TowerXchange 11, 02/15

Transcription

Tower
Xchange
Journal of the telecom tower industry in Africa, CALA and Asia
ISSUE 11 | February 2015 | www.towerxchange.com
Now featuring even more comprehensive
tower counts and transaction histories!
TowerXchange Americas:
< How many towers are in Brazil?
< Argentina: are the rewards worth the risk?
< Interviews with BTC, PTI and Skysites
TowerXchange Africa:
< What’s left for SSA’s leading towercos and MNOs?
< Four opportunities for middle market towercos
< Burkina Faso, Ghana, Niger, Nigeria and Tanzania
TowerXchange Asia:
< edotco 360: views of CEO, COO, CFO and CSMO
< Myanmar’s tower power ‘Mexican standoff’
< Towercos now own 51% of Indonesia’s towers
“In Brazil, other than AMT and SBA, everyone
has an exit strategy”
- Dr Chahram Zolfaghari, CEO, Brazil Tower Company
Plus our analyses of Q4 tower deals worth $3.8bn by AMT, TBIG, STP and IHS
Tower
Xchange
With special thanks to the TowerXchange “Inner Circle”
Our informal network of advisers:
About TowerXchange
TowerXchange is your independent community
Chairman: Daniel Lee
Managing Director
Intrepid Advisory Partners
Chuck Green
CEO
Helios Towers Africa
Kurt Bagwell
President International
SBA Communications
Michel Faivre
Directeur Programme Partage
d’Infrastructure AMEA
France Telecom-Orange
Hal Hess
EVP, International Operations and
President, EMEA and Latin America
American Tower
Riana Donaldson
Manager: International Network
Operations Support
Vodacom
and Asian towers. We’re a community of
Jim Eisenstein
Chairman & CEO
Grupo TorreSur
Bimal Dayal
COO
Indus Towers
James Maclaurin
Former CEO
edotco
or invest in towers; we’re a neutral community
Terry Rhodes
Interim CEO
Eaton Towers
Nobel Tanihaha
President Director
PT SOLUSI TUNAS PRATAMA (STP)
Inder Bajaj
CEO
Helios Towers Nigeria
Marc Ganzi
President, Digital Bridge Holdings &
Mexico Tower Partners
Tunde Titilayo
Vice Chairman
SWAP International
Jeffrey Eldredge
Partner
Vinson & Elkins
Thorsten Schaefer
CEO
azeti Networks
David Meganck
Founder & COO
Acsys
Gary Staunton
CEO
Likusasa Group
Meetups and the sale of advertising, without
Areef Kassam
Director of Infrastructure
GSMA Mobile for Development
Ayman Al Adl
Executive Director, TMT MEA
Standard Chartered Bank
Enda Hardiman
Managing Partner
Hardiman Telecommunications
TowerXchange was founded by Kieron
Andrew Doyle
Managing Director
Tech & Comms Practice
Mott MacDonald
Adeel Bajwa
Senior GM of Legal Affairs and
Contracts
Warid Telecom
Laurentius Human
Senior Director
Corporate Finance
Jabil
governed with the support and advice of the
Nina Triantis
Managing Director, Global
Head of Telecoms & Media
Standard Bank
Chris Gabriel
former CEO, Zain Africa
Senior Adviser, Macquarie Group
Chairman, Clean Power Systems
Suresh Sidhu
CEO
edotco
Arun Kapur
Chairman
Irrawaddy Green Towers
Maria Scotti
CEO
Torrecom
2
| TowerXchange Issue 11 | www.towerxchange.com
Aniko Szigetvari
Head, Africa & Latin America TMT
IFC
for operators, towercos, investors and
suppliers interested in African, Latin American
practitioners formed to promote and accelerate
infrastructure sharing in Africa, Latin America
and Asia. TowerXchange don’t build, operate
host and commentator on African, Latin
American and Asian telecoms infrastructure.
The TowerXchange Journal is free to qualifying
recipients. We also provide webinars and
regular meetups. TowerXchange monetizes
this community through hosting annual
compromising editorial integrity.
Osmotherly, a TMT community host and events
organizer with 16 years’ experience, and is
TowerXchange “Inner Circle” – an informal
network of advisors
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www.towerxchange.com | TowerXchange Meetup |
11
Contents
Grupo TorreSur
6,185
American Tower
7,000
SBA Communications
Grupo TorreSur
18,851
3,496
1,163
20,000
3,496
457
8,412
25,000
30,000
457
8,412
498
35,000
498
7,000
5,000
5,000
10,000
15,000
10,000
20,000
15,000
25,00020,000
30,000
35,000
25,000
30,000
35,000
110
93
220
600
Africa: What’s left? Tower
strategies of SSA’s MNOs
350
1000
400
600
400
200
400
500
93
500
86
350
300
180
146
S
175
58
51
re
co
m
az
Co il T
m ow
pa e
ny r
II
M
T
H
do ig
Br hlin
az e
il
Z
Si
te
s
Re
de
Ph
Su
o
In en
l
te ix
rn T
at ow
To ion er
rr al
e
O
nl
in
e
C
U
en
ta
l*
Ce
nt
en
ni
To
al
rr
es
U
ni
M
da
ex
s
ic
o
Pa To
rt w
ne er
rs
100
200
40
40
s
Analysis of latest Airtel deal with IHS, news
200
te
s
23
15,000
65
800
re
ys
i
To
r
Sk
om
ec
Br
To
r
127 Weathering the forex storm in Ghana
130 TowerXchange Meetup Africa report
Te
l
CS
M
Q
T4
115 Why HTA has made Tanzania their anchor
Co
nt
in
11 Analysis of the AMT-TIM deal, other news
57 Dagan Kasavana’s PTI buys AMT Panama towers
64 ‘Brazil uncovered’, BTC and Skysites interviewed
84 Argentina: are the rewards worth the risk?
10,000
6,185
1000
56
18,851
6,185
Grupo TorreSur
CALA: Argentina, Panama, plus
how many towers in Brazil?
1,163
5,000
SBA Communications
American Tower
*Continental Towers owns a portfolio of ~1,000 towers across Colombia, Costa Rica, Panama, Nicaragua, Guatemala, El Salvador,
Jamaica and Honduras
1,163
American Tower
18,851
SBA Communications
457
3,496
8,412
498
5,000
10,000
15,000
20,000
25,000
30,000
65
220
350
400
93
CS
S
200
200
175
58
51
To
rr
e
C
U
M
T4
Q
180
co
Br
m
az
Co il T
m ow
pa e
ny r
II
M
T
H
do ig
Br hlin
az e
il
Z
Si
te
s
Re
de
Ph
Su
o
In en
l
te ix
rn T
at ow
To ion er
rr al
e
O
nl
in
e
To
r
M
Ce
nt
en
ni
al
re
s
U
ni
da
ex
s
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o
Pa To
rt w
ne er
rs
l*
en
ta
Co
nt
in
300
40
40
re
s
146
100
To
r
86
350
te
s
500
Sk
ys
i
500
ec
om
400
Te
l
600
400
200
232 CCE propose EMSaaS™ model, CPS prove it works!
241 Energy storage: EnerSys, GS Yuasa and Coslight
253 Tower power: Eltek, PRAMAC and Flexenclosure
267 Acsys vs Abloy, ZNV vs AIO, Tarantula in Asia
3
| TowerXchange Issue 6 | www.towerxchange.com
220 The Indonesian towerco success story
Special features
35,000
1000
5
204 Myanmar’s tower power Mexican standoff
110
600
231
189 edotco 360: CEO, COO, CFO and CSMO views
6,185
Independent developer towers in CALA
800
Proof of concept:
energy innovations
36 TBIG gets Mitratel, STP-XL Axiata deal, news
7,000
Grupo TorreSur
1000
183
Asia: big deals, big interviews,
big opportunities
Tower counts
and transaction histories
5 CALA SLBs raise average of US$213k per tower
20 Towercos now own 47,600 (29%) of SSA towers
33 Asia: India, Indonesia, Malaysia and Myanmar counts
69 How many towers are there in Brazil?
46 TowerXchange Meetup Americas agenda
61 Baseline data on the US tower market
166 Ericsson: business model for operators,
towercos and OEMs to cooperate
171 EY’s guide to commercial due diligence
175 How to perfect imperfections in leases
179 MM: strategies for a changing landscape
2015 calendar
< TowerXchange Meetup Americas, April 28-29
< TowerXchange Meetup Africa, October 1-2
< TowerXchange Meetup Asia, November 24-25
www.towerxchange.com | TowerXchange Issue 11 |
3
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Find out more about our business
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TowerXchange’s analysis
of the independent tower
market in CALA
1,163
American Tower
18,851
2015: a year of consolidation in Brazil,
restructuring in Mexico, regulatory turmoil in
Chile, growth in Peru and Central America… And
what of Argentina?
457
3,496
8,412
498
SBA Communications
Estimated
number of7,000
towers owned or managed by towercos in CALA
Source: TowerXchange research, quarterly filings, site lists
Grupo TorreSur
6,185
American Tower
1,163
5,000
SBA Communications
American Tower
7,000
SBA Communications
Grupo TorreSur
18,851
10,000
15,000
18,851
3,496
1,163
20,000
3,496
457
8,412
25,000
30,000
457
8,412
498
35,000
498
7,000
6,185
Grupo TorreSur
6,185
5,000
5,000
1000
10,000
15,000
10,000
20,000
15,000
25,00020,000
30,000
35,000
25,000
30,000
35,000
65
800
110
220
600
350
1000
400
175
40
51
40
s
58
re
200
To
r
200
te
s
S
re
CS
To
r
C
M
Q
U
180
co
Br
m
az
Co il T
m ow
pa e
ny r
II
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T
H
do ig
h
Br lin
az e
il
Z
Si
te
s
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Su
In oen
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rn T
at ow
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rr al
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in
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ex
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T4
as
ic
o
Pa To
rt w
ne er
rs
al
U
ni
d
ni
s
re
To
r
Ce
nt
en
Co
nt
in
en
ta
l*
100
300
m
146
ys
i
86
350
Sk
400
93
500
ec
o
200
500
Te
l
600
400
XX | TowerXchange Issue 11 | www.towerxchange.com
Q1-3 2014 was relatively quiet for the CALA
tower industry if compared to the wave of
transactions that took place in 2013. But the
Brazilian market swung back into life in Q4
with SBA securing another (the last?) tranche
of towers from Oi, and AMT deploying over
US$2bn to acquire a large portfolio from TIM
and to absorb BR Towers, a portfolio previously
acquired through sale and leasebacks (SLBs)
with Vivo and Oi and supplemented by BTS.
With the majority of operator-captive towers
now transferred to towercos, America Movil’s
Claro towers notwithstanding, 2015 will be a
year of consolidation in Brazil. AMT and SBA will
concentrate on due diligence and integration of
acquired assets, and the number three towerco
GTS refocusing on their own organic growth plans
after their sale process in 2014 did not attract any
satisfactory offers. Further tower deals in Brazil
are more likely to come from trade acquisitions, as
middle market towercos mature and are acquired,
than from SLBs. It will be interesting to see whether
the Lei das Antenas has any noticeable effect
in 2015 on the notoriously complex and timeconsuming permitting regime in Brazil, unlocking
huge pent-up demand for build to suit towers in the
country.
2015 will be similar for Mexico, with a notable
exception; America Movil’s Telcel towers being
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transferred to a carve-out towerco in response to
regulatory pressure. All indications are that Telcel’s
towers will be kept as close to the America Movil
mothership as possible – no commentators expect
an open auction process. Meanwhile, the rest of
Mexico’s tower market resembles Brazil’s in that
the majority of non-America Movil assets have been
transferred to towercos, most the new build will
be undertaken by towercos, and a growing layer of
middle market towercos have entered the market
– although few are mature enough to be subject to
trade acquisitions as early as 2015.
The Chilean tower market remains hindered by a
regulatory regime that was supposed to help but
certainly seems to be hindering the local tower
industry and its investment in ICT infrastructure.
Enterprising middle market towercos are making
good progress in Peru and Central America, SBA
Communications’ traditional stronghold. And what
of Argentina? The ‘sleeping giant’ of the CALA
tower industry is the region’s #2 mobile market, but
remains sheathed in macro-economic turbulence
and government policy that raises the spectre of
nationalisation of assets. As such concerns gradually
recede, expect the tower industry to heighten their
‘watching brief’ over Argentina in anticipation of
country risk dropping below the threshold required
for tower investment, possibly as soon as 2016/17.
There is plenty of capital flowing into CALA towers
- the three major transactions of 2014, AMT-BR
Towers, SBA-Oi and AMT-TIM, represented a
total of US$2.7bn in deployed capital, compared
to just under US$3bn spent in total over eleven
Major tower transactions in Latin America 2011/2014
Date
Seller
Buyer
Country
USD/Tower
Tower Sites
Value in USD
Q4 2014
TIM
American Tower
Brazil
185
6,480
1.2 billion
Q3 2014
American Tower
Phoenix Tower Intl.
Panama
N/A
60
N/A
Q2 2014
BR Towers*
American Tower
Brazil
212
2,530+ 2,100 excl. rights
978 million
Q2 2014
Oi
SBA Communications
Brazil
321
1,641
527 million
Q4 2013
Nextel
American Tower
Brazil
180
1,940
349 million
Q4 2013
Z-Sites
American Tower
Brazil
542
236
129 million
Q4 2013
Oi
SBA Communications
Brazil
321
2,007
645 million
Q3 2013
Nextel
American Tower
Brazil
148
2,790
413 million
Q3 2013
Nextel
American Tower
Mexico
239
1,666
398 million
Q3 2013
Oi
SBA Communications
Brazil
163
2,113
343 million
Q3 2013
Global Tower Partners*
American Tower
US/Costa Rica
306
15,700
4.8 billion
Q2 2013
Oi
BR Towers
Brazil
119
2,113
251 million
Q2 2013
Oi
Grupo TorreSur
Brazil
138
2,113
293 million
Q1 2013
Telefonica
American Tower
Brazil
190
93
18 million
Q1 2013
Axtel
American Tower
Mexico
283
883
250 million
Q1 2013
Sitesharing
BR Towers
Brazil
N/A
100+250 BTS
N/A
Q4 2012
Telefonica
Torres Unidas
Chile
N/A
400
N/A
Q4 2012
Telefonica
SBA Communications
Brazil
223
800
178 million
Q4 2012
OI
Grupo TorreSur
Brazil
214
1,208
258 million
Q3 2012
Telefonica
American Tower
Brazil
172
192
33 million
Q3 2012
Telefonica
BR Towers
Brazil
132
1,912
252 million
Q2 2012
Telefonica
American Tower
Brazil
150
1,500
225 million
Q1 2012
Telefonica
American Tower
Chile
172
558
96 million
Q4 2011
Telefonica
American Tower
Mexico
208
1,554
323 million
Q3 2011
Telefonica
American Tower
Mexico
209
584
122 million
Q3 2011
Telefonica
American Tower
Colombia
144
125
18 million
Q2 2011
Millicom
American Tower
Colombia
85
2,126
182 million
2011
Telefonica
Grupo TorreSur
Brazil
159
1,358
206 million
Q1 2011
Sitesharing
American Tower
Brazil
879
666
585 million
* company acquisition
Special thanks to Jonathan Atkin, Managing Director at RBC Capital Markets for his contribution
7
LatAm towerco breakdown by country
AMT
Andinas
Brazil
Brazil
Continental Innovattel QMC
Brazil
Mexico
SBA
Columbia
Chile
Chile
Peru
Peru
Costa Rica
Torres
Unidas
Brazil
Phoenix
Centennial
Tower Int.
Brazil
Mexico
Mexico
Columbia
Torrecom
Columbia
Brazil
Mexico
Colombia
Colombia
Colombia
Chile
Peru
Peru
Costa Rica
Costa Rica
Costa Rica
Costa Rica
Panama
Panama
Panama
Panama
Nicaragua
Nicaragua
Nicaragua
Guatemala
Guatemala
Guatemala
El Salvador
El Salvador
transactions we reported in 2013 (not counting the
AMT-GTP deal, which was US-centric). We may be
entering a period where trade acquisitions will
be as common as SLB deals, with several parties
seeking assets in Brazil and Mexico.
The premium paid for a buy and leaseback from
a CALA carrier shows no sign of abating, average
cost per tower having risen from US$128k in 2010,
US$148k per tower in 2011, US$169k in 2012,
US$188k in 2013 and US$213k per tower in 2014. It
is also notable that trade acquisitions come at an
even higher premium, which makes sense given
that the towers concerned are typically newer,
have more wind load capacity, and their lease
agreements more suited to co-location. The fact
that Brazilian towers are almost “sold out” suggests
attention may be diverted to trade acquisitions
or diverted outside Brazil for towercos seeking to
extend their growth narrative
Key executives from: SBA Communications,
Jamaica
American Tower, Trilogy International Partners,
Grupo TorreSur, Torrecom, Catalina Inc., Torres
Honduras
Ecuador
Andinas, Brazil Tower Company, Skysites, IIMT,
Ecuador
Mexico Tower Partners, and Digital Bridge
Management have already confirmed that they
will speak at the 2nd Annual TowerXchange
Towercos focusing on a single country
Brazil: GTS, Highline, CSS, T4U, Skysites, Telecom Torres, Z Sites, Rede Sul, Torre Online
Mexico: MTP, IIMT
Panama: Torres de Panama
Dom. Rep: Teletower Dominicana
Costa Rica: Catalina Inc., Tocsa
Meetup Americas, taking place in Hollywood,
FL, 28-29 April 2015, in co-location with PCIA’s
Wireless Infrastructure Show.
Contact me for further information
at [email protected]
9
American Tower acquires
TIM portfolio in Brazil
Reinforcing its leading position in Latin America and beyond
Just when we thought 2014 was going to remain a relatively
quiet year for the CALA tower industry, American
Tower delivered some much needed excitement with the
acquisition of TIM towers in Brazil for a reported US$1.2bn
in a sale and leaseback (SLB) deal.
TIM’s willingness to sell their passive infrastructure assets
had been rumoured for quite some time and, with the
current strength of the US dollar offering a virtual discount,
this deal wasn’t a real surprise. American Tower was always
the most likely a potential buyer and the company has
consolidated their position as the largest towerco in Brazil
and in the CALA region.
Arianna Neri, Head of Americas and Asia,
TowerXchange
Keywords: American Tower, South America, Brazil, TIM,
BR Towers, Nextel, Z-Sites, Acquisition, Deal Structure,
Valuation, Transfer Assets, Sale & Leaseback, Nigeria,
Africa, Bharti Airtel, Tenancy Ratio, Viom Networks, India,
Southern Asia
Read this article to learn:
< The details of the AMT-TIM deal and TowerXchange commentary
< AMT’s stock strong performance
< An acquisition spree in LatAm and Africa
< Rumours about AMT India
American Tower has trebled its asset count in
Brazil in 12 months
American Tower’s Brazilian portfolio grew to
approximately 7,000 towers last December thanks
to the acquisition of 2,790 towers from Nextel and
500 towers from Z-Sites. Its recent BR Towers deal,
which includes 4,640 sites, recently closed bringing
American Tower’s portfolio over 11,000.
Likely to be finalised in Q1 2015, the TIM deal will
transfer between 5,240 to 6,480 of TIM Cellular S.A.
towers to American Tower which will then own
some 17,000 to 18,000 towers in Brazil, more than
all the country’s other towercos combined.
Reportedly, Claro is a tenant on 1,240 TIM towers
and retains the right of first refusal (ROFR) on them,
therefore the American Tower-TIM deal on this
portion of the portfolio won’t be concluded until the
expiration of the ROFR.
In a press release, American Tower stated that the
acquired towers “will generate approximately 435
million Brazilian Reais (approximately US$ 171
million at the current exchange rate) in annual
run rate revenues (which includes ground rent
pass-through and existing collocation revenue),
and approximately 191 million Brazilian Reais
(approximately US$ 75 million at the current
exchange rate) in annual gross margin.”
American Tower’s stock is value up 42% over the
course of the 2014, net income up over 10% and
quarterly revenue up 20% year-over-year.
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Figure 1: American Tower’s Brazilian
portfolio has almost trebled in size in
deals announced in H2 2014
Figure 2: Example tenancy ratio growth (American Tower Brazil 2002-13)
3.5
18,079
3
11,599
2.5
6,959
2
1.5
Q3 2014
BR Towers
TIM*
2002
2003
2004
2005
2006
2007
* Assuming Claro declines ROFR on 1,240 TIM towers
Ten thousand towers in one week
In addition to the TIM portfolio, American Tower
entered into an agreement with Bharti Airtel in
Nigeria to acquire over 4,800 towers via a SLB deal.
American Tower announced deals for over ten
thousand towers over the course of 48 hours and
is ending the year with approximately 70,000 sites
worldwide, of which 41% are in the U.S. but the
majority are now owned internationally.
Combining organic growth and expanding tenancy
ratios with targeted strategic acquisitions, American
2008
2009
2010
2011
2012
2013
Source: American Tower Analyst Presentation 2013
Tower is maintaining an impressive growing
pattern, and confirming its leading position in the
tower industry in the Americas and worldwide.
States,” which speaks to both the pent up demand
for co-locations, and to the potential for significant
organic growth.
TowerXchange commentary on the American
Tower – TIM deal
With this latest acquisition, assuming Claro waives
it’s ROFR on 1,240 of the towers, American Tower
will bring their Brazilian tower count over 18,000,
representing approximately 25% of the tower assets
in the country, and giving AMT a significant scale
advantage over the next largest towerco in Brazil,
SBA Communications with 6,700 towers (pending
the closing of the latest Oi deal).
American Tower loves Brazil. And with good cause.
They’ve already proved that they can drive tenancy
ratios above three in ten years in the country
(see figure 2). According to Chairman, President
and CEO Jim Taiclet “there are currently 4,400
subscribers per cell site location in Brazil compared
to just 1,500 per cell site location in the United
American Tower’s acquisition from TIM looks like
13
Figure 3: Comparison of Brazilian tower transactions announced in the last
two years
TCF / EBITDA multiple
300
250
15.7x
Daily rewriting the history of the towerco
industry
16.3x
15.8x
200
14.7x
150
100
50
12.1x
AMT-TIM
SBA-Oi2
AMT-BRT
SBA-Oi1
AMT-NII
Source: RBC Capital Markets data, TowerXchange presentation
a fair valuation for both parties when compared to
the benchmarks established by other transactions
in the country in the last two years (see figure
3). Telecom tower sale processes in Brazil tend
to be succinct affairs, attracting a familiar group
of bidders who are both fiercely competitive
yet disciplined enough to walk away before
valuations get frothy. The lower cost of capital for
American Tower and SBA Communications means
the publicly listed US giants secure most of the
large opportunities (although Crown Castle were
rumoured to have looked long and hard at a recent
trade sale in Brazil, before ultimately passing on the
deal). The strength of the listed towercos may price
out the smaller local players from SLB and major
acquisitions, although in this case it was widely
rumoured the PE-backed towerco Cell Site Solutions
(CSS) made a compelling case as a viable counterparty to TIM.
More pessimistic commentators than
TowerXchange would point to ongoing discussions
about the potential merger of TIM and Oi as a
source of potential downside for the Brazilian
tower market. Indeed over the same weekend as
TIM’s Brazilian tower sale was announced, owners
Telecom Italia noted that they had “empowered
management to examine in depth the options for a
possible integration” between TIM and Brazil’s #4
ranked MNO Oi. TowerXchange feel any reduction
in the number of credit worthy tenants would be
short-lived, with the Brazilian regulator clearly
On December 1, the Economic Times of India
prematurely reported that American Tower
would acquire a 51% stake in Viom Networks for
approximately US$1bn. To date, the deal hasn’t
been inked yet however, there’s probably no smoke
without fire, and American Tower’s interest in
Viom’s assets would fulfil their appetite to secure a
larger foothold in India
“
The strength of the listed
towercos may price out the
smaller local players from SLB
and major acquisitions, although
in this case it was widely
rumoured the PE-backed towerco
Cell Site Solutions (CSS) made
a compelling case as a viable
counterparty to TIM
“
Cost per tower
350
keen to attract a new market entrant fourth play,
and imminent spectrum auctions offering the
opportunity to forcibly restructure the market to
reinstate the current competitive balance.
15
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is our
mission
National Association of Tower Erectors
The industry leader in
tower climber safety
605-882-5865 • 888-882-5865 (U.S.)
www.natehome.com
Guatemalan investors who might acquire a stake
in the company. Hondutel is seeking US$300mn to
upgrade its infrastructure and enhance its market
share.
LatAm news
A roundup of tower new across Latin America
Mexico
AT&T acquires Nextel Mexico
AT&T will buy NII Holdings’ Mexican assets for
US$1.875bn including Nextel Mexico, spectrum
licenses, network assets, retail stores and its
customer base of approximately 3 million. The
transaction follows the bankruptcy filing of NII
Holdings in Q3 2014.
Mexico
América Móvil spins of Sercotel
América Móvil is planning to spin off Sercotel
and the move has already been approved by its
shareholders. In the meantime, América Móvil has
reached out to potential buyers including Softbank
Corp. of Japan, Bell Canada, China Mobile and AT&T
with views to discuss the possible sale of Telmex
and Telcel in a deal valued as much as US$20bn.
Mexico
AT&T inks deal with Grupo Salinas
Grupo Salinas sold Iusacell to AT&T for US$2.5bn
in a deal that includes all of its wireless properties
including over 9 million customers and a network
covering approximately 70% of Mexico’s territory.
The goal is to create the ‘North American Mobile
Service’ area which will cover more than 400
million individuals and business in Mexico and the
United States.
Mexico
Guatemala
New spectrums available in 2015
Ifetel has announced it intentions to allocate
via auction or direct allocation various wireless
spectrums which will become available over the
course of this year including 1710MHz-1725MHz
paired with 2110MHz-2125MHz and 1755MHz1770MHz paired with 2155MHz-2170MHz. The
details of the allocation process haven’t been
announced yet.
Costa Rica
Operators expanding 4G offering
Kolbi, Movistar and Claro are moving forward
with the extension of their 4G LTE coverage.
All companies announced plans to extend their
footprint to uncovered areas in the upcoming
months.
Honduras
Tigo launches 4G LTE
Tigo Honduras has recently launched its 4G LTE
services in Tegucigalpa, San Pedro Sula and La
Ceiba for both pre and post-paid customers.
Honduras
Guatemalan investors interested in
Hondutel
State-owned Hondutel has attracted the interest of
Operators launching 4G LTE in major cities
Movistar Guatemala switched on its 4G LTE network
in the capital city and other key sites back in 2014
and will be soon followed by Tigo who recently
announced it will launch 4G LTE in Q2 of 2015.
Colombia
Movistar Colombia 4G results after 12
months
Movistar has reached over 300,000 4G LTE users
since its launch one year ago. 4G LTE is available in
seventy-five major cities and municipalities and the
company is ahead of the coverage requirements set
by the regulator.
Colombia
Une-EPM and Tigo release 50MHz of
spectrum
After the merger, Une-EPM and Tigo have agreed
to relinquish a 50MHz block of spectrum in the
2500MHz band. The combined entity ended up
owning as much as 135MHz of spectrum versus
the 85MHz limit set by the Superintendencia de
Industria y Comercio (SIC).
Venezuela
Digitel only company offering 4G
Digitel has announced it invested as much as
17
US$650mn over the course of 2014 to upgrade its
3G and 4G networks. To date, the company is the
only one offering 4G LTE services in major cities
across the country.
Venezuela
Infra-sharing started among
Venezuelan carriers
Movilnet, Digitel and Movistar have started the
construction of the first shared base station in
a project supported by the Ministry of Popular
Power for Higher Education, Science and
Technology. The first shared station is being
constructed in the Zona Franca Industrial,
Commercial and Services Paraguana. The
companies are planning to build ten more shared
base stations in the future.
Ecuador
Claro and Movistar in 4G talks with
government
Claro and Movistar have agreed with the national
government terms to grant 4G LTE licenses. The
document setting terms and conditions is now
being discussed by the cabinet and president for
approval and operators will then sign contracts.
The negotiated portion of spectrum included
1900MHz bands and the parties also agreed an
expansion of import quotas for LTE smartphones.
Ecuador
Optical fibre expanding nationwide
The Ministry of Telecommunications and
Information Society has recently announced that
18 | TowerXchange Issue 11 | www.towerxchange.com
Ecuador has 35,111 kilometres of fibre installed
and is expecting it to reach 45,000 km by the end of
2017. Telesemana reported that back in 2006, the
country had a fibre backbone of 3,500 kilometres
only.
Peru
Claro’s investments plans
Local newspaper Gestion reported that Claro Peru
is ready to invest US$987.1mn over the next three
years to expand coverage, increase capacity and
develop new value added services. According to
Claro, its 4G LTE customer base has reached 600,000
users in eight months of services and will work to
enhance its offering further.
Peru
Movistar announces new serviced
locations
Movistar has expanded services to 1,432 new
locations since March 2013, when its concession
was renewed. In order to meet stringent coverage
targets, the company announced investment plans
for US$1.8bn for the period 2014-2016.
Peru
Chile
700MHz frequency to be allocated within
few months
Frequencies to the winners of last year’s 700MHz
auction should be allocated within the next few
months. The three awarded companies, Entel, Claro
and Movistar, have eighteen months to launch
services using the new band.
Chile
Chilean operators reach 500,000 4G users
Claro, Movistar and Entel have announced that
they finished 2014 with half a million combined 4G
LTE subscribers and noted how the numbers could
be higher if it wasn’t for the delays in the 700MHz
spectrum allocation. Claro signed up approximately
250,000 users by the end of 2014, Movistar 200,000
and Entel 170,000. The delays were caused by the
legal action of MVNO Telestar which stated that the
obligations set in the auction were prohibitive for
small operators.
Brazil
Oi agrees to sell PT Portugal Telecom
Oi has recently stated it’s open to discuss various
New Peruvian auction planned for 2015
alternatives in terms of market consolidation. After
the approval of PT Portugal Telecom sale to Altice
Plans to launch a new spectrum auction for LTE
services are being discussed by the Agency for
the Promotion of Private Investment along with
government officials. The auction would include
three blocks of spectrum in the 698MHz-806MHz
band and should be completed by Q2 2015.
Group (for US$9.2bn), Oi has the financial bandwidth
to consider various deal options. In the meantime,
it’s been reported how Telecom Italia is discussing
with Brazilian officials a possible bid for Oi.
Brazil
Telco consortium dissolves, Telefonica set
to offload shares
XX
Anatel has recently approved the dissolution of the
Local news sources announced that Vivo has
and Carilo among others thanks to one hundred-sixty
Telco consortium which is the largest shareholder
launched 4G LTE in sixteen new cities in the states of
base transceiver stations.
in Telecom Italia. The consortium was formed by
São Paulo, Rio de Janeiro, Minas Gerais, Mato Grosso
Telefonica (Spain), Intesa Sanpaolo, Gruppo Generali
do Sul and Mato Grosso. To date, Vivo’s 4G LTE
and Mediobanca (Italy) and as a result, Telefonica
footprint reaches out to 77 million people.
is now the largest owner of TI shares (14.8%).
Telefonica has agreed to offload its stake within
Brazil
eighteen months in line with Brazilian competition
Argentina
Telecom Personal switches on 4G LTE
Argentinian operator Telecom Personal has switched
Algar Telecom denies takeover and plans
on 4G LTE in major cities including Buenos Aires,
further investments
Cordoba and Rosario with a total of eighty-four base
transceiver stations deployed at launch. This figure
law.
Reuters Brasil has recently quoted Algar Telecom’s
should reach two hundred stations by Q1 2015 and
President, Divino de Souza, stating that the company
the company’s network should cover 85% of the
has no interest in a deal in spite of rumoured
population by the end of 2016. The company has
Nextel has announced its intention to invest as much
takeover interest from other carriers. Algar Telecom
announced it will invest approximately US$1.52bn to
as US$1bn in the country in order to reach 200 new
is currently planning investment of US$162.2mn
deploy 3G and 4G nationwide
cities in 2015. To date, the company covers 497 cities
over the course of this year to utilise the 700MHz
and has recently inked a five-year network sharing
frequencies and will add forty new cities to its
agreement with Telefonica Vivo.
footprint, in addition to the one-hundred ninety-two
Brazil
Nextel announced Brazilian investments
Brazil
already covered.
Claro to invest billions in Brazilian
network
Argentina
Join 250 CALA tower industry leaders
at the TowerXchange Meetup Americas
April 28-29, Hollywood, FL
New fibre network launched by Telecom
< Speakers include all CALA’s leading towercos!
Argentina
< Regional leaders from SBA and American Tower
Claro will invest US$3.8bn to expand its 3G and 4G
Independent developers including Grupo TorresSur,
networks over the course of this year. The news was
Telecom Argentina will invest US$24.4mn to
MTP, Digital Bridge, Innovattel, Torres Andinas, IIMT,
announced by Carlos Zenteno, President of Claro
deploy a new fibre-optic network using DWDM
Torrecom, Skysites and BTC
Brazil and reported by local news outlets.
technology. Huawei is building the network and
reportedly its first phase between Buenos Aires,
Brazil
AMT buys TIM towers
Rosario and Cordoba is already active. The second
phase connecting more cities is being launched in
American Tower has entered an agreement with TIM
Brasil for the acquisition of two portfolios of towers
(approximately 6,480) for an estimated US$1.2bn.
February.
< Round table breakouts provide unique small group
interactions focused on the markets and issues most
impoortant to you
< Co-located with the PCIA Wireless Infrastructure
show, itself attended by 2,000+ US tower industry
leaders
Argentina
Movistar extends 4G footprint
For details, visit:
Brazil
Vivo launches 4G in new locations
Movistar has announced that its 4G LTE services are
www.towerxchange.com/meetups/americas
now covering Buenos Aires, Mar del Plata, Pinamar
19
TowerXchange’s analysis of the
independent tower market in Africa
TowerXchange believe a further 2,000 Airtel towers
will be sold in early 2015. Our research suggests
the transactions are pending regulatory approval
only, with announcements imminent involving
the transfer of Airtel’s towers in Gabon to Helios
Towers Africa and in Madagascar to Eaton Towers.
Airtel are set to retain their towers in Sierra Leone.
Surge in African tower deals! 29% (47,600) of Africa’s towers are now owned or
operated by towercos, a further 12,000+ are currently for sale
Figure 1: Estimated number of towers owned or managed by towercos in Africa
734
IHS Africa
1900
2230
American Tower
1998
1912
1648
14222
1226
380
4800
200
4500
1500 800
500
500 500
Eaton Towers
1400
SWAP Technologies 700
400
1600
170
300
500
250
509
Helios Towers Nigeria
Unknown Country
South Africa
DRC
Rwanda
Uganda
Nigeria
Cote d’Ivoire
Zambia
Tanzania
Ghana
Cameroon
Congo B
Malawi
Burkina Faso
Niger
Chad
1300
5000
10000
15000
20000
25000
Source: TowerXchange
23,800 additional African towers will be transferred
from MNOs to independent towercos in six major
deals announced in the second half of 2014, with
further transactions imminent. African towercos
now own or operate 47,600 (or 29%) of Africa’s
towers.
The size of Africa’s tower industry doubled in
two quarters, triggered by Airtel’s sale of towers
in 16 of their 17 African countries (sales of 4,800
towers to American Tower, 3,500 to Eaton, 3,100 to
Helios Towers Africa and 1,113 to IHS have been
announced to date). The sale of Airtel’s Nigerian
Towers, recently secured by American Tower,
stimulated two other deals in Africa’s most lucrative
mobile market, both of which were closed before
the Airtel deal; Etisalat Nigeria sold 2,136 of their
~2,700 towers to IHS, while MTN sold all 9,151 of
their Nigerian towers to the same counterparty,
retaining a 51% stake in the joint venture.
