bearing capacity required,

some of the existing towers may not have been designed to cater to

combined load of antennae of service providers sharing the tower

resulting in unsuitability of such towers for sharing. In case of roof

top mounted antennae, load bearing capacity of the building/ foundation

also becomes very important and may limit the possibility of sharing.

The operation and maintenance of shared site is a critical issue.

Unsatisfactory maintenance may badly affect quality of service and

coverage. Insufficient Power supply/ Power backup can totally paralyze

the operation of the mobile service in that area. (Source: TRAI

Consultation Paper No 17/2006 - Consultation Paper on Infrastructure

Sharing)

Passive Infrastructure components include

* Tower site, which is typically around 4,000 sqft of land for a Ground

Based Tower (GBT) and Roof Top Tower (RTT)

* A steel tower on which active components such as an antennae are

mounted

* Shelter room to house the equipment

* Power regulation equipment

* Battery back up

* DG Set

* Air conditioner

* Fire extinguisher

* Security Cabin

(Source: CRISIL Research Report on Telecom Towers and Allied

Infrastructure, December 2008)

According to TRAI?s Consultation paper on Infrastructure Sharing (Nov

2006), to cater to 136 million mobile subscribers, all service

providers together commissioned approximately 90,000 towers in the

country. As per the information available with TRAI, the number of

towers in the country is approximately 3 lakhs as on Feb 2010. In the

TRAI Recommendations on Spectrum Management and Licensing Framework, it

has been mentioned that as per research estimation, there will be an

average annual growth of 17% in number of towers in the next 4-5 years.

(Source: TRAI's Recommendations on Spectrum Management and Licensing

Framework, May 11th 2010). According to CRISIL Research Report on

Telecom Towers and Allied Infrastructure, December 2008, investment of

around Rs.950 billion is expected in the passive telecom infrastructure

during 2008-09 t0 2010-11

Primary Growth Drivers of Passive Infrastructure in India

* Growth in subscribers and network traffic: In the month of Mar 2010,

India added 20.3 million wireless subscribers. The wireless teledensity

in India is 44.7% as of Dec 31, 2009, which provides opportunities for

further growth in wireless subscribers. While there is growth in

subscribers, there will be demand for networks also, which will further

lead to demand for passive infrastructure. India has high Minutes of

Usage ("MoU") (410 minutes per month per subscriber for GSM and 307

minutes per month per subscriber for CDMA for QE Mar 2010) which

results in a higher demand for passive infrastructure.

* Reduction in Cost and Capital Expenditure: An asset-light service

approach is possible for telecom operators due to passive

infrastructure sharing. This allows telecom operators to focus on core

activities like marketing etc

* Network Expansion by operators: The need for network expansion in India

is driven by both coverage and capacity considerations. Coverage

considerations are to bring more areas within the reach of telecom

operators while capacity considerations are for augmenting additional

capacity to existing networks. In the initial period of operations, the

telecom operators incur coverage related capital expenditures and as

the operators start getting more subscription and usage, capacity

related capital expenditure is incurred. Both coverage and capacity

considerations result into more demand for passive infrastructure. In

addition, passive infrastructure sharing assists in faster roll out of

services.

* Roll out of services by new operators: In addition to existing

operators, a number of new operators including Sistema Shyam, S Tel,

Tata DoCoMo, Videocon and Uninor have launched services. Given the

importance of faster time to market and lower capital expenditure

requirements involved, they are also opting for sharing passive

infrastructure for their roll outs. This results in an increased demand

for passive infrastructure. Passive Infrastructure sharing is expected

to allow operators to enhance focus on core network roll out, brand

building and marketing.

* Need to improve network quality: Given the increasing number of

subscribers and the related increase in usage, coupled with spectrum

constraints, there are problems of network congestions resulting in

call drops and lower quality of services to the subscribers. According

to TRAI some operators could not meet the quality of services

requirement. One of the ways in which the operators can improve the

quality of services is to increase the network, which may result into

higher demand for passive infrastructure.

* Emergence of New Technologies like 3G and Broadband Wireless Access

("BWA"): 3G systems represent the next step in the evolution of mobile

cellular communication. 2G systems focus on voice communication, while

3G systems support increased data communication. They allow high speed

data transfer of at least 144 kbps, mobile Internet access,

entertainment, and triple-play converged communications services, and

have markedly greater capacity and spectrum efficiency than 2G systems.

Broadband Wireless Access Spectrum ("BWA") technologies enable

high-speed data communication over wireless links. BWA may offer

significant advantages over fixed line broadband systems based on cable

networks or DSL in terms of better coverage, speedy deployment, high

scalability, lower maintenance and upgrade costs, and phased investment

to match market growth. The Government of India (the "Government"),

through the Department of Telecommunications ("DoT"), has proposed to

allot the rights to use certain specified radio spectrum frequencies in

the 2.1GHz band (the "3G Spectrum") and in the 2.3GHz band (unpaired)

(the "BWA Spectrum") by means of auction in various telecom service

areas in India. The auction process has recently concluded and the

winners of the auction are expected to offer 3G and BWA services. They

would need to increase/improve their networks to be able to provide

customers such services. Thus, the adoption of new technologies will

create more demand for passive infrastructure. (Source: Notice

Inviting Applications, Department of Telecom and Auction of 3G and BWA

Spectrum Revised Information Memorandum, DoT)

* Government initiatives on infrastructure sharing: DoT has promoted

infrastructure sharing in India through schemes like the Universal

Service Obligation (USO) Fund Schemes. The USO Fund scheme entails to

provide subsidy support for setting up and managing 7,871 (revised to

7,436) number of infrastructure sites (towers) in 500 districts spread

over 27 states for provision of mobile services in the specified rural

and remote areas, where there is no existing fixed wireless or mobile

coverage. The infrastructure so created shall be shared by three

service providers for provision of mobile services. The agreements

effective from 01.06.2007 have been signed with the successful bidders

in May 2007. The status of the rollouts under the USO Fund Scheme is as

under: (Source: DoT website)

Name of Provider No of Towers to Towers commissioned

clusters be set up as of Mar 2010

RCIL (RCOM) 5 407 396

QTIL (Quippo) 1 88 88

GTL 4 412 409

KEC 4 377 373

BSNL 63 5,794 5523

Vodafone 4 309 309

Total 81 7,387 7,098

Source: DoT website

In addition, USO Fund also proposes to cover the other uncovered areas

in the country through mobile services for which additional towers are

being identified. About 11,000 towers are proposed to be installed

under the second phase of the scheme, which is likely to be launched

shortly. (Source: DoT Website)

Passive Infrastructure industry accounts for around 60 percent of the

capital costs for setting up a wireless network in India. In order to

manage costs in an environment of declining average revenue per user

(ARPU), wireless operators in India have been increasingly adopting

passive infrastructure sharing. (Source: CRISIL Research Report on

Telecom Towers and Allied Infrastructure, December 2008)

The passive telecom infrastructure market includes:

Telecom Tower companies that build own and manage the passive

infrastructure and lease it to multiple telecom operators.

(Source: CRISIL Research Report on Telecom Towers and Allied

Infrastructure, December 2008)

Allied Infrastructure companies supply products required at telecom

tower sites to keep the active equipment functional;

* Shelters: An enclosure that houses the BTS and other equipment at

tower sites. The shelter keeps the equipment at tower sites keeps the

equipment protected from the vagaries of the external environment and

reduces the amount of sunlight coming into the room

* Power Management System: Performs the functions of handling power

fluctuation, phase selection, and lightning and surge protection

* Battery back up: Provides back up during short-term disruptions of

power supply

* Air conditioning systems: Used to cool down the temperature within

the shelter

* Diesel generator sets: Used to provide back up power supply in case

of prolonged disruption of electricity supply. Generally DG sets of 7.5

or 15 KVA capacity are installed at tower site

(Source: CRISIL Research Report on Telecom Towers and Allied

Infrastructure, December 2008)

Turnkey Service Providers (TSPs) offer passive infrastructure solutions

on a turnkey basis to operator clients. This business model differs

from that of tower companies as TSPs build the site for the operator

and subsequently hand it over to the operator. Thereafter, they provide

Operations and Maintenance services to the operator depending on the

terms of the contract. On the other hand, telecom tower companies build

sites for operators and the asset lies on their own books, in return,

they receive monthly rentals from operators occupying the site.