2014 concludes with independent towercos owning
close to 30% of Africa’s towers, slightly less than we
forecast as the complexity of the Airtel transaction
has slowed other processes. Nonetheless, early next
year we expect the aforementioned balance of the
Airtel tower sale to be announced, plus the sale of
~3,500 towers currently owned by MobiNil in Egypt,
where Eaton Towers are believed to be on a shortlist
of two final bidders. Processes in Senegal, Mali and
the Guineas, plus rumors of a potential tower sale
by Telkom which could trigger repercussions in
the attractive South African market, are unlikely
to close before the end of Q1 2015. With the Airtel
deal triggering follow-on deals, and with towercos
growing 10-15% per annum organically by building
the majority of the continent’s new towers, we’re
sticking to our forecast that towercos will own
46.9% of Africa’s towers by year end 2015. That will
represent the vast majority of the towers owned
by credit worthy anchor tenants – the addressable
market for towercos in Africa may be 55-60%.
Almost US$5bn of PE-backed towerco’s investors
and American Tower’s money is now at work in
the African tower sector, not including substantial
equity stakes retained by MTN, Millicom and
Vodacom. Sub-Saharan Africa has graduated to a
XX
Figure 1a: Count differentiating towers that are owned from those that are managed
and marketed by towercos
2000
19000
9936
7800
4370
800
While a glance at Africa’s tier one MNO’s remaining
tower portfolios suggest a finite amount of
investible assets remain operator-captive (see
“What’s left?”), TowerXchange forecast that the
Airtel deal will trigger a handful of follow-on deals
in 2015.
700
Filled bars = Owned Towers
700
new class of investor, and the price of participation
in this maturing asset class is now likely well over
US$100mn. Many commentators feel the three
PE-backed members of Africa’s ‘Big Four’ towercos
have now achieved the necessary diversification
of country and counterparty risk to commence the
final phase of integration and consolidation in the
run up to trade sale or IPO.
Unfilled bars = Managed and marketed towers
700
759
5000
10000
15000
20000
25000
Figure 2: Africa's regional and prospective new entrant towercos
TowerXchange are tracking several towercos who are active in or targeting Africa (there are a couple
more, but we’re not at liberty to disclose them!):
< Communication Towers Nigeria
< Frontier Tower Solutions (targeting Burundi)
< Square1 Infrastructure (Nigeria and South
Africa)
< Hotspot Network Limited (Nigeria)
< TASC (targeting MENA)
< Infratel (South Africa)
< TowerCo of Madagascar
< Pro High Site Communication (South Africa)
< Tower share (targeting MENA)
< Shared Networks Tanzania (active
TowerXchange estimate that these towercos own
or operate a total of around 1,000 African towers.
infrastructure sharing)
As the ‘Big Four’ reach scale and focus on colo
sales, efficiency programmes, and the drive to
profitability, they may open up opportunities for
‘middle market towercos’ in markets considered too
small or too risky for the ‘Big Four’ to be concerned
with. Another opportunity for the aspiring new
entrant towerco is Africa’s urgent need for a
commercially viable proposition to build single
tenant towers, even in markets where the ‘Big Four’
are active, particularly in low ARPU, off-grid areas –
a tough combination of economics which attracts a
unique breed of telecoms entrepreneur!
After 2014’s recent sell-out event, TowerXchange
are looking forward to once again hosting the
top 250 decision makers in African towers at the
next TowerXchange Meetup Africa, moving to the
prestigious ballroom at the Sandton Convention
Centre on October 1 and 2 2015
21
Figure 3: Africa’s biggest tower sharing transactions to date
Year
Operator
Country
TowerCo
Est. # of towers
Publicly stated
purchase price
Cost per tower
Jan-2010
Millicom / Tigo
Ghana
HTA
750
$54mn for 60%
$120k
Feb-2010
Multilinks
Nigeria
HTN
400
Unknown
Aug-2010
Visafone
Nigeria
IHS
800
$67mn
Oct-2010
Vodafone
Ghana
Eaton
750
Not applicable
Dec-2010
Starcomms
Nigeria
SWAP
407
$81m
$199k
Sale and leaseback
Dec-2010
Cell C
South Africa
American
1,400*
$430mn
$307k*
Sale and leaseback
Dec-2010
MTN
Ghana
American
1,876
$218.5mn for 51%
$228k
Joint venture
Dec-2010
Millicom / Tigo
DRC
HTA
729
$45mn for 60%**
$103k
Joint venture
Dec-2010
Millicom / Tigo
Tanzania
HTA
1,020
$80m for 60%**
$131k
Joint venture
Dec-2011
MTN
Uganda
American
1,000
$89m for 51%
$175k
Joint venture
Deal structure
Joint venture
Manage with license to lease
$84k
Sale and leaseback
Mar-2012
Orange
Uganda
Eaton
300
Unknown
Sale and leaseback
Mar-2012
Warid Telecom
Uganda
Eaton
400
Unknown
Sale and leaseback
Oct-2012
MTN
Cameroon
IHS Africa
827
$143m
$173k
$151k
Sale and leaseback
Oct-2012
MTN
Cote d’Ivoire
IHS Africa
931
$141m
Apr-2013
Orange
Cameroon & Cote d’Ivoire
IHS Africa
2,000
N/A
Jun-2013
Telkom Kenya***
Kenya
Eaton
1,000
N/A
Jul-2013
Vodacom
Tanzania
HTA
1,149
~$75mn for 75.5%
May-2014
MTN
Rwanda & Zambia
IHS
1,269
Unknown
Jul-2014
Airtel
Tanzania, DRC, Congo B & Chad tbc
HTA
3,100
~$400-500mn
$145k
Sale and leaseback
Aug-2014
Etisalat
Nigeria
IHS
2,136
$470-500mn
$227k
Sale and leaseback
Sale and leaseback
$65k
Joint venture
Sale and leaseback
Sep-2014
MTN
Nigeria
IHS Africa
9,151
$882mn for 49%
$197k
Joint Venture
Sep-2014
Nov-2014
Airtel
Ghana, Niger, Burkina Faso, Kenya,
Uganda & Malawi tbc
Eaton
3,500
~$525-700mn
$175k
Sale and leaseback
Airtel
Nigeria
American
4,800
$1,050mn
$219k
Sale and leaseback
Dec-2014
Airtel
Zambia & Rwanda
IHS
1,113
~US$181mn
$163k
Sale and leaseback
*Cell C deal included 1,400 existing towers plus 1,800 towers to be constructed **Millicom/Tigo’s stake in Helios Towers Tanzania reduced to 24.5% after Helios acquired towers from Vodacom Tanzania in 2013
***Telkom Kenya-Eaton deal subsequently cancelled
Figure 4: African tower industry achieves launch velocity
End of Year
Est total # of towers in Africa
Est # of African towers owned or operated by towercos
% of African towers owned by towercos
2009
2010
2011
2012
2013
2014
2015(f)
120,000
125,000
130,000
140,000
150,000
165,000
180,000
100
6,000
9,000
16,661
*25,510
47,500
84,500
0.001%
4.7%
6.9%
11.9%
17%
29%
46.9%
XX
TowerXchange’s analysis:
American Tower’s acquisition of
4,800 towers from Airtel Nigeria
‘Big Four’ competition for IHS in a market where towercos now own 76.4% of the towers
The last of the dominoes has fallen in the Airtel African
tower sale; American Tower has acquired 4,800
towers in Nigeria for US$1.05bn. Congratulations to
Airtel on raising over US$2.5bn in the sale of passive
infrastructure in Africa, a transaction that has driven
Africa’s ‘Big Four’ towercos to scale, and which has seen
American Tower complete their first transaction on the
continent since 2011.
By Kieron Osmotherly, CEO, TowerXchange
Keywords: News, Editorial, Towercos, Acquisition, Deal
Structure, Valuation, Tenancy Ratios, Fuel Security,
Anchor Tenant, Unreliable Grid, Sale & Leaseback,
Cashflow Finance, Infrastructure Sharing, Africa,
Nigeria, Airtel, MTN, Etisalat, Globacom, Helios Towers
Africa, Helios Towers Nigeria, SWAP Telecoms &
Technologies, Hotspot Network, IHS Africa, American
Tower
< A comparison of the cost per tower realised by the Etisalat, MTN and Airtel Nigerian tower sales
< Why American Tower likes Nigeria
< Which towerco has acquired, or will acquire, towers in which country from Airtel?
< Who now owns Nigeria’s towers?
Is it a fair price?
$1.05bn is right about par for American Tower’s
acquisition of 4,800 Nigerian towers from Airtel; a
good deal for both parties.
It’s tough to evaluate any tower transaction without
being able to discuss the leaseback rate, which
as usual is not in the public domain, but it’s not
heavily discounted. TowerXchange understand
Bharti Airtel Group’s focus on reducing debt means
the deal structure is balanced toward maximising
cash released. The initial term is ten years. At
$218,750 per tower, America Tower’s deal with
Airtel is close to replacement cost in Nigeria, but
represents a fair valuation for both parties since
the tenancy ratio is 1.15 from the outset, and
TowerXchange are bullish about the potential of the
Nigerian market to yield tenancy ratios >2.0 at good
lease rates in the near term.
The Nigerian towers were always the crown
jewels in the Airtel tower sale, accordingly they’ve
attracted a 33% better valuation in Nigeria than in
the rest of SSA; the 6,600 announced Airtel towers
sold to date outside Nigeria have been sold to Helios
Towers Africa and Eaton Towers for an estimated
$1.085bn, or $164,773 per tower.
To put the American Tower-Airtel Nigeria
transaction in context, IHS paid $196,700 per tower
to MTN Nigeria ($1.8bn for 9,151 towers), although
the two deals are difficult to compare as Airtel and
American Tower’s deal is a pure sale and leaseback,
while MTN retained 51% equity in their Nigerian
23
Cost per tower comparisons, 2014 Nigerian tower transactions
250,000
200,000
In analyst guidance, American Tower indicated
that the 4,800 towers they are acquiring from Airtel
in Nigeria are expected to generate annual rental
revenue of approximately US$255mn, more than
half of which is US$ denominated, generating a
gross margin of approximately US$91mn, with
SG&A costs of 11% of revenue, falling below 10%
after year one. American Tower expects to generate
20% IRR on this investment, consistent with
expectations from their other African investments.
150,000
50,000
IHS-Etisalat
Equity Stake:
Nigeria is not for the feint-hearted! But American
Tower knows what it is getting itself into – they’ve
operated in markets affected by poor grid and fuel
theft, in regions of Uganda in particular.
IHS-MTN
Equity Stake:
AMT-Airtel
Equity Stake:
deal. A better comparison can be sourced earlier
this summer, when IHS acquired 2,136 towers from
Etisalat Nigeria in a pure sale and leaseback for a
little under half a US$billion, realising a yield per
tower 4% greater than that realised by Airtel.
TowerXchange think the acquisition of 4,800
towers (representing 17% of the country’s towers)
from Airtel Nigeria is a smart move for American
Tower. Once American Tower realised they had to
engage with DC power to meet operators’ service
expectations in SSA (American Tower provides a
full DC service in Uganda, and is migrating to that
model in Ghana), American Tower’s main barrier
to entry into the most lucrative telecoms market
in Africa ceased to exist. Network planners in
Nigeria are used to leasing rather than building
towers, lease rates are established, and the tenancy
ratios on older vintages are already over two.
Indeed towers in attractive locations in urban
Lagos, Abuja and Port Harcourt are packed with
four to five tenants. The notorious unreliability of
Nigeria’s grid, compounded by the ferocity of the
country’s diesel mafia, mean operating towers in
American Tower had been interested in the
Etisalat and MTN Nigerian portfolios, but a lack of
operational footprint in the country narrowly edged
them out of the Etisalat transaction, while MTN’s
unprecedented requirement to retain a majority
stake probably dissuaded the publicly listed
towerco giant from participating in the latter stages
of the MTN process.
The final map of Airtel’s African tower sale
Airtel’s Nigerian tower sale effectively closes the
books on a job well done by the world’s fourth
largest MNO. Through the sale of 17,935 sites on
Airtel’s African Network (site count according to
Q3 results, minus whatever towers are retained
in Sierra Leone), Bharti Airtel have raised over
US$2.5bn to relieve debts estimated at US$9bn.
While the American Tower deal is added to
XX
previous announcements of 3,100 Airtel towers sold
to Helios Towers Africa, and 3,500 towers sold to
Eaton Towers, several other tower transactions are
agreed but awaiting the approval of local regulators
before announcement.
How TowerXchange forecast the Airtel towers will be divided among
Africa’s towercos
When the dust settles on the deal, TowerXchange’s
research suggests that Helios Towers Africa will
have acquired Airtel’s towers in Tanzania, Chad,
DRC and Congo Brazzaville, with HTA’s addition of
Airtel’s towers in Gabon to be announced in due
course. Meanwhile Eaton Towers will have acquired
Airtel’s towers in Ghana, Niger, Burkina Faso,
Kenya, Uganda and Malawi, with Eaton in prime
position to acquire Airtel’s towers in Madagascar.
IHS are the only logical counterparty for the sale
of Airtel’s towers in Rwanda and Zambia, in a
transaction expected to be announced imminently.
Airtel will retain their towers in Sierra Leone.
Implications of the deal for Nigerian tower
industry
It will be interesting to see how the fallout from
this transaction affects the other towercos in
Nigeria. Operators will be relieved that IHS, which
has acquired 51% of Nigeria’s towers, has another
member of Africa’s ‘Big Four’ towercos to provide
competition and benchmarking on lease rates and
service, while some of Nigeria’s smaller towercos
look ripe for consolidation.
Eaton Towers
IHS
American Tower
Airtel has retained its towers in Sierra Leone
SWAP telecoms and Technologies, with 700 towers
25
IHS Vintage 1: IHS own towers pre-2014
IHS Vintage 2: towers to be acquired from
Etisalat
IHS Vintage 3: towers to be acquired from
MTN
4,800
9,151
American Tower: towers to be acquired
from Airtel
1,300
700
250
100
600
SWAP towers
Other small Nigerian towerco towers
6,000
2,935
Independent towercos now own
76.4% of Nigeria’s towers, led by IHS
with 51% of the country’s towers
and American Tower with 17%”
HTN towers
Hotspot Network towers
2,136
“
Etisalat retained towers
Globacom retained towers
“
Tower ownership in Nigeria
Why American Tower likes Nigeria
Strong macro economic indicators
< Largest economy in Africa
< Real GDP growth >6% 2011-13
< 60% of 175mn population under 25
< Stable forex
< Significant oil reserves and low debt
Attractive tower industry indicators
including some prime locations, is in need of
reinvigoration and may be open to investment.
Helios Towers Nigeria, owners of 1,300 towers,
whose books have been rebalanced away from
their CDMA tenant origins to secure a significant
majority of their revenue from GSM tenants, has
now been left on the sidelines of three major
transactions despite a recent successful bond
issuance.
With only Globacom’s assets still operator-captive,
and no indication of an imminent tower sale by
Nigeria’s #2 ranked operator, the restructuring of
the Nigerian tower market is complete for now.
Independent towercos now own 76.4% of Nigeria’s
towers, led by IHS with 51% of the country’s towers
and American Tower with 17%. Let’s take a look
at the new telecom tower industry landscape in
Nigeria (TowerXchange estimates) above
< Largest mobile market in Africa
< Negligible fixed line penetration, ~1%
< Runway for mobile subscriber population
penetration growth, currently ~50%
< 80% of subscribers still use 2G; smartphone
penetration ~15%
< 2.6GHz and 700MHz spectrum auctions
imminent
XX
IHS to acquire 1,113 towers
from Airtel in Zambia and Rwanda for
US$181mn
IHS consolidates market leadership in the two countries; Airtel’s African tower sale has
raised US$2.3bn to date
Estimated US$ cost per tower comparisons, Airtel African IHS recently announced the
acquisition of 1,100 towers
tower sale
219k
175k
162.5k
145k
100
150
200
250
AMT in Nigeria
Eaton in Burkina Faso, Ghana, Niger, Malawi and Uganda
IHS in Zambia and Rwanda
HTA in Chad, Congo B, DRC and Tanzania
from Airtel in Zambia
and Rwanda. In fact the
provisional tower count is
929 in Zambia and 184 in
Rwanda, for a total of 1,113.
We estimate the deal value
to be US$181mn, placing the
transaction in the 3rd quartile
in terms of cost per tower
among Airtel’s recent African
tower sales.
Keywords: News, Editorial, Towercos, Acquisition, Market Overview, LTE, Anchor Tenant, Sale & Leaseback,
Infrastructure Sharing, Africa, Rwanda, Zambia, Airtel, IHS
< The structure and value of Airtel’s tower transaction with IHS in Zambia and Rwanda
Airtel’s only logical counterparty for their tower sale
in Zambia and Rwanda was IHS. IHS’s acquisition
of 1,113 towers from Airtel (929 in Zambia, 184 in
Rwanda) was announced in mid December 2014.
The deal consolidates Africa’s largest towerco’s
leadership of the tower markets in Zambia and
Rwanda, following a similar sale and leaseback
agreed between IHS and MTN in May 2014.
IHS will provide a full “tower and power” service in
both Zambia and Rwanda, assuming ownership and
responsibility for investment in energy equipment
as well as the towers themselves. IHS now has over
21,000 towers in Nigeria, Cameroon, Cote d’Ivoire,
Rwanda and Zambia – more than double the tower
count of the next largest towerco in Africa.
With an estimated US$181mn raised through the
sale of this latest tranche of towers, Airtel has
brought the proceeds raised from their African
tower sale to a running total of around US$2.3bn
with the sale of towers in just two relatively small
countries, Gabon and Madagascar, still to be
announced.
TowerXchange therefore are sticking to our
forecast that Airtel’s African tower sale will net a
total of US$2.5bn, primarily used to pay down debt
generated by Bharti Airtel’s original US$10.7bn
acquisition of Zain’s SSA business.
< The Rwandan tower market post-acquisition and the launch of ORN
< The Zambian tower market post-acquisition
< A comparison of the cost per tower paid by each of Africa’s ‘Big Four’ towercos in transactions
to date with Airtel
Airtel’s African business has been reducing trading
losses on a subscriber base of ~86mn in SSA. Airtel
Africa recorded a net loss of US$137mn on revenue
of $1.164bn during Q1 2014.
27
“
We are delighted to partner with
IHS, which has a proven track
record in passive infrastructure
management in Africa and look
forward to working with them.
This agreement will accelerate
infrastructure sharing amongst
operators and benefit customers
in form of affordable tariffs and
wider network coverage
- Christian de Faria, MD & CEO
– Africa, Bharti Airtel
“
Details of the deal
According to a statement issued by Airtel to the
Rwandan stock exchange, Airtel has entered into
an agreement with IHS Zambia for the sale of
100% of the equity in Zambian Towers Limited,
Airtel’s Africa Towers subsidiary in Zambia. The
value of the Zambian tranche of the transaction is
US$151mn, subject to the usual adjustments based
on the number of sites actually delivered, working
capital et cetera.
TowerXchange has learned that the transaction
includes 929 towers in Zambia, which works out
as an average cost per tower of US$162,540. The
deal also includes 184 towers in Rwanda, although
no data on the acquisition cost has been made
available from Rwanda.
TowerXchange estimate the total deal value to be
~US$181mn. The initial term is ten years.
number of towers acquired by IHS to 734 in
Rwanda and to 1,648 in Zambia, plus such towers
as have been built in H2 2014 under build-to-suit
programmes. IHS now owns significantly more than
50% of the towers in each country.
As the newest market entrant with the least
mature network, Airtel has the most to gain
from infrastructure sharing among the three
international operators in Rwanda.
The deal remains subject to regulatory approval.
Airtel had already announced the sale of 11,400
African towers, divided as follows:
< 3,100 towers to Helios Towers Africa, believed
to be in Tanzania, DRC, Congo B and Chad at an
acquisition cost of US$400-500mn
< 3,500 towers to Eaton Towers, believed to be in
Ghana, Niger, Burkina Faso, Kenya, Uganda and
Malawi at an acquisition cost of US$525-700mn
< 4,800 towers to American Tower in Nigeria for a
confirmed acquisition cost of US$1,050mn
Airtel’s counterparty for the sale of towers in Gabon
and Madagascar has yet to be announced, but
TowerXchange believe that Helios Towers Africa
and Eaton Towers respectively are the most likely
acquirers of those assets. We understand Airtel will
retain their towers in Sierra Leone.
Licensed in September 2011, Airtel had accelerated
their launch into Rwanda with the acquisition of
liquidated Rwandatel’s towers for US$15.5mn back
in 2012, a network they have since supplemented
before selling to IHS. MTN had a monopoly on the
Mobile subscriber market share,
Rwanda
14%
50%
36%
Implications for Rwanda and Zambia
IHS previously acquired 1,269 towers in Rwanda
and Zambia from MTN in May 2014. When closed,
IHS’s acquisition from Airtel will bring the total
MTN
Tigo
Airtel
Source: RURA, October 2014
XX
“
We have been working with Airtel for many years. And we are very
pleased to have signed our first Buy and Lease Back transaction with
Airtel. The opportunity to expand our East African business bringing
IHS’ market leading energy and infrastructure management
practices to a wider market is an excellent opportunity. We are very
excited that following this deal more mobile phone users will benefit
from the efficiencies and increased network uptimes that will result
- Issam Darwish, Executive Vice Chairman and Group CEO, IHS
Mobile penetration in Zambia was reported by
ZICTA as 63.8% in Q3 2014, with 23% mobile
Internet penetration. As Airtel and MTN vie for
“
mobile market in Rwanda until 2006, and thus had
the country’s largest network until the sale of all 550
of its towers to IHS in May 2014. Millicom-Tigo is
the #2 operator in Rwanda. LTE has been launched
in Rwanda thanks to ORN, an open-access LTE
infrastructure joint venture between the Rwandan
government and KT Corp, launched in November
2014. Mobile penetration is around 65% in Rwanda.
market leadership, thus IHS has acquired Zambia’s
two largest networks from the country’s most credit
worthy anchor tenants. Third ranked operator
Zamtel was seized by the Zambian government
from LAP GreenN in 2012 and remains embroiled in
legal dispute.
By November of 2014, Huawei had built 147 of 500
rural towers on behalf of the Zambian Information
and Communication Technology Authority (ZICTA)
– a project to be completed by 2016, with the towers
to be shared among Airtel, MTN and Zamtel
Please feel free to contact the TowerXchange team
Kieron Osmotherly
Founder & CEO
E: [email protected]
M: +44 7771 148001
For editorial & speaking enquiries regarding Americas or Asia:
Arianna Neri
Head of Americas & Asia
M: +39 338 111 2103
For editorial & speaking enquiries regarding Africa or Europe:
Frances Rose
Head of EMEA
M: +44 7793 045718
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© 2014 Site Seven Media Ltd. All rights reserved. Neither the whole nor any
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the UK. Company number 8293930.
29
Africa News
Egypt
MobiNil tower sale and leaseback may
conclude in Q2 2015
The protracted saga of the potential MobiNil tower
sale may be drawing to a close, with the timeline
suggesting a Q2 2015 close. Various reports suggest
the process was whittled down to a shortlist of
two bidders, certainly including Eaton Towers
and perhaps also Accelero Capital. Reports that
the auction has concluded with Eaton emerging
victorious are premature, although that outcome
would not be a surprise.
Egypt
Telecom Egypt agrees deal with MobiNil
and Vodafone Egypt
State-owned Telecom Egypt announced in January
2015 that it has signed a deal worth EGP15bn
(US$2bn) to provide services including domestic
transmission to MobiNil and Vodafone Egypt,
reducing the need for extensive new tower builds.
The terms of the contracts were set by the operators,
with Vodafone lasting three years and MobiNil five.
Kenya
Eaton Towers appoints Jimmy Eisenstein
as Chairman
3,200 base stations, nearly half of which are 3G
enabled. The independent tower industry has been
relatively nascent in Kenya, consisting only of Eaton
Towers’ abortive partnership with Orange-Telkom
Kenya, followed by the same towerco’s recent
acquisition of Airtel’s Kenyan assets.
Morocco
Moroccan 4G license auction details
revealed
The particulars of Morocco’s 4G spectrum contest
were revealed in November 2014. The bid deadline
was recently extended to 12 March 2015. Vivendi
sold their 53% stake in market leader Maroc
Telecom to Etisalat late last year. Maroc Telecom
competes with Medi Telecom, rebranding as
Orange, and Inwi. There has been little or no
independent towerco activity to date in Morocco,
where towers remain operator-captive. It remains
to be seen whether the simultaneous capital
requirement and need for cell site densification
brought about by 4G could stimulate tower sales in
the country.
Mozambique
Safaricom launches SSA’s first LTE
Advanced network
With initial rollout in Nairobi and Mombassa,
Safaricom’s LTE Advanced network will offer peak
speeds of up to 100Mbps. Safaricom will leverage
the widest network in Kenya, consisting over of
Surprise Viettel tower sale on the cards?
Here’s a rumor out of left field for you - the
grapevine suggests Viettel, who stirred up the
Mozambique mobile market with the the rapid
rollout of an estimated 1,600 towers to date,
might consider divesting those assets. That would
Eisenstein was a co-founder of American Tower
in 1995, after which he has founded and been
CEO of Concourse Communications, Optasite
and most recently Grupo TorreSur, the largest
privately-held towerco in Brazil. Jimmy is also
a member of the TowerXchange ‘Inner Circle’
advisory board.
Eisenstein said: “I am delighted to become
Chairman of Eaton Towers at this exciting stage
of the Company’s development. I want to thank
our outgoing Chairman and Co-Founder, Sanjiv
Ahuja, for his leadership during this period of
dramatic growth, and I am most appreciative
that he has agreed to continue as a Director of
the Company. I look forward to working with
Sanjiv and the full Board as we continue to build
Eaton Towers in the years ahead.”
seem consistent with intimations coming out of
Vietnam that the MNO had opened to the idea of
infrastructure sharing and echoed in Cameroon,
where Viettel has signed a co-location agreement
with IHS.
Nigeria
IHS raises additional US$2.6bn and
targets US$800mn loan for Nigerian JV
Existing shareholders have re-invested a further
US$2bn in IHS, topped up by US$600mn in debt.
The equity investment comes from Wendel and
XX
four new European and Investors, including FFP
and Sofina. The debt raise includes US$112.5mn
from ICBC, US$50mn from the IFC’s own account,
and a further US$37.5mn from the IFC Managed
Co-Lending Portfolio Program. IHS has now raised a
total of US$4.5bn since 2012, the largest equity raise
in Africa since 2007.
Meanwhile, INT Towers, the joint venture towerco
formed when IHS acquired a 49% equity stake in
9,151 MTN Nigerian towers last year, is closing in on
a US$800mn loan, coordinated by Citi and Standard
Chartered, according to a report in GlobalCapital.
Nigeria
At least two Nigerian towercos may be
for sale
With IHS and American Tower acquiring over
16,000 towers from MTN, Etisalat and Airtel
in Nigeria, a window may be opening for the
restructuring or sale of a couple of local tower
companies owning smaller portfolios in the country.
TowerXchange is aware of at least two such ongoing
processes.
Nigeria
NCC confirms 2.6GHz spectrum auction
The Commission will offer 14 Lots of 2 X
5 megahertz FDD paired spectrum in the 2.6 GHz
band ranging from 2500 - 2570 megahertz and 2620
to 2690 megahertz totaling 2 X 70 megahertz for
auction, with a reserve price of US$16mn for each of
the 14 lots. The NCC has set a target to raise mobile
broadband penetration in Nigeria from its current
level of 6% to 30% by 2018.
South Africa
Cell C roll out and Gauteng improvement
project details
Cell C spent R2.3bn (US$200mn) rolling out 442
towers in South Africa during 2014, of which 256
were in Gauteng, with a further 158 works in
progress due online in early 2015. The regional
focus of their investment is reflected in the
completion of Cell C’s ‘Gauteng improvement
project’ in which the RAN has been upgraded and
harmonized, with the replacement of equipment of
1,215 base stations, creating a framework to support
Cell C’s LTE strategy.
Tanzania
In-market consolidation in Tanzania?
Bloomberg cites three unnamed sources suggesting
that in-market competitors Vodacom, Airtel
and Millicom have all bid to acquire Etisalat’s
controlling stake in Zantel, which owns the last
significant portfolio of operator-captive towers in
Tanzania. Zantel’s strength in Zanzibar would make
any acquisition additive to existing revenues for any
of Tanzania’s three market leading operators, each
Headlines from the Middle East and European tower markets
Zain tower sale may be imminent
Zain emailed a statement to Reuters saying
“We have appointed advisors to advise us on
the best business model for Zain, whether it’s
tower sharing or sale and leaseback of towers
across some of our operations.” The Reuters
report suggests Citi, which handles the majority
of MNO tower asset divestitures in MEA, had
been appointed as advisors. “It’s early stages,”
continued the statement. “To date, there is no final
decision on whether we will sell or form a tower
company in any of our operations. Partnering in
a newly formed tower sharing company or selling
networks to enhance cash positions and then
leasing them back are several considerations that
Zain, like many other operators across the region,
has been deliberating for several years now. Each
particular Zain operation is unique and either of
the two models may be adapted according to what
best serves Zain from both a financial point of
view.” Zain operates in Kuwait, Iraq, Sudan, South
Sudan, Bahrain and Jordan, and has a 37% stake
in Zain Saudi.
Wind tower sale process progressing in Italy
Bloomberg suggest American Tower, Abertis,
Italy’s own EI Towers and a consortium including
F2i and experienced tower investors Providence
Equity are among bidders for 6,000 Wind towers
valued at around US$900mn by parent company
Vimpelcom
31
of whom has sold their towers to Helios Towers
Tanzania.
Uganda
Africell completes Orange Uganda
acquisition, invests US$150mn in network
Africell Chairman and CEO Ziad Dalloul said the
company plans to invest US$150mn in the network
recently acquired from Orange Uganda. Africell will
focus on the data business, and targets a market
share of 20% within four to five years.
Orange had previously sold their 300 Ugandan
towers to Eaton Towers, which added 400 from
Warid, while ATC Uganda, an American TowerMTN joint venture towerco, markets a further 1,226
towers in the country. Africell has a track record of
leveraging co-location to accelerate market entry,
acquiring 20% market share in just 18 months in
DRC without building a tower – the company relied
on co-locations on Helios Towers DRC sites
Telkom issues RFP for sale of ~6,000 sharable structures
Telkom issued an RFP in December 2014, seeking
a buyer for a diverse portfolio of ~6,000 sharable
structures, including 3-4,000 macro towers.
Fixed line incumbent Telkom launched its mobile
business in October 2010 and was privatized in
2013. Telkom’s turnaround strategy remains on
track, and its share price has better than doubled
in the last twelve months. Telkom has just over
2mn mobile subscribers, representing 2% market
share, and is in the early stages of rolling out LTEAdvanced.
While Telkom’s passive infrastructure sale process
is of interest in it’s own right, of even greater
interest could be the implications of a Telkom sale
for South Africa’s other operators, particularly
MTN. MTN had been discussing a network
agreement with Telkom (discussions believed to
be ongoing), while MTN had been on the brink of
selling their own ~6,000 towers to American Tower
in 2013, before ultimately stepping back from the
deal. Could a Telkom transaction prompt MTN
to re-evaluate their own timetable to divest their
South African towers? Vodacom denied interest in
selling their South African towers as recently as
September 2014, but if MTN or Vodacom did decide
the time was right to sell towers, they’d have no
shortage of bidders.
Towercos own just 13% of South Africa’s estimated
17,200 telecom towers, making the country the
least penetrated of SSAs most attractive tower
markets. Two of Africa’s ‘Big Four’ towercos are
in South Africa, plus a handful of ‘middle market’
towercos. Eaton Towers has around 170 BTS sites
and boasts a tenancy ratio over two, and are joined
by American Tower, which owns and markets
1,912 towers, 1,400 of which were acquired from
Cell C back in 2010 in a US$430mn deal.
Every towerco in SSA would doubtless take a long,
hard look at any substantial tower opportunity
in South Africa, as would several international
towercos, although those with African dirt under
their fingernails would likely be in pole position
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XX
Updated Southern and Southeast Asian tower count and deals
In the following pages, we are pleased to offer our readers TowerXchange’s initial findings on tower counts and major deals in Southern and
Southeast Asia. If you are aware of further details and would like to discuss them with us, feel free to contact Arianna Neri, Head of Asia and
Americas, at [email protected]
Estimated tower counts for Indonesia’s largest independent towercos
Estimated number of towers owned or managed by towercos in India
Indus Towers
114,101
Towerco-owned
Tower Bersama*
49,368 - 42% equity stake in Indus Towers
36,861
Reliance Infratel
50,000
Viom Networks*
Protelindo
42,000
GTL Infrastructure
Tower Vision
450 208 823
2,079
Bharti Infratel
American Tower*
600
STP
6,625
29,432
IBS Tower
15,195
12,533
KIN
8,600
Ascend
Retower Asia
Balitowers
4,000
20,000
40,000
60,000
80,000
100,000
120,000
Others
11,216
State owned MNOs Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam retain 70,000 towers
Estimated current state of Myanmar rollout
2,400
1,800
<
<
<
<
800
Estimated tower count for Malaysia
Pre-existing towers
Phase one towers complete
Phase two towers complete
Works in progress
3,200
edotco
3,500
1,800
13,300
Remaining
MNO-captive
State-backed and other independent
towercos
Sacofa
765
Touch Matrix
460
D’harmoni
346
KJS
309
Common Tower
260
Infra Quest
201
Yikedbina
200
Perak Integrated Networks
150
Asia Space
137
Desabina
118
Melaka ICT Holdings
95
Rangkaian Minang
90
PDC Telecommunications
43
Perlis Comm
23
33
Tower deals in Asia 2008-2014 (excluding carve-outs)
Year
Country
Seller
Buyer
US$/Tower
Towers/Sites
Value US$
2014
Indonesia
PT Telkom
Tower Bersama
$230k
4000
$904mn*
2014
Malaysia
KJS**
YTL Power
International
$48.5
309
$15mn
2014
Indonesia
XL Axiata
STP
$131.4k
3500
$460mn
2012
Indonesia
Hutchison
Protelindo
N/A
503
N/A
2012
Indonesia
PT Central
Investindo
Protelindo
N/A
152
N/A
2012
Indonesia
Indosat
Tower Bersama
$207.6k
2500
$519mn
2011
Indonesia
Infratel
Tower Bersama
N/A
595
N/A
2010
India
Essar Group
American Tower
$97.1
4450
$432mn
2010
Indonesia
Hutchison
Protelindo
$112k
1482
$165.9mn
2010
India
Aircel
GTL Infrastructure
$103k
17500
$1800mn
2009
India
Viom Networks
QTIL
£134k
18000
$2407mn
2008
Indonesia
Bakrie
STP
$64.4k
543
$136mn
2008
Indonesia
Hutchison
Protelindo
$135.4k
3692
$136mn
2008
India
Xcel**
American Tower
$98
1730
$170mn
*Structured as a share swap agreement, PT Telkom receiving ~13.7% stake in Tower Bersama over two phases in return for 100% of Mitratel
Tower Bersama also acquired Telenet Internusa, Bali Telekom, Prima Media Selaras and SKP between 2004 and 2010, plus 295 towers from
Mobile-8 in 2006
** Company acquisition
Bangladesh: edotco has acquired 49% equity in
5,300 Robi towers, offering passive and active
infrastructure sharing services. Further market
restructuring likely with Vimpelcom believed to
be considering divesting their towers, and Bharti
Infratel reportedly keen to enter Bangladesh
(although Airtel has only ~7% market share). "One of
the most unstable grids we have ever experienced"
according to NorthStar Batteries.
Cambodia: the good news: Cambodia has 130%+
penetration and a sensibly restructured MNO
market. The bad news: challenging grid conditions.
edotco active in the market with 1,500 towers.
CamGSM and Mobitel believed to have considered
tower sales in the last few years.
China: Owned by China Mobile, China Unicom and
China Telecom, China Tower Company has a contract
to build an initial 125,000 of the 900,000 towers
needed for 4G. China's existing 900,000+ towers
could be injected into China Tower in the coming
months. Q Towers also owns a modest portfolio in
China.