(Source: CRISIL Research Report on Telecom Towers and Allied

Infrastructure, December 2008)

Indicative timelines in setting up a tower:

The principal steps in the construction of a tower at a new site are

acquisition of land/space, procurement of the requisite

government/municipal/local authorities and electricity related

approvals and construction and erection activity.

The first step is to identify an appropriate location and

acquiring/taking on lease the land requirement to put up the passive

infrastructure. For selecting an appropriate location, telecom tower

companies typically make use of surveys and radio frequent planning

techniques. Once land/space has been acquired and if an operator is

desirous of coming aboard the tower, telecom tower companies and their

operator clients enter into a site agreement in respect of each site,

setting forth details of the site an charges payable in respect of the

same.

The approvals required include site clearance from Standing Advisory

Committee for Frequency Allocation (SACFA), structural stability

certification of RTT from authorized architects/civil engineers,

approval from the relevant local bodies for site erection, clearance

from the relevant housing society for erection of RTT, pollution

control approval for development of diesel generator (DG), DG running

clearance from the respective state electricity authorities and a no

objection certificate from electrical load for site.

Construction and erection activity comprises laying the civil

foundation, shelter foundation, telecom tower construction, shelter

construction, and finally installing other passive components at the

tower site.

The process of setting up a tower typically requires 45-90 days from

start to finish; however, the amount of time taken may vary

significantly from case to case. Once these steps are completed and a

site is ready to be handed over to an operator, a site is said to be

"ready for installation", which means wireless service providers can

install their active components and make the networks operational.

(Source: CRISIL Research Report on Telecom Towers and Allied

Infrastructure, December 2008)

Cost Structure of Telecom Tower Companies Operating Costs

The main items of operating costs in the telecom tower business are:

* Network operating expenses comprising:

a. Power and Utilities: Power consumption in the cell site including

the cost of diesel required during power break downs and DG set is

operational; these costs are pass through in nature

b. Repairs and Maintenance: All kinds of preventive, corrective, and

breakdown maintenance required to keep a cell site operational

c. Lease rent: For the land/structure on which the tower is erected

d. Security, insurance, and other miscellaneous expenditure

(Source: CRISIL Research Report on Telecom Towers and Allied

Infrastructure, December 2008)

* Power Supply: In a number of villages the power supply is irregular

and available only for a few hours. As a result even if the battery

back up is provided, due to non availability of electricity for

reasonable duration, the batteries do not get fully charged. Further

due to frequent interruption of power supply these batteries get

shortened which in turn increases the operational cost to run services

in rural areas. Non availability of reliable power supply in rural and

semi urban India increases operational costs further as sufficient back

up systems have to be maintained. Due to lack of reliable power in

rural areas there is substantial increase in the cost of diesel for

running of the engine alternators for keeping exchanges, transmission

equipment and BTSs in the live conditions. (Source: TRAI's

Recommendations on An Approach to Rural Telephony - Suggested Measures

for an Accelerated Growth)

* Operations and Maintenance: Maintenance costs of the network in the

rural areas are high as compared to the urban areas because of several

factors such as poor transportation systems, difficulty in supply of

spare parts, non availability of skilled man-power etc.