India: deal flow is returning in India after the
restructuring of MNO licenses forced the country's
towercos to refocus on efficiency, and to lower their
glass ceilings on potential tenancy ratios. However,
Indus, Bharti Airtel and Viom Networks all boast
tenancy ratios over two, with American Tower and
Reliance Infratel not far behind. Reports that a
deal for American Tower to acquire 51% of Viom
Networks were premature, but the union would
be make sense given AMT's appetite to increase
it's footprint in India, and given Viom Networks'
ongoing efforts to seek a trade sale or IPO.
Indonesia: the Telkom-Mitratel-TBIG and XL AxiataSTP transactions announced at the end of 2014 drove
towerco ownership to 51% of Indonesia's ~72,000
towers . TBIG and Protelindo's tenancy ratios (1.71.8), EBITDA and share price performance remain
impressive, despite growing rumours of pressure
on lease rates. Protelindo (11,216), IBS (2,079) and
Re-tower (~450) also own significant portfolios, but
our tip for growth in 2015 is KIN, who have set out
to "roll up" some of Indonesia's long tail of regional
towercos.
Malaysia: edotco has carved out 3,500 towers
XX
What proportion of the towers are owned by towercos?
100
Early stage markets: China, Pakistan, Thailand, Vietnam
Negligible towerco activity: Bhutan, Japan, Laos, PNG,
Nepal, Philippines, Singapore
80
60
85% y/e
2017
40
Pakistan: Towershare has several hundred sites
in Pakistan and are keen to close a substantial
acquisition in the country. edotco has 12,000Km of
fibre and aims to build a couple of hundred towers
in 2015. Awal Telecom also present in the market.
Successful 4G auction and aggressive rollout by
60% y/e
2014
20
70%
51%
33%
33%
31%
20%
12%
China Mobile's Zong mean there may be pent up
demand for tenancies. Local TowerXchange readers
report substantial grid problems.
Sri Lanka: Dialog has transferred 2,150 towers
to edotco, and Bharti Infratel again believed to
be interested in entering the market. High levels
of bi-lateral sharing means tenancy ratios are
closer to two than one. 4G driving need for cell site
densification.
Thailand: is TRUEGIF progressing from a piece
of financial engineering to a bona fida towerco?
m
na
Vi
et
sh
de
la
ng
Ba
Sr
iL
an
ka
a
di
bo
m
Ca
M
do
In
al
ne
ay
si
si
a
a
a
di
ar
m
ya
n
M
ya
n
m
ar
%
M
Myanmar: excitement at the greenfield rollout
designed from the outset to leverage shared towers
has given way to frustration caused by import,
permitting and licensing delays, compounded by
the incompatible power asset ownership policies
of Telenor and Ooredoo. There is light at the end
of the tunnel however, with the Myanmar Tower
and Infrastructure Providers Association being
established to lobby the Ministry and share best
practices, and with Ooredoo piloting an ESCO model.
Meanwhile, MPT are building and co-locating,
and the latest rumour about YPT connects them
with a partnership with Viettel. Expect Myanmar's
tower industry, consisting of six towercos so far, to
consolidate in the next 18-24 months.
In
from Celcom in Malaysia. A further 3,200 towers
are owned and operated by a diverse group of
State-backed independent towercos. Malaysian
commentators felt that the recent sale of one of the
State-backed towercos, KJS, is an isolated incident,
and that a substantial rollup of Malaysia's smaller
towercos is unlikely, given the alignment of political
and personal interests it would require across the
country.
True Corp has transferred another 350 towers tom
TRUEGIF, bringing the tower count to ~7,000. True
Corp, DTAC and CAT are believed to be leasing up
the towers. Recent rumours suggest TOT and CAT
have been approached about the possibility of selling
their towers to TRUGIF.
Vietnam: A host of small towercos own 3-4,000 of
the country's ~30,000 towers. The restructuring of
the operator market may (finally) see the separation
of VINAfone and VMS, leaving VMS in particular in
need of shared towers. Even Viettel is taking colocations now
35
Telkom Indonesia agrees
unique share-swap to divest Mitratel
to Tower Bersama
TBIG to become largest towerco in Indonesia, adding 3,928 Mitratel towers
PT Telkom Indonesia is to acquire a stake of up
to 13.7% in Tower Bersama in return for the
transfer of control of it’s towerco subsidiary
Mitratel, and it’s 3,928 towers, to Tower Bersama.
This unique transaction represents the best
example of the relatively favourable valuation
multiple arbitrage between mobile network
operators and towercos – at time of print Tower
Bersama was trading at 3.2x it’s IPO price. The
deal also puts Tower Bersama in pole position
should Telkom and Telkomsel’s remaining tower
assets, estimated to number 23,000, come to
market subsequently.
Keywords: News, MNOs, Towercos, Acquisition, LTE, Deal Structure, Valuation, Tenancy Ratios, Business
Case, Sale & Leaseback, Asia, Indonesia, Telkom Indonesia, Telkomsel, Mitratel, Tower Bersama
< The unique structure of the share swap
< The implications for Tower Bersama’s competitive position and relationship with Telkom
< Why the telecom analysts like the deal
< How Telkom made the case for the deal
< Controversy surrounding the deal
Unique deal structure
Tower Bersama (TBIG) has grown their portfolio
by 35% and vaulted to the top of the Indonesian
tower count table with the acquisition of Mitratel,
and their 3,928 towers, from National operator PT
Telkom Indonesia. The addition of Mitratel’s towers
brings TBIG’s tower count to 15,195, deepens
TBIG’s relationship with Telkomsel (anchor tenant
on most of Mitratel’s towers), and significantly
adds to the scale of the company from a revenue
and geographical perspective. Mitratel’s towers
are primarily located across Java and Bali, and
generated revenue of ~US$130mn in 2013, and
could generate ~US$70mn additional EBITDA for
TBIG. Crucially, the transaction suggests TBIG
would be well placed to secure an estimated 23,000
towers still retained by Telkom / Telkomsel, whose
coverage outside of major metropolitan areas is
believed to exceed that of their competitors in
many locations, and to partner with Telkomsel
in the rollout of what could be as many as 50,000
additional towers.
The first phase of the swap deal sees TBIG receive
49% of the shares in Mitratel in return for 290mn
TBIG shares (approximately a 5.7% stake). No
cash will change hands in the first phase of the
deal, although TBIG will assume ~US$234mn of
debt. The second phase could follow anytime in
the next two years, during which time PT Telkom
Indonesia has the right to swap its remaining 51%
stake in Mitratel for an additional 473mn TBIG
shares – a further 8%. This would value the deal
at the equivalent of around US$904mn, including
XX
~US$142.5mn in cash as a deferred consideration
if certain performance milestones are achieved.
In the meantime, TBIG will assume management
control and de-consolidate Mitratel.
The unique structure of the transaction
Pre-Swap
1st Stage
Post-Swap(4)
Analyst reaction
Analysts have come out in favour of the deal;
“Despite the additional debt, the deal is credit
positive for (TBIG) as it is immediately EBITDA
accretive and will help (TBIG) deleverage, given
the low gearing at Mitratel,” said Nidhi Dhruv,
a Moody’s Assistant Vice President and Analyst,
who is also Lead Analyst for TBIG. “We expect
(TBIG’s) adjusted leverage (based on last twelve
months EBITDA) to decline from 6.0x as at June
2014 to 4.6x for financial year 2015 and 4.1x in
2016. There is considerable scope for cost cuts at
Mitratel. Mitratel’s tenancy ratio of 1.1x as of endJune 2014 is quite low compared to TBI’s tenancy
ratio of 1.7x. Hence, there is potential to increase
collocations and improve margins.” Nonetheless,
Moody’s commentary on the deal goes on to
express concern that TBIG’s “financial metrics
-especially its leverage profile (remain) under
pressure.”
Saham.ws stated “Including the potential cash
payment, the deal is valued at EV/EBITDA of
approx 10.7-12.5x (with EBITDA of approx Rp850900bn in 2013 and assuming Mitratel can see co-lo
enhancement to 1.5x EBITDA could possibly reach
Rp1.1tr). This is a fair multiple, in our view.”
According to Fitch, “the all-equity deal between
c.5.7%(1)
c.13.7%(2)
100%
51%
49%
100%
< 3,928 towers (3)
< Resellerbusiness
1. Based on TBIG’s enlarged capital after issuing 290mn new shares to Telkom
2. Based on TBIG’s enlarged capital after issuing a further 473mn new shares to Telkom
3. As of June 2014
Source: Telkom investor presentation
4. If option to swap is exercised by Telkom
Telkom and (TBIG) will add about US$125mn to
(TBIG’s) annual revenue and US$70mn to EBITDA.
(TBIG)’s FFO-adjusted net leverage will improve
to around 4.0x-4.5x from 5.0x as its annualised
last-quarter run-rate EBITDA will rise to US$295mn
from US$225mn, and it will consolidate additional
net debt of US$225mn to its existing net debt of
US$1.2bn on completion of the transaction.”
How Telkom made the case for the deal
In a recent investor presentation Telkom Indonesia
gave a threefold explanation for the rationale
behind the transaction;
37
1. Increasing tenancy ratios by partnering with a
leading independent towerco, in which they noted
Mitratel’s tenancy ratio of 1.1 compared with
Tower Bersama’s 1.7
2. Creating value in the short and long term
with Telkom’s preference for a share-based
consideration allowing for further upside sharing
as the tower industry in Indonesia continues to
grow, in which they noted TBIG’s 3.2x increase in
valuation since IPO
3. Benefit for consumers, noting the government’s
enthusiasm for passive infrastructure sharing
to improve coverage and signal strength for
consumers, in which they noted that both domestic
(Indosat and XL) and international operators
(Airtel, AT&T and Verizon) had recently sold towers
After almost two years of considering how best to
monetise their tower assets, PT Telkom Indonesia
made a smart deal, taking only a small hit to the
profitability of the business due to increased tower
rental costs, while securing a significant stake
in one of the world’s most respected and fastest
growing towercos. Critically, the independence of
TBIG has been assured as Telkom Indonesia has
immediately relinquished control of Mitratel and
does not have a seat on TBIG’s board.
Inevitable controversy
When substantial assets change hands from a stateowned to a private company, even to a listed entity
that has been one of Indonesian TMT’s greatest
success stories, there is bound to be controversy,
and the Telkom-TBIG deal has been no exception.
And the waters have been muddied by a change in
management at Telkom, where Arief Yahya has left
to become Minister of Tourism.
Critics seem to have three principle complaints
about the share swap; that the enlarged TBIG
would have a monopolistic market share; that
Telkom didn’t achieve a good return from the share
swap; and that Telkom would not achieve the same
long term growth in owning a minority stake in
TBIG compared to owning Mitratel outright. We’ll
examine the case for and against each of these
objections in turn.
Critics suggesting that TBIG will secure a
monopolistic market share called for the deal to be
investigated by Indonesia’s Business Competition
Supervisory Commission (KPPU). While the
acquisition of Mitratel will make TBIG the number
one towerco in Indonesia, they are unlikely to be
considered in a dominant position as TBIG will
own only 21.1% of Indonesia’s towers, with the
number two towerco Protelindo owning 15%, and
number three towerco STP growing to 9.2% after
their recent deal with Axiata.
Critics have challenged whether Telkom swapping
dividends and potential growth from their own
towerco for a minority stake in Tower Bersama
is a good deal for the state-owned company and
ultimately government. Why is Telkom receiving
only 13.7% of Tower Bersama in exchange for
towers that constitute 26% of TBIG’s portfolio? Any
knowledgeable investor in towers will tell you that
the value resides more in the tenancies than in
the tower count, and the Mitratel towers represent
only 18% of Tower Bersama’s total tenancies.
Mitratel’s tenancy ratio is 1.1, Tower Bersama’s 1.7.
If one assumes a significant proportion of Mitratel
towers require a degree of improvement capex to
add capacity for additional tenants, and certainly
one must grant that time and expertise is required
to drive tenancy ratio growth, there’s logic behind
a 13.7% share swap.
The loudest objections concern the relative
positioning of Telkom and TBIG in relation to
Telkomsel’s network extension and densification
plans, which could involve building as many as
50,000 towers in the next five years. Would Telkom
have been better off retaining Mitratel and selling
some of it’s stock?
In the end, it comes down to the usual business
case of concentration on core competencies; by
divesting Mitratel, Telkom is free to concentrate
on selling minutes and megabytes, and they’ve
secured a significant stake in an entity whose
raison d’etre is to manage passive infrastructure,
and who can focus on driving efficiencies within
the tower network.
Telkom is swapping ownership of an immature,
operator-led towerco for a stake in an independent,
more proven entity, whose share price has leapt
3.2x since IPO.
Again, critics might ask how much growth is left
in Tower Bersama’s stock, given the maturity of
XX
US towerco stock prices before and after LTE
120
Indonesian towerco’s performance to date to
US towercos’ performance before and after the
early days of LTE in that country (MetroPCS and
Verison offered the first LTE smartphones in the
US in March 2010), it’s notable that US towerco
valuations have risen substantially as LTE has
been rolled out. It seems reasonable to forecast
Indonesia’s towercos benefitting from similar
improvements in their valuations.
Stock price at 1 March 2010, when first LTE phones came to US
Stock price at 17 December 2014, mid LTE rollout
100
80
More Indonesian deals to follow
60
109.18
95.78
40
20
75.47
39.40
Crown Castle
43.41
35.72
American Tower
the business? There remains plenty of scope for
inorganic growth in the Indonesian tower market
where towercos own 51% of Indonesia’s ~72,000
towers – a fully penetrated market might see
towercos owning 60-70%+ of the sites, as we see
in India and the USA. Indonesia needs more cell
sites, and TBIG’s organic growth is well into double
digit percentages. LTE will drive further growth as
operators add infill sites and generate amendment
SBA Communications
revenue. While Indonesia’s first LTE service, Bolt,
was launched as long ago as November 2013,
the service is limited to Jakarta and surrounding
cities, and Indonesia’s ‘Big Four’ operators are not
expected to rollout LTE until 2015 after spectrum
reallocation.
International comparisons are of limited value
because every market is unique, but if one likens
The Telkom Indonesia-TBIG deal follows hard on
the heels of XL Axiata’s sale of 3,500 towers to STP
for US$460mn. 51% of Indonesian towers are now
owned or controlled by independent towercos, a
statistic TowerXchange expect to rise in 2015 as
further towers are monetised by Indonesia’s MNOs.
Telkom and Telkomsel retains a further ~23,000
towers, XL Axiata still has ~6,500 and Indosat
retains ~5,800. All three MNOs have a track record
of divesting towers in Indonesia, and we expect
further transactions to follow.
We also anticipate further consolidation among
Indonesia’s “long tail” of small, regional towercos.
Tower Bersama and Protelindo both have a track
record of acquiring local towercos in Indonesia,
but currently the most active towerco expanding
by rolling up smaller portfolios is Komet Infra
Nusantra (KIN), boosted by a capital injection from
Providence Equity Partners, and led by CEO David
Burke, widely credited as the original architect of
Mitratel back when he served as EVP for Strategic
Investment and Corporate Planning at Telkom
39
XL Axiata drives a bargain
in US$460mn tower deal with STP
Analysts disagree about pressure on lease rates in Indonesia
Estimated breakdown of tower ownership in
Indonesia, y/e 2014
Towerco-owned
Tower Bersama*
11,216
Protelindo
STP
15,195
6,625
2,079
5,800
IBS Tower
KIN
600
450
208
823
Retower Asia
Balitowers
Others
Operator-captive
6,500
23,000
Telkom + Telkomsel*
XL
Indosat
*3,928 Mitratel towers consolidated into Tower Bersama’s count
XL Axiata has announced the sale
of 3,500 towers to PT SOLUSI TUNAS
PRATAMA (STP) for US$460mn, with
an initial term of ten years, realising a
healthy return of US$131.4k per tower.
XL’s all-in, fixed price leaseback rate
is just IDR10mn per month (a little
over US$800), significantly below the
market lease rates in Indonesia, which
tend to be around US$1,200-1,500 per
month. While those familiar with the
process agree that XL Axiata drove a
hard bargain, could this be indicative
of lease price erosion in the maturing
Indonesian tower market? And how
does this deal enhance STP’s platform?
Keywords: News, MarketWatch, Editorial, Towercos, Acquisition, Market Overview, Valuation, Lease Rates,
Opex Reduction, Bankability, Fixed Price, Leasing & Permitting, Sale & Leaseback, Infrastructure Sharing,
Asia, Indonesia, Tower Bersama, Protelindo, PT SOLUSI TUNAS PRATAMA, XL Axiata, DAS, 4G, FTTT
< The terms of the XL Axiata-STP deal, and why it made sense for both parties
< TowerXchange’s estimated breakdown of tower ownership in Indonesia
< As independent towerco markets mature, how do lease prices evolve?
< Will the XL-STP deal create pressure on lease prices in Indonesia?
< STP’s innovations in micro-poles, fibre and DAS for 4G
Prevailing tower industry wisdom runs something
like this; MNOs’ core competency is selling
minutes and megabytes, their KPIs are all about
ARPU and the Customer Experience. Towercos’
core competency is adding value to passive
infrastructure through co-location sales and
efficiency programmes, and their KPIs are about
uptime, tenancy ratios and tower cash flow. The
capital markets reward the separation of telecom
retail risk from telecom infrastructure with
increased valuations when assets are transferred
from MNOs to towercos. So it’s a win-win for
MNOs to sell their towers to passive infrastructure
specialists, and when operators choose to monetise
their towers, MNOs might choose to maximise cash
released, OR they might choose to minimise opex
costs by negotiating a discounted lease rate… So
how have XL Axiata managed to strike a deal with
STP in which they realised a healthy average cost
per tower AND secured a discounted leaseback
rate?
This is a great deal for XL Axiata. XL is 66% owned
by Malaysia’s Axiata Group, who know a thing
or two about towerco economics having recently
carved out their own towerco, edotco. Through their
deal with STP, XL Axiata have raised almost half
a billion dollars to deleverage the debt from their
2013 acquisition of Axis Telecom while securing
an anchor tenant leaseback rate 30-50% below
prevailing rates.
But this a good deal for STP too. With Protelindo and
Tower Bersama driving through the internationally
recognised indicator of ‘scale’, a 10,000 tower
XX
count, STP was in danger of being left behind. being
left behind. The deal to acquire 3,500 sites (3,233
ground based towers and 267 rooftops) from XL
Axiata doubles STP’s portfolio and cements their
position as number three in a market that in the
long term may only sustain three towercos of scale.
STP’s partnership with XL Axiata makes them more
credit worthy as a function of the status of anchor
tenant XL Axiata, number two ranked operator in
Indonesia.
While it’s true that Protelindo probably has too
much discipline to do a deal on these terms, and
while Tower Bersama concentrated their energies
on structuring the recent equity-swap deal with
PT Telkom Indonesia to add 3,928 Mitratel towers
“
STP revenue breakdown by customers pre- and post-deal
3Q 2014 - Pre XL Towers acquisition
Big 4 operators=74%
“
7%
11%
9%
31%
15%
41%
21%
12%
5%
24%
7%
XL
XL Axiata’s towers were always
going to attract a good valuation
– it’s unusual for an operatorcaptive portfolio to have a tenancy
ratio as high as 1.66, which STP
will feel they can boost even
higher in part because their
ownership of the assets lends
‘independence’
3Q 2014 - Post XL Towers acquisition
Big 4 operators=84%
Telkom
Indosat
to their portfolio, STP faced a tough negotiation,
but come out of the XL Axiata transaction with
an attractive portfolio of 6,625 assets with strong
growth prospects given less than 1% of the acquired
towers overlap existing STP locations. Indeed, postintegration, 90% of STP’s portfolio would be located
in the attractive Greater Jakarta, Java, Bali and
Sumatera regions.
XL Axiata’s towers were always going to attract a
good valuation – it’s unusual for an operator-captive
portfolio to have a tenancy ratio as high as 1.66,
which STP will feel they can boost even higher in
part because their ownership of the assets lends
‘independence’.
With energy costs passed through to the tenant, and
Hutch
Bakrie
17%
Others
Source: STP
opportunities for to create synergies and efficiencies
in O&M post-integration, STP feels they can further
increase the acquired towers’ already solid 87%
EBITDA margin.
Lease pricing war in Indonesia?
Is the XL Axiata-STP deal symptomatic of a shift in
the balance of power between MNOs and towercos,
and of pressure on lease prices in Indonesia? Let me
state up front that Indonesian tower lease prices are
typically not in the public domain, so TowerXchange
can only share third party observations. However,
we have seen lease pricing in other tower markets
develop along similar lines to what is rumoured
to be happening in Indonesia. In the early days as
an independent tower industry takes root, capital
41
“
“
the sale is credit negative for the Indonesian tower industry because it
increases the probability of increased price competition. The sale and
leaseback terms are quite favourable for XL... such favourable deal terms
are thus far unprecedented in the Indonesian tower sector – Moody’s
constrained tenants accept ‘rack rate’ pricing to
co-locate within 60-90 days on a finite number of
independent towers, accelerating time to market
for sites where permitting and building a new site
could take 12-18 months (if permitted at all).
TowerXchange have spoken to knowledgeable
sources in Jakarta who suggest that as the inventory
of independently owned and co-locatable towers
has increased, as the cost of site rental has become
an ever growing line item on operators’ balance
sheets, and as leases roll off their initial term fixed
rates, Indonesian MNOs are trying to re-price lease
rates in their favour.
Moody’s link the pressure on Indonesian lease rates
to the XL Axiata-STP transaction: “the sale is credit
negative for the Indonesian tower industry because
it increases the probability of increased price
competition. The sale and leaseback terms are quite
favourable for XL... such favourable deal terms are
thus far unprecedented in the Indonesian tower
sector.”
Not everyone agrees. “Fitch does not view the XL/
STP deal as setting a precedent for tower rental
pricing, and should not lead to heightened price
competition. In sale and lease-back transactions,
low lease rental payments can be offset by larger
up-front cash payments, so they do not necessarily
act as pricing benchmarks for standard non-sale
leasing agreements.”
Moody’s add their own caveats to the lease rate
debate; “Leading independent tower companies
(Protelindo) and (Tower Bersama) would face
revenue pressure if the XL-STP terms become a
benchmark for future rental contracts. However,
there is no immediate risk because existing
contracts are non-cancellable, non-negotiable
and long-dated. The average remaining life of
Protelindo’s contracts are 7.4 years and TBI’s are 7.2
years.” Moody’s concludes “if STP continues to offer
very competitive low rental rates on towers it builds
and purchases, (Tower Bersama) and Protelindo
may be forced to follow suit for newly signed
contracts... Price competition within the industry
will be a drag on margins and lead to telecom
operators negotiating down rental rates when their
tower lease contracts come up for renewal.”
Are STP offering below market “very competitive
low rental rates on towers”? The company’s own
commentary on the XL Axiata deal specifies that
the rental rate for non-anchor tenants on the
towers they’re acquiring is IDR 13.3mn per month
(around US$1,100). It seems like STP is pricing
aggressively, but reports of the collapse of lease
rates in Indonesia seem premature – Indonesian
tower companies remain one of the world’s most
respected success stories in the asset class
STP innovates to create new
revenues from 4G
STP’s unique selling point is their 4G play. STP
is the only listed towerco in Indonesia to have
obtained a license to lease out space on microcell poles, and they own a fibre backbone to
connect these poles – STP owns over 1,200km
of fibre in Greater Jakarta alone. This strategy
is supplemented by a comprehensive outdoor
and indoor IBS offering, the latter of which
already boasts a tenancy ratio of 2.58. 6% of
STP’s revenues already come from micro-cell
poles, fibre and DAS, a proportion they expect
to increase in future
XX
Asia News
of a 51% stake in Viom. American Tower could could
acquire stakes by Srei, Tata Group as well as minor
stakeholders. The merged portfolio would include
approximately 54,000 sites.
India
3G auction postponed
company saying: “We are currently in the process
Pakistan
Mobilink extends its 3G footprint
of conducting our service field trials across multiple
The 3G spectrum auction has been postponed until
towns and cities, as well as in-house. During this
4 March by the Department of Telecommunications
period, we are introducing our services to small
Mobilink is expanding its 3G coverage into four new
in order to give time to the cabinet to agree on the
groups of people who will offer us feedback, so that we
cities taking the total number of covered cities to
reserve price. The deadline for applications has been
can develop a robust service platform and then scale
twenty-four. The newly covered cities of Muzaffargarh,
modified to February 16.
up our services.”
Muridke, Okara and Kharian will have free access to
India
Tata to buy back NTT DOCOMO shares
India
3G services for two weeks.
16% YoY EBITDA growth at Bharti Infratel;
Indus Towers tenancy ratios surge beyond 2.0
Bangladesh
Robi delaying IPO until 2016
Tata Group received the green light from the Indian’s
The Daily Star reported that Robi Axiata
central bank to buy back a 26.5% stake in NTT
Via its subsidiary Bharti Infratel, Bharti Airtel
DOCOMO at the price of INR58 per share, more than
generated R 13,744mn revenue, and an EBITDA
might delay its mandatory IPO until July 2016 due to
double PwC’s valuation of INR23.34.
of R 6,305mn from Tower Infrastructure Services
the company’s uncertainty related to the spectrum
in Q3 2014, representing 9% and 16% YoY growth
acquisition via the 2015 auction as well as tax-related
respectively.
issues and the current national corporate tax regime
India
All Indian villages to be connected by 2016
making a listing unattractive to shareholders.
The Economic Times of India reported that the
Bharti Infratel owned 36,381 towers at the end of Q3
Department of Telecommunications plans to cover
2014, having added just over a thousand towers YoY.
New spectrum auction to take place in
the remaining unconnected 10% of rural villages
Bharti Infratel’s tenancy ratio was announced as 1.97,
March
of the country by the end of December 2016. There
up from 1.84 at the same time last year. Bharti Infratel
are approximately 55,000 unconnected villages
owns a 42% equity stake in Indus towers, which owns
Available spectrum in the 1800MHz and 2100MHz
across India to date, most of which are located in the
a further 114,101 towers with a tenancy ratio of 2.11,
bands will be auctioned in March to existing
Arunachal Pradesh, Meghalaya, Mizoram and Manipur
up from 2.0 YoY.
operators. The decision follows a meeting between
regions.
India
India
Reliance launching 4G in 2015
Bangladesh
the Bangladesh Telecommunication Regulatory
American Tower and Viom Networks close
to deal?
Commission and mobile network operators. China
China Tower expands into new provinces
Reliance Jio Infocomm is planning to launch 4G
The Economic Times reported back in December that
services in eight-hundred cities across India by June
American Tower and Viom Networks could be close to
The newly formed tower management firm China
2015. A report by the Business Standard quoted the
inking a deal worth US$900mn-1bn for the acquisition
Communications Facilities Services Corporation (China
43
Tower) has launched in twenty-eight of the country’s
of November 2014, the company had installed 305
thirty-one provinces, according to Mobile World Live.
sites in the city and although 2G is widely available
From this year on, all new sites will be deployed by
across Yangon, cell site densification is needed for 3G
China Tower which is planning to launch one million
coverage.
new sites by 2017. The company will also incorporate
the existing tower portfolio valued US$16.29bn from
Vietnam
announced expansion projects
This past October, TRUGIF has inked a network sharing
towers and DTAC is reportedly considering leasing
space on an additional five hundred towers over the
As MobiFone unfolds plans to possibly go public,
course of 2015. To date, True Corp and CAT Telecom
Malaysian Axiata Group could take part it the
signed an agreement to lease 4,360 towers from
1,500 kilometres of fibre deployed between
company’s privatisation. Axiata’s officials recently
TRUEGIF.
China and Myanmar
stated that the company is committed to long-term
the course of 2015.
cooperation with MobiFone.
Zee News reports that China Unicom recently
completed the deployment of 1,500 kilometres of
Vietnam
fibre-optic cable from the southwest of China to the
The towerco has plans to invest as much as US$123mn
in 4G towers to achieve 7,000 assets in its portfolio. In
VNPT’s restructuring plan approved by
the meantime, DTAC is planning to further enhance its
Prime Minister
3G and 4G asset base to a total of 6,500 sites by the end
of Q1 2015.
Irrawaddy Delta in Myanmar. The project started
back in 2011 and is now running through Ruili, Muse,
VNPT presented its plan to split assets into three units
Mandalay and Yangon.
which was recently approved by the Vietnamese Prime
Myanmar
TRUEGIF and DTAC signed deal and
deal with DTAC to lease approximately one hundred
Axiata potentially investing in MobiFone
China Mobile, China Unicom and China Telecom over
Myanmar
Thailand
Thailand
MPT staying out of price war
CAT Telecom and DTAC in joint venture
talks
Minister Nguyen Tan Dung. According to the proposed
plan, VNPT’s entities would be split as VNPT-Net,
operating in the network infrastructure area, VNPT-
According to the Nation, DTAC and state-owned CAT
In a recent interview with the Myanmar Times,
Vinaphone, offering mobile services and VNPT-Media
Telecom are discussing joint venture which could
representatives of MPT and KDDI Summit Global
in charge of multimedia offering.
include sharing of towers, fibre-optics as well as base
Myanmar stated that MPT decided not to get involved
in a price war with Telenor and Ooredoo. According
Thailand
stations. The joint venture could not only use but
True Corp transfers assets to TRUEGIF and
to the company, a price war might jeopardise MPT’s
enters into tower sale talks with TOT and
capital availability to invest in network expansion and
CAT Telecom
Malaysia
Axiata enters into strategic agreement with
key suppliers
other necessary services.
Myanmar
eventually lease these assets.
True Corp is planning to transfer further
Telenor: more towers needed to cover
infrastructure assets worth US$430mn to TRUEGIF
Axiata has recently signed global framework
Yangon
including 8,000 kilometres of fibre-optic cables
arrangements with Ericsson, Huawei, NEC and SIAE
and 350 towers. In the meantime, the operator is
among others, in order to obtain one streamlined
In a recent interview, Peter Furberg, CEO of Telenor,
reportedly discussing with TOT and CAT Telecom the
procurement platform for all its subsidiaries. Thanks
has stated that at least eight-hundred towers are
sale of their tower portfolios to TRUEGIF.
to the agreements, the company is expecting to save us
needed in Yangon to achieve good 3G coverage. As
much as US$100mn over the next three years.
XX
Malaysia
DiGi launches 4G in Sabah
DiGi Telecommunications has launched its 4G LTE
network in Kota Kinabalu in the Sabah region. The
new service will bring to 1Mbps the minimum speed of
internet services in the area.
Have you missed one of the past ten editions of
TowerXchange?
Standard Bank: aggressive bids likely to continue
Tower
Indonesia
STP and TBIG look further into fibre-optic
Xchange
Helios take you inside the due diligence process
Who’s who: turnkey infrastructure and law firms
Africa’s New telecoms infrastructure journal
TowerPower: reducing Africa’s reliance on diesel
ISSUE 2 | FEBRUARY 2013 | www.towerxchange.com
Why IHS invested in Cameroon and Cote d’Ivoire
Tower
Xchange
Eaton CTO Thomas Jonell’s procurement priorities
Egypt’s 4 companies licensed to lease infrastructure
STP and Tower Bersama are reportedly planning to
expand their fibre-optic footprint. To date, STP owns and
operates more than 2,400 kilometres of fibre and this
business accounts for 9-10% of its revenue, according to
the Jakarta Post. STP plans to expand its fibre business
to reach 50% of its revenue within four years.
Indonesia
XL Axiata paying off debt via recent tower
sale and considers divesting 4,500 more
Growth stock ATC vs the PE-backed towercos
ISSUE 3 | April 2013 | www.towerxchange.com
Tower
Xchange
The front lines of the African Tower Industry
Who’s who in the telecoms infrastructure supply chain
ISSUE 4 | June 2013 | www.towerxchange.com
Tower
< Vodacom and Etisalat’s tower strategy
Xchange
< MTN’s tower strategy in Rwanda and Zambia
< HTN, SWAP and BMI on the Nigerian tower market
< Tanzania case study with exclusive HTA interview
The journal for the emerging market telecom tower industry
< Tower deal news from Egypt, Mali, Senegal & Rwanda
< TowerCo of Madagascar, FTS and Eaton interviews
ISSUE 5 | September 2013 | www.towerxchange.com
< Who’s whos in Managed Services, RMS & TowerPower
Tower
Xchange
Marc Rennard: Why Orange Tower
is sharing
towers
Xchange
< A closer look at Telkom Kenya’s deal with Eaton
Don’t miss TowerXchange’s checklist of the data you need to buy and sell towers
Structuring deals to meet the requirements of each affiliate
ISSUE 6 | December 2013 | www.towerxchange.com
African tower market heats up
The drivers of SBA
Tower
Xchange
Top 200 decision makers
in African
towers
TowerXchange
Meetup
TowerXchange
maps
past,invited
currentto
and
future tower transactions
Communications’
expansion
Exclusive interview with Kurt Bagwell,
President - International, SBA Communications
Let’s meet up!
Tower
Join 200 African tower decision makers at
the TowerXchange Meetup
< Airtel’s 15,000 African towers may be sold country by country
Tower
Xchange
< The risks and rewards of operating towers in DRC
in African Towers converge at TowerXchange Meetup
< Insights and images from the TowerXchange Meetup Africa
XL Axiata raised US$444.1mn through the recent sale
of 3,500 telecom towers to STP and could use as much
as half of it to cover its debt.
TowerXchange forecasts the growth of African towercos from 23k towers today to 54k by the end of 2014
< Brazil case study: 9,000 new towers needed for World Cup
Xchange
< Rural infraco pioneers Connect Africa and AMN
ISSUE 9 | August 2014 | www.towerxchange.com
Tower
< Accelerating new tower construction - the Lei das Antennas
Xchange
The TowerXchange Who’s Who:
18 advisory firms with experience
of emerging market tower deals Tower
Xchange
< Brazil’s Ministry of Communications’ view of the tower industry
< LatAm transactions to date, plus new deals by AMT and SBAC
< Cameroon and Cote d’Ivoire case study
< IHS acquires 2,136 Etisalat Nigeria towers
Tower on opportunities
Xchangein MENASA
TowerXchange extends our coverage to include Africa and the Americas!< Towershare
ISSUE 10 | October 2014 | www.towerxchange.com
How to raise capital for towers
< CEO Olivier Puech on AMT’s BR Towers deal
< Maria Scotti on Central America and Mexico
< Torres Andinas: BTS in Colombia and Peru
Debt, bond issuance and the impact of
country risk and MNO consolidation
< 17,877 towers sold: new African tower market analysis
TowerXchange Asia:
In the meantime, the operator is considering selling
more telecom towers over the course of 2015. CEO
Hasnul Suhaimi recently told The Jakarta Post that
any sale “will totally depend on whether we need the
money or not.” Apparently, as many as 4,500 towers
might be up for sale.
Indonesia
Tower Bersama adding sites to its portfolio
this year
TBIG is looking at investing as much as US$161mn to
enhance its tower portfolio and add as many as 1,5002,000 new towers over the course of this year
< How Etisalat Nigeria accelerated the tower sale process
“With our latest acquisition from Airtel, HTA
now owns over 7,800 towers in Africa”
CEO, Helios Towers Africa
< Case studies on Nigeria, Kenya, Cameroon, South Africa
< Myanmar: 17,300 towers by 2017, Telenor interview
< Asian tower report, India and Indonesia tower counts
< Commentary on the new towerco for China
– Chuck
Green,
TowerXchange
Americas:
< Latest tower counts and market size data for CALA
< Costa Rica opens up to operators and towercos
< Interview
withan
JoséESCO
Escobar,
President
of Catalina
Towerco or powerco? Views from a major
vendor,
and
a community
power venture
TowerXchange Asia:
< Umang Das predicts bright future for India and Myanmar
< The structure of the tower industry in Malaysia
< How Digicel has excelled in its first towerco venture
Tower
Xchange
Terry Rhodes back on familiar ground:
Eaton acquires 3,500 African towers from Airtel
Plus! Huawei and Ericsson on the implications of tower deals for managed services
Tower
Xchange
For a limited period, you can download back issues FREE at:
www.towerxchange.com/publications
Ensure you have the entire back catalogue of TowerXchange, which provides a record of emerging
market tower industry evolution, and a comprehensive index of proven solution and service
providers in Africa, LatAm and Asia.