(Source: TRAI's Recommendations on an Approach to Rural Telephony -

Suggested Measures for an Accelerated Growth)

* Employee costs (Source: CRISIL Research Report on Telecom Towers and

Allied Infrastructure, December 2008)

* Selling, General and administrative expenses (SG&A expenses) (Source:

CRISIL Research Report on Telecom Towers and Allied Infrastructure,

December 2008)

With the growing number of towers, telecom tower operators are focusing

on operating efficiency and control, monitoring infrastructure (active

and passive) and getting real time information on site performance and

improving asset management (including optimizing site equipment)

In order to emphasize and encourage the use of eco-friendly green

equipment in telecom and ICT sector, TRAI has released a

pre-consultation paper on Green Telecom and has invited stakeholders

views on the following:

1. Increasing carbon footprint- Contribution of telecom industry

2. Need for carbon credit policy for telecom sector

3. Methods / options to reduce the carbon foot print by ICT industry

in India

4. Standardization of Green Telecom equipment and incentive for their

adoption.

5. Framework for monitoring carbon emission and corrective action for

telecom sector

6. Options for environment friendly alternate energy sources

7. Cost implication for adopting alternate energy source

8. Incentive schemes for promoting alternate source of energy in

telecom sector

9. Type of incentives to boost research & development in Green Telecom

initiative

10. Challenges and alternative to meet the futuristic energy demand

for telecom sector

11. Management of e-waste and related issues

12. Any other issues

Recognizing that electricity is one of the key drivers for rapid

economic growth and poverty alleviation, the Government of India (GoI)

has set the target of providing electricity to all households by 2012.

The GoI has set a target to achieve 1,000 kWh per capita by Fiscal

2012, according to its mission of "Power for All by 2012" as envisaged

in National Electricity Policy.

Demand / Supply Scenario

Demand for energy increased at a CAGR of 6.2% from Fiscal 2003 to

Fiscal 2010 and during the same period, supply of energy increased at a

CAGR of 6.0%. As depicted in the table below, historically India

witnessed shortages in energy and peak power requirements. The energy

deficit averaged at 9.0% and the peak power deficit averaged at 12.9%

from Fiscal 2003 to Fiscal 2010 with the deficits increasing.

Period Energy Energy Energy Energy

Availability Deficit/ Deficit/ Requirement

(MU) (MU) Surplus Surplus

(MU) (%)

2002-03 545,983 497,890 (48,093) (8.8)

2003-04 559,264 519,398 (39,866) (7.1)

2004-05 591,373 548,115 (43,258) (7.3)

2005-06 631,757 578,819 (52,938) (8.4)

2006-07 690,587 624,495 (66,092) (9.6)

2007-08 739,345 666,007 (73,338) (9.9)

2008-09 774,324 689,021 (85,303) (11.0)

2009-10 830,300 746,493 (83,807) (10.1)

Average (61,587) (9.0)

CAGR 6.2% 6.0%

Period Peak Peak Peak Peak

Deficit/ Met Deficit/ Demand

(MW) (MW) Surplus Surplus

(MW) (%)

2002-03 81,492 71,547 (9,945) (12.2)

2003-04 84,574 75,066 (9,508) (11.2)

2004-05 87,906 77,652 (10,254) (11.7)

2005-06 93,255 81,792 (11,463) (12.3)

2006-07 100,715 86,818 (13,897) (13.8)

2007-08 108,866 90,793 (18,073) (16.6)

2008-09 109,809 96,685 (13,124) (12.0)

2009-10 118,472 102,725 (15,748) (13.3)

Average (12,752) (12.9)

5.5% 5.3%

Source: Power Scenario at a Glance, Apr 2010 (CEA) available at

http://www.cea.nic.in/planning

The deficits in electric energy and peak power requirements varies

across India. The following table depicts the energy and peak power

deficits across various regions in India during Fiscal 2010.