45
Co-located with the PCIA Wireless Infrastructure Show
Meetup Americas 2015
28-29 April,
Diplomat Resort & Spa,
Hollywood, Florida
A unique networking experience with 250 leaders of the CALA telecom tower industry
Register online at www.towerxchange.com/meetups/americas. Questions? Call Annabelle on +44 7423 512588
Gold Sponsor:
Created and hosted by:
Silver Sponsor:
Exhibitors:
Media Partners:
Associate Partner:
Co-located with:
The unique experience of a TowerXchange Meetup
Personal development
< Learn from 250 peers, the leaders of the CALA tower industry
< Align your role and strategy with the needs of the ecosystem
Experience
< Networking
< Selective audience
Infrastructure focused
< Undiluted focus on passive
infrastructure
< Curated exhibition
< Relax and enjoy
< Professionally hosted
< Real estate
< Power
< Construction
< Monitoring
< O&M
Learning
< CALA market forecasts
< Q&A with the CEOs
< Round tables add insight
< Structured introductions
< Select your own agenda
< Local market knowledge
Insights
< Market transformation
< Next sale & leasebacks
Connections
< BTS opportunities
< Top 250 decision makers
< Site upgrades
< Energy opex reduction
< Country specific round tables
< Towerco CXOs
< MNO tower strategists
< Investors
< Strategic advisors
< Proven suppliers
For more information visit www.towerxchange.com/meetups/americas
TowerXchange Meetup Americas
Westin Diplomat, Hollywood, Florida | 28-29 April 2015
Day One | Tuesday 28 April
Day Two | Wednesday 29 April
8:00 Registration and coffee
9:00 Keynote speech
9:00 Welcome and opening remarks
9:30 Third structured networking roundtable
9:10 TowerXchange analysis of the CALA tower
industry
10:50 Morning coffee and networking
g Manuel Aviles, President and Founder, 11:20 Towerco keynote panel Part I
g Bill Bates, VP Business Development, SBA
10:40 Morning coffee and networking
12:20 Strategic partners panel part II: the
importance of partner selection for ROI
optimisation and opex reduction
g Marco Cordoni, Senior Partner, Analysys Mason
11:10 First structured networking roundtables
12:40 Networking lunch
g
9:30 Mobile network operator decision makers
panel
Early confirmed speakers include:
g Zaid Alsikafi, Managing Director, Madison
Dearborn Partners
g Jonathan Atkin, Managing Director, RBC
Capital Markets
Innovattel / Torresec
Communications
g Juan Cueria, Vice President and COO, Innovattel
g Mandar Donde, Managing Director - Media and Telecom
g
12:30 Networking lunch
1:50 Executive One to One
1:40 Second structured networking roundtable
2:20 Afternoon coffee and networking
g
g
g
g
3:00 Afternoon coffee and networking
2:40 Towerco keynote panel Part II
g
3:30 Strategic partners panel part I: the
importance of partner selection for ROI
optimisation and opex reduction
3:40 Investors keynote panel
4:40 Closing remarks from day one
5:00 Close of day one
4:00 Summary and closing remarks from day two
g
g
g
Interested in moderating a roundtable?
Contact Arianna Neri, Head of Americas
and Asia at [email protected]
g
g
g
g
g
Investment Banking, Merrill Lynch, Pierce, Fenner &
Smith, Inc.
Jim Eisenstein, CEO and President, Grupo TorreSur
Eric Ensor, COO, Torres Andinas
José Escobar, President, Catalina Inc.
Marc Ganzi, CEO, Digital Bridge Management
Edgar Geidans, Group CTO, Trilogy
International Partners
Mark Johnson, Managing Partner, Astra
Capital Management
Guillermo Mulville, Principle Investment Officer,
TMT Latin America, IFC
David Porte, VP Inernational, SBA Communications
Olivier Puech, CEO LatAm, American Tower
William G. Ritchey, Executive Vice-President,
IIMT Mexico
Maria Scotti, CEO, Torrecom
Luiz Silva, CEO – South America, Skysites Americas
Jose Sola, CEO, Mexico Tower Partners
Jose Augusto Varela, VP Operations LATAM,
Grupo TorreSur
Chahram Zolfaghari, CEO, Brazil Tower Company
XX
TowerXchange’s unique structured networking round tables
TowerXchange roundtables bring together 8-10 representatives
of different segments of the tower industry ecosystem, brought
together by a common geographical focus or hot topic. There
are 3 roundtable sessions at the Meetup, each new roundtable
“reshuffles” the decision maker-level participants at your table so
you will meet several different prospective partners.
250 Director, VP and C-level Decision makers broken down
as follows:
Mobile Network Operators
Towercos
Investors and Investment Management Advisors
Lawyers and Strategic Consultants
Energy Equipment Providers
OEMs & Managed Service Providers
Static Assets, Access Control & Monitoring and Management
49
Tower Industry Value Chain
Investors: private equity, debt finance, infrastructure funds
Investment management advisors
Independent Towercos
Subcontract
Strategic consultancy
Due diligence
Demand forecasts
Valuations
Group level strategists
C-suite & network planners at local OpCos
Mobile Network Operators
Transfer assets to
Some become
towerco
Sell co-locations
Upgrade capacity
Build-to-suit
Maximise uptime
Reduce opex
Invest in network
Law firms
Outsource
to
Tier 1 OEMs
Subcontract
or in-house
Managed service providers
Construction services
Static assets
Turnkey infrastructure rollout
Manufacture of steelwork
Import, customs & delivery
Leasing & permitting
Installation of towers
Upgrades for capacity
O&M services
Towers & masts
Shelters
Brackets
Enclosures
Lighting
Fencing
Monitoring &
management
Outsource
to
O&M services
RMS
Intelligence/analysis
Site management
Job ticketing
Asset lifecycle platform
Maintenance
Staffing
Spare parts
VMI?
Refueling
Energy as a service
Access control
Dynamic assets
Energy equipment
Diesel genset
Solar
Wind
Fuel cell
Batteries
Rectifiers
Inverters
Line conditioning
PIUs
Backhaul, FTTT, Core Network
Air conditioning
Lightning protection
Controller
Voltage regulator
ESCOs
Microgeneration
Community power
Active equipment
How TowerXchange ensure an audience
of decision makers
TowerXchange successfully launched its first live event
for the LatAm telecom tower industry in 2014 gathering
over 250 executives from the CALA region in Orlando,
Florida. Since then, we have further reinforced our strong
reputation for delivering a high quality, meaningful
platform for our selected audience of tower professionals.
The TowerXchange Meetup is exclusively for Director, VP
and C-level decision makers. If registrants are substituted,
we will only accept replacement registrants of equal or
greater seniority than those pre-approved.
Through our passive infrastructure focused journal
publication and research, TowerXchange have cultivated
relationships with 9000 (at time of press) decision makers
active in the Latin American tower industry, 85% of
whom are at Director, VP or C-level.
By once more co-locating our event with the highly
successful North American PCIA’s 2015 Wireless
Infrastructure Show, we will offer our audience a unique
chance of exposure to the most mature tower industry in
the world and its poll of top telecom professionals.
Who will you meet
TowerXchange serves the Latin American tower
community along two intersecting axes. On a
horizontal axis we facilitate relationships between
MNOs, towercos, investors and their advisers, aiding
the structuring of deals and the transfer of assets.
On a vertical axis, we examine the impact on, and
opportunities for, the passive infrastructure supply
chain, whether they sell to MNOs, towercos or
through OEMs.
XX
Our sponsors & exhibitors
GOLD SPONSOR:
Exhibitor:
Telemisis
SILVER SPONSOR:
Acsys
Acsys is a solution provider and industry leader in cell
tower access control and workforce management. Our
patented, military-grade mechatronic solutions fill the
gap that existed for secure, remote site access control.
Acsys specializes in wire-free solutions that allow for
easy deployment in any environment.
European-rooted with an innovative team from
around the globe, and the advantages of China-based
production, Acsys stays at the forefront in designing
cutting edge security and productivity solutions at
Telemisis manufacture the highly reliable
SitePro® system for remote monitoring and control
for all business sectors, since 2000; our specialisation
being mobile operators, tower companies and mobile
plant, including the world’s largest generator leasing
and rental company. We deliver full site management
solutions providing fuel management, electricity
metering, environmental management and machine/
equipment control in harsh and demanding locations
that enable asset owners to increase uptime and reduce
operating costs.
The in-house designed SiteNode®, the industry’s
smallest, most flexible and cost-effective remote
telemetry node, coupled with Telemisis’ flexible and
scalable back-end server systems, enable us to offer
standard or bespoke solutions that grow as monitoring
needs evolve.
Exhibitor:
keys, apps, code system, and software have earned
companies, and vendors.
Karam
www.acsys.com
KARAM specializes in field of Fall Protection &
Our complete vertically integrated manufacturing
set-up is spread over a span of around 325,000 square
feet area with work force of above 1500 highly skilled
people.
KARAM provides a range of Solution to the user
working at Height on variety of towers, masts,
monopoles and lattice structures that are used in
Telecom industry.
Our commitment to quality is reaffirmed by our ISO
9001-2008 certification. All our products are certified
as per EN also meets American & other International
standards.
www.karam.in
Exhibitor:
www.telemisis.com/products
a competitive price. Our programmable locks and
acclaim from many of the globe’s leading MNOs, tower
manufactures the highest quality equipment, leading
the way with innovative products & solutions for safe
working at height.
Mecc Alte
Mecc Alte is proud to be the world’s largest
independent producer of synchronous alternators.
A specialised manufacturer of rotating machines,
within the electromechanical sector. Quite simple
we manufacture the widest range of low voltage
alternators. We are a totally independent company
51
Our exhibitors
focused on one product sector, making us specialists
within our field. We operate in many diverse
applications working closely within the independent
power generation market offering a versatile range
from 1-3000kVA.
We are pleased to support TowerXchange where we
will be introducing the new innovative Mercurio
Telecom system, a cost effective simple DC power
solution for remote telecom stations.
www.meccalte.com
Metalogalva promote the excellence of its services,
investing in the researching, development and
innovation of its products.
Exhibitor:
www.metalogalva.pt
Abloy
Exhibitor:
GS Yuasa
Exhibitor:
GS Yuasa is a Japanese company formed in 2004 by the
Abloy South East Asia is one of the leading
manufacturers of locks, locking systems and
architectural hardware and the world’s leading
developer of products in the field of electromechanical
locking technology. We develop safe, aesthetic and
easy-to-use locking solutions which satisfy the needs of
end-users and our construction industry partners for
security, safety and ease-of-access. merger of two large 100 year old battery manufacturers,
Japan Storage Battery and Yuasa. At US$3.2B in
sales, GS Yuasa is one of the worlds largest battery
manufacturers.
Metalogalva
GS Yuasa manufactures a full line of technologies
including lithium, lead acid, nickel metal hydride,
Metalogalva is a Portuguese steel manufacturing
company with more than 43 years of activity in fields
of Energy, Communication, Transport, Lighting,
Renewables and Steel protection (hot dip galvanizing
and painting). Has three industrial units (total area of
44000m² and a total gross area of 160000m²), with a
galvanizing capacity (per year) of 100000 tons.
Metalogalva exports 70% of its own manufacturing for
more than 40 different countries. Has invested (6.6M€)
on new equipment to face the requirements/delivery
times of the international markets.
and nickel cadmium for the automotive, industrial,
and specialty battery markets. Especially for Telecom
market, we have developed a 48V lithium ion battery
module that has outstanding cyclic life and charge
Abloy Protec2, which is based on the patented rotating
disc cylinder mechanism guarantees the physical
security at your site, while electronic Abloy CLIQ
technology brings together and integrates the very best
of electronics and mechanics allowing flexible control
of keys, access rights and audit trails.
www.abloy.sg
Exhibitor:
acceptance that can reduce the runtime of generators
and the total cost of ownership of telecom base stations.
With 36 affiliates in 16 countries, GS Yuasa has a
worldwide presence operating under the GS Yuasa, GS,
and Yuasa brands.
www.gs-yuasa.com (GS YUASA)
www.gsbattery.com (GS Battery USA)
Nanhua
For more than 24 years, Shanghai NANHUA Electronics
has been focused on the designing, manufacturing and
marketing of industrial application products. NANHUA
XX
Our Exhibitors
has begun the promotion and application of Aviation
obstruction light system for telecom towers in the year
2007. NANHUA has full experience in manufacturing of
the complete line of cost-effective obstruction lighting
and control solutions for the telecom towers, chimneys,
high buildings, port machinery and any other high
structures that could threaten the aircrafts. NANHUA
products have been proven to be professionally
designed and highly reliable.
NANHUA Electronics is located in Shanghai, China, with
a factory of 6000 square meters, 310 staffs till June of
2014, including 37 members in R&D center and ISO 9001
quality authentication certification.
Tower
support equipment on Radio and Core sites and benefit
from reducing the OPEX without major investments.
With the Netbiter® concept we have developed a
vendor independent solution that fits into all kind of
systems and takes care of all hassles with different
communication protocols, different sizes of diesel tanks,
tampering etc.
www.hms.se
Exhibitor:
www.nanhua.com
Exhibitor:
HMS Industrial Networks
HMS Industrial Networks is the leading independent
supplier of products for industrial communication and
remote management. Products are marketed under the
brands Anybus®, IXXAT and Netbiter®. Headquartered
in Halmstad, Sweden, HMS is represented by branch
offices in 10 countries plus distributors in more than 50.
HMS employs over 350 people and reported sales of 60+
million EUR 2013.
Telco site support equipment has become smart, which
offers the opportunity to have full remote control of all
SonarWise by azeti Networks
azeti SonarWise is the IoE enabled Remote Site
Management Solution for Cisco Routers integrating
Cisco Cameras and Cisco EnergyWise. It enables cell
site operators to monitor and manage the operations
of remotely distributed sites 24/7. SonarWise offers a
multitude of features including Energy Management,
Access and Security Management, Environmental
Control or HVAC Management. It can connect to
everything onsite from generators and batteries over
fuel tanks to the HVAC or Doors, helping to detect
critical events like theft or malfunction of equipment.
SonarWise uses azeti’s Intelligence@the edge
technology, reducing the data traffic to the NOC by over
90%.
Xchange
Meetup Americas
2015
April 28-29, Westin Diplomat
Resort & SPA, Hollywood, FL
Meetup Africa
2015
October 1-2, Sandton Convention
Centre, Johannesburg
Meetup Asia
2015
November 24-25,
Marina Bay Sands, Singapore
www.azeti.net
53
28-29 April, Diplomat Resort & Spa,
Hollywood, Florida
Tower
Xchange
By invitation only: restricted to Director, VP and C-level attendees. Maximum of 2 delegate passes per company except for MNOs, towercos and sponsors
Benefits
Access to TowerXchange Meetup
Delegate pass
Exhibitor
Bronze
Sponsor
Silver
Sponsor
Gold
Sponsor
Platinum
Sponsor
Diamond
Sponsor
1 pass
1 pass
1 pass
2 passes
3 passes
4 passes
5 passes
either
either
either
Daytime Catering
TowerXchange after hours networking receptions & catering
TowerXchange Roundtable interactions
Video on TowerXchange TV
10ft x 10ft Turnkey booth
One time dedicated post event emailshot to all TowerXchange attendees
Logo on backdrop, signage, fliers & invites for TowerXchange Meetup
either
Private meeting room
or
or
or
or
Your choice of bronze sponsorship benefit
Your choice of silver sponsorship quality benefit
Your choice of gold sponsorship premium benefit
Your choice of platinum business-class benefit
Your choice of diamond first-class benefit
Participation in TowerXchange Panel sessions to short list for RFPs - limited availability, contact [email protected] for details
Interview and ad in journal & TowerXchange Meetup Special edition
* Discounted registration available to towercos, government and regulator representatives, 100% discount for
qualifying Director to C-level execs from LatAm carriers
Bronze, Silver, Gold and Platinum Sponsorship Benefit Options
Bronze Sponsorship
Stationary sponsor (provided by client)
Gift drop (provided by client)
Drinks coaster sponsor (provided by client)
Business card wallet (provided by client)
Gold Sponsorship
Sponsorship of breakfast (Open) day one
Sponsorship of breakfast (Open) day two
Sponsorship of Lunch Day one
Sponsorship of Lunch Day two
Silver Sponsorship
USB sponsor (provided by client)
Totes Bags (provided by client)
Lanyards (provided by client)
Sponsorship of coffee break day two pm
Sponsorship of coffee break day two am
Sponsorship of coffee break day one am
Sponsorship of coffee break day one pm
Platinum Sponsor
Host of private Lunch Day one
Host of private Lunch Day two
Sponsorship of icebreaker drinks
Reception desk sponsor
Champagne Roundtable session sponsor
Diamond Sponsor
Sponsorship of Drinks Reception / Opening reception
Industry breakdown of Meetup Americas 2014
15%
Towercos
29%
4%
Carriers
RMS
6%
Energy Equipment
Investors
7%
Managed Service providers
9%
18%
12%
Static Assets
Others
Special feature:
Towers in the Americas:
a growth story
Who owns the 268,575 cell and broadcast
towers in the US?
31%
To kick off our coverage of the Americas in this edition of the
TowerXchange Journal, we check in with Dagan Kasavana,
CEO of Phoenix Tower International. If Dagan’s name sounds
familiar, it might be because he used to head up M&A for GTP
before they sold most of their assets to American Tower, making
a cool US$4.8 billion in the process. Dagan has set up his own
towerco and bought some of those same assets back again! In our
exclusive interview, we talk about Panama and about his vision
for Phoenix Tower International.
Next we take a furtive look over the border, beyond
TowerXchange’s usual jurisdiction, into the United States, where
Marc Perusat of corporate finance advisory firm Xpand Capital
has gathered some useful baseline data on the size of the market
and ownership of the towers, shared here and at
www.towerlocation.com.
34%
4%
4%
7%
20%
Crown Castle
In the coming pages:
56 Phoenix Tower Internatiuonal: new kids on the block?
61 Baseline data on the US tower market
American Tower
SBA Communications
Verizon
AT&T
Miscellaneous
Source: www.towerlocation.com
55
Phoenix Tower International:
the new kids on the block - or are they?
The recipe for success: a strong management team, plenty of experience in the
tower and M&A space and entrepreneurial spirit
Dagan Kasavana is a known face in the international tower
space and was part of the team involved in the US$5.4bn
Global Tower Partners-American Tower acquisition back in
2013. Since then Dagan has formed his own tower company,
acquired towers in Panama, North America, Brazil, Costa
Rica and Colombia and is now seizing more opportunities
and financing options. In this exclusive interview, he shares
insights on what it takes to create a successful tower business,
memories from his long standing experience within GTP and
an outlook for the future of Phoenix Tower International (PTI)
and the tower industry as a whole.
Dagan Kasavana, CEO, Phoenix Tower International
Keywords: Who’s Who, Interview, Phoenix Tower
International, Towercos, North America, Central America,
South America, Brazil, Colombia, Costa Rica, Colombia,
Global Tower Partners, American Tower, Ernst & Young,
M&A, Deal Structure, Build-to-Suit, New Market Entrant,
Debt Finance, C-Level Perspective
< PTI’s footprint and future plans in Latin America and beyond
< What it takes to create a successful tower business
TowerXchange: From one of the largest
acquisitions of the decade (GTP-AMT) to
founding your own towerco… Please tell us
about your professional background and the
path towards the creation of Phoenix Tower
International.
Dagan Kasavana, CEO, Phoenix Tower
International: I founded Phoenix Tower
International (PTI) with a vision to evaluate and
aggregate transactions across multiple geographies
with a focus on partnering with developers and
owners wherever possible, and constructing
towers directly for the wireless operators. PTI is
now operational in Brazil, Colombia and Central
America. I couldn’t be more pleased with where the
business stands today and I am excited about the
future.
By way of background, I am an accountant by
trade which has been very helpful as an M&A
professional during my career. Starting at Ernst
& Young with their Audit and Assurance practice,
I became a Certified Public Accountant and later
joined their Transaction Advisory Services group
where I worked with buyers that were looking to
make acquisitions across various industries. In
2004, I had the chance to work with Marc Ganzi
of Global Tower Partners and together we worked
on about ten deals over a two year period. I really
enjoyed the work and was drawn to the tower
industry and the tower ownership business model. < Insights into PTI’s recent deal to acquire AMT’s Panamanian towers
< Best practices in dealing with landlords
In 2006, Marc hired me to run the M&A practice
for Global Tower Partners (GTP) which led to an
XX
eight year run whereby we spent about US$1.5bn
and acquired approximately 4,000 towers. It was
an incredible experience to be an active part of
the company’s dynamic growth. The management
team at GTP was comprised of some of the best
professionals in the business. We constantly
challenged ourselves and had a passion for the
business that was contagious. It was a rewarding
time in my life and we produced great results for
the management team and our investors.
When GTP was sold I had a number of available
paths. But I got the entrepreneurial bug from GTP
and I am a young guy - relatively speaking! - and
thought if I didn’t try to start my own business now,
I would never do it.
Also, when I looked at the tower landscape I
felt that a tower company focused on both the
US and international markets from day one
would be unique and allow the business to chase
opportunities that delivered the highest returns
for our investors and created the highest value
across multiple fast growing economies, anchored
by multi-national wireless operators spending
significant capex on network deployments.
During the last few years at GTP we explored the
international markets across Latin America and
completed some great transactions, namely in
Mexico, Costa Rica and Panama. We also looked
at major transactions in Colombia and Brazil.
Latin America as a whole has numerous countries
that meet our investment thesis, with 3G and 4G
deployments lagging three to five years behind the
PTI’s team: Orlando, Natalya and Dagan
US. Also, I enjoy doing business in Latin America. TowerXchange: How is PTI funded? And how did
you bring together the members of your team?
International: PTI’s investors include
Blackstone, through investors in its Tactical
Opportunities Fund, as well as various members
of the management team. Blackstone’s Tactical
Opportunities business employs an opportunistic,
multi-asset class investment strategy focused on
special situations investments, and seeks to invest
globally in opportunities throughout the capital
structure.
In terms of my team, we have a mix of tower
professionals and transaction professionals with
significant experience doing business across the
US and Latin America. PTI was founded by myself
and Natalya Kashirina, who had previously worked
at Global Tower Partners with me and oversaw
many of the M&A functions. Natalya runs our
M&A practice at PTI – having someone with years
57
“
the Panama transaction is interesting as this was a portfolio of
towers that I had previously led to a closing at GTP. Panama is a great
wireless market with four major operators and has a fast growing
professional economy. It is also a very stable place to do business
and transactions are denominated in US$
Tim Culver is the Chairman of the Board and the
company’s Senior Legal Advisor. Tim has been my
partner for eight years and joined the company
soon after its founding to help us raise capital and
provide advisory services. Tim was a senior leader
at GTP where he was involved from the beginning
as the General Counsel and subsequently the Senior
Legal Advisor. He also was one of the key members
in the sale process of GTP to American Tower. He
has significant M&A and financing experience
in the United States and Latin America and was
involved in all of the major M&A and financings
GTP undertook. Tim is central to our ongoing
financing and business execution efforts.
“
of experience in closing tower transactions and of
working hand in hand with developers has been
crucial to our success.
Orlando Porras is the company’s Chief Financial
Officer. Orlando has years of experience at Ernst
& Young both with their audit practice as well as
their transaction advisory services practice. He
worked on transactions for GTP over the years
and has a deep understanding of what it takes to
achieve success in this industry. When we spoke to
Orlando after founding the business, he was excited
for the opportunity to be the CFO and has been a
significant member of the team ever since. Orlando
has historically done significant work throughout
Latin America and as the Chief Financial Officer
is responsible for overseeing tax, structuring and
collections efforts for the company across various
countries.
The broader team represents a mix of tower
professionals responsible for sales, new tower
development and operational matters throughout
Central and South America as well as tower and
transaction professionals based here in Boca Raton.
It is a really great team and I am proud to call them
my partners. To succeed in the tower industry, you
need a team that is hungry, driven and experienced
and I feel we have the best people in each of these
positions to grow this business.
TowerXchange: Tell us about the company’s
expansion into Panama thanks to your recent
deal with American Tower (AMT).
International: The Panama transaction is
interesting as this was a portfolio of towers that I
had previously led to a closing at GTP. Panama is
a great wireless market with four major operators
and has a fast growing professional economy.
It is also a very stable place to do business and
transactions are denominated in US$. Luckily,
when AMT looked to sell the business they reached
out to PTI among others and given the PTI team’s
knowledge of the portfolio we were well positioned
to close the transaction quickly. I think AMT was looking for a buyer who
understood the market and the assets well and
could get a closing done quickly and professionally.
We demonstrated to AMT that we checked all of
the boxes including country knowledge, asset
knowledge, professional transaction expertise
and a strong balance sheet. These are hallmarks
of PTI’s transaction strength and I think we will
win other opportunities with this combination of
XX
execution strength and industry knowledge. I have
many friends at AMT and was proud to get this
transaction done with them.
The portfolio includes both an existing footprints
of towers as well as a portfolio of towers being
constructed. So far the operating results have
been outstanding and we have a pending backlog
of leases we are signing on the towers. We are
also seeing opportunities to continue to grow the
business in Panama through incremental M&A
as well as providing Build-to-Suit for the wireless
operators and believe we will be able to continue to
grow this portfolio organically in a great market.
TowerXchange: Beside Panama, what’s next in
the pipeline? Which countries is the company
targeting?
International: In addition to Panama, PTI also
owns sites in Costa Rica, Colombia, Brazil and the
United States. We are currently looking at various
international opportunities that offer similar
growth. With the strong support of our investor
we are able to evaluate and acquire assets in
different countries which meet our investment
thesis. Of course, we are also looking to expand
in the United States and are talking to many
developers and brokers that have done significant
business with the PTI team over the years and I
am sure we will continue to evaluate and close
on the right opportunities in the United States. As
for other markets it will largely be driven by the
opportunities to grow while also staying disciplined
Panama City
and we expect to have a significant footprint across
the Americas and potentially other international
markets.
TowerXchange: How can entrepreneurial
tower companies carve out a profitable niche
alongside the big publicly listed players?
International: The reality is that historically in the
tower space, entrepreneurial tower companies have
made a significant profit alongside the publicly
listed players.
But the real way you are successful as an
59
“
for the landlords that wish to monetise their lease payments in the
form of a lump sum settlement, we work with them to see if there is
a way to do so. We also offer lump sum settlements to other landlords
or property owners under third party owned towers or rooftop
locations in countries we do business in as an ancillary business line
TowerXchange: Changing topics, is ground lease
aggregation as much of a threat to the towercos
in CALA as it has been in North America?
International: Good question. Of course, the land
“
entrepreneur in any business is by being
innovative, showing high character, showing
flexibility with your business partners and
delivering on your promises. When we have
opportunities to partner with the wireless
operators and developers, we want to deliver what
we say we will deliver and be open and honest
with them every step of the way. That will lead to
long lasting relationships and repeat business and
ultimately success and profit for all parties.
under towers is a valuable commodity to all of the
tower operators and most would prefer to own the
land under their towers.
I have always felt it is important to treat the
landlords as partners and allies as it is good
business practice and they too have a vested
interest in the site. Many of the landlords wake
up every morning living literally with a tower
within eyeshot and they deserve rightfully so to
be compensated for leasing their land to the tower
company as well as to be respected. At Phoenix Tower, we spend a lot of time making
sure our landlords are paid in a timely manner,
have various points of contact in each country
as well as in our headquarters to discuss any
matters that may arise at the site, and strive to
ensure our landlords feel like they are a valued
business partner of Phoenix Tower International.
In addition, for the landlords that wish to monetise
their lease payments in the form of a lump sum
settlement, we work with them to see if there is a
way to do so. We also offer lump sum settlements
to other landlords or property owners under
third party owned towers or rooftop locations
in countries we do business in as an ancillary
business line. This helps landlords and other
property owners use the ground lease payments
they receive as a form of purchasing power to
reward their family or upgrade their property in
ways that they could not do otherwise. TowerXchange: What’s the vision and desired
scale of PTI, and how do you foresee the
financing of the business evolving as it expands?
International: We want to see the business grow
logically and have not set any artificial goals. Given
the team’s background and our investor base, there
is no reason we can’t own thousands of towers
over the next few years and build a significant
tower business across the Americas and other
international tower markets. On the debt side, we are working with local and
multinational financing partners that wish to play a
part in Phoenix Tower International’s growth and I
imagine you will see announcements going forward
on who those partners are as we continue to grow
the business
XX
Baseline data on the US
tower market and a view on Europe
Former Macquarie tower guru now runs boutique European advisory firm and
launches website quantifying US tower market
TowerXchange are frequently asked for data on the US
tower market, which our analyst team don’t yet cover. So
we were delighted when Marc Perusat, Managing Partner
of corporate finance advisory firm Xpand Capital, asked if
we wanted to share some insights he’d learned about the
US market in the creation of www.towerlocation.com – a
unique database of cell phone and broadcast towers in
the US as registered by the FCC, FAA and individual tower
operators.
Marc Perusat, Managing Partner, Xpand Capital
Keywords: Towercos, Lawyers & Advisors, Research,
Market Overview, Tenancy Ratios, Rooftop, DAS,
Masts & Towers, Sale & Leaseback, Private Equity,
Infrastructure Funds, North America, Europe, USA, UK,
Abertis Telecom, Crown Castle, American Tower, Wind,
Telefonica, Vimpelcom, Vodafone, Orange, Deutsche
Telekom, Xpand Capital, Towerlocation.com
TowerXchange: What’s your background
Marc, and what inspired you to compile a
comprehensive database of US cell sites?
Marc Perusat, Managing Partner, Xpand Capital:
For the last 20 years I’ve been in TMT investment
banking at Morgan Stanley and Citigroup, and in the
private equity / infrastructure side with Macquarie.
At Macquarie I was head of the European
Communications Infrastructure Group between
2010 and 2013; in that position I was a director
of Arqiva (UK tower operator), Airwave Solutions
(wireless operator for UK emergency services) and
Ceske Radiokomunikace (Czech tower operator).
I left Macquarie in 2013 to set up my own corporate
finance advisory firm Xpand Capital, focusing on
M&A deals and capital raising in the European TMT
market. As I was advising a client to find US towerco
partners, I realised there were no readily available
sources of basic information on US-based cell and
broadcast towers (numbers, location, et cetera),
despite having three listed companies with a
combined market cap of US$80bn (!), so I decided to
create that database with the help of a few people.
TowerXchange: How many cell sites are there in
the US, and how does that break down between
macro towers, rooftops, DAS and other ‘special
structures’?
< How many wireless and broadcast towers there are in the US
< The market share of the ‘Big Three’ US towercos, what is retained by Verizon and AT&T
< The proportion of the market held by smaller and regional towercos
< Marc’s views on the potential for tower transactions in Europe
Having aggregated the various databases into
one and having updated the information in there
whenever relevant, we’ve now found that the total
61
number of towers in the US is 268,575. That figure
compares with prior estimates anywhere between
100,000 to 500,000. Of these, 248,000 are active,
which is a healthy 92% ratio of the total. In terms
of the tower structures listed, we found that 42% of
towers were guyeds, 24% were rooftops and 13%
were monopole towers. DAS systems account for
only 3% of the total though clearly we expect that
number to grow!
Who owns the 268,575 cell and broadcast
towers in the US?
31%
34%
TowerXchange: What proportion of the
towers have been transferred from carriers
to independent towercos, or were built by
towercos?
4%
Marc Perusat, Managing Partner, Xpand Capital: It’s
a bit difficult to say because the database doesn’t
go back in time. Having said that, we know that
wireless operators have been selling large numbers
of towers in the past, especially those in rural areas
that were not economical due to relatively low
traffic. In terms of some of the largest deals, last
year AT&T sold 9,700 towers to Crown Castle; the
year before T-Mobile US sold 7,180 of its towers to
Crown Castle again. In the early 2000s AT&T and
Verizon had divested respectively 2,450 and 1,800
towers to American Tower.
A rough estimate is therefore that a minimum
of ~8% of towers have gone from the wireless
operators to the independent operators. The
strange thing is that whilst they are divesting tower
assets, US wireless operators are also adding to
their tower portfolio as they seek to improve their
networks.
4%
7%
20%
Crown Castle
American Tower
SBA Communications
Verizon
AT&T
Miscellaneous
Source: www.towerlocation.com
TowerXchange: How many towers do the carriers
retain, and what are the prospects for further
tower transactions?
Today the top four wireless operators operate
11% of all US cell / broadcast towers, a number
that is surprisingly low by European standards
and illustrates the fact that the independent tower
operators have established a very strong foothold in
that market: the top three towercos account for 61%
of the total number of towers: Crown Castle is the
leader with 34% of the towers, American Tower has
20% and SBA Communications 7%. Further tower
transactions are expected in the US market: we
know that Verizon is contemplating selling 12,000
towers in 2015. There could be others as pricing
pressures in the US wireless market combined
with significant LTE-related investments may force
operators to seek cash from such divestments.
TowerXchange: What does the ‘long tail’ of
local/regional players look like in terms of the
proportion of the market they represent, and the
size of portfolios in this category?
Circa 28% of the market is represented by a
large number of organisations as disparate as
smaller local towercos, regional carriers, TV and
radio broadcasters but also federal and state
agencies, railway operators, churches, et cetera.
The individual portfolio sizes range from a single
tower or rooftop to up to 300 towers for operators
accounting for 23.5% of the total number of towers.
TowerXchange: How much growth is left in the
US market in terms of tenancy ratio growth,
network extension and infill sites?
There is still considerable upside ahead for US
XX
towercos. I would say that most of the growth is
likely to come from network extension and infill
sites. That is due to a variety of well-known factors
including the search for better signal coverage,
greater traffic volumes, deployment of small cells
and the roll-out of high frequency networks. AT&T
and Sprint alone are planning to add respectively
50,000 and 40,000 sites to their portfolio, many of
which are probably going to come from existing
third party sites.
Collocation ratios may increase a bit from the
current 2.6x but that’s already a pretty high
figure. For example, there is growth potential from
specialist connectivity operators, e.g. in M2M, who
may deploy their networks next to GSM operators’
own network. The downside in collocation comes in
the short term from the planned decommissioning
of the Clearwire, LEAP and MetroPCS networks
and in the short to medium term from the potential
merger of Sprint and T-Mobile.
Overall recent equity research is suggesting that
the top three tower operators’ leasing revenues will
grow by 6% p.a. in the next three years: still not bad
by infrastructure standards!
TowerXchange: What’s your view on the
potential for tower transactions and the
establishment of a tower industry in Europe
similar to the US?
Where there have been tower transactions in
Europe, they’ve often been motivated by the need
to deleverage at companies like Telefonica and
Vimpelcom. Other operators such as Vodafone,
Deutsche Telekom and Orange have sustainable
levels of debt and therefore less need to monetise
their towers. This is unlikely to remain a key driver
for tower transactions.
I would expect increasing competitive pressures
in the MNO market to result in further tower
divestitures as MNOs are likely to recognise in
due course that passive infrastructure is not core
to their operations. However, they will be careful
not to divest towers if it puts them at a competitive
disadvantage, for example by getting locked into
long term contracts with fixed price increases and
limited termination rights.
The European tower industry is different to its US
counterpart; specifically the independent wireless
telecom tower sector is likely to remain subdued for
a couple of reasons: 1) there’s some expectation of
further consolidation of MNOs (and their networks)
in Europe, and 2) network sharing is a lot more
developed in Europe – if you’re able to co-locate
on competitor’s towers, there’s less need to a third
party. Still there is scope for independent towercos
to thrive in rural areas. All in all, the only way I
can see European independent towercos becoming
dominant as per the US is if and when MNOs decide
to divest the bulk of their towers.
TowerXchange: Who are the most obvious
bidders for European towers? How well
positioned are European towercos compared to
the US towercos, particularly American Tower?
For that matter, we’ve even seen Protelindo from
Indonesia acquire 261 towers from KPN in the
Netherlands…
Well, it depends if we’re talking about broadcast
or cell phone towers. Broadcast towercos are
often regulated national monopolies and as such
attract infrastructure funds who put a premium on
predictable cash flows. Cell phone towercos are not
regulated as they operate in a typically competitive
environment, therefore they attract a broader
spectrum of acquirers, including other domestic
towercos, infrastructure funds and international
towercos, American Tower being the best example.
We’ll probably see a few European corporate
champions emerging though it may take a bit
of time. Abertis Telecom is the most acquisitive
European towerco at the moment; they’re
planning an IPO in which they would raise
funds for acquisition purposes. Other European
towercos have taken a less acquisitive and more
domestic-focused view as the case for cross-border
acquisitions is not clear-cut.
There is no doubt that US towercos could play a big
role in unifying the European tower market from
its current fragmented state. American Tower has
already set foot in Germany and is rumoured to be
looking at the Wind towers in Italy. They have the
advantage of a $40bn market cap, a P/E of 50x and
therefore considerable firing power! It’ll be hard for
any European companies or funds to beat them…
Crown Castle may join them at some point
63
Special feature:
Brazil case study,
part two
In past issues of TowerXchange, we’ve interviewed the leaders of
the ‘Big Three’ towercos who are buying thousands of Brazilian
towers: American Tower (issue 9), SBA Communications (issue
6) and Grupo TorreSur (issue 7). So in this edition, we thought
we’d contrast the perspective of a couple of the independent
developers who are building new towers in Brazil – Brazil Tower
Company and Skysites.
We also share the insights of Arianna Neri, TowerXchange’s
Head of Americas, who recently flew out to Sao Paulo and Rio
to meet with Vivo, TIM, Claro and Oi. But first we open with a
look behind the scenes at TowerXchange as we try to answer the
deceptively simple question “How many towers are in Brazil and
who owns them?”
Don’t miss:
65 Brazil uncovered - editorial
69 How many towers are there in Brazil and who owns them?
75 BTC: Why building rather than buying towers creates more value
81 Skysites evolves from property aggregator to BTS towerco
And don’t miss TowerXchange’s analysis of American Tower’s
acquisition of 6,480 towers from TIM! See page 11!
XX
Brazil uncovered
Insights and ideas from my trip to Rio de Janeiro and São Paulo
By Arianna Neri, Head of Americas and Asia, TowerXchange
Upon arriving in São Paulo and driving from the
airport towards the city centre, clashing views of
modern rooftops filled with antennas and favelas fill
my eyes. Despite the unusual proximity of shantyhouses and multi-millionaires’ condos, the overall
feeling is the one of a contemporary metropolis where
smartphones are becoming prevalent at a rapid pace,
just like everywhere else in the world. Although not
quite like home in Italy where driving and generally
walking is proving impossible nowadays as people are
not looking ahead anymore but constantly scrolling
down their Twitter and Facebook feeds, the Brazilian
middle class I spotted by the beach, in coffee shops
and driving seemed pretty well connected! And here
are some of my findings by delving deeper into the
local telecom and tower industry.
Keywords: Editorial, Brazil, South America, Rio de Janeiro, São Paulo, Claro, TIM, Telefonica, Vivo,
Oi, Algar Telecom, 4G, LTE, Universal Access, Valuation, Due Diligence, Urban vs Rural, Infrastructure
Sharing, Market Forecasts, Build-to-Suit, Active Infrasharing, SLA, Tax, Regulation
< How the Brazilian tower industry in changing and maturing
< Regulatory challenges pose critical problems to BTS activities
< What’s left for land grab in Brazil?
To satisfy their ever-growing data hungry customer
base, Claro, TIM, Vivo and Algar Telecom all bid
and won 700MHz blocks during the recent 4G
auction. At the same time, and as part of the 2012
2.5GHz spectrum auction requirements, carriers
are working hard to reach 100% rural coverage by
the end of this year. Not an easy task in a country
where the permitting framework is referred to as
the biggest obstacle carriers, towercos and managed
service providers face in deploying greenfield
projects.
Permitting is the number one problem
In fact, during my trip to Brazil which took me to
meet key stakeholders from carriers, towercos and
managed service providers in both Rio de Janeiro
and São Paulo, one fact appeared as quite striking:
everyone, when asked what was the main challenge
they were facing in their daily job, mentioned
permitting.
We all know that permitting can be quite tricky in
Brazil, especially since all the municipalities are
involved in the process. However, I didn’t expect
everyone to feel so strongly about it. It appears that
the new Lei das Antenas will be able to speed up the
process but in a country with 5,570 municipalities,
the swift implementation of a new law and its terms
isn’t always easy. Some stakeholders set targets
to build over 4,000 new sites in 2014 but achieved
slightly over half of them and mainly due to
regulatory and permitting limitations.
< A complicated and evolving carriers’ landscape
While carriers and towercos are working side by
65
side to deploy new sites in rural as well as urban
areas - especially in Rio in preparation of the 2016
Summer Olympics - I took a look at some of the
trends likely to drive the industry forward in the
next few months.
Not a lot left to grab - towercos set to mature
With the last transactions of 2014 involving
respectively Oi-SBA and TIM-AMT, it didn’t take me
long to realise that there shouldn’t be much left
to acquire for towercos. Right now, towercos are
generally busy performing accurate due diligence
on the portfolios they’ve acquired in the past 1224 months, and swap rights are still be in place for
them. Therefore, carriers need to retain enough
towers to satisfy any swaps and the whole process
usually takes about three years.
We can estimate that at the end of the due
diligence phase, some carriers will be left with
small portfolios of sites which are too poor
quality to be sold. The long term solution could be
decommissioning but to date, we don’t foresee this
as a viable option, considering the coverage and
capacity needs of the country.
It’s safe to say that Brazilian towercos are entering
a more mature phase. A time for the industry to
stabilise and find its balance. TowerXchange have
seen valuations peaking and we’ve analysed quite
extensively the premiums some towercos paid to
gain their leading positions. So are they now just
focusing on build to suit (BTS) and have nothing left
to buy?
Copacabana, Rio de Janeiro
Quite the opposite, I’d say. If the excitement of
sale and leaseback deals with carriers is fading,
a handful of companies are likely to become
acquisition targets in the near future. In fact,
whereas AMT and SBA keep scaling up, a significant
gap is being created between them and Brazil’s
indigenous independent developer towercos, which
TowerXchange generally refer to as middle market
towercos.
A separate comment must be made about Grupo
TorreSur which was able to build a strong portfolio
of 6,000+ towers in Brazil and was believed to be up
for sale over the last few months. However, GTS’s
valuation seems to have scared potential buyers off
and the company is reportedly now back on track
with a strong pipeline of BTS projects until the
opportune time to reassess it’s next steps.
With significant and yet smaller portfolios of 50500 towers, Brazil’s pool of middle market towercos
is leading the way in the development of BTS
projects in several regions, as well as diversifying
their revenue stream with the involvement in
several DAS and small cells initiatives. However,
it seems like common knowledge that each of
XX
these companies is potentially up for sale and
are just waiting for the perfect time to leverage
their growing portfolios and valuations. The usual
suspects will surely consider every possibility they
have to keep scaling up, as recently showed by the
acquisition by AMT of BR Towers - a full-value deal
that still contributed to AMT’s explosive growth
pattern over the past 12 months.
So while towercos are entering a more mature and
possibly less dynamic phase of their business, with
due diligence being performed, swaps to take care
of, regulatory worries and an eye on restructuring
some of the SLAs with the carriers, the race towards
acquisitions is far from over. And as long as middle
market towercos will continue growing their
portfolios organically via BTS projects, we believe
major towercos will keep looking closely at them.
Top four becoming three?
In the meantime, carriers, freed from the burden
of managing large tower portfolios, shift their
attention to their core business while keeping an
eye on creative ways to enhance their coverage.
In fact, TIM and Telefonica, although with different
approaches, are working very strong on their 4G
LTE projects, developing micro-sites and alternative
solutions in metropolitan areas and the overall
outlook of their business seems quite positive.
One of TIM’s innovative biosites
TIM has been performing well lately and is
retaining a very strong second position in the
market, closely following Vivo. Although facing
some internal changes now that its tower business
is being outsourced, the company is keeping a very
close eye on innovation and its recently developed
biosites - lamp posts with seamless antennas - are
just one of the exciting products TIM is working
on. And the company’s push for small cells will be
eased by the fact that the inspection tax (Fistel) for
small cells with power from 1W to 5W has been
eliminated this past December in a bill which TIM
strongly supported and lobbied for.
At the same time, the rumours about TIM’s potential
merger with Oi have not been denied by either
party. However, it seems clear that whereas for TIM
a merger could mean an even stronger position and
a chance to become leader in the market, for Oi at
this stage consolidation could be the only recourse.
Oi didn’t bid at the recent 700MHz auction. In the
absence of 4G spectrum, its debt situation might
not be sustainable for long. However, its assets
are attractive; its nationwide footprint is still
quite strong and includes infrastructure such as
several thousands of kilometres of fibre optics.
However, the sale of PT Portugal is key to Oi’s
future and is far from an easy transaction since
the €879 million default earlier in 2014. In a recent
statement, Oi announced that through the PT sale
the company “…will also reduce leverage and gain
financial flexibility and investment capacity. In
addition, it will enable itself to participate in the
expected consolidation process in Brazil, which
has the potential to capture material synergies
and economies of scale, as well as to increase
competitiveness.”
67
In the meantime, Claro appears to be playing
a different game with its long term strategy of
retaining its tower portfolios and generally playing
solo. Thanks to its own 6,000+ asset base and solid
financials, the company retains a strong third place
in the market. Gossip around the creation of Carlos
Slim’s own towerco in Mexico have been spreading
but just as much as América Móvil’s statement
back in July about its intention to sell off assets in
its portfolio. And beside the spin off of Sercotel
Holding, for now nothing has changed. But if the
company’s Mexican strategy to carve out a towerco
pays dividends, even though their hands were
forced, the strategy (or the regulatory pressure)
could be replicated in other countries and Brazil
could surely follow.
Still number one in the market and exuding
positivity through its majestic high rise in
downtown São Paulo, Telefonica/Vivo ended 2014
leading the way in terms of 4G coverage (40.6%) and
reached out to 140 municipalities with its newly
launched services. Having pioneered the divestiture
of their tower portfolios, with the first transaction
dating back November 2010 when the company
sold 1,500 towers to GTS, Vivo has since then been
able to leverage its flexibility and speed to market
and personally, I had the clear perception the
“
Still number one in the market
and exuding positivity through its
majestic high rise in downtown
São Paulo, Telefonica/Vivo ended
2014 leading the way in terms of 4G
coverage (40.6%) and reached out
to 140 municipalities with its newly
launched services
“
Although partially admitting its intention to enter a
merger process, rumours suggest that other carriers
could be more inclined to each acquiring a portion
of Oi’s business by splitting it into three separate
entities. Whether that is an actionable solution, only
time will tell.
company is very well tuned with the current state
of the market and able to separate itself from the
competition while keeping an eye on the possible
movements of TIM and Oi on the merger side.
My predictions for 2015
If I had to bet money on a few big moves for the
months to come, I’d definitely put Oi being up for
sale this year as number one - although conditioned
to a PT Portugal sale. BTS will continue to represent
the most intense and possibly frustrating tower
industry activity in the country, with several
thousand sites yet to be deployed in rural areas and
Rio in need of a makeover ahead of the Olympics.
Second bet; as Brazil’s middle market towercos
achieve scale, expect them to be picked off by
American Tower and SBA in strategic acquisitions.
Expect the premium paid for a multi-tenant tower
in Brazil to remain high – they’re going to continue
to cost $100,000 to build and $200,000 to buy! For
the same reasons, expect more new entrant BTScentric towercos in Brazil. While Brazil needs so
many more macro towers, that will remain the
tower industry’s focus, expect towercos large and
small to increasingly engage with IBS and small
cells, particularly in Brazil’s “vertical cities” in the
South.
From the carriers’ perspective, co-location is
becoming “muscle memory” – something they do
without thinking about it. Infrastructure sharing
is no longer a strategy to be discussed around
boardrooms – it’s the new norm in Brazilian
network planning. Building and operating towers
is becoming, for everyone except Claro, someone
else’s problem. This, of course, is a good thing for
towercos.
The permitting process will remain the number
one obstacle to the expansion of Brazil’s tower
industry, even though the Lei das Antenas
represents a step in the right direction. I would
even go as far as suggesting a closed door meeting
gathering key parties from towercos, carriers,
the regulator and anyone else involved to discuss
options (TowerXchange will be happy to facilitate
this!) Finally, I’d say that while Brazil’s Big Three
towercos are maturing and transactions slowing,
with portfolios diligently assessed and integrated,
and swaps performed, operators might be looking
beyond passive infrastructure and start discussing
active infrastructure sharing and other creative
ways to enhance their coverage
XX
How many towers are there
in Brazil and who owns them?
TowerXchange analysis reveals that towercos own 71% of Brazil’s towers
You would think it would be easy to count telecom
towers, right? Big lump of concrete with a hundred
feet of steel sticking out of it – fairly conspicuous,
right? Given the blood, sweat and tears invested to
navigate one of the world’s most notorious permitting
regimes, not to mention the investment of US$100,000
or so, you’d imagine we’d know how many towers
were in Brazil, right? Yet asset registers in Brazil
are as inaccurate as anywhere and, try as we might,
TowerXchange just cannot make a Brazilian tower
count add up to the 70,000 towers everyone seems to
think are in the country.
Keywords: Editorial, MNOs, Towercos, Market Overview, Transfer Assets, Due Diligence, Market Forecasts,
Site Surveys, Asset Register, Sale & Leaseback, Masts & Towers, South America, Brazil, American Tower,
SBA Communications, Grupo TorreSur, T4U, CSS, Brazil Tower Company, BTC, Phoenix Tower International,
QMC Telecom, Highline do Brasil, Skysites, Z Sites, Rede Sul, Centennial, Torre Online, Telecom Torres, BR
Towers, Vivo, Telefonica, Claro, Oi, TIM, Nextel
<
<
<
<
<
How many towers each towerco owns in Brazil
Why independent developers’ towers might attract a higher premium when sold
How many towers have been sold by Brazil’s carriers and what did they yield?
How many towers do we think Brazil’s carriers have retained?
How the swap market works in Brazil
I thought it might be fun to share with our readers
the challenge of publishing an accurate tower count,
whilst at the same time shedding what light we can
on one of the most investible tower markets in the
world: Brazil.
Our tower counts are based on dozens of telephone
and face to face conversations with the most
knowledgeable people in Brazilian towers. Based on
the latest figures in the public domain, we wouldn’t
know much about Brazil. But we overlay multiple
informed stakeholders’ opinions and estimates of
the structure and size of the tower market, we apply
some weighting, and come up with an informed
estimate. The simple fact is that no-body really
knows how many towers there are in Brazil, but
aggregating and averaging informed estimates gives
us a good insight.
I should point our that it is extremely difficult to
separate macro towers from rooftop structures, but
what really matters for this analysis is the number
of shareable structures. So if a few robust rooftops
get into the calculation, so be it.
What we DO know about Brazil’s towers
We know American Tower has been buying a lot of
Brazilian towers. So has SBA Communications. As
publicly listed companies, they’re pretty transparent
– as long as you don’t mind your data being up to
date only to the last published quarterly results,
where you can find their tower counts in every
market.
69
Figure 1: Estimated towers owned by towercos in Brazil
The value of Brazil’s 2,600
independent developer towers
6,185
2,600
7,000
Those 2,600 independent developer-owned
sites might look like a relatively insignificant
slice of the market, but consider this; the
most active and aggressive companies in this
category are growing their tower counts by
Independent developers
Rede Sul 175
T4U 500
Centennial 100
QMC 500
Torre Online 51
CSS 350
Telecom Torres 40
BTC 300
Skysites 40
Highline do Brasil 200
Allowance for small regional
Z-Sites 200
towercos 144
18,851
AMT
SBA
GTS
100% or more per year. Brazil’s independent
developers deliver more than half the build
to suit programmes in the country. Their
towers are newer than the carriers’. They
are designed for multiple tenants (usually
three or four) from the outset. They are being
aggressively leased up – tenancy ratios of 1.3
upward are not uncommon already, but they
may not come to market until tenancy ratios
American Tower’s recent acquisitions of BR Towers
and from TIM brings their count to 18,851 towers
in Brazil – some of which are in the process of
being transferred, others of which they’ve operated
and marketed since as long ago as 2002. SBA
Communications own around 7,000 towers and
rooftops in Brazil, topped up by their most recent
acquisition from Oi.
are nearer two than one. Smart independent
developers ensure their leases are readily
transferrable, and ensure their site maps
don’t overlap with AMT and SBA.
In summary, many of those 2,600 independent
developer towers in Brazil are built in unique
locations, and they are built to sell. If their
tenancy ratio gets nearer two than one, they
will attract valuations well above the $200k+
cost per tower that is the current norm for an
operator-captive tower
around 500 towers and rooftops. Cell Site Solutions
(CSS) has approximately 350, Brazil Tower Company
(BTC) 300, Highline do Brasil 200, Z Sites 200, Rede Sul
175, Centennial 100 sites, Torre Online 51, Telecom
Torres and Skysites around 40 each. Phoenix Tower
International are in Brazil, but their BTS sites are
most likely still works in progress at time of press. In
addition, Brazil has around a dozen small regional
towercos each with less than 20 towers.
What we DON’T know about Brazil’s towers
AMT and SBA are where the transparency ends in
Brazil. There are a host of private tower companies,
headed by Grupo Torresur who, when they last told
us their tower count this time last year, had a little
over 6,000. Our sources suggest GTS’s count is now
closer to 6,185.
Then there’s Brazil’s host of smaller independent
developer towercos, what we call middle market
towercos because for most, their raison d’etre is to
be acquired by AMT or SBA! T4U and QMC each have
Counting a build-to-suit centric towercos’ towers in
Brazil is a challenging exercise – some are relatively
dormant, others are building as quickly as they can
get sites permitted, so it’s a movable feast. However,
we’re confident we’ve identified and quantified the
assets at most of Brazil’s middle market towercos.
Brazil’s independent developers account for a total
of ~2,600 towers, plus GTS’s 6,185.
This gives us an aggregated estimate of 34,636
towerco-owned sites in Brazil, broken down in figure
1.
XX
Figure 2: Announced number of towers sold by Brazilian carriers since 2010
12000
10000
8000
6000
4000
11,195
6,748
6,480
4,730
2000
0
Vivo
TIM
Claro
Oi
Nextel
Source: Company announcements, RBC Capital Markets and TowerXchange
How many operator-captive towers are left in
Brazil?
If you thought counting towerco-owned towers was
complicated, try counting those retained by carriers!
As a legacy of the era when networks were a genuine
competitive differentiator, carriers worldwide are
reluctant to share tower counts. However, we can
count the towers each has sold since 2010 – see
figure 2.
In Brazil, Anatel publishes robust data on the
number of sites each operator has (see figure 3). It’s
notable that the current figure of 70,185 cell sites
in Brazil tallies with the popular notion that there
are 70,000 towers in the country. But the site count
should not be confused with the tower count as a
site count can include any Point of Service (PoS);
towers, rooftops, co-locations on third party towers
and all manner of special structures that are not
macro towers. Anatel is counting sites because that’s
what matters from a tax point of view, but if you’re
trying to count the number of shareable structures
in Brazil, Anatel’s data is of finite use. However,
cell-site count might be considered a proxy for
the number of tenancies in a market. Taking into
account a few PoSs on non-shareable structures, this
suggests the average tenancy ratio across Brazil is in
the 1.3-1.4 range.
América Móvil has to date retained their towers
across their Claro, Net Serviços and Embratel
businesses in Brazil. Claro are notoriously secretive
about their tower counts, so TowerXchange have
not been able to draw on any primary sources to
estimate the size of their tower network. Informed
third party sources provided a range between 7,000
and over 12,000, with the concentration in the lower
end of the range. Calculating the median with a
little weighting of sources yields an estimate of 8,500
América Móvil towers.
Brazil’s other leading three carriers have divested a
significant proportion of their towers, retaining only
a few sites considered too strategic, plus a modest
inventory to fulfill swap rights where contractually
necessary (we’ll explain swap rights later).
Vivo reportedly has sold around 80% of their towers,
with the majority of those remaining considered too
strategic to sell, plus a few to cover swaps. Again,
our sources give us a range of estimates of Vivo’s
remaining captive towers, the mid point of which is
1,750.
Brazil’s build to suit market
Capacity and permitting constraints are
limiting Brazil’s carriers to adding ~5,000
tower per annum, almost exclusively executed
by towercos through build to suit contracts.
SBA Communications seem to be building as
fast as anyone, adding around 250 sites per
annum compared to a little over 100 each at
GTS and AMT. However, some of the build to
suit-focused independent developers may be
building even faster still
71
Figure 3: Brazil cell-site growth
Carrier
2011
2012
2013
2014
Vivo
13,291
14,115
14,851
17,249
TIM
12,325
12,789
13,901
15,443
Claro
13,681
14,454
14,507
15,159
Oi
13,158
13,684
14,775
15,797
Nextel
157
3,195
4,733
5,899
Algar
451
521
576
589
Sercomtel
51
50
50
49
Aeiou
209
209
-
-
-
53,323
59,017
63,393
70,185
Source: Anatel, Company Reports, RBC Capital Markets, MyTower
TIM had around 8,200 towers and rooftops prior to
the recent sale of 6,480 to American Tower, leaving
TIM retaining ~1,720 for operational and legal
reasons.
Struggling #4 carrier Oi has already sold over
11,000 towers, potentially leaving them with just
~1,000 towers to cover swaps. Note that Oi has a
4G infrastructure sharing agreement with TIM.
Therefore any prospective consolidation affecting
the two companies would have a reduced impact on
tower tenancies.
Nextel sold the majority of their towers in the
deals that sent 4,730 towers to AMT. TowerXchange
have been unable to substantiate rumors that
the potential acquisition of a further 900 towers
from Nextel was mentioned in the Q3 2014 analyst
conference call – there’s no mention of it in the call
transcript. Such a deal is yet to be consummated
so we’ll treat it with a pinch of salt. Nextel may
have had a few sites built since, so we’ll cautiously
estimate 500 towers on their balance sheet.
Then there’s a long tail of smaller and nontraditional operators that will have built and
co-located on towers, including Sky Brasil, Algar
Telecom, Sercomtel and ON Telecom. We estimate
they have 500 towers and rooftops between them.
Why is there such a discrepancy between the
70,000 towers people think there are in Brazil and
the 48,606 this analysis reveals?
There are several possible explanations for the
discrepancy between the number of towers our
analysis can ascribe in Brazil, and the 70,000 tower
count most commentators referenced, ourselves
included, until now.
1. Anatel’s data is widely available, and it suggests
there are over 70,000 cell sites in Brazil. However,
as previously mentioned, cell-sites include colocations and ‘special structures’, and thus produces
a significantly higher number than a pure count of
shareable structures.
2. Perhaps we have yet to identify a few more
middle market towercos in Brazil – in the course
of this research, we identified four previously
unidentified Brazilian towercos with a total of a little
over 400 towers. There may be a handful more, but
we doubt we’re missing more than few hundred.
3. The greatest margin for error in our analysis
is to be found in the count of remaining carrier
towers. América Móvil may have a couple of
thousand more towers than we’ve estimated and noone knows how many towers Oi have.
4. Towers, rooftops , DAS or street furniture?
Technically TowerXchange tries to count macro
towers. But in practice any shareable structure
counts. Robust rooftops with wind load capacity
for multiple antenna could make up a significant
proportion of our count, and some may have been
omitted. Multi-tenant DAS and street furniture
may also start contributing to Brazil’s inventory
of shareable sites, but we haven’t collected data
on such PoS for the purpose of this analysis. It’s
early days for heterogeneous networks in Brazil
– we don’t think the inclusion of such sites would
increase the tower count by a four digit quantity.
5. Inaccurate asset registers. The asset register may
say there’s a tower at a given grid reference, but
sometimes there’s no structure there. Or sometimes
XX
Figure 4: Brazil’s tower transaction history since 2010
Date
Seller
Buyer
USD/Tower
Tower sites
Value in US$
2010
Telefónica / Vivo
GTS
$128k
1,085
$138mn
2011
Sitesharing
AMT
$879k
666
$585mn
2011
Telefónica / Vivo
GTS
$152k
1,358
$206mn
2012
Telefónica / Vivo
AMT
$150k
1,500
$225mn
2012
Telefónica / Vivo
BR Towers
$132k
1,912
$252mn
2012
Oi
GTS
$223k
800
$178mn
2013
Sitesharing
BR Towers
N/A
100+250 BTS
N/A
2013
Telefónica / Vivo
AMT
$190k
93
$18mn
2013
Oi
GTS
$138k
2,113
$293mn
2013
Oi
BR Towers
$119k
2,113
$251mn
2013
Oi
SBA
$163k
2,113
$343mn
2013
Nextel
AMT
$148k
2,790
$413mn
2013
Z Sites
AMT
$542k
5,238
$129mn
2013
Nextel
AMT
$180k
1,940
$349mn
2013
Oi
SBA
$321k
2,007
$645mn
2014
Oi
SBA
$321k
1,641
$527mn
2014
BR Towers
AMT
$212k
2,530+2,100 excl. rights
$978mn
2014
TIM
AMT
$185k
6,480*
$1,200mn
*Assuming Claro declines ROFR on 1,240 TIM towers
there is a tower but it’s overloaded, structurally
unsound, not legally permitted, or the landlord
simply refuses access to the site for one reason or
another – in any case, the tower is not usable and
may not be savable. Towers are not carriers’ core
business and it’s an unspoken truth in the tower
business that their asset registers are inaccurate.
Brazil’s swap market
A clever system has evolved to mitigate the risk of
All these challenges are somewhat resolved by the
creation of Brazil’s tower swap market, whereby
an acquiring towerco has a specified period of time
post-deal to perform more robust due diligence
on each site and, if what they find doesn’t meet
certain predetermined and diverse criteria, they
have the right to swap the tower for an alternate
(prime sites are embargoed of course). In instances
where different towercos have acquired towers
from the same carrier, this creates a high pressure
race to evaluate an acquired portfolio, swapping out
undesirable sites and acquiring more attractive sites
before the competition, although we understand the
percentage of sites ultimately swapped is quite low.
It should be emphasised that not all Brazilian tower
transactions include swap provisions, and when
they do, it seems no two contracts are the same.
As mentioned previously, the obligation to fulfill
swap rights, and the retention of rejected, “swapped
out” towers means Brazil’s carriers must retain a
tranche of their towers.
Source: RBC Capital Markets and TowerXchange
the aforementioned inaccurate asset registers, and
to compensate for the compressed timeframes in
which Brazilian tower transactions are concluded.
The window to conduct due diligence can be
measured in days not weeks, rendering physical
site visits to a significant sample of sites impossible.
Brazilian tower transactions seldom involve all a
carrier’s towers, with segments of the portfolio being
carved off and sold off piece by piece.
Conclusion: Towercos own 71% of Brazil’s 48,606
towers and rooftops
As Brazil completes it’s migration from an operatorcaptive to an independent towerco driven business
model, we’re learning more every day about the
current size of the Brazilian tower market, and
it’s seemingly insatiable appetite for growth.
TowerXchange’s investigation of the Brazilian tower
count has prompted us to downgrade our estimate
to 48,606 towers, but by the time you read this, there
will be a few more!
73
Figure 5: Who owns Brazil’s 48,606 towers?
500
1,000 500
AMT
1,720
1,750
SBA
GTS
Independent developers
8,500
18,851
América Móvil (Claro, Net and Embratel)
Vivo
TIM
Oi
2,600
Nextel
We estimate that towercos now own just over 70%
of Brazil’s towers, representing close to saturation
of the addressable market. There is not much left
to buy for AMT, SBA and CCI (should they wish to
belatedly enter the market) – we estimate Brazil’s
carriers retain a little under 14,000 towers, the
majority of which are owned by América Móvil,
which shows no inclination to sell. However, with
towercos building almost all of Brazil’s new towers,
and with the aggressive pricing offered by Brazil’s
middle market towercos meaning they have a
significant share of the BTS market, there are still
acquisition opportunities, albeit primarily trade
acquisitions rather than carrier SLBs
Other small and non-traditional operators, including
Sky Brasil, Algar Telecom, Sercomtel and ON Telecom
6,185
7,000
If your company owns towers in Brazil and has
not been included in this analysis, please send me
an email at: [email protected]!
What are Brazil’s towers worth?
The average cost to buy and leaseback a carrierowned Brazilian tower has increased from
US$128k in 2010 to US$152k in 2011, US$168k
in 2012, US$176k in 2013 and US$212k in 2014.
This analysis excludes trade acquisitions of
existing towercos, although we do include AMT’s
acquisition of BR Towers as most of BR Towers’
inventory derived from buy and leasebacks.
Cost per tower is a crude and imperfect measure.
Tower Cash Flow (TCF) multiples are a much
better measure, and they have typically been in
the mid-teens in Brazil. See if you can get hold
of RBC Capital Markets’ excellent “Brazil Mobile
Infrastructure and Tower Review” for a detailed
breakdown of the TCF multiples in Brazilian tower
transactions.
TCF is the superior measure because it takes into
account the revenue towers generate, not just the
costs. To calculate TCF you need to know the tenancy
ratio and the lease rates, and these are seldom in
the public domain. Quoting the aforementioned
RBC Capital Markets report (TowerXchange’s
parenthesis), “average monthly tenant rent (in
Brazil) is in the low to mid R$2,000 range (currently
US$750-900), net of taxes, but can be significantly
higher or lower, depending on site-specific factors
such as licensing complexity, desired height, and
loading… For anchor rent on sale/leaseback tower,
carriers may negotiate lower rents, in the low
R$2,000 or high R$1,000 per month range (US$700750).” The RBC Capital Markets report subsequently
notes that amendment revenue, for a next
generation technology overlay, is in the R500-1,500
range (US$200-600), depending on loading.
Ground rent and energy costs are typically passed
through to the tenant in Brazil
XX
Why building rather than
buying towers creates more value
“In Brazil, other than AMT and SBA, everyone has an exit strategy”
- Dr Chahram Zolfaghari, CEO, BTC
Brazil Tower Company (BTC) has built over 300 towers,
primarily in Northeast Brazil, and is ahead of their growth
schedule, forecasting having a portfolio of 1,000 towers by
year end 2015. In TowerXchange’s exclusive interview Dr
Chahram Zolfaghari, BTC’s CEO, discusses building, buying and
ultimately selling towers in the high demand Brazilian market.
Dr Chahram Zolfaghari, CEO, BTC
Keywords: Who’s Who, Towercos, Construction, Capex,
Valuation, Transfer Assets, Tenancy Ratios, Network
Rollout, Build-to-Suit, Exit Strategy, Bankability, Novation
of Leases, IBS, DAS, Sale & Leaseback, Private Equity,
Debt Finance, C-Level Perspective, Masts & Towers, South
America, Brazil, 1848 Capital, CAF, Claro, Vivo, TIM, Oi,
American Tower, SBA Communications, Crown Castle, BTC,
Brazil Tower Company
< How BTC is funded, and how the cost of debt decreases as the scale of towercos increases
< Building to sell; building in unique locations, choosing structures with capacity for four tenants,
transferrable leases
< How many towers Brazil has today, how many are needed to achieve Anatel’s coverage and QoS
objectives, and what is a realistic timescale?
< Why BTC is focusing on macro towers rather than Brazil’s demand for indoor and outdoor DAS
< BTC’s tenancy ratio and the proportion of their revenue that comes from non-traditional carriers
TowerXchange: Please tell us about the origins of
Brazil Tower Company (BTC).
Dr Chahram Zolfaghari, CEO, BTC: Brazil Tower
Company was conceived of in 2011 in Miami
between myself and three lawyer friends of mine.
We wrote our first business plan on a napkin, and
named ourselves Brazil Tower Company because
we wanted to do for Brazil what American Tower
Company had done for the USA! We secured seed
capital from 1848 Capital while my management
team and I also put some money in. We added
development finance from CAF to our shareholder
structure, and have deployed close to US$50mn to
date in equity, supplemented by a further US$70mn
we’ve been able to raise in debt.
BTC is focused on build-to-suit. We are a developer.
Like all the other Brazilian tower developers, we
have an exit strategy to transfer assets, probably to
one of the big three listed US towercos, American
Tower, SBA Communications or Crown Castle.
TowerXchange: Talk to us about the thinking
behind your capital raising to date.
Dr Chahram Zolfaghari, CEO, BTC: Like any young
business, we don’t want to dilute equity, so our
first preference is raising debt. We have plenty of
investors willing to buy more equity, but as the
value of our business increases, it becomes cheaper
to raise debt. With the collateral we’ll be able to
put on the table in a year’s time, we should be able
to refinance at half the interest rate we have today
with the same bank.
75
Debt is always cheaper than equity. That said, our
shareholders are very knowledgeable in the field
– they understand the business, they have been
involved from beginning in our strategy, and they
are patient – there is no pressure to exit before the
optimum time. We’re had three offers to buy BTC
already, but we want to create more value first.
TowerXchange: What do you see as the relative
merits of building rather than buying towers?
Dr Chahram Zolfaghari, CEO, BTC: Given the
premiums paid for Brazilian towers today, I’d rather
build than buy towers. Besides which, there’s not
much left to buy – Grupo Torresur is the only major
portfolio left!
“
We’re building our targeted 1,000
towers for an average of about
US$100,000 per site. However, in
order to acquire 1,000 existing
sites we would have to pay at
least two to three times as much
as it costs to build. In addition to
that capital outlay you have to
invest improvement capex
“
Let me explain BTC’s roadmap. We have 308 towers
today. We had targeted building a total of 1,000
towers by the end of 2016, but now we’re on track
to have 1,000 by the end of 2015! The volume of
instructions we’ve received has increased, we’ve
raised more money, and ramped up our team to get
a year ahead of schedule.
We’re building our targeted 1,000 towers for an
average of about US$100,000 per site. However, in
order to acquire 1,000 existing sites we would have
to pay at least two to three times as much as it costs
to build. In addition to that capital outlay you have
to invest improvement capex to reinforce towers,
many of which carriers built for a single tenant,
sometimes even just a single technology. Acquiring
towers is further complicated by legal issues; land
leases are not always readily transferrable. All these
tower transactions take many months, even a full
year to close because when the new owners get to a
XX
forecasting the addition of 2,000 towers in 2015.
Vivo will add 1,200 in their first batch alone. Claro
are planning to deploy at least 4,000 new sites in
2015 through a combination of co-locations and
new build out. Oi’s financial difficulties mean they
are not investing in new towers currently.
The 1,000 sites BTC will have in our portfolio by the
end of 2015 are all either already built, or are in the
process of licensing or in construction. We’ve won
RFPs for over 300 towers in 2015 with Vivo, TIM and
Claro, so we know there are additional sites coming
to us.
TowerXchange: Please put that into context
for our readers – how many towers are there
in Brazil and how many do there need to be to
achieve Anatel’s coverage and QoS objectives?
Dr Chahram Zolfaghari, CEO, BTC: There are around
70,000 towers in Brazil now. In order to meet
coverage objectives (never mind optimising QoS),
you need to multiply that number by four, but that’s
not going to happen in the near term.
site, the owner might not be willing to transfer the
lease to the towerco.
Under our build-to-suit business model, we do
everything with a future exit strategy in mind.
So from the get-go we’re building towers with
structural capacity for four tenants. All our
contracts are designed so that leases can easily be
transferred to another entity – so a future buyer
doesn’t have to talk to the owner for approval to
transfer the lease.