Period (Fiscal Energy Energy Energy Deficit /

2010) Require-ment Availability Surplus

(MU) (MU) (MU) (%)

Northern 253,803 224,447 (29,356) (11.6)

Western 258,551 223,153 (35,398) (13.7)

Southern 220,557 206,525 (14,032) (6.4)

Eastern 88,040 84,054 (3,986) (4.5)

N. Eastern 9,349 8,315 (1,034) (11.1)

Period (Fiscal Peak Peak Peak Deficit /

2010) Demand Met Surplus

(MW) (MW) (MW) (%)

Northern 37,159 31,439 (5,720) (15.4)

Western 39,609 32,586 (7,024) (17.7)

Southern 32,082 29,053 (3,029) (9.4)

Eastern 13,963 12,885 (1,078) (7.7)

N. Eastern 1,760 1,445 (315) (17.9)

Source: Power Scenario at a Glance, Apr 2010 (CEA) available at

http://www.cea.nic.in/planning

The North Eastern region faced the highest peak deficit of 17.9% for

Fiscal 2010, closely followed by the Western region with a peak power

deficit of 17.7%. The deficit is a consequence of slow progress in the

development of additional power generation capacity.

The Government of India, Integrated Energy Policy, Report of the Expert

Committee (August 2006) has made the following estimate for total

projected energy, peak power requirement and the installed capacity

required accordingly. The installed capacity requirement at the end of

2017 is 306 GW and 337 GW for assumed GDP growth rate of 8% and 9%

respectively against the current installed power generation capacity of

159 GW as on March 2010.

Year Billion kWh

Total Energy Energy Required

Requirement at Bus Bar(1)

@ GDP Growth Rate @ GDP Growth Rate

8% 9% 8% 9%

2011-12 1,097 1,167 1,026 1,091

2016-17 1,524 1,687 1,425 1,577

2021-22 2,118 2,438 1,980 2,280

2026-27 2,866 3,423 2,680 3,201

2031-32 3,880 4,806 3,628 4,493

Projected Peak Installed Capacity

Demand (GW) Required (GW)

@ GDP Growth @ GDP Growth

Rate Rate

8% 9% 8% 9%

2011-12 158 168 220 233

2016-17 226 250 306 337

2021-22 323 372 425 488

2026-27 437 522 575 685

2031-32 592 733 778 960

(1) Energy demand at bus bar is estimated assuming 6.5% auxiliary

consumption.

Source: Government of India Integrated Energy Policy, Report of the

Expert Committee (August 2006) available at

http://planningcommission.gov.in/reports/genrep/rep_intengy.pdf

State Gencos: State Generation Companies

CPSUs: Central Public Sector Units

IPPs: Independent Power Producers

SEBs: State Electricity Boards

STUs: State Transmission Unit

Discoms: Distribution Companies

PGCIL: Power Grid Corporation of India Limited

Generation

Generation generally refers to the bulk production of electric power

for industrial, residential and rural use. Currently, under Indian

law, any generating company can establish, operate and maintain a

generating station if it complies with the technical standards relating

to connectivity with a grid.

Installed Generation Capacity

According to CEA July 2010 Report, as on July 31, 2010, the total

installed power generation capacity in India was 163,669.80 MW. State

Electricity Boards accounted for 49.4% and Central Public Sector Units

accounted for 31.6% of the total installed power generation capacity.

The participation from the private sector is comparatively small at

19.0%.

Currently, Indian generation uses all available fuel options and

conventional, non-conventional and emerging power generation

technologies. Thermal power plants powered by coal, gas, naphtha and

oil accounted for approximately 64.5%, hydro electric plants accounted

for 22.6%, nuclear power plants accounted for 2.8% and renewable energy

sources accounted for approximately 10.0% as on July 31, 2010.

Installed Capacity as on July 31, 2010 (Figures in MW)

Sector Hydro Thermal Nuclear

State 27,115.0 50,870.7 -

Central 8,685.4 38,482.2 4,560.0

Private 1,233.0 16,294.0 -

Total 37,033.4 105,646.9 4,560.0

% of Total 22.6% 64.5% 2.8%

Sector R.E.S. Total % of Total

State 2,789.4 80,775.1 49.4%

Central - 51,727.6 31.6%

Private 13,640.0 31,167.0 19.0%

Total 16,429.4 163,669.8 100.00%

% of Total 10.0% 100.00%

R.E.S: Renewable Energy Sources

Source: Monthly Review of Power Sector July 2010 (CEA) available at

http://www.cea.nic.in/power_sec_reports

Historical Capacity Additions

India follows a system of successive five-year plans that establish

targets for economic development in various sectors, including the

power sector. During the last 10 five-year plans, the actual capacity

addition always fell short of the targeted capacity. During the last 2

five-year plans, the achievement in terms of capacity addition has

declined to a level of 47.5% in 9th and 51.5% in 10th plan, as

illustrated by the graph below. According to the CEA Monthly Review of

Power Sector reports for March 2008, March 2009 and March 2010, the

capacity addition achievement rate for FY 2008, FY 2009 and FY 2010 was

56.7%, 34.2% and 66.1% respectively.

Capacity Addition Plans (11th and 12th Plans)

The capacity additions envisaged in the 11th Plan (2008-12) and 12th

Plan (2013-2017) are 78,700 MW and 100,000 MW respectively.

The following table depicts the capacity addition during the 11th Plan

and the 12th Plan:

Projected Capacity Additions (MW)

Sector Hydro Thermal Nuclear Total

11th Plan 15,627 59,693 3,380 78,700

12th Plan 20,100 76,500 3,400 100,000

Source: CEA- Base Paper for International Conclave on Key Inputs for

Accelerated Development of Indian Power Sector for 12th Plan & Beyond

(Aug 2009)

This represents a growth in generation capacity of 9.8% per annum

during the 11th Plan period, over the installed capacity of 132,329 MW

at the end of Fiscal 2007 and growth of 8.1% per annum during the 12th

Plan period over the planned generation capacity of 211,029 MW at the

end of Fiscal 2012.

Transmission

In India, the transmission and distribution system is a three-tier

structure comprising regional grids, state grids and distribution

networks. Most interstate transmission links are owned and operated by

the Power Grid Corporation of India Limited, or PGCIL, though some are

jointly owned by the State Electricity Boards, or SEBs. In addition,

PGCIL owns and operates many inter-regional transmission lines (which

are a part of the national grid) to facilitate transfer of power from a

region of surplus to one with deficit. State grids and distribution

networks are primarily owned and operated by the respective SEBs or

state governments (through state electricity departments).

The generation resources in the country are unevenly located, the hydro

in the northern and north-eastern states and coal being mainly in the

eastern part of the country. Also peak demand does not occur

simultaneously in all states, and therefore situations may arise in

which there is surplus of power in one state while another state faces

a deficit. The regional grids facilitate transfers of power from a

power surplus state to a power deficit state. The grids also facilitate

the optimal scheduling of maintenance outages and better co-ordination

between the power plants. Expansion of regional transmission network

and inter regional capacities is critical to achieve optimal

utilization of the generation resources spread across the country.

Development of strong National Grid has therefore become a necessity to

ensure reliable supply of power to all.

Existing Transmission Lines and Planned Expansion (in cKM) (220 KV and

above)

Transmission Existing at the Planned Total at the end

Lines end of 10th Plan Addition of 11th Plan

(2007) during 11th (2012)

Plan

765KV 2,184 5,428 7,612

HVDC 500 KV 5,872 1,606 7,478

HVDC 800 / - 3,600 3,600

600 KV

400 KV 75,722 49,278 125,000

220 KV 114,629 35,371 150,000

Total 198,569 95,283 293,852

Transmission Planned Total at the end

Lines Addition of 12th Plan

during 12th (2017) Plan

765KV 25,000 - 32,612 -

30,000 37,612

HVDC 500 KV - 7,478

HVDC 800 / 5,000 8,600

600 KV

400 KV 50,000 175,000

220 KV 40,000 190,000

Total 120,000 - 413,690-

125,000 418,690

Source: CEA (Aug 2009)

The 11th Plan envisages addition of 95,283 cKM of transmission lines

and the 12th Plan envisages addition of 120,000 - 125,000 cKM of

transmission lines. This will result in total installed transmission

line network of 413,690 - 418,690 cKM of 220 KV and above class at the

end of 2017.