Older towers need more maintenance – ours and
the other build-to-suit towercos’ towers are all new
– and new towers require minimal maintenance for
the first two years.
TowerXchange: What quantities of new towers
are Brazil’s operators investing in in 2015? And
how much of that build-to-suit business is BTC
going to win?
Dr Chahram Zolfaghari, CEO, BTC: In 2015 TIM are
In a city like São Paulo you have one antenna per
15,000 subscribers, whereas in other major cities
worldwide you might have one antenna for 4,000 –
that illustrates the need.
Never mind the long term need for four times as
many towers, Brazil doesn’t have the capacity
to double the number of towers we have now.
Between all the suppliers in Brazil today we can’t
build that volume – there are not enough suppliers,
77
and not enough resources – we can’t go out and
buy 70,000 macro tower structures for example. So
there’s still plenty of room for new market entrant
towercos and suppliers in Brazil.
TowerXchange: Does BTC focus on macro towers,
or have you looked at lamp-posts, DAS, small
cells and other infill solutions?
Dr Chahram Zolfaghari, CEO, BTC: Never say never,
but BTC is going to focus only on macro towers, plus
a few rooftops, in 2015.
Is there a need for more specialised small cells and
DAS? Yes. But at BTC we have created a production
machine to produce macro towers. It took time to
build relationships and find suppliers, and now
that machine is working full speed, we don’t want
to get distracted by other activities, even if they are
lucrative. We’ll focus on what we do the best.
I envision that at some point the market will start
stagnating, macro tower rollout numbers won’t be
as crazy as today. We always have to show growth,
so at that time I’ll have to find new areas, and at
that time we might move into indoor systems and
outdoor DAS. There are several high density cities
in Brazil – vertical cities – which creates unique
coverage and capacity requirements ideally suited
to heterogeneous networks. The need is there
today but there’s no-one really attending that need
– macro sites remain carriers’ priorities, so if we
speak again in 2016, I’ll be telling a different story!
For now, the low hanging fruit is to build macro
towers.
TowerXchange: How might the restructuring of
the carrier market, and potential consolidation
of operators, affect the tower market?
Dr Chahram Zolfaghari, CEO, BTC: There are
different rumors of consolidation every day! Will
there be consolidation? Yes. There will be less
carriers – the same thing happened in Europe and
in the US. But in terms of timing, it’s not going to
happen tomorrow. Oi is not deploying capex – so
something needs to change there. But in Brazil
the government will take a huge interest in and
operator consolidation as these companies employ
tens of thousands of people. With Brazil now in
recession, the Brazilian government won’t make
operator consolidation easy – it’s still a free market,
but the Brazilian government will put obstacles in
place to delay consolidation, or if the result is the
dismantling of a carrier, they will do their utmost to
ensure jobs are preserved.
XX
“
2014 because our portfolio keeps growing! We’re
building towers even faster than we can attract new
tenants!
The reality in Brazil is that
everyone else has exit strategy
to sell to American Tower
and SBA Communications (or
Crown Castle)
TowerXchange: What proportion of your tenancy
revenues derive from non-traditional carriers?
Dr Chahram Zolfaghari, CEO, BTC: A lot of nontraditional carriers are our clients; they represent
around 15% of our revenues. There are a lot of
small companies in Brazil offering high speed
broadband Internet and cable services. They tend to
co-locate rather than building their own towers, and
there is enough volume in this segment that it will
not disappear in the event of consolidation.
“
There will be consolidation – the market can’t
support all these carriers – but it’s not going to
happen tomorrow, it will take a couple of years with
the exception of Oi either “merging” with TIM or
being purchased by a new entrant.
The majority of our sites are in northeastern Brazil,
which is less developed than the South. So the nontraditional carriers have less fixed infrastructure
available so have to use wireless for high speed
internet, cable TV, even fixed line communications.
How will operator consolidation effect BTC? Not
much. We’re not doing any build to suit for Oi –
that would be too high risk. We also do not build
sites close to any existing site so even in case of
consolidation the “new consolidated entity” will
still need our site. So our exposure to operator
consolidation risk is almost zero.
Some of our competitors, particularly those
focused on São Paulo, have a lower ratio of nontraditional tenants where the availability of fixed
infrastructure makes the probability of securing
non-traditional tenants lower.
TowerXchange: What is BTC’s tenancy ratio?
Dr Chahram Zolfaghari, CEO, BTC: Our tenancy
ratio hasn’t increased from 1.3 since I spoke at
the TowerXchange Meetup Americas in May
However, all BTC’s anchor tenants are either
Vivo, Claro or TIM. We don’t build-to-suit for
non-traditional carriers because it could have an
adverse effect on our credit rating – when your
investment comes from outside Brazil it can be
difficult to explain building for a carrier no-one has
heard of.
TowerXchange: What effect will consolidation
among Brazil’s towercos - the tower acquisitions
by American Tower and SBA Communications have on Brazil’s smaller tower developers?
Dr Chahram Zolfaghari, CEO, BTC: The reality in
Brazil is that everyone else has exit strategy to sell
to American Tower and SBA Communications (or
Crown Castle). For example, BR Towers’ people
were telling everyone their objective was to grow
to 10,000 sites, and three months later they were
sold to American Tower! We know there will be
consolidation among Brazil’s towercos - I wouldn’t
even call this consolidation! We’re all in the market
to sell!
TowerXchange: But does the growing inventory
of towers marketed for co-location have any
impact?
Dr Chahram Zolfaghari, CEO, BTC: When American
Tower and SBA are growing exponentially in Brazil,
it’s not a threat, it’s an opportunity for companies
like BTC.
A company like American Tower is not a competitor
to BTC – we even share our plans with them. I’d
be flattered if they considered us a competitor –
BTC is a little drop in the ocean compared to their
portfolio!
We do a simple analysis to ensure 100% of our sites
are where there is no existing site for a couple of
kilometres. You can download an excel spreadsheet
showing our site locations from our website and
79
you’ll see that there is no overlap between our
existing sites and those of American Tower and SBA.
So we believe in creating value for a future sale by
ensuring they’re not buying duplicate sites.
The funds that invest in American Tower, SBA and
Crown Castle are seeking growth. With the US
tower market almost saturated, Brazil is the most
attractive of the sizeable international markets
where they can expand.
TowerXchange: Do you think Crown Castle
will join American Tower and SBA in Brazil
eventually?
Dr Chahram Zolfaghari, CEO, BTC: I think Crown
Castle will be active in Brazil soon. As last market
entrant they will have to pay a premium, just like in
any other business.
“
TowerXchange: As the carriers sell most of
their towers and divest much of their passive
infrastructure building and maintenance
capabilities, who will build the single tenant
towers as networks extend into lower population
density areas?
Dr Chahram Zolfaghari, CEO, BTC: Good question!
Like other towercos, BTC build sites with the
potential to add another tenant within months for
a second carrier who needs coverage at a similar
location.
In rural locations where carriers are only going
because Anatel insist, one solution would be if the
carriers could accept a running partner to invest
in both the tower and antenna under an opex and
revenue sharing model. Other than that, no-one is
going to accept building those single tenant sites.
TowerXchange: How would you sum up the state
of the tower market in Brazil?
Three years ago when we started we felt like pioneers. We had to
convince carriers of the merits of the build-to-suit model. Today that
model is fully accepted by all Brazil’s major carriers. The mobile
market is booming, and the need for new sites is tremendous. The
current build-to-suit companies cannot keep up with demand – there is
a huge gap in capacity
“
Dr Chahram Zolfaghari, CEO, BTC: Three years
ago when we started we felt like pioneers. We had
to convince carriers of the merits of the build-tosuit model. Today that model is fully accepted by
all Brazil’s major carriers. The mobile market is
booming, and the need for new sites is tremendous.
The current build-to-suit companies cannot keep
up with demand – there is a huge gap in capacity,
which means room for new entrants. I forsee the
market will remain this buoyant for at least the next
two to three years
XX
Sky is the limit: Skysites
evolves from property aggregator
to build-to-suit towerco
Brazilian site acquirer-turned towerco targets 2,000 BTS sites in five years
Founded in November 2010, Skysites started out as an
aggregator, accumulating a portfolio of 27,000 prospective
cell sites by securing exclusive agreements with large
property owners including retail chains, churches, hotels,
universities and sports arenas. As Brazilian carriers
moved from building their own towers to outsourcing
to towercos, Skysites has moved into the build to suit
business, as well as exploring small cells and Wi-Fi.
Luiz G. Silva, CEO – South America, Skysites Americas
Keywords: Who’s who, Towercos, Construction,
Lease Rates, QoS, Build-to-Suit, New Market Entrant,
Densification, Leasing & Permitting, Regulation,
Tax, Rooftop, Small Cells, Sale & Leaseback,
Infrastructure Sharing, South America, Brazil,
Skysites
< Skysites’ transition from site acquisition and aggregation to BTS towerco
< Comparing the cost of macro towers, rooftops and small cells in Brazil
< The network planning implications of Brazil’s shift from voice to data-centricity
< Opportunities for small cells and Wi-Fi as networks reach capacity
< The three factors which need to be addressed to unlock implementation of new sites in Brazil
TowerXchange: What’s your background and the
experience of Skysites’ co-founder?
Luiz G. Silva, CEO – South America, Skysites
Americas: I have a background in strategy, product
development, network design and building GSM,
CDMA and UMTS mobile networks for companies
such as Bellsouth International, Claro, Hutchison 3
UK and Brasil Telecom (now Oi).
Skysites’ co-founder, our Chairman Ryan Jarvis,
founded UK telecom real estate firm Macropolitan,
which he sold to Arqiva for £9.5mn, and a panEuropean public Wi-Fi operator, which he sold to
Swisscom. Ryan has also held senior roles at BT.
Skysites’ core competence is network design; we
have a deep understanding of how urbanisation,
new products and new technologies affect network
design, and we’re able to anticipate demand from
operators and innovate to meet their needs.
TowerXchange: Please introduce Skysites to our
readers – where do you fit in the telecom tower
industry ecosystem?
Americas: Skysites has evolved through three
phases. In phase one, we started out as an
aggregator of sites with direct MNO relationships.
Then in phase two we evolved as we recognised
that the carriers were increasingly outsourcing
build to suit, and we’ve slowly started to build
towers. Phase three, the next phase of our
proposition is to develop small cells and Wi-Fi.
81
“
to thousands of sites on which they would be able
to install various wireless technologies.
As we already had framework
agreements with Brazil’s leading
MNOs, we felt Skysites was well
positioned to provide build
to suit services ourselves. We
started building a few towers,
less than 50 so far, but in our
next phase we’re aiming to build
2,000 premium sites within five
to six years
“
To go back to the start of our story, the initial idea
of Skysites was a site acquisition model. Instead of
going site to site one at a time, we acquired rights
from big property owners: real estate investors,
churches, drug stores, supermarkets and hotel
chains. We were successful in putting together
a portfolio of 27,000 properties with exclusive
agreements 5-16 years in duration. In 2010 through
early 2012 we didn’t have as many towercos
in Brazil, just a smaller scale American Tower
operation and a few local players. So the operators
still invested in a lot of their own sites and had own
their own acquisition and construction teams – and
Skysites were positioned to help MNOs with access
2012 marked a change of strategy, with operators
starting to sell their towers to towercos and ask
the towercos provide build to suit services. As we
already had framework agreements with Brazil’s
leading MNOs, we felt Skysites was well positioned
to provide build to suit services ourselves. We
started building a few towers, less than 50 so far,
but in our next phase we’re aiming to build 2,000
premium sites within five to six years.
As well as seeking to address the build to suit
opportunity in Brazil, we’re also developing,
educating and interacting with MNO’s deployment
of small cells and Wi-Fi hotspots – lots of our sites
are ready to have Wi-Fi hotspots deployed.
TowerXchange: What are the secrets of
identifying a location that could be attractive to
Mobile Network Operators?
Americas: Network design is in Skysites’ DNA. We
understand where the MNOs are today, and we
know where their weaknesses are. And we know
where people and traffic are. We’re able to match
gaps in operators’ existing network with areas of
increasing population density, put those in our
model and identify potential hotspots in short,
medium and long term demand. Operators tend to
plan networks within short term horizons – they
find a problem today, solve it tomorrow. We get
ahead helping them to anticipate demand hotspots.
TowerXchange: How do you decide whether
and where to build? Do you use your network
planning knowledge to pre-emptively identify
attractive locations? Or do you wait for one or
preferably two tenants to request a site near a
similar grid reference before breaking ground?
Americas: It’s a mixture of both. Where demand
at a particular location is huge, one operator with
capex available for the location may be sufficient.
We don’t need to have two tenants from the outset,
particularly if our analysis suggests the site will
be required by a second and third tenant in the
medium term.
TowerXchange: Will Skysites build structures
yourself or will you subcontract?
Americas: We’ll be subcontracting the construction
work – we don’t need to have this in-house. There
is no national construction company with a cost
effective proposition in Brazil, so we’ve found it
better to use regional companies with a strong
internal programme management team.
TowerXchange: Talk us through the economics
of building and leasing out towers in Brazil.
Americas: A traditional macro site costs US$100200,00, depending on the location. Rooftop sites
can cost a lot less, around US$50,000. Innovative
small cells or Wi-Fi hotspots depend on the cost and
XX
Rental rates vary a lot according to the
geographical context. At some locations tenants pay
less than US$400 per month, other special locations
can attract lease rates of up to US$2-3,000 per
month.
TowerXchange: How do you foresee the
evolution of Brazil’s telecom networks?
Americas: Brazil is so huge that the design of
network varies greatly. You have a dense, urban
environments such as São Paulo, Rio or Belo
Horizonte where the networks are at capacity and
you need a lot of infill sites, small cells and Wi-Fi
offload, similar to the UK or US. Then you have
rural areas as challenging as sub-Saharan Africa.
You have everything in Brazil, so it’s like having to
have a business plan for multiple countries.
We need to double the ~70,000 sites in Brazil. A
good proportion of those sites will still be big macro
sites providing suburban coverage, but half of them
will be in urban high density areas, and networks
will evolve to include a lot of street furniture, Wi-Fi
hotspots, small cells, indoor and outdoor DAS.
“
We need to double the ~70,000
sites in Brazil. A good proportion
of those sites will still be big
macro sites providing suburban
coverage, but half of them will be
in urban high density areas, and
networks will evolve to include
a lot of street furniture, Wi-Fi
hotspots, small cells, indoor and
outdoor DAS
“
quality of location and the type of infrastructure
used, but the range is US$5-20,000 up front capex.
For example, we have an agreement with major
drug store chains with over 4,000 locations across
Brazil. We can use their outdoor space to place
small cells, with a small unit inside, with a capital
cost typically around US$20,000 for a solution with
capacity for two carriers.
Brazil has already shifted from a voice-centric to a
data-centric network in terms of what users want
to do. People are talking less. They’re accessing
data, videos, Facebook and WhatsApp. In terms
of resource allocation per user, Brazil’s mobile
networks were designed for voice, so this data
explosion demands a lot from the RAN and core
network resources. So operators are in the midst of
a challenge to adapt Brazil’s network from voicecentric to data-centric.
The marketing guys face a similar challenge. Price
plans, billing systems… everything was designed
for voice, but the economics of data changes
everything. Brazil has one of the lowest costs of
data in the world. You can still access mobile data
after using the full volume of data in your plan,
but operators will decrease data speed. However
users don’t care about data speed for 90% of
the applications they’re using because they’re
primarily using low bandwidth apps.
So I foresee an evolution in how the network is
designed, and a parallel evolution of products on
offer to the market. This is creating pressure on
operators’ balance sheets, under pressure to deliver
the best returns for shareholders, which leads to
the sale of towers and the outsourcing of build
to suit. Skysites are trying to help by providing
sites quickly and at low cost, and adding value by
providing innovative solutions.
TowerXchange: How will the new Antenna Law
affect the acquisition and building of new cell
sites in Brazil?
Americas: There are three factors we need to
address to unlock the volume of implementation of
new sites. The time consuming licensing process is
the first, and the National Antenna Law will help
a lot – it will speed up the implementation of new
sites. The second factor is an internal challenge
within operators to reconcile the new economics
and new network design required for a data-driven
market – they need to reinvent how they design the
network. And thirdly, we need to address licensing
costs, for small cells for example, and taxation in
general
83
Special feature:
Argentina case study
Argentina is host to a large, relatively stable and profitable
telecom industry, dominated by three carriers - Claro, Movistar
and Personal - with close to equal market shares. Penetration
is high, but with room for growth. 4G is being rolled out. In
spite of this, the country has so far failed to attract independent
towercos and considerable international investments in light of
its political and currency instability and risk.
The country is divided between urban networks Buenos Aires
leading the way in terms of technology investments and network
enhancements, while rural Argentina remains close to virgin. In
light of the huge tasks ahead for mobile network operators, we
can predict that Argentina will eventually become a target for
towercos and, specifically, for entrepreneurial towercos with the
appetite for the risk of doing business there.
In the next few pages, Mott MacDonald present a comprehensive
analysis of the current state of LTE in Argentina, while BMI
tackle country risk – but first we introduce the market and
speculate about possible future opportunities to create an
Argentinian tower industry.
Don’t miss:
85 TowerXchange: Are the rewards worth engaging with
the political risk?
87 Mott MacDonald Share Square: Argentina
90 BMI: Is the Argentinian tower market turning a corner?
XX
Argentina: Are the rewards
worth engaging with the political
and currency risk?
An initial look at the potential of the Argentinian market for the tower industry
Argentina is on everyone’s radar in the CALA
tower industry. It’s a huge untapped market,
trailing only the lucrative Brazilian and
Mexican tower markets in terms of potential.
But Argentina is untapped for good reason.
TowerXchange asks: is the risk worth the reward?
By Arianna Neri, Head of Americas and Asia, TowerXchange
Keywords: Editorial, Market Overview, 3G, 4G,
LTE, New License, Urban vs Rural, Bankability,
New Market Entrant, Densification, ARPU,
Country Risk, South America, Argentina,
America Movil, Claro, Telefonica, Movistar,
Telecom Personal, Telecom Argentina, Telecom
Italia, Fintech
< The attractiveness of a balanced, competitive MNO landscape
< Successful 3G and 4G spectrum auctions, promising penetration but still room for growth
< Macro-economic concerns
< Contrasting Argentina’s urban and rural markets
< Opportunities for BTS-centric entrants, and conditions in which the big publicly listed towercos
may be interested in Argentina
First, let’s look at the positives.
Competitive operator landscape
Argentina is host to one of the most balanced,
competitive operator markets in CALA, and that’s
always good news for the tower industry. Three
operators vie for market leadership: America
Movil’s Claro, Telefonica / Movistar, and Telecom
Personal (the mobile arm of Telecom Argentina,
which itself is controlled by Telecom Italia, which in
turn is in the process of exiting Argentina in spite of
several delays in the sale process involving Fintech).
Nextel has a small market share.
Mature subscriber market, growing smartphone
penetration drives demand for data – LTE being
launched
In 2013 the GSMA recorded 52.9mn SIM connections
in Argentina, representing active SIM penetration
of 128% but multi SIMing leaves room for growth,
given that there are only 28mn unique subscribers
among a population of 41.5mn (unique subscriber
penetration of 67%). 3G penetration had topped
40% in 2013, with smartphone penetration in the
low 20s. GSMA Intelligence suggested ARPUs in
Argentina, at around US$14 in 2012, were higher
than the fertile tower markets of Mexico and Brazil.
During the 3G and 4G spectrum auction held in
November 2014, operators’ bids exceeded the
floor price of US$1.97bn by 13% and invested a
very healthy US$2.23bn. As a result, LTE is now
being launched by major operators, with Telecom
85
instability and perilous condition of national debt
create substantial macro concerns.
In January 2014 the devaluation of the Argentinean
peso slowed economic growth while driving
inflation above 30%, eroding purchasing power. The
resultant widening of the deficit had a lot to do with
Argentina’s recent default on restructured bonds.
The implications for upgrading communications
from feature phones to smart phones are obvious,
as are the implications for towercos to establish
their presence in the country.
Corruption
Buenos Aires
Personal and Movistar both in the process of
launching services across major cities.
Corruption is commonplace in Argentina.
Transparency International ranked Argentina
107th on the corruption perception index in 2014
– interestingly just behind Mexico (103rd), where
corruption hasn’t hindered the development of the
tower industry.
Two different Argentinas
You can see why there’s so much interest in
Argentina. Smart towercos have prospered in Brazil
and Mexico – Argentina could be next. But the
towercos haven’t entered Argentina yet – why? Let’s
look at the negatives.
Sovereign and currency risk
Argentina is host to many of the same challenges
one sees elsewhere in CALA, only those challenges
are compounded. The unstable currency, political
From a purely telecom perspective, it’s been
noted how Argentina is home to two completely
different markets: urban and rural. Urban areas are
represented by Buenos Aires and literally a handful
of other substantial cities such as Cordoba, Rosario
and Mar del Plata which are now enjoying 4G LTE
and relatively modern services while the rest of the
country is affected by site scarcity.
In a recent conversation, a towerco executive
commented how an investment could be
theoretically possible in urban areas where cell
site densification is trending. However, it looks
like Argentina has a long way to go to ensure fair
coverage throughout its territory and rural coverage
hasn’t been legally enforced yet.
Conclusions
No matter how much we’d love to report on the
opening of a new attractive tower market, we
don’t foresee large towercos to make considerable
investments in Argentina any time soon. However,
we could expect smaller, entrepreneurial towercos
to start looking at the country and the developments
of its telecom industry.
At one point, cell site densification in urban areas
will become a necessity and BTS focused firms could
enjoy relative prosperity in a country still far from
developed.
Improvement in macro-economic conditions,
particularly the settling of the bond dispute, coupled
with re-assurance that the spectre of nationalisation
is removed, would transform Argentina into one
of the world’s most attractive virgin markets for
towercos, enabling local operators to capitalise their
passive infrastructure assets and focus on the core
business of selling minutes and megabytes. The
Argentinian tower market may currently be frozen,
but the usual suspects are monitoring Argentina,
awaiting a time at which the political and currency
risk settles to a level that meets their investment
thesis
XX
Key mobile developments
Share Square: Argentina
• 63.1 million mobile subscriptions by the end of 2014, giving a
penetration rate of 151%
• A high level of multiple SIM ownership means subscriber penetration
is around 68%
Passive
• 3G penetration sits at around 37% of subscriptions
None
Current Sharing
Active
• 3 MNOs with very similar market share: Claro (América Móvil) with
21.6m subscribers, Personal (Telecom Argentina) with 19.9m and
Movistar (Telefónica) with 18.6m
• October 2014 3G/4G auction means all three operators have 4G
spectrum and Movistar and Personal have launched 4G services
• There remains lots of growth potental for 3G, 4G and subscriber
growth – which stands to stimulate a need for tower infrastructure
• However, uniquely for a market of the size and potential, the tower
market has yet to take off – owing to perceived politcal, economic and
regulatory risk
Argentina
• Recent regulatory developments, the 2014 spectrum auction and
elections in 2015 look set to make conditions more favourable to
towercos
• Tower market therefore has the potential to take off in the near future
3G
4G
Technology Deployment
Opportunity for TowerCo entry with
focus on high Lease Up Rate (LUR)
Opportunity for Outsourcing
by MNO to TowerCo
Limited opportunity for new
entrant TowerCo
Mobile Market Overview
Argentina had a population of 41.8 million people
and 63.1 million mobile subscriptions (source:
GSMA) at the end of 2014, giving a penetration rate
of 151% - the second highest in South America, after
Uruguay. Around 71% of subscribers had a prepaid account.
There are four Mobile Network Operators (MNOs)
serving the Argentina market, with three players in
close competition to be market leader (See figure
1) – Claro (América Móvil) with 21.6mn subscribers,
Personal (Telecom Argentina) with 19.9mn and
Movistar (Telefónica) with 18.6mn.
Argentina has one of the most developed mobile
markets in Latin America, with the third highest
number of subscribers after Brazil and Mexico, and
the second highest degree of mobile penetration in
South America after Uruguay. Whilst penetration
is high, there is still thought to be potential for
subscription growth, given that there is a high level
of multiple-SIM ownership – meaning that the
penetration rate in terms of unique subscribers sits
at around 68%.
In terms of mobile technologies, Claro, Personal,
and Movistar all launched 3G services in 2007, and
3G accounted for 38% of subscriptions at the end of
2014.
On October 31st 2014 Argentina’s Secretaria de
Comunicaciones (SeCom) staged a multi-band
spectrum auction - offering up national 4G LTE
spectrum in the 700MHz and 1700MHz/2100MHz
(AWS) frequency bands, as well as additional
regional 3G spectrum in the 850MHz (SRMC) and
1900MHz (PCS) ranges. Winning bidders of the
4G spectrum are required to provide coverage
of all locations with more than 500 inhabitants
(corresponding to around 98% population
coverage) within five years, with the licences valid
for a period of 15 years. It is notable that, according
to the GSMSA, 3G currently covers around 84% of
the population. According to the World Bank, 92%
of the population is urban – second only to Uruguay
amongst major Latin American nations.
Overall, the auctions were considered a success,
87
with SeCom confirming that it received a total of
US$2.23bn in bids for the wireless spectrum, 13%
above the floor price of US$1.97bn.
Movistar was awarded LTE-suitable frequencies
in the 1710MHz-1720MHz and 2110MHz-2120MHz
bands, all of which is available for use on a
nationwide basis. The company reportedly agreed
to pay US$209.14mn for the spectrum. Movistar
opted not to bid for 3G spectrum.
Claro won the following spectrum blocks for
3G use: 1892.5MHz-1895MHz and 1972.5MHz1975MHz (Region I – North), 1870MHz-1875MHz
and 1950MHz-1955MHz (Region II – Buenos Aires
metropolitan area) and 1867.5MHz-1870MHz
and 1947.5MHz-1950MHz (Region III – South).
Figure 1: Mobile subscriptions market share
3%
35%
30%
32%
Claro
Personal
MovistarNextel
Claro was also awarded a national 4G LTE licence
encompassing 1720MHz-1730MHz and 2120MHz2130MHz. Claro reportedly paid US$281.49mn for
the 3G and 4G-suitable spectrum.
Personal won the following spectrum for 3G use:
1890MHz-1892.5MHz and 1970MHz-1972.5MHz
(Region I – North), 830.25MHz-834MHz and
875.25MHz-879MHz (Region II – Buenos Aires
metropolitan area) and 1862.5MHz-1867.5MHz and
1942.5MHz-1947.5MHz (Region III – South). Personal
also won a national 4G Long Term Evolution (LTE)
licence encompassing 1730MHz-1745MHz and
2130MHz-2145MHz spectrum. Personal will pay
US$410.78mn for its allocations.
The spectrum awarded to the fourth and final
bidder, media conglomerate Arlink (Grupo Uno),
has yet to be confirmed.
Movistar is reported to have switched on 160 LTE
BTSs, covering a number of cities including Buenos
Aires, Mar del Plata, Carilo and Pinamar and has
sold 10,000 LTE-capable smartphones since its
commercial 4G launch in December last year – as
well as having 250,000 older handsets in circulation
which are 4G capable.
In January 2015 Personal announced that it has
switched on its LTE network in two new cities, Mar
del Plata and Pinamar, taking the total number
of locations served to five – having launched in
Buenos Aires, Cordoba and Rosario in December
2014. The operator noted that it now has 141 4G BTS
in service, up from 84 at launch. Going forward,
Personal expects to have 200 LTE towers active by
the end of Q1 2015, with a plan to cover 85% of the
population within two years. Personal notes that it
will spend around US$1.52bn on the deployment of
3G and 4G networks over the next 3 years, on top
of the funds committed during the recent spectrum
auction.
Claro has commented that its LTE rollout is
progressing well, but that it does not intend to
announce its commercial 4G launch until the
network achieves significant coverage. A launch in
2015 is expected [source: GSA].
In terms of 4G roll-out, according to media channel
Clarin, by mid-January 2015 Movistar and Personal
had around 100,000 4G users between them –
although Personal had previously announced that
it had signed up 200,000 LTE users across its three
initial launch cities. GSMA puts the figure slightly
higher than Clarin – estimating that Personal had
over 150,000 LTE subscribers by the end of 2014. It
is perhaps too early to be confident about precise
subscriber figures, with better data likely to emerge
as 2015 progresses.
The tower sharing market
Perhaps uniquely for a market of its size,
maturity and growth potential, Argentina’s
tower infrastructure market remains completely
undeveloped, with very little activity evident to date.
Regional big-hitters like American Tower and SBA
report no towers assets in Argentina despite having
coverage in most of the other prominent markets in
XX
There are a number of potential reasons for this
anomaly between the apparent potential of the
market and the actual level of towerco activity.
Firstly, there has been a significant degree of
financial instability – with a recent currency
devaluation and high levels of inflation – which
represents a degree of risk. The stance of the
left-wing government – including threats of
nationalisation – may also have led to caution on
the part of external towercos fearful their assets
might be seized. There has also been a degree of
regulatory and market uncertainty – for example
regarding the ongoing sale of Telecom Italia’s
controlling stake in Telecom Argentina – which
has been dragging on for over a year. Argentina
ranks 124th in the world in the World Bank’s
Ease of Doing Business rankings (only Bolivia
and Venezuela rank lower amongst major Latin
American states) – and factors like corruption have
been a problem – although this is far from unique
(Brazil ranks 120th and yet has a thriving tower
market).
There are also a number of reasons for believing the
tide may be turning, and that the tower market in
Argentina may take off in the near future.
From a regulatory perspective, for example,
there were significant developments in 2014. In
December Argentina’s Chamber of Deputies, the
“
following the October 2015 national elections could
signal the return to a more stable business friendly
environment.
Significant tower infrastructure
will be required to meet coverage
targets and to cater for mobile data
date demand in large population
centres – with operators likely to
be keen to share infrastructure to
protect returns. Given the lack of
towerco activity to date, the market
also represents something of a
unique greenfield site
“
the region. Neither has there been much evidence
of investment activity by private equity companies
– which have been active in the creation of towercos
in other Latin markets such as Mexico and Chile.
lower house of the National Congress, approved a
new telecommunications law, replacing legislation
dating back to 1972. The ‘Digital Argentina’ bill will
allow companies to provide bundled telephone,
internet and cable television services. It also creates
the Autoridad de Aplicacion de las Tecnologias de la
Informacion y las Comunicaciones (AFTIC), a new
seven-member body responsible for controlling
and regulating all ICT-related matters. Critics argue
that the new bill, which still needs to be signed by
President Cristina Fernandez, will benefit market
leaders rather than aiding competition – and it is a
little early to assess its impact on the tower market,
but the move is seen as being broadly positive.
From a political and economic perspective, there
is a chance that the advent of a new government
From a mobile market perspective, the recent
spectrum auctions and demand for 4G services
mean that there will be a significant need for
additional tower infrastructure if the operators are
to meet the coverage targets imposed as part of their
licence conditions.
Conclusions
The Argentina market has many positive
characteristics with regard to its potential for
towercos – with three sizeable, competitive mobile
operators vying for leadership, high penetration yet
potential for subscriber growth, and a nascent 4G
mobile market. Significant tower infrastructure will
be required to meet coverage targets and to cater
for mobile data date demand in large population
centres – with operators likely to be keen to share
infrastructure to protect returns. Given the lack of
towerco activity to date, the market also represents
something of a unique greenfield site, which the
leading international players and investment houses
are likely to be eying with a view to making first
move.
It is less a question of “if” and more of “when” will
be the right time to make that move. Given recent
regulatory and 4G developments the answer is likely
to be sooner rather than later – with an expectation
that there will be start to be announcements
regarding tower activity as 2015 unfolds
89
Is the Argentinian tower
market turning a corner?
Recent auctions, impending regulatory reform and slow economic
recovery could see the market ignite in 2016-17
Argentina’s telecoms tower industry is notable for its overall lack of
activity, with third-party towercos eschewing the market in favour
of lower risk countries in Latin America. In this analysis, Business
Monitor International’s CALA tower expert Jake Grant shares his
view of a tower market fraught with contradictions; an attractive,
balanced triumvirate of MNOs, a recent spectrum auction with one
of the region’s highest 3G penetration rates, offset by global headline
grabbing political and currency risk. When will the Argentinian
tower industry kick off?
Jake Grant, ICT Analyst, BMI
Keywords: Research, Market Overview, Investment, 3G, 4G , LTE,
Risk, Market Forecasts, Market Entry, QoS, Bankability, Regulation,
Country Risk, BMI Analysis, South Americ, Argentina, Telefonica, NII
Holdings, Claro, Movistar, Nextel, Telecom Personal, ArSat, Telecom
Italia, Telecom Argentina, Fintech, AFTIC, American Tower, SBA
Communications, BMI, Business Monitor International
< The favourable competitive landscape among MNOs
< The impact of the spectrum auction, plus the current and forecast 3G/4G penetration –
a comparison with CALA’s more active tower markets
< Political risk and the spectre of nationalisation
< Regulatory reform – the creation of AFTIC
< BMI’s view on when independent towercos could enter Argentina
The sale of telecoms network infrastructure to
third-party tower companies has been a key theme
in the industry over the past three years. In Latin
America, mobile operators such as Telefónica and
NII Holdings have followed this trend, offloading
tower assets to the likes of American Tower
Corporation and SBA Communications in markets
including Brazil, Mexico, Colombia, Chile, Peru
and others. Argentina is the notable exception to
this trend, despite the presence of Telefónica and,
until recently, NII Holdings in the mobile market.
American Tower and SBA Communications report
no holdings of towers in Argentina, while the
former owns and operates over 32,000 tower sites
and the latter over 8,500 in the rest of the region.
Argentina the exception in a growing towers
industry
This is despite many of the conditions in Argentina
that would point to potential success for third party
towercos entering the market. Argentina is the
second largest country in Latin America in terms of
geographic size and fourth in terms of population.
This would make it attractive for mobile operators
to sell tower infrastructure to third-parties in order
to reduce the burden of expansion into large rural
areas of the country. Further, Argentina’s mobile
market is characterised by fierce competition
between three national operators, which has
driven one of the highest mobile penetration rates
in the region, for both basic subscriptions and 3G
connections. Telecom Personal, Claro and Movistar
are within 4.3pps of one another in terms of market
share as of Q314. Nextel holds the remaining 3.5%
XX
Fierce competition driving high mobile development
Market share (%), 2011-2014
40
35
30
25
20
Claro
Nextel
15
Movistar
Telecom Personal
10
5
Q111
Q211
Q311
Q411
Q112 Q212
Q312
Q412 Q113
Q213
Q313
Q413 Q114
Q214
Q314
Source: BMI, operators, national regulatory authorities
share of the market and does not boast the national
presence of its rivals, making it a minor player by
comparison. difficult for foreign companies to bring in the parts
and equipment needed.
Political risk scaring off investors
The uncertain regulatory environment and
ongoing macroeconomic problems including
currency devaluation and high levels of inflation
have conspired to keep third-party towercos out
of Argentina, in favour of lower risk markets.
Import restrictions and quotas also add to the
underwhelming business environment, making it
BMI believes the greatest risk is posed by mounting
government intervention. The administration of
President Cristina Fernández has intervened both
directly and indirectly in business operations
as part of its left-wing, nationalist policy. The
government has nationalised several companies
across various industries and has entered into
acrimonious arbitration processes in order to
pay compensation to the companies affected.
This is true of the telecoms sector also, where the
government cancelled a September 2012 auction of
3G spectrum and awarded the frequencies to stateowned ArSat. The company held this spectrum,
amounting to 25% of total 3G frequencies, for
two years without utilising them in any way,
before they were eventually auctioned to the
three major mobile operators at the end of 2014.
In addition to the move to award ArSat with
spectrum, the government has also threatened to
renationalise operators and suspend sales of new
subscriptions if they failed to improve their quality
of service, as well as forcing the breakup of media
conglomeration Grupo Clarín.
The nationalisation threats are particularly
worrisome and serve to keep out third party
towercos, for fear that their assets will be seized
by the government for unfair compensation.
Complaints regarding quality of service were in
part due to the lack of 3G spectrum available to
mobile operators, given that these frequencies were
held by ArSat for two years.
The uncertain regulatory environment is also
noticeable in the ongoing sale of Telecom Italia’s
entire controlling stake in Telecom Argentina to
investment firm Fintech. A US$960mn deal was
agreed in November 2013; however, since then,
TI has been forced to extend the sale completion
deadline twice, as it awaits regulatory approval.
In October 2014, TI gave Fintech 30 months to
91
Communications Authority (AFTIC), which will
be responsible for controlling and regulating all
matters relating to Information Technology and
Communication (ICT) and other related services and
players in the ecosystem. It remains to be seen what
kind of powers the new regulator will have and how
independent it will be but it should at least resolve
problems with delays to policy and the Telecom
Argentina acquisition.
Latin America 3G/4G penetration
80
Argentina
Chile
Mexico
70
Brazil
Colombia
Peru
60
50
40
30
20
10
2013e
2014e
2015f
2016f
2017f
2018f
e/f = BMI estimate/forecast. Source: National Sources/BMI
complete the deal but Argentina’s communications
ministry (SECOM) has been slow to offer its support.
Changing telecoms and macro environment to
spur towers interest
With the auction of 3G and 4G spectrum in October
2014, the market for third party towercos could
potentially be turning a corner. Argentina has been
one of the last markets in the region to award 4G
spectrum to mobile operators, and now all three of
the major players have access to these frequencies.
This will result in expanded investment strategies
for Personal, Claro and Movistar as they look to roll
out infrastructure across the country. These capital
expenditure budgets may require mobile operators
to sell off tower and infrastructure assets to thirdparties in order to raise funds for their 4G LTE
deployment strategies.
The auction coincides with the Argentina Lower
House approving a draft bill in December 2014,
proposing reforms to the country’s previous
telecoms law which had been introduced in
1972. The bill had already been approved by the
Senate on December 10, and will now go before
the executive branch, where it will wait for its
enactment by President Cristina Fernandez. The
stipulations of this reform, include the creation of
the Application of Information Technologies and
Economic growth in Argentina will remain tepid
in the coming quarters, with a recession in H214
giving way to a subdued recovery in 2015. We
expect the election of a new government in the
October 2015 national elections to see a return
to more orthodox, business-friendly economic
policies, generating an increase in fixed investment
over a multi-year timeframe. BMI also believes a
settlement with bondholders will also take place
during 2015, improving the outlook for investment.
However, unwinding Argentina’s economic
imbalances will be a prolonged affair with another
peso devaluation expected in 2016 and we do not
anticipate a significant acceleration in growth until
2017 at the earliest. We forecast real GDP growth of
1.0% in 2015 and 2.5% in 2016, following a projected
0.2% contraction in 2014.
While the business environment has prevented the
entrance of tower companies into the market, we
believe wide-scale changes in the government, the
telecoms sector and the regulator could bring in the
likes of American Tower during 2016-17
www.businessmonitor.com/bmo
XX
Special feature:
What’s left?
The tower monetisation strategies
of SSA’s leading MNOs
Airtel’s African tower sale nears completion. MTN has
monetised their most attractive sub-Saharan African towers,
except those in South Africa. Etisalat has restructured with
Maroc Telecom and sold most of their Nigerian towers. First
movers Millicom have since been dormant, while Vodacom
and Vodafone have sold relatively few towers. Orange’s
infrastructure sharing programmes continues.
In this special feature, TowerXchange reflect on the tower
monetisation strategies of SSA’s top six MNOs; MTN, Airtel,
Etisalat / Maroc Telecom, Orange, Vodacom and Vodafone.
Towercos don’t want all the towers; many are in duplicate
locations, others are owned by anchor tenants who are not
credit worthy. For towercos the addressable market is not
all 165,000 African towers, but perhaps a little over half. So
what’s left in the pipeline?
In this special feature:
94 Lessons learned from the MNO panel at the
TowerXchange Meetup Afrca
98 Airtel’s African tower sale: who got what
100 MTN’s passive infrastructure monetisation strategy
104 What’s left? Etisalat, Orange, Vodacom and Vodafone’s
tower strategies in SSA
93
Lessons learned from the MNO panel
How each operator introduced their tower
strategy:
session at the TowerXchange Meetup Africa
Etisalat
Five of Africa’s leading operators reveal the drivers and future of their tower strategies
TowerXchange MNO Panel, Africa 2014
Prakash Ranjalkar has been fostering Airtel’s passive infrastructure
assets in SSA until their imminent transfer to the towercos; he
currently serves as CEO of Airtel’s Africa Towers entity. TowerXchange
‘Inner Circle’ advisory board member Michel Faivre has led Orange’s
infrastructure sharing programme for several years. Tim Knowles
represented both an M&A perspective and that of Etisalat, who of
course recently sold 2,136 towers in Nigeria. Riana Donaldson was
a key part of the team that outsourced towers to Eaton at Vodafone
Ghana – she now serves as Manager: Network International for
Vodacom. And Sudhir Chopra, Group CTO of Smile, represented the
tenant’s point of view as the foremost of Africa’s many new entrant 4G
plays. The panel was ably moderated by Gulfraz Qayyum, Managing
Director of TMT Investment Banking at Citi.
Keywords: Who’s Who, MNOs, 4G, LTE, EBITDA, Capex, Deal Structure, Lease Rates, Network Rollout,
QoS, Build-to-Suit, First Mover Advantage, Tenant’s Perspective, Active Infrasharing, SLA, MLA, Anchor
Tenant, KPIs, Operator-Led JV, Sale & Leaseback, Manage With License To Lease, Stakeholder Buy-In,
Infrastructure Sharing, Africa, Nigeria, Mozambique, Cameroon, Cote d’Ivoire, Uganda, Tanzania, Airtel,
Etisalat, Orange, Smile, Vodacom
< The SSA tower strategies of Airtel, Etisalat, Orange, Smile and Vodacom
Etisalat is present in 19 countries, with a
leadership position or strong challenger status
in most markets. As such, they are considered
a highly desirable counterparty in any tower
transaction. During 2014, Etisalat’s West African
business was restructured through the sale of the
Atlantique Telecom / Moov assets in six countries
to Maroc Telecom and Etisalat’s acquisition of a
53% stake in Maroc.
Etisalat’s Head of M&A Tim Knowles revealed there
was no group wide strategy toward towers. Indeed,
Andrew Kemp CFO of Etisalat Nigeria, championed
the sale of their Nigerian towers in 2014, a market
in which Etisalat needed to raise funding and
reduce opex, but also needed to bring their towers
to market in a timely manner in to get best price,
the Airtel and MTN processes having triggered a
scramble to acquire Nigerian towers.
Etisalat doesn’t see tower sales as the sole means of
generating efficiencies; they have also outsourced
managed services and created 3G joint ventures in
selected markets.
< Contrasting appetite for SLB (with or without retention of equity), MLL and joint venture towerco
deal structures
Airtel
< Are MNOs concerned about towerco monopolies and oligopolies?
< How new towers get built
< Pros and cons of active infrastructure sharing
Airtel has a stated strategy to ensure their towers
are managed in a focused manner – a large capital
investment has been deployed, and they see
XX
passive infrastructure as critical to operations.
The sheer number of towers and the complexity
of operations in India prompted the creation
of Bharti Infrastructure, within which Bharti
manages their own Indian towerco Bharti Infratel
and their stake in joint venture towerco Indus
Towers. Airtel’s tower strategy has played out
successfully in India, reducing costs and enabling
expansion while driving tenancy ratios over two.
From 2010 it was Bharti Airtel’s intention to
share towers in Africa but, given the smaller
individual tower portfolios across such a diverse
SSA footprint, they found they couldn’t replicate
the carve out towerco model they used in India.
Nor did efforts to attract partners in MNO joint
venture towercos achieve much traction in SSA.
With the growing wave of tower transactions in
SSA, Airtel felt it was better to consolidate and
bring their African towers into the hands of expert
independent towercos. Thus 15 months ago Airtel
commenced an Africa wide tower sale process,
described (in October 2014) as 70% complete,
and anticipating that by Q1-2 2015 their partners
will have been selected in each of Airtel’s SSA
countries.
By offering up Airtel’s “entire platter” of African
towers, whilst being prepared to carving up the
portfolio and allow towercos to mix and match
to select the countries which best matched their
investment thesis, Airtel has been able to offload
towers in their smaller perhaps less attractive
markets, bundled with the assets that more
obviously met towercos’ criteria.
Vodacom
The drivers of Vodacom’s tower strategy are the
stabilisation of cost and optimisation of QoS.
Vodacom’s only tower transaction to date has been
in Tanzania, where they had previously outsourced
the management of passive infrastructure
to Nokia. They see the Mozambique market
somewhat driven by coverage, creating a specific
niche opportunity for a more rurally focused tower
venture that could focus on supporting coverage
objectives. Vodacom undertakes substantial bilateral tower sharing in DRC, but retains their
passive infrastructure assets in the country.
Orange
Orange’s strategy is to share the network as much
as possible to improve QoS and optimise rollout
capex, particularly in the context of the difficulty
securing authorisation to permit new sites.
Orange adopts a different tower strategy model
from one market to the next, according to market
need. Orange has agreed managed services deals
with IHS in Cameroon and Cote d’Ivoire, and had
sold towers to Eaton Towers in Uganda prior to the
sale of their license to Africell.
Smile
Smile considers outsourcing and infrastructure
sharing as two pillars of their strategy – they
believe they can achieve better performance,
better KPIs at a lower cost by sharing towers. Smile
has evolved to focus on mobile broadband internet
using 4G LTE technology – they launched Africa’s
first 4G LTE service in Tanzania, in March 2012,
and now also provide 4G LTE services in several
cities in Uganda and Nigeria. Sudhir noted that as
recently as three years ago there was hardly any
sharing in Nigeria, yet today over two thirds of
towers are shared.
What is the right deal structure, MNO joint
venture, sale and leaseback or manage with
license to lease?
“We’ve tried sale and leasebacks, we’ve tried to
create MNO joint ventures to which we then add a
towerco partner – the right deal structure depends
on local market requirements,” said one operator.
Tower strategy isn’t just about the management of
existing towers, it’s also about getting new towers
built. Build to suit programmes are typically
bundled with tower divestitures. Tower strategy
is also a larger corporate finance consideration.
Few African opcos are 100% owned by their
parent companies, and if local shareholders
aren’t prepared to contribute further capital,
monetising passive infrastructure is an attractive
alternate way to raise capital. Every shareholder
has their own view of the potential conflicts of
interest between MNO and towerco, which is why
stakeholder engagement is critical and can affect
how empowered the local management team is
to manage balance sheet considerations such as
divesting their tower portfolio. Sometimes it is
95
simply not possible to sell the towers.
Orange’s Michel Faivre called attention to the
many efficient joint venture infrastructure sharing
business models working very effectively in
Europe, particularly in fiercely competitive mobile
markets, and to the potential for such models to be
implemented in Africa.
Orange favours an outsourcing model with
managed services – very similar to sale and
leaseback, but the only difference is that Orange
retains ownership of the towers. They still have an
SLA to leverage QoS improvements, they can realise
good prices as the towerco can still create extra cash
flow through co-location sales. Orange typically
bundle a build to suit programme, and the towerco
still takes over power. While there are exceptions,
generally Orange prefer to retain towers.
Retention of equity and transaction pricing
The question of whether to retain equity in joint
venture towercos was raised, although in fairness it
should be noted that two of operators that seemed
most inclined to retain equity, MTN and Millicom,
once again declined to participate in this year’s
debate. Vodacom indicated a preference to retain
a little equity and thus retain a bit of operational
control, for example control over quality of towers.
The other MNOs didn’t seem to feel retaining
equity was necessary as some sort of hedge
against mispricing of deals. Their feeling was that
the independence of the towerco was key – that
an anchor tenant’s representative on a towerco
board could have minimal influence on capital
deployment, opex reduction priorities or on third
party pricing without restricting the towerco.
Such considerations certainly factored into Airtel’s
thinking when they resolved to sell 100% equity in
their African towers – with portfolios of 500-2,000
towers in most countries except Nigeria, Airtel
didn’t have an appetite to participate in 15 or 16
joint venture towercos.
monitored closely.
Of course pricing is a risk – it’s a trade off of cash
released and reduced monthly opex bills against
the leaseback rate agreed. Ultimately, tower
transactions are hugely complicated – sometimes
expediency prevails, an attitude of “we’ve got we
need to get it done and move on”.
A third operator felt that under a regime of passive
infrastructure management by towercos, costs had
already been proved to come down, with MNOs and
towercos striking partnerships where is one was
successful the other would share in that success.
Fear of loss of control, quality degradation, and loss
of pricing power had all been overcome, he felt.
Tower transactions shift capex to opex, which
materially affects the EBITDA reported to
stakeholders. EBITDA targets have to shift and
other KPIs need to be adjusted accordingly, for
example benchmarking exercises must take the
new structure of the tower-outsourced opco into
consideration. Such performance measures aren’t
always as aligned as they should be!
Are MNOs concerned about creating towerco
oligopolies and monopolies, especially as
towercos rationalise in the future?
Opinions differed in response to this question.
One MNO was not concerned about oligopolistic
behavior in the near term, but felt any consolidation
among Africa’s ‘Big Four’ towercos would have to be
Another operator had a nearer term concern that
a dominant towerco may have a temptation to use
their position to keep prices high, and may have less
incentive to optimise services. The term of towerco
contracts extends beyond several generations of
technology, which itself may have implications for
the operating costs for towercos and therefore for
the lease rates charged to tenants.
The tenant’s perspective
The growth of independent towercos has improved
the business case for newer operators like Smile
Telecom, who originally felt they’d have to build
a significant portion of their own towers, but find
that 100% of their current towers are shared. Even
though Smile was not an anchor tenant, they didn’t
feel there was any overt favoritism, and they were
particularly impressed that even in cases where the
towers they wanted were idle, the towerco invested
to deliver QoS at the right price.
A note of caution was shared by one operator,
who expressed concern about the difficulties
getting rural sites (often destined to become
XX
Build to suit – how to ensure network expansion
goals are met
When seeking to extend coverage or improve
capacity in a given location, MNOs will always check
whether there is an existing tower nearby that they
can share first. Failing that, a new tower may be
“built to suit”. Co-location on an existing tower can
take as little as a month, a tower built to suit may
take around 120 days, depending how long it takes
to secure a permit. Build to suit (BTS) is still quicker
to market than waiting for towercos to acquire and
integrate towers.
Airtel have retained flexibility in their BTS strategy
through the divestiture of their African towers,
ensuring that if the prevailing lease rate doesn’t
match their requirements, they can build their
own or ask other companies to build towers for
them. Despite the sale of towers, strong network
planning and project management capabilities still
exist within Airtel – those competencies will not be
fully transferred to their towerco partners – Airtel’s
tower operating company still exists and will be
responsible for SLA management and governance.
The reality is that today most of the rollout work
for MNOs in SSA is done by third parties – turnkey
contractors – so while MNOs that divest passive
infrastructure to towercos may end up with a few
stray BTS towers which towercos refuse to build, the
ecosystem is big enough that an alternate service
provider can readily be secured.
Diversification of the passive infrastructure
sharing business model
There were mixed views on active infrastructure
sharing both within the panel and within the
represented MNOs’ board rooms! Whilst in
Europe infrastructure sharing has included
both passive and active infrastructure, opinion
was divided about the timeline and benefits
of active infrastructure sharing in SSA. While
some were wary of the potential implications
active infrastructure sharing may have in terms
of restricting future consolidation, others felt
active infrastructure sharing was critical to the
implementation of new technologies.
Master Lease Agreements between anchor tenant
and towerco are increasingly drafted with multiple
future scenarios in mind. The implications of
shared antenna for lease pricing may be covered
alongside clauses defining the specific space
available made available on a tower and the kWh of
power included in the service. So if the MNO tenant
increases capacity, whether space or power, there
are provisions built into the contract but it still
provides enough flexibility for the opco to manage
their capacity.
Several members of the panel called on towercos
to consider providing shared solutions for the last
“
In most SSA markets, coverage is no longer
a differentiator. QoS, products and services
and the Customer Experience differentiate
MNOs – the customer doesn’t care whose
tower they get their signal from, they just care
about tariffs, they care that the call doesn’t
drop, and they’re starting to care about mobile
broadband services
“
single tenant towers) built in a market where one
towerco was dominant. The same operator also
expressed reservations about fair pricing of towers
to be transferred to a dominant towerco after the
majority of towers in a given market had been
transferred.
mile. One panelist suggested towercos would be
unlikely to diversify beyond “hard infrastructure”
(fibre, backhaul, IBS and DAS) unless the model
changes from a terrestrial to a completely different
model.
The start of the shared infrastructure era in SSA
In most SSA markets, coverage is no longer a
differentiator. QoS, products and services and the
Customer Experience differentiate MNOs – the
customer doesn’t care whose tower they get their
signal from, they just care about tariffs, they care
that the call doesn’t drop, and they’re starting to
care about mobile broadband services. If the era of
parallel infrastructure in SSA is coming to an end,
2015 has demonstrated that there is first mover
advantage in bringing towers to market before the
competition, securing the best pricing and preferred
terms as anchor tenant
97
Airtel’s African tower sale:
who got what
How Airtel’s 15,000+ African towers will be divided among Africa’s “Big Four” towercos
Keywords: Who’s Who, MNOs, Towercos, Editorial, Deal
Structure, Market Entry, First Mover Advantage, Sale &
Leaseback, Africa, Tanzania, DRC, Chad, Congo Brazzaville,
Gabon, Ghana, Uganda, Kenya, Niger, Burkina Faso, Malawi,
Madagascar, Rwanda, Zambia, Sierra Leone, American
Tower, Helios Towers Africa, Eaton Towers, IHS, Airtel
Airtel’s tower sale has driven
African towercos to the tipping
point; achieving scale and
diversification of country and
counterparty risk. TowerXchange
expect the last of the Airtel African
towers to be sold by the end of
Q2 2015, raising ~$2.5bn. All the
towers have been sold on a pure
sale and leaseback basis, with the
respective towercos acquiring
100% equity in Airtel’s African
towers. Here’s how TowerXchange
understand the Airtel towers are
going to be divided among the
towercos, in the process drawing
Helios Towers Africa, Eaton
Towers and American Tower into
several new countries.
< The structure of the Airtel African tower sale and how much capital has been raised
< Which towerco is acquiring Airtel’s towers in each country
< The potential knock-on effect for other tower transactions in affected countries
TowerXchange understand that Helios Towers
Africa has added 3,100 of Airtel’s towers to their
existing assets, including all of Airtel’s towers in
Tanzania and DRC, where Helios Towers Africa
is the sole towerco and is marketing significantly
more than half of each country’s towers. We believe
Helios Towers Africa will enter new markets in
Chad, Congo Brazzaville, with Gabon perhaps to
follow soon.
We think the 3,500 Airtel towers acquired by Eaton
and announced recently includes the towers in
existing markets Ghana, Uganda and Kenya, plus
new markets Niger, Burkina Faso and Malawi, with
Madagascar likely to follow.
Paying approximately US$181mn for 1,113 towers,
IHS has added Airtel’s towers in Rwanda and
Zambia to those they acquired from MTN, making
IHS the only towerco in both markets, owning
significantly more than half each country’s towers.
IHS also owns 56% of Nigeria’s towers, having
acquired assets from MTN and Etisalat, although
the Airtel Nigeria towers will be sold to American
Tower for a little over US$1bn.
TowerXchange understand that Airtel will
retain their towers in Sierra Leone, where their
enthusiasm that Africell not co-locate on their
towers made a tower sale untenable.
The Airtel tower sale could trigger further tower
transactions as the other operators in affected
countries realise that their towers are at risk of
becoming stranded assets – if they’re ever going to
XX
“
The Airtel tower sale could trigger
further tower transactions as the
other operators in affected countries
realise that their towers are at risk of
becoming stranded assets – if they’re
ever going to sell, they need to sooner
rather than later
“
sell, they need to sooner rather than later.
It may be noteworthy that Airtel’s Q3 2014 report
stated that the company had 17,935 sites across
Africa (491 more than the same time last year), of
which 8,104 had a 3G antenna (up 1,867 YOY).
TowerXchange has written extensively about
Airtel’s African tower sale. We forecasted which
assets would be transferred to which towerco, and
provided a snapshot of each tower market – for
detailed analyses see “TowerXchange’s forecast for
how the Airtel towers will be distributed among
Africa’s ‘Big Four’ towercos” on pages 13-21 of issue
10 of the TowerXchange Journal.
Here is the updated map of the Airtel African tower
sale. Note that specific details of which country’s
towers have been sold to which towerco is not yet
in the public domain, however TowerXchange
sources strongly intimate that this will be “the lay
of the land” when the dust settles on the deal
Eaton Towers
IHS
American Tower
Airtel will retain their towers in Sierra Leone
99
MTN’s passive infrastructure
monetisation strategy
MTN has disposed of the majority of their most
attractive tower assets, raising an estimated
US$2.5bn+ whilst retaining equity stakes in joint
venture towercos in selected markets.
MTN has raised ~US2.5bn to date, retaining equity in selected markets. With assets
transferred to towercos in seven MTN countries to date, what’s left?
MTN’s passive infrastructure monetisation strategy
made headlines in the global telecom press with the
recent sale of equity in their Nigerian towers to IHS,
although most reports didn’t pick up on the fact that
MTN retained a “non-controlling interest of 51%
with protective rights in the new entity” (quoting
MTN H1 2014 interim results).
MTN has monetised their towers in seven subSaharan African countries – representing the
majority of the most attractive portfolios to
towercos. While Airtel concluded a portfolio
asset sale, albeit to multiple counterparts,
MTN has proceeded one country at a time –
raising a similar amount to Airtel, albeit with
MTN’s prized tower assets in South Africa as
yet retained. In this article, TowerXchange
summarises MTN’s tower transactions to date,
and once again asks “what’s left?”
Keywords: Who’s Who, MNOs, Towercos, Acquisition, Deal Structure, Market Forecasts, Novation of
Leases, Sale & Leaseback, Infrastructure Sharing, Africa, Nigeria, Cameroon, Cote d’Ivoire, Rwanda,
Zambia, Ghana, Uganda, South Africa, Guinea Conakry, Guinea Bissau, Congo Brazzaville, Iran, Sudan,
Syria, Afghanistan, Yemen, Benin, Botswana, Liberia, Swaziland, Cyprus, American Tower, IHS, Telkom,
Irancell, MTN
The Nigeria transaction followed previous sale and
leasebacks of 100% of the equity in MTN’s towers in
Cameroon, Côte d’Ivoire, Rwanda and Zambia, again
with IHS as the counterparty. MTN commenced
their passive infrastructure monetisation strategy
in 2010-11 with the formation of joint venture
towercos with American Tower in Ghana and
Uganda, in which MTN retained 49% equity.
So, with MTN’s towers in five of their top eight
countries, plus probably the most attractive assets
in the “small opco cluster”, already transferred to
towercos, is there still a pipeline of potential tower
deals to come from MTN? What’s left?
MTN South Africa
< Summary of MTN’s tower transactions to date
< The prospects of an MTN tower deal in South Africa
< The adverse effect of country risk and the BOT agreement on the prospects for tower deals in Syria and Sudan
< The adverse effect of International sanctions on the prospects for a tower deal in Iran
< Tower deal possibilities within MTN’s small opco cluster, particularly Congo B, the Guineas and Afghanistan
MTN’s ~6,000 South African towers seemed to be
on the brink of sale to American Tower in 2013
before MTN stepped back from the deal. The towers
remain operator captive.
XX
Although intensifying competition in South Africa
resulted in MTN’s market share declining by 2.7%
over H1 2014, with revenue down 7% and EBITDA
down 1.5%, negative subscriber growth has been
reversed and MTN remains in a robust position
with 31.9% market share. So robust is MTN’s
competitive position that they lack motivation
to divest their South African towers. The Group
still sees their network as a source of competitive
differentiation in South Africa, where Cell C and
Telkom have labored to capture market share from
leaders Vodacom and MTN. The extent of bi-lateral
infrastructure sharing, in particular with Vodacom,
means that any MTN tower transaction would face
a complicated path to convert so many swaps into
commercial leases – on the plus side, it also means
tenancy ratios would likely start nearer two than
one, which significantly increases the valuation that
could potentially be realised.
With the South African tower market considered
by most as one of the two most appealing in SSA
(alongside Nigeria, which is finalising its own
process of migrating to a towerco-driven business
model), it will be interesting to see if Telkom’s
recently initiated process to seek buyers of their
passive infrastructure might precipitate a reevaluation of MTN’s preference to retain their South
African towers. Telkom is believed to have issued an
RFP in December 2014 seeking bids for a portfolio
of assets which could include as many as 6,000
shareable structures (including perhaps 3-4,000
macro towers).
Figure 2: Mapping MTN’s passive infrastructure monetisation strategy to date
Towers retained by MTN
100% of equity in towers sold to IHS
49% of equity in towers sold to IHS, 51% noncontrolling interest retained by MTN
51% of equity in towers sold to American Tower,
49% non-controlling interest retained by MTN
Airtel’s African tower sale triggered MTN to bring
www.towerxchange.com | TowerXchange Issue 11 | 101
Figure 3: MTN Group EBITDA by country (in Rm, as per MTN H1 2014
interim results)
South Africa
6,382
Nigeria
16,280
Ghana
1,486
Cameroon
1,291
Ivory Coast
1,213
Uganda
Syria
Sudan
“Small OpCo
Cluster”*
*MTN’s “Small OpCo Cluster” includes Yemen,
Afghanistan, Benin, Congo-Brazzaville,
Zambia, Guinea, Rwanda, Cyprus, Liberia,
Botswana, Guinea-Bissau and Swaziland
967
338
435
4,173
5,000
their Nigerian towers to market – it remains to
be seen whether the Group will re-evaluate their
approach to get to market first in the event of a
process being commenced by a competitor in South
Africa.
10,000
15,000
20,000
The only other countries from MTN’s “large opco
cluster” where MTN retains 100% ownership of
passive infrastructure are Syria and Sudan.
Any tower deal in Syria would have been held up by
the “Build Operate and Transfer” (BOT) agreement
which, until the end of 2014, existed between
MTN Syria and the Syrian Telecommunications
Establishment (STE). Under a BOT framework, MTN
Syria would have been required to handover their
network to STE at the end of their licence period.
However, the BOT agreement was converted into a
20-year operating license, taking effect on 1 January,
2015.
Security is obviously of paramount concern in Syria
at the moment, creating challenging conditions for
the operation of any infrastructure in the country,
towers included.
International sanctions against Syria and Sudan are
indicative of elevated country risk in both countries,
which in turn makes investment in infrastructure
and the repatriation of funds difficult. This would
MTN Syria and Sudan
seem to preclude the participation of any US
publicly listed towerco in any auction of towers
from those regions, while similarly limiting the
pool of prospective private equity with an appetite
for investing in opportunities in these countries,
thus leaving several PE-backed towercos similarly
hamstrung.
Nonetheless, the potential for towerco activity in
these markets is greater than zero as TowerXchange
are tracking several entrepreneurial, risk-tolerant
tower companies with an appetite for opportunities
in Syria and, in particular, Sudan. However, MTN
has a preference to work with proven towercos of
scale, so the operator is likely to remain reluctant
to enter into transactional relationships with what
they would consider “unproven” counterparts
until they have reached scale. Thus, TowerXchange
forecast that tower opportunities in Syria and
Sudan will remain restricted to build to suit and
managed services deals. Whilst the resolution of
the BOT agreement in Syria is a positive step, until
country risk recedes and sanctions are eased, MTN’s
passive infrastructure assets in Syria and Sudan
will probably remain on their balance sheet for the
foreseeable future.
MTN Iran
Iran is MTN’s third most commercially attractive
market, outside of Nigeria and South Africa.
MTN’s joint venture Irancell, which serves 42.7mn
subscribers in Iran, acquired spectrum to upgrade
their license to include 3G / 4G in August 2014 with
intent to commence rollout imminently. Reports
XX
“
towers will also remain on their balance sheet for
the foreseeable future.
The Group continues to improve
operational and cost effectiveness with
initiatives including the monetisation
of passive infrastructure through
tower deals across a number of key
markets (MTN H1 2014 interim results)
“
suggest MTN has rolled out 2,146 towers in Iran
in anticipation of the launch of mobile broadband
services.
However, International sanctions mean it remains
unlikely that an independent tower company could
acquire infrastructure in the country. Quoting
Analysys Mason: “Iran’s telecoms market is known
for its unpredictability. Would-be foreign investors,
including Etisalat, Türk Telekom and Zain, have all
come close to launching mobile operations in the
country since its telecoms market was liberalised
in 2004, but have been prevented from doing so
following reported failures to adhere to their licence
commitments. MTN has succeeded in establishing
Irancell as the second national mobile operator in
Iran, but has faced costly legal battles because of
alleged improprieties when it acquired its licence,
in addition to Western pressures to pull out of Iran.”
TowerXchange thus forecast that MTN’s Iranian
MTN’s Small OpCo Cluster
With the towers in Rwanda and Zambia, perhaps
the most investible towers from MTN’s Small OpCo
Cluster, already sold, MTN retains their towers in
Afghanistan, Yemen, Benin, Guinea Conakry, Congo
Brazzaville, Botswana, Liberia, Swaziland, South
Sudan, Guinea Bissau and Cyprus. Of MTN’s Small
OpCo cluster, three stand out as being ripe for tower
transactions.
The recent Airtel African tower sale, with assets
believed to be in the process of being transferred to
Helios Towers Africa, will kick start an independent
tower market in Congo Brazzaville. Until Airtel’s
acquisition of #3 operator Warid, MTN had been
the market leader in Congo Brazzaville. With the
market supporting only one additional operator,
Bintel’s Azur, there are a finite amount of tenancies
up for grabs, which means towers residing on
balance sheets are effectively declining in value. It
would thus seem logical for MTN to at least explore
the possibility of selling their towers in Congo
Brazzaville, with Helios Towers Africa being the
most likely counterpart.
In Guinea Bissau and Guinea Conakry Orange will
soon commence a process to seek a towerco partner
for a ‘manage with licence to lease’ deal. While no
partnership has yet been consummated, a window
may be opening for MTN to bring their Guinean
towers to market first, albeit the small scale of
these markets does not appear to make them a
priority for towercos in the absence of a bundled
transaction. This may explain why Orange are
believed to be bundling the Guineas with their more
attractive Senegal and Mali towers.
MTN and Etisalat explored the possibility of selling
their towers in Afghanistan to IHS, but it was
rumoured that IHS’s backers had finite appetite for
opportunities in a market so removed from their
West African core territories, and with such obvious
country risk. It’s notable that Afghan Wireless spun
off their towers to Frontier Tower Solutions several
years ago, so there is a precedent for independent
towerco operations in Afghanistan. Depending on
the success of the handover of peacekeeping to
local authorities, we may not have heard the last of
potential tower transactions in Afghanistan.
Conclusion
MTN has completed the lion’s share of their
prospective tower transactions in Africa. One
highly attractive portfolio remains on MTN’s
balance sheet, South Africa, where the traction
achieved by the Telkom process may prompt a reevaluation of MTN’s appetite to sell. MTN’s tower
assets in North Africa and the Middle East remain
affected by varying levels of country risk, making
transactions unlikely in the short to medium term.
Perhaps the most likely next MTN tower sales are
in Guinea Bissau and Conakry, if triggered by an
Orange ‘manage with license to lease’ deal, in Congo
Brazzaville where Airtel’s towers will be sold to
Helios Towers Africa, and potentially Afghanistan
What’s left? Etisalat, Orange,
Vodacom and Vodafone’s tower
strategies in SSA
…Plus a look at the attractiveness of towers owned by Africa’s other MNOs
2014 was the year the SSA independent tower industry reached
scale. Africa’s ‘Big Four’ towercos each have tower counts over
or approaching 10,000 assets. Having diversified country and
counterparty risk and grown portfolios to the point where best
practices can be shared and economies of scale realised, the
prevailing opinion at the Q4 2014 TowerXchange Meetup Africa
seemed to be that Africa’s ‘Big Four’ towercos were moving from
land-grab to a period of integration of assets, driving toward
profitability and prospective IPO / trade sale in 18-36 months time.
Keywords: Editorial, MNOs, Towercos, Acquisition, Deal Structure, Market Forecasts, First Mover
Advantage, Bankability, Carve Out, Sale & Leaseback, Manage With License To Lease, Africa, Kenya, Egypt,
DRC, South Africa, Mozambique, Senegal, Mali, Guinea Bissau, Guinea Conakry, Niger, Madagascar, Cote
d’Ivoire, Gabon, Nigheria, Tanzania, Chad, Rwanda, Angola, Zimbabwe, Congo Brazzaville, Airtel, MTN,
Vodacom, Vodafone, Safaricom, Orange, Etisalat, Maroc Telecom, Millicom, Tigo, MobiNil, Zantel, Telkom
South Africa, Africell, Econet, Globacom, Unitel, Viettel, Smart East Africa, Helios Towers Africa, Eaton
Towers, IHS
< Towercos’ addressable market in Africa
< Summaries of Airtel and MTN towpassive infrastructure monetisation strategies
< Analyses of the tower strategies of Vodacom, Vodafone, Safaricom, Orange, Etisalat / Maroc Telecom
and Millicom-Tigo
< Potential tower transactions from outside Africa’s tier one, multi-country MNOs
< TowerXchange’s view of the pipeline of African tower transactions in 2015
One of the main reasons the land grab is coming
to an end, although not yet complete, is that the
investibility of emerging market towercos is
somewhat dependent on the credit worthiness of
the anchor tenant. Thus the ‘Big Four’ towercos
don’t want all SSA’s towers – especially as many are
in overlapping locations. Independent towercos
currently own 47,600, around 29% of Africa’s towers.
The addressable market may be a little under
100,000 towers, perhaps 55% of the current tower
count.
Airtel and MTN in brief
As we’ve seen in the two previous analyses, the
tower monetisation strategies of Africa’s two largest
MNOs is almost complete – Airtel will have no
towers left to sell by H2 2015; MTN has sold towers
in five of it’s top six markets, with only its coveted
South African towers and a few high risk countries
from MTN’s small opco cluster remaining operator
captive.
Vodacom, Vodafone and Safaricom
Apart from an early ‘manage with license to lease’
(MLL) deal in Ghana and the sale of 1,149 towers to
Helios Towers Africa in 2013, Vodacom, Vodafone
and Safaricom seem to consider their tower assets
too strategic to divest. Nonetheless, the recent second
tower transaction in DRC (Airtel’s towers following
Millicom/Tigo’s in being sold to Helios Towers Africa)
and the imminent MobiNil deal in Egypt might
prompt re-evaluation of potential tower deals in
either market.
XX
Rumors that Safaricom might participate in a
JV towerco with Airtel in Kenya have long since
been forgotten – the latest rumors that Safaricom
is considering starting their own towerco sound
similarly incredible, although their market dominance
and the relative strength of their network means
a Safaricom towerco could be a lucrative venture.
However, on balance TowerXchange feel status quo
is the most likely future of Safaricom’s towers in the
near term.
Vodacom, Vodafone and Safaricom consider most towers too strategic to sell
Meanwhile in Mozambique, the turbulence caused
by Viettel’s aggressive network rollout and launch,
coupled with the Vietnam-owned operator’s
reluctance to participate in bi-lateral tower sharing,
makes a Vodacom tower sale unlikely. It seems more
likely that Vodacom would seek an infrastructure
partner more specialised in rural connectivity in
Mozambique.
While the recently commenced Telkom passive
infrastructure sale RFP might stimulate a reevaluation of Vodacom’s appetite to divest towers in
South Africa, TowerXchange feel that the strength of
Vodacom’s position in the market means they may be
content to be late movers, if they move at all in terms
of divesting towers in their South African heartland.