Existing Inter-Regional Capacity and Planned Expansion (in cKM)

System Existing at the Planned Total at the end

end of 10th Plan Addition during of 11th Plan

(2007) 11th Plan (2012)

ER-SR 3,130 500 3,630

ER-NR 3,430 8,700 12,130

ER-WR 1,790 4,700 6,490

ER-NER 1,260 1,600 2,860

NR-WR 2,120 2,100 4,220

WR-SR 1,720 1,000 2,720

NER/ER - - 6,000 6,000

NR/WR

Total 13,450 24,600 38,050

System Planned Total at the end

Addition during of 12th Plan

12th Plan (2017)

ER-SR 4,200 7,830

ER-NR 5,900 18,030

ER-WR 10,500 16,990

ER-NER - 2,860

NR-WR 10,200 14,420

WR-SR 6,300 9,020

NER/ER - - 6,000

NR/WR

Total 37,100 75,150

Source: CEA (Aug 2009)

ER: Eastern Region

SR: Southern Region

NR: Northern Region

WR: Western Region

NER: North Eastern Region

With increased focus of government of India on improving the

inter-regional transmission network, the 11th plan envisages addition

of 24,600 cKM and the 12th Plan envisages addition of 37,100 cKM to

increase the total capacity to 75,150 cKM by 2017.

Existing HVDC/Substation Capacity and Planned Expansion (220 KV and

above)

Transmission Existing at the end Planned Total at the

Lines of 10th Plan (2007) Addition end of 11th Plan

during 11th (2012)

Plan

HVDC ( in MW) 8,200 6,000 14,200

765 KV (in MVA) - 53,000 53,000

400 KV(in MVA) 92,942 52,058 145,000

220 KV(in MVA) 156,497 73,503 230,000

Total KV (in MVA) 2449,439 178,561 428,000

Transmission Planned Total at the end

Lines Addition of 12th Plan

during 12th (2017)

Plan

HVDC ( in MW) 16,000 - 30,200 -

22,000 36,200

765 KV (in MVA) 110,000 163,000

400 KV(in MVA) 80,000 225,000

220 KV(in MVA) 95,000 325,000

Total KV (in MVA) 285,000 713,000

Source: CEA (Aug 2009)

The 11th Plan envisages addition of 178,561 MVA of substation

transformation capacity and the 12th Plan envisages addition of 285,000

MVA to increase the total transformation capacity to 713,000 MVA of 220

KV and above class at the end of 2017.

Funding Requirement

Funding Requirement (Rs. Crores)

Centre State Total

11th Plan 75,000 65,000 140,000

12th Plan 140,000 100,000 240,000

The total funding requirement estimated for the Transmission Segment in

the 11th Plan and 12th Plan is Rs. 140,000 crores and Rs. 240,000

crores respectively.

In addition, the Electricity Act 2003 provides for open access, whereby

any generator has non-discriminatory access to transmission lines or

distribution systems, and permits the creation of alternative or

parallel distribution networks, provided there is available space on

the transmission network. Private sector investments have been allowed

in the transmission sector and foreign direct investment in this sector

is being encouraged by the GoI.

Distribution

Power distribution is a critical link between power generation, power

transmission and end users of power. India has high Aggregate Technical

and Commercial (AT&C) Losses of 28.4% at the end of FY 2009.

High technical losses in the system are primarily due to inadequate

investments over the years for system improvement works, which has

resulted in unplanned extensions of the distribution lines, overloading

of the system elements like transformers and conductors, and lack of

adequate reactive power support.

The commercial losses are mainly due to low metering efficiency, theft

& pilferages. This may be eliminated by improving metering efficiency,

proper energy accounting & auditing and improved billing & collection

efficiency. Fixing of accountability of the personnel / feeder

managers may help considerably in reduction of AT&C loss.

To improve the distribution of power, the GoI has formulated the

Accelerated Power Development Reform Programme ("APDRP") and Rajiv

Gandhi Grameen Vidyutikaran Yojana (RGGVY).

APDRP was launched in 2002-03 as Additional Central Assistance to the

States for strengthening and upgradation of sub-Transmission and

Distribution systems. 50% incentives were given to SEBs / Utilities to

reduce their financial losses for actual cash loss reduction.

Ministry of Power took up a comprehensive evaluation of the APDRP

programme and approved the continuation of this programme in the 11th

Plan with revised terms and conditions under the Restructured

Accelerated Power

Development and Reform Programme (R-APDRP) laying emphasis on

performance of Distribution companies and linking grants to

achievements.

R-APDRP scheme:

The focus of R-APDRP in 11th Plan and beyond is on actual, demonstrable

performance in terms of loss reduction. State Power Utilities are

expected to reduce AT&C losses to 15%. The Utilities are also to

achieve the following target of AT&C loss reduction for the Utility as

a whole: Utilities having AT&C loss above 30%: Reduction by 3% per year

Utilities having AT&C loss below 30%: Reduction by 1.5% per year

Projects under the scheme are proposed to be taken up in Two Parts.

Part - A

* Total Outlay - Rs. 10,000 crores.

* Towns having population - 30,000

* Focus Area - Preparation of Base-line data for the project area

covering Consumer Indexing, GIS Mapping, Metering of Distribution

Transformers and Feeders, Automatic Data Logging for all Distribution

Transformers and Feeders and SCADA / DMS system, IT in Distribution.

* Completion Time -3 years for 100% assistance

Part - B

* Total Outlay - Rs. 40,000 crores.

* 25%/90% Loan to Non-Special (NS)/Special Category (SC) States

* Conversion of Loan into Grant upto 50%/90% To NS/SC States

* Loan to Grant conversion on reduction of AT&C Losses to 15% In town

area

* Focus Area - Renovation, Modernization and strengthening of 11 kV

level Substations, Transformers /Transformer Centers, Re-conductoring

of lines at 11kV level and below, Load Bifurcation, Load Balancing,

HVDS, installation of capacitor banks and mobile service centers etc.

In exceptional cases, where sub-Transmission system is weak,

strengthening at 33 kV or 66 kV levels may also be considered.

* Completion Time -maximum 5 years

RGGVY Scheme:

RGGVY was launched in April-05. Under the programme 90% grant is

provided by Government of India and 10% as loan by REC to the State

Governments. REC is the nodal agency for the programme.

The RGGVY aims at:

* Electrifying all villages and habitations as per new definition

* Providing access to electricity to all rural households

* Providing electricity Connection to Below Poverty Line (BPL) families

free of charge

RGGVY aims at electrification of 125,000 un-electrified villages and

un-electrified hamlets and electrification of 7.8 crore households.

Status of RGGVY as on 1st August 2009:

* Detail Project Report (DPRs) Received- 619

* DPRs Sanctioned In X Plan -562

* Cost Of DPRs Sanctioned (X & XI Plan) - Rs.26,001 crores

* Funds released (X & XI Plan) - Rs. 15,013 crores

* Franchisees - 99,745 villages

* Villages Electrified - 63,040

* Households - 7.38 million (6.35 million BPL)

* Tentative Cost of RGGVY Phase II - Rs. 30,000 crores

The total funding requirement estimated for the Distribution and Rural

Electrification Segment in the 11th Plan and 12th Plan is Rs. 309,000

crores and Rs. 404,000 crores respectively.

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caution in preparing the CRISIL Research Report on Telecom Towers and

Allied Infrastructure, December 2008. Information has been obtained by

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Source: BS TransComm Ltd. - 06/10/2010