While Vodacom, Vodafone and Safaricom are
obviously distinct entities, with Vodafone as a
common shareholder, there is no imperative to raise
capital. While these companies play their cards close
to their chest when it comes to tower deals, don’t hold
your breath for much tower transaction activity in
SSA from Vodacom, Vodafone and Safaricom in 2015.
Towers retained Vodacom
Towers retained by Vodafone Egypt
Towers retained by Safaricom
75.5% of equity in towers sold to Helios Towers
Africa, 24.5% non-controlling interest retained
by Vodacom
Towers outsourced to Eaton on a manage with
licence to lease-type deal
Orange prefers manage with licence to lease deals
Orange
Orange has seemingly preferred MLL deals to date,
as agreed in Cameroon and Cote d’Ivoire with IHS,
and in Kenya with Eaton Towers before the contract
was cancelled amid rumors of Orange’s impending
exit from the market.
1
2
3
4
Orange has sold towers to Eaton Towers in Uganda,
where Orange
5 has since sold their operator license
to Africell, while the sale of ~3,500 MobiNil towers in
6 around the end of H1 2015. Orange /
Egypt may close
Sonatel is also about to commence a process to seek a
partner towerco in Senegal, Mali, Guinea Bissau and
Guinea Conakry.
Orange retains tower assets in several markets
where towercos are increasingly active, including
Niger, where Eaton are believed to be acquiring
Airtel’s towers, and Madagascar, where Eaton’s
potential acquisition of Airtel’s towers would place
them alongside TowerCo of Madagascar, formed
from the spin-out of an initial 50 Telma towers, but
since grown to a tower count of over 200. While
the transactions in Niger and Madagascar could
accelerate any MLL or sale and leaseback (SLB)
opportunity Orange considers bringing to market
from those countries, we understand Orange has
looked at a tower deal in DRC and feel a managed
services deal structure is the most viable option.
Towers retained by Orange
Towers transferred to IHS under MLL deal
Towers sold to Eaton, operation
subsequently sold to Africell
Towers believed to be coming to market
In conclusion, Orange’s passive infrastructure
sharing programme has transferred towers in
several of their most attractive SSA markets, but
they still retain plenty of desirable assets. Perhaps
XX
the biggest question is whether the towercos have
any appetite for MLL deals now that they own 90%
of their towers in SSA (up from 69% at the end
of 2013)? Or whether Orange has any appetite to
consider SLB deal structures in remaining markets?
Etisalat sells selected towers to IHS, operations to Maroc Telecom
Etisalat / Maroc Telecom
We have to overlay an Etisalat and a Maroc Telecom
map to track assets that changed hands when the
Atlantique Telecom business was recently sold,
Maroc Telecom acquiring assets in six countries for
US$650mn. In parallel, Etisalat acquired Vivendi’s
53% controlling stake in Maroc Telecom for
US$5.3bn.
While the dust is still settling on the restructuring
at corporate level, it is notable that Maroc Telecom
now operates in several markets where independent
towercos are active, including Ivory Coast, where
IHS owns or markets the majority of sites; Niger,
where Eaton is currently setting up shop having
acquired Airtel’s towers; and Gabon, where we
understand Helios Towers Africa are in pole position
to acquire Airtel’s towers. In addition, if and when
the Orange / Sonatel process concludes, it may bring
a towerco into Maroc Telecom’s Mali market. So,
while Maroc Telecom has made no suggestions that
they are considering tower sales, TowerXchange
note that they may have opportunity to do so in
2015.
Etisalat closed their first tower deal in November
2014, selling ~80% of their Nigerian towers to IHS.
Etisalat retains their towers in Sudan, Egypt and
Towers and operation retained by Etisalat
80% of towers sold to IHS (Etisalat retains
~600/2750)
Etisalat / Moov operation sold to Maroc Telecom
Original Maroc Telecom territory
Maroc Telecom acquired operation from Etisalat /
Moov in addition to existing operation in Gabon
Could Millicom / Tigo return to the negotiating table?
Tanzania – the towers in the latter two markets
being perhaps the next most attractive to towercos.
The aforementioned imminent MobiNil tower sale
could inaugurate a wave of passive infrastructure
consolidation in Egypt, which could provide an
opportunity for Etisalat Misr to monetize their towers.
However, the situation in Tanzania is less clear, where
#4 ranked operator Zantel’s Zanzibar-centric tower
portfolio remain the only significant operator-captive
assets in a market otherwise led by Helios Towers
Tanzania, which has acquired the towers from the
operators ranked #1-3. While a Zantel tower sale
remains a possibility, rumors continue that Etisalat
might prefer to exit Tanzania altogether.
1
2
3
4
5
6
In conclusion, there are several potential SSA tower
deals within the Etisalat-Maroc Telecom axis, but
TowerXchange don’t think any are imminent.
Millicom / Tigo
Millicom / Tigo undertook the first pioneering tower
transactions with Helios Towers Africa in Ghana, DRC
and Tanzania from 2010-11, but the group hasn’t done
a SSA tower deal since.
Towers retained by MIC
Joint venture towerco with Helios Towers Africa
Could the entrance of Millicom’s previous towerco
counterparty, Helios Towers Africa, into Chad
persuade Millicom to divest their towers in the
country? As recently as May 2014, TMT Finance
initiated rumors that Helios Towers Africa were in
discussions to acquire Millicom’s ~800 towers in Chad.
Blending the Millicom towers with Airtel’s would give
Helios Towers Africa a strong market position in Chad,
and create economies of scale.
XX
With IHS acquiring #1 and #2 ranked operators MTN
and Airtel’s towers in Rwanda, if Millicom is ever
going to part with their Rwandan towers, it’s going
to be sooner rather than later. Similarly, could the
current Sonatel / Orange process in Senegal trigger a
follow up tower sale by Millicom in Senegal?
With the exception of their assets in Gambia,
Millicom now has an obvious and closing window
to divest towers in their remaining SSA territories.
While it has been rumored that Helios Towers
Africa has a Right Of First Refusal agreement on all
Millicom’s SSA towers, it would be surprising to see
Chuck Green’s team roll into the IHS stronghold that
is Rwanda – but if such an ROFR did exist, it could be
leveraged in Senegal and incentivise Helios Towers
Africa to take a close look at those Sonatel / Orange
assets – particularly if they were available on a sale
and leaseback basis.
In conclusion, we don’t think Millicom are done
selling towers in SSA. A deal in Chad with Helios
Towers Africa makes sense for both parties, Senegal
has potential, while the question remains whether
IHS would even want a third portfolio of towers
in Rwanda, where IHS already have a very strong
market position.
Beyond the usual suspects
It’s oversimplifying matters to say that there are no
credit worthy anchor tenants beyond Africa’s six
“tier one” MNOs. Cell C were able to consummate
the first major SSA tower deal as long ago as 2010 –
Telkom will be hoping that has set a precedent for
their current passive infrastructure RFP. Companies
like Africell are doing very well in some markets,
but their low-cost, rapid rollout strategies makes
them more likely co-location tenants than anchor
tenants – for example Africell has not built a single
tower in DRC but has captured 20% market share by
co-locating on 180 Helios towers.
Such entities can contribute as much as 0.3 to
prospective tenancy ratios, albeit often on shorter,
discounted leases as their equipment often requires
less space and less power.
So what’s still on tower companies shopping
lists?
There are interesting regional players like Econet,
whose strong position in Zimbabwe means they
could consider creating their own towerco.
Globacom’s reluctance to part with their towers
probably means they’ve missed the optimum
window on a sale in Nigeria or Ghana – figure those
assets to remain operator-captive indefinitely.
Unitel’s passive infrastructure assets could attract a
good premium if a third licence was issued in Angola
– Vodacom, Airtel and MTN have all been linked with
the market.
While the unprecedented SSA tower deal flow we
saw in H2 2014 will doubtless slow in 2015, there are
several ongoing processes which may yield further
transactions in 2015.
Perhaps the most aggressive new market entrant
into SSA is Viettel, whose preference remains to
build their own low-cost, often single tenant sites,
but who seem to be warming to the principle of
co-location, from their home market in Vietnam
to Cameroon and, potentially, Tanzania. But again,
they’re building not selling, so count Viettel as
prospective co-location tenants not anchor tenants
in a sale. The same applies to Smart East Africa,
a subsidiary of the Aga Khan Fund for Economic
Development, which is rolling out in Burundi,
Tanzania and Uganda. Dig a little deeper into the
market share statistics in almost any SSA country
and you’ll find a layer of “non-traditional MNOs”
such as urban TD-LTE plays and WiMAX operators.
The next wave? Airtel and Orange tower deals could
trigger knock-on transactions in Burkina Faso, Chad,
Congo Brazzaville, DRC, Egypt, Gabon, Mali, Niger,
Rwanda and Senegal.
< MobiNil’s SLB in Egypt is expected to close in H1
2015
< The Sonatel / Orange process will soon commence
for their towers in Senegal, Mali and the Guineas
< Telkom’s RFP to sell their passive infrastructure
could re-ignite the SLB market in South Africa
Could we see towercos piling into the same market
as their competitors? Probably not in SSA; in what
Eaton Towers’ Terry Rhodes described an “outbreak
of rationality”, there has been a decreasing amount
of overlap between towercos. The independent
towerco business model is a natural monopoly; it
works best with half as many towercos as profitable
operators, suggesting most African markets can
support 1-1.5 towercos, with perhaps only Nigeria
and South Africa able to support two
Special feature:
Return to Tanzania
Estimated tower ownership in Tanzania
~289
1,020
TowerXchange last analysed the Tanzanian tower market in issue five, back
in September 2013, shortly after Helios Towers Africa closed their second of
now three major acquisitions in the market. With Airtel’s Tanzanian towers
soon to be integrated into the Helios Towers Tanzania portfolio, meaning the
company now owns and operates 82% of Tanzania’s towers, we thought it
would be timely to revisit the Tanzanian tower market.
This special feature opens with BMI’s view of the market dynamics and
country risk issues to consider in Tanzania - our new columnist Amy
Cameron has some particularly interesting views on the implications of
Viettel’s imminent market entry for potential consolidation, with Zantel
rumored to be on the block.
We also feature lessons learned from the Tanzania round table at the recent
TowerXchange Meetup Africa, moderated by Helios Towers Africa CEO and
visionary Chuck Green, and attended by six of the eight leading managed
service providers in the country.
711
~931
1,149
1,400
Helios Towers Tanzania, 2011 vintage
(acquired from Tigo)
(acquired from Vodacom)
Don’t miss:
111 BMI: positives outweigh negatives for Tanzanian tower market
(to be acquired from Airtel)
115 Why Helios Towers Africa has made Tanzania the anchor of their portfolio
Helios Towers Tanzania BTS towers
Remaining Zantel towers
Miscellaneous small operator and
independent towers
XX
BMI: positives outweigh negatives
for Tanzanian tower market
Favorable macro-economic and political environment, Viettel
shakes up mobile market
BMI View: Low ARPUs and a large rural population are
key factors driving the development of Tanzania’s towers
market. Although these circumstances have put a drag
on subscriptions growth in recent years, Tanzania’s very
bright economic growth outlook combined with the
positive impact of falling oil prices could yet accelerate the
pace of growth in the mobile market, and increase demand
for towers infrastructure.
By Amy Cameron, MEA ICT Analyst, BMI
Keywords: Research, Market Overview, 3G, Urban vs Rural,
Fuel Security, Market Forecasts, Network Rollout, New
Market Entrant, Densification, ARPU, Country Risk, Off-Grid,
Sale & Leaseback, BMI Analysis, Infrastructure Sharing,
Africa, Tanzania, Helios Towers Africa, Helios Towers
Tanzania, Millicom, Tigo, Vodacom, Airtel, Etisalat, Zantel,
TTCL, Benson, Viettel, BMI, Business Monitor International
< Room for growth in voice and data but stagnating subscription growth and falling ARPUs
< Viettel entry could catalyse consolidation
< Stable political environment and bright economic outlook, power sector scandal notwithstanding
< Falling oil prices reduce energy opex and boost private consumption
Tower sharing already the norm
Tanzania is already one of the most developed
third-party towers markets in Sub-Saharan Africa.
Millicom-owned Tigo was the first operator to
offload its portfolio of 1,020 towers to a joint
venture with Helios Towers Africa (HTA) in 2011. In
2013, mobile market leader Vodacom followed suit
and sold 1,149 towers to Helios Towers Tanzania,
in the 2011 joint venture. In November 2014, it
was confirmed that Airtel’s sale of 3,100 towers
to HTA earlier in the year included its portfolio of
approximately 1,000 towers in Tanzania. Although
smaller operators Zantel, owned by the UAE’s
Etisalat, state-owned TTCL and Benson still retain
their tower assets, TowerXchange estimates that
Helios Towers Tanzania controls just under 80%
of all mobile tower infrastructure in the country.
Through its partnerships with Vodacom, Airtel and
Tigo, it also manages infrastructure for more than
93% of all mobile subscriptions, with the three
operators claiming market shares of 37.2%, 31.4%
and 25.1%, respectively, in September 2014.
Helios Towers Tanzania a crucial player in
network expansion
BMI estimates that at the end of 2014, Tanzania’s
mobile penetration rate was just 61%, below the
regional average of around 70%, and that 3G
subscriptions accounted for less than 20% of the
entire mobile market. This means there remains
significant room for growth in the basic voice and
nascent mobile data markets, which will require
expansion of mobile networks to reach underserved
Rural expansion poses upside risk
Mobile and 3G subscriptions growth forecast, 2012-2019
450,000
Mobile Phone Subscribers ‘000s
Mobile Phone Subscribers/100 Inhabitants
400,000
3G & 4G phone subscribers ‘000s
3G & 4G market, % of mobile market
350,000
80
70
60
300,000
Viettel entry could catalyse consolidation
50
250,000
40
200,000
30
150,000
100,000
20
50,000
10
0
As the only tower company in Tanzania and
with a strong relationship with the three leading
mobile operators, Helios Towers Tanzania will
be instrumental to expanding networks to
underserved areas.
2012
2013
2014e
2015f
2016f
2017f
e/f = BMI estimate/forecast
rural areas and tower densification in urban
areas to respond to rising demand for mobile data
services.
However, BMI currently forecasts underwhelming
subscriptions growth in the mobile market.
Tanzania’s ARPUs fell sharply during the price wars
that swept across the region, dropping from more
than US$7 in 2008 to US$3 by 2011. These partially
recovered as Vodacom, Tigo and Airtel collectively
raised tariffs during 2012 and 2013, but also
contributed to subscriptions growth slowing nearly
to a halt, with population growth outpacing mobile
subscriptions growth in 2013.
Slowing growth momentum is also closely related
to the fact that most subscriber acquisition
0
2018f
2019f
Source: BMI, TCRA, operators
opportunities lie in under- or unserved rural areas,
where 72% of Tanzanians live. In order to overcome
stagnation in the mobile market, operators must
make heavy investments in expanding networks
to reach these subscribers. In its fiscal year ended
March 2014 Vodacom invested around US$124mn
in network expansion, while Tigo announced that it
had earmarked US$104mn for network expansion
to rural areas in August 2014. These investments
offered an important boost to subscriptions growth
in the first nine months of 2014, and underpin BMI’s
forecast of positive growth between 2015 and 2019.
Nevertheless, with ARPUs set to remain below
the US$5 mark over the next five years, despite
growing private consumption trends, BMI
believes tower sharing provides the only truly
sustainable solution to rural network expansion.
In October 2014, Vietnam-based Viettel won a
concession to build and operate a 3G network
in Tanzania. Viettel started building its national
network in November and is expected to launch
commercial mobile services in July 2015, according
to Tanzania’s deputy communication, science and
technology minister, January Makamba. Viettel
A crowded market
Tanzania mobile market shares (%), September 2014
25%
31%
1%
6%
37%
Vodacom
Zantel
Airtel
TTCL
Tigo
Benson (0%)
Source: BMI
XX
Tanzania a regional outperformer
Tanzania versus SSA real GDP growth forecast, 2012-2019
10
Tanzania
9
Sub-Saharan Africa
8
7
6
5
4
2
0
2012
2013
2014e
2015f
2016f
2017f
2018f
2019f
e/f = BMI estimate/forecast. Source: BMI, UN
plans to invest US$1bn in a new 3G network and
to focus on rural areas, connecting around 4,000
villages currently without a telephone network to
mobile services by 2016.
The addition of a new player and intensification
of competition in the mobile market bode well
for Helios Towers Tanzania. With urban areas
already heavily penetrated, it is nearly certain that
Viettel will choose to lease capacity on existing
infrastructure rather than invest in building out
its own. Viettel’s stated plans to direct investment
towards reaching underserved rural areas confirms
this view. Helios Towers Tanzania will therefore
benefit from a rise in tenancy ratios in urban areas.
One consequence of Viettel’s entry that could affect
the towers market is the increased likelihood of
consolidation across the mobile sector. While any
change to TTCL or Benson would have little tangible
impact, given their combined market share of less
than 1%, Zantel’s reaction to tougher competition
could have a larger impact. We see three potential
courses of action for Zantel. It could choose to ramp
up its expansion into mainland Tanzania, which
would likely include leasing capacity from Helios
Towers Tanzania; it could choose to improve its
fiscal position by selling off tower assets, which
could open an opportunity for Helios Towers
Tanzania to expand into Zantel’s stronghold in
Zanzibar; or it could become an acquisition target
for one of the three larger players, which would
reduce the number of potential tenants for Helios in
Tanzania.
Tanzania a political and economic bright spot
Aside from the presence of several major regional
players and strong long term mobile growth
prospects, Tanzania’s stable political environment
and bright economic outlook also make it an
attractive towers market. BMI forecasts Tanzania
will be the fourth fastest growing economy in
Sub-Saharan Africa (SSA) between 2015 and 2019,
with average annual GDP growth of 7.5%. During
2015 and 2016, private consumption will be the
main driver of growth, which will underpin rising
demand for mobile voice and data services. Over
the long term, Tanzania is set to see sustained
growth as offshore gas reserves now under
development come online. In terms of the political
outlook, BMI expects national elections scheduled
for October 2015 to be fair and relatively free of
violence or major public protests, with the currently
ruling Chama Cha Mapinduzi (CCM) party expected
to remain in power.
But Tanzania is not immune from political risk;
for example a corruption scandal in the power
sector in November 2014 led the development
partners group, including the World Bank, African
Development Bank and several developed states,
to withhold general budget support for the 2014/15
fiscal year, ending in June. This triggered an
acceleration in inflation and led BMI’s Country Risk
team to make a slight downward revision to our real
GDP growth forecast for Tanzania in 2015.
As the November incident suggests, corruption
remains a key political risk for all companies
operating in Tanzania. In the towers market
specifically, the area of business operations most
affected by corruption issues is the import and
delivery of fuel to power base stations.
Added benefits from lower oil prices
Tanzania is among the biggest beneficiaries in
SSA of the collapse in Brent oil prices from more
than US$100/bbl to US$60/bbl in the second half of
2014, and to US$50/bbl in early 2015. During the 12
months to September 2014, oil accounted for 35.6%
of all goods imports to Tanzania. The sharp drop in
oil prices, which BMI’s Oil and Gas team forecast to
remain subdued during 2015, and range between
US$60-70/bbl over the five years to 2019, led
Tanzania’s government to cut the maximum retail
price for a litre of petrol by 6.8%, diesel by 5.9% and
kerosene by 7.2% in late 2014.
This will benefit the towers market in two major
ways. First, lower import costs for Tanzania will
help curb inflation. The combined impact of lower
household energy costs and reduced inflation will
offer a boost to private consumption - a metric
which is closely tied to usage of telecoms services.
Meanwhile, in areas outside the reach of the power
grid, telecom and tower operators remain heavily
reliant on diesel generators to power mobile base
stations. Lower energy costs will therefore help to
reduce HTA’s operating costs and, in turn, operators’
tenancy costs in Tanzania
Visit the TowerXchange.com website
< Access to the “Internet of People” in emerging market
towers – a trust web of over 10,000 decision makers in
passive infrastructure
< Independent analysis and commentaries on the
prospects for tower transactions in selected countries
< The latest industry emerging market tower industry
news – BEFORE it’s published in the TowerXchange
Journal, accessible 24/7 from desktop, tablet or mobile
< A comprehensive archive of TowerXchange’s
interviews and analyses, searchable by topic, country,
company or grouped by category (e.g. interviews or
how to guides)
< The latest news and registration information about
TowerXchange’s Meetups.
Tower
Xchange
www.businessmonitor.com/bmo
XX
Why Helios Towers Africa has made
Tanzania the anchor of their portfolio
Insights gleaned from the Tanzania round table hosted by Helios Towers Africa
CEO Chuck Green at the TowerXchange Meetup Africa 2014
Chuck Green, CEO, Helios Towers Africa
When the Airtel tower transaction closes, Helios Towers Africa
will own around 4,500 towers in Tanzania, representing 82%
of the country’s towers, and almost half their pan-African
portfolio, making Tanzania the anchor of Helios Towers
Africa’s portfolio. Helios Towers Africa has invested, invested
and invested again in Tanzania for good reason: Tanzania is
a stable, growing economy with four credit worthy tier one
MNOs seeking to extend coverage into new regions, joined by
an aggressive new market entrant and several niche players.
Helios Towers Africa’s CEO Chuck Green was joined by Head of
Projects, Innocent Mushi, in hosting a revealing round table on
Tanzania at the recent TowerXchange Meetup Africa; here are
some of the main talking points.
Keywords: Towercos, Managed Services, O&M, Opex Reduction, Batteries, Tenancy Ratios, Build-to-Suit,
Energy Efficiency, Operational Excellence, New Market Entrant, SLA, ROI, Hybrid Power, Solar, DG Runtime,
KPIs, Site Visits, Skilled Workforces, IBS, DAS, Small Cells, C-Level Perspective, RMS, Stakeholder Buy-In,
Infrastructure Sharing, Africa, Tanzania, TCRA, Airtel, Millicom, Vodacom, Viettel, Camusat, MER Group,
NEWL, Pivotech, QTE, Sagemcom, Helios Towers Africa
< A breakdown of the towers acquired and to be acquired in Tanzania, and forecast tenancy ratio
< The implications of Viettel’s imminent entry into the market
< Helios Towers Tanzania’s operational and energy efficiency priorities
< How Helios Towers Tanzania partners with maintenance subcontractors to optimise performance
< The potential for towercos to diversify into fibre sharing
The growth of the Tanzanian tower market and
of Helios Towers Tanzania
Helios Towers Africa first entered the Tanzanian
market in 2011 in a transaction to acquire 1,020
towers from Millicom Tigo, bundled with Helios
Towers Africa’s acquisition of Tigo’s assets in DRC.
The subsequent integration of 1,149 Vodacom
towers, which commenced in February 2014, is
almost complete.
When Helios Towers Africa’s acquisition of around
1,400 Airtel’s towers in Tanzania closes, subject
to Conditions Precedent and fair competition
clearance, Helios Towers Tanzania (HTT) will own
4,500 of an estimated 5,500 towers in the country,
representing more than half of Helios Towers
Africa’s 8,000 asset portfolio across the continent.
While HTT’s tenancy ratio is not in the public
domain, Chuck revealed that they were projecting
the tenancy ratio to exceed 2.0 within five years.
Tanzania’s changing MNO market; Viettel in,
Zantel out?
Helios Towers Tanzania is currently servicing
significant build to suit rollout and co-location
programmes from both Millicom and Vodacom,
and they’ve already taken on the co-ordinates of
Airtel sites to plan for additional tenants.
Tanzania’s top three operators are building
aggressively in anticipation of the planned market
entry and rollout by Viettel, which recently
acquired a license from My Cell. Viettel had a
notably disruptive influence on the Mozambique
market, where their aggressive rollout of 1,600
low cost towers (spending as little as US$40,000 on
some sites!) in 18 months enabled the Vietnameseowned operator to grab significant market share
from incumbent operators. The fact that 82% of
Tanzania’s towers will be independently owned
and marketed will doubtless accelerate any new
market entrant. After initial resistance to utilising
independent towers, Viettel has signed a colocation agreement with IHS in Cameroon as a
means of accelerating their delayed 3G launch, so
there is a precedent for Viettel leveraging shared
sites.
The potential impact of Viettel’s entry into
Tanzania can be illustrated in comparison with
another disruptive, aggressive new market entrant.
Africell leveraged co-locations on 180 Helios
Towers Africa sites in DRC to grab 20% market
share in 12-18 months. The market entry of either
Africell or Viettel tend to engender a new world
order – driving down tariffs and ARPU – indeed,
Viettel is talking about rolling out as many as 8,000
sites in two years in Tanzania, a great opportunity
for HTT.
Further market restructuring may follow in
Tanzania, with Zantel believed to be for sale.
Particularly strong in Zanzibar, the Etisalatmajority owned operator could be a ripe target for
in-market consolidation.
Tanzania remains an ideal market for the
Estimated tower ownership in Tanzania
~289
1,020
711
(acquired from Tigo)
(acquired from Vodacom)
~931
1,149
(to be acquired from Airtel)
Helios Towers Tanzania BTS towers
Remaining Zantel towers
Miscellaneous small operator and
1,400
independent towers
independent towerco model. With a population
of 40mn spread across a land mass the size of
France, four strong operators and a fifth entering,
none of which has dominant market share, and
each with distinct regional biases, Tanzania still
has relatively low penetration, so there is a lot of
growth potential. Helios Towers Africa describe
the regulatory environment created by Tanzania’s
TCRA as “super-supportive” to infrastructure
sharing – indeed the regulator’s concern about the
proliferation of towers may draw Viettel into closer
co-operation with HTT.
The attractiveness of Tanzania to towercos is
illustrated by the fact that Tigo’s initial auction
in 2011 attracted three just bidders, whereas the
Vodacom process in 2013 attracted twelve.
Helios Towers Tanzania’s operational priorities
While HTT boasts a strong and motivated team,
they are always seeking ways to be smarter, better
and faster operationally. The company is no longer
in the aggressive land-grab cycle of the business
(not that they’ve necessarily finished buying
assets), but is instead rebalancing their time, effort
and energy into improving operations to deliver
against SLAs and KPIs. Ensuring projects come
in on time, on budget, and getting maintenance
contractors performing as they should be are nearwww.towerxchange.com | TowerXchange Issue 11 |
XX
term priorities. As Chuck Green put it, “a dollar
saved in opex or freed GLA (Gross Leasable Area)
is just as valuable as a dollar of incremental tenant
lease revenue.”
Green went on to describe HTT’s operational
priorities as “blocking and tackling;” conducting
an intelligent audit of all their own operational,
mapping them, and ensuring best practices are
followed.
Energy efficiency
HTT’s DC load per site peaks at 2.5-3kW per tenant,
with the actual load around 1.5kW per tenant.
Tanzania’s electricity grid is one of the more
reliable in Africa, with an average of 20 hours of
availability, and over 70% of cell sites connected to
the grid. Where feasible, connecting off-grid sites
to the grid delivers better RoI than any other power
investment.
HTT’s objective remains to deliver a lower cost
structure, for example by leveraging energy saving
solutions that make economic sense, that are “fit for
Africa”, and that can be managed and maintained
by the existing team in the field.
HTT is looking for the easiest way to reduce DG
runtime, for example by migrating from standard
batteries to CDC batteries. HTT uses a systematic
process to drive down DG runtime with different
solutions to meet the needs of different sites; while
four strings of batteries are right for some, others
might need two or six. Battery theft remains a
challenge; HTT have tried welding a bar across
four strings of batteries as a deterrent, and they’ve
taken out insurance to mitigate the risk of battery
theft, but it’s not cheap!
Opportunistic and administrative theft of batteries
and fuel cannot be eliminated entirely, but
towercos feel they can improve upon the levels
of pilferage affecting MNOs. It comes down to
visibility and proper procedures, processes and
controls. People have to be appropriately motivated
– employees in the refueling supply chain have to
be paid a salary to compete with the temptation to
take money from thieves.
HTT have some solar sites; half a dozen acquired
from Vodacom, plus two or three more from Tigo.
As PV prices come down, and innovations reduce
the space requirement, HTT have an open mind
about renewables. Chuck Green suggested: “I’m not
wedded to any technology – I just want solutions
that work in Africa.”
One of the challenges for hybrid energy is that
there is no way to optimise hybrid power without
visibility; visibility into the impact of the number
of battery strings, the quality of grid, the number of
tenants et cetera.
Towercos need first line data from RMS to optimise
hybrid energy, and the search for a reliable remote
monitoring capability is ongoing, with multiple
different solutions being piloted by Helios Towers
Africa. Many challenges have been encountered
by all the African towercos, each of which is
seeking to make RMS work; from connectivity
and communications, reporting and reliability,
to the difficulty of maintaining and updating
systems. Many RMS are found not fit for purpose
as the skill levels in the field are not on a par with
the technology adopted, while the challenges of
enforcing new systems and processes if any party
finds RMS undesirable have been noted previously.
“We’re crawling before we can walk,” concluded
Green, “if we can knock three or four hours of DG
runtime out, we’re almost free of generators – then
there’s no fuel to steal.”
Motivating tenants to upgrade to low power,
outdoor solutions
Gain sharing used to be a naughty word, but it was
incorporated into Helios Towers Africa’s Vodacom
Tanzania transaction. In this case, the operator
doesn’t share in any reduction in opex that comes
from HTT’s investment, but they do benefit from
their own investments.
HTT currently charge a lease rate inclusive of
power, with the utility meter rate averaged across
tenants. RMS may provide an opportunity to meter
each tenant separately.
How HTT partners with maintenance
subcontractors to drive performance
improvements
With senior representatives of six of HTT’s
and understand the contractual requirements
we have under SLAs. It’s not just about achieving
99.95% uptime for class A sites, it’s about fire
suppressions systems, certification of equipment,
and a multitude of other details. There’s a way for
us to work together so that field engineers visiting
a site to complete a preventative maintenance task
simply take a couple of pictures, and work through
a tick list of other checks. I need maintenance
partners who will follow the culture and processes
of what we’re trying to achieve here.”
Diversification into fibre, small cells and DAS?
At every TowerXchange Meetup, the towercos are
asked if they foresee the diversification of their
business model from towers into fibre, and the
answer is usually the same; never say never, but we
have a lot on our plate at the moment and remain
focused on squeezing as much value from towers
as possible.
HTT’s maintenance subcontractors, to discuss
how to minimise staff turnover, how to handle
troublesome technicians (“weeding out bad apples
to ensure they can’t move from one company to
the next”), and to share best practices to optimise
alarm response performance, enabling a transition
to preventative maintenance.
In theory, towercos are interested in anything
shareable in the value chain. But most towercos
worldwide don’t own or share transmission and
backhaul. The reality is that, while microwave
backhaul remains a bottleneck, many MNOs
remain protective about shared transmission.
Some towercos have spoken to fibrecos about
potential joint ventures, but it hasn’t progressed
beyond initial dialogues.
In Chuck Green’s words, “this is where the rubber
meets the road at a company that outsources O&M.
Maintenance contractors have to train people well,
However, many towercos are getting into small
cells and DAS – HTT have around 20 in-building
solutions
The Tanzania round table at the TowerXchange Meetup Africa 2014
principle subcontractors participating in the round
table (Camusat, MER Group, NEWL, Pivotech, QTE
and Sagemcom), it was possible to have a fruitful
discussion about skills development across the
Tanzanian telecoms/engineering talent pool, and
about maintenance best practices.
While several contractors revealed details of
their training and qualification programmes, we
also learned how HTT’s CEO Norman Moyo had
created a Maintenance Forum, consisting of all
XX
Special feature:
Return to Ghana
We wrote about Ghana in the very first edition of the
TowerXchange Journal back in December 2012, asking: “Are three
towercos in Ghana too many?”
That case study was written two years after the inauguration of
the tower market in Ghana, Africa’s first and most competitive
market for towercos. Helios had kick started things with a deal
with Millicom/Tigo, Vodafone outsourced their towers to Eaton,
and American Tower and MTN partnered to form ATC Ghana.
Airtel’s Africa Towers subsequently made a fourth towerco in
Ghana, although their assets are soon to be transferred to Eaton.
When we spoke to Helios Towers Africa CEO Chuck Green in 2012,
he was bullish about the prospects for Ghana; “demand in Ghana
has been significant enough to spread among three towercos with
different footprints. We have the market share we targeted and
we’ve already had a reasonably decent lease up experience”.
Two years on, TowerXchange revisits Ghana to see how the
market has progressed.
In this special feature:
120 Navigating the changing landscape of the Ghanaian
tower market
124 Eaton’s Gareth Townley on “staying competitive in
Africa’s busiest tower market”
127 Netis on “Weathering the storm – making a profit in
Ghana”
Navigating the changing
landscape of the Ghanaian tower market
Lessons learned from the Ghana round table at the TowerXchange Meetup
Africa, October 2014
TowerXchange Meetup Africa 2014 Roundtable
Ghana is a very attractive telecoms market, but is
it overcrowded? Six MNOs. Four towercos – soon to
become three – serving a population of just 26mn.
How is competition affecting the tower industry?
What was the impact of the devaluation of the
Cedi? How has that affected access to diesel and the
battle to reduce energy opex? How will the launch
of LTE, restricted to date to indigenous new market
entrants, reshape the market? These were just some
of the questions posed at the Ghana round table
at the last TowerXchange Meetup Africa, based on
which we present the following insights.
Keywords: Towercos, Market Overview, 4G , LTE, New License, Urban vs Rural, Tenancy Ratios, Outdoor
Equipment, Network Rollout, Energy Efficiency, Pass-Through, Leasing & Permitting, Regulation, Country
Risk, SLA, ESCOs, Solar, Skilled Workforces, DAS, Decommissioning, RMS, Infrastructure Sharing, Africa,
Ghana, Leadcom, American Tower, ATC Ghana, Eaton Towers
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The impact of the devaluation of the Cedi – lessons learned applicable worldwide
The management and staffing of local subcontractors
RMS and asset management systems in Ghana
How Ghana’s towercos respond to the ESCO proposition
American Tower’s migration from AC to DC power service provision in Ghana
Currency devaluation
The Ghanaian Cedi was 2014’s worst performing
currency in the world up until August, before
strengthening 12% in September and stabilising
thereafter.
Currency devaluation obviously has a tremendous
impact on fixed price contracts, harming margins
and capacity for suppliers to Ghana’s tower
industry, particularly where equipment and fuel
must be imported, and for companies whose
performance is measured in US$. Currency
devaluation compounds the challenge to minimise
opex, making the forecasting of diesel prices
difficult in such a volatile environment.
Ghana was an attractive market for the tower
industry two years ago, and the market still looks
good in the mid term, but in circumstances of short
term extreme currency devaluation, there are
inevitably situations when tenants can’t pay their
lease rates, so towercos may not be able to pay,
leaving vendors in a tight cash flow situation.
How to mitigate forex risk
Securing local debt rather than US$ debt has helped
offset currency risk, while Ghanaian towercos had
to put more effort into the indexation of contracts.
Local currency contracts further mitigate forex risk
– as revenues are in local currency, so as many costs
as possible must be in local currency. So Ghana’s
towercos have bands of “normal cost increases”
as well as more substantial cost increases where
XX
Ultimately, African towercos’ best hedge against
currency risk is to build a portfolio across multiple
countries to dampen the effects of forex volatility,
which is exactly what the three towercos in Ghana
(American Tower, Eaton Towers and Helios Towers
Africa) have done.
Tenancy ratios in urban and rural Ghana, and
the potential for rural network extension
Despite concerns that the Ghanaian tower market
might be overcrowded, tenancy ratios have
remained broadly aligned with towercos’ original
business plans. One of the Ghanaian towercos
apparently has a tenancy ratio of 2.1 in urban areas
compared to 1.5 in rural areas. The combination
of relatively low tenancy ratios and high costs of
operation makes the economics of rural network
extension challenging.
While the moratorium on new towers (now a
restriction on builds less than 400m apart) in urban
Ghana led to good tenancy ratios, rural parts of the
country remain underserved. A phase of network
extension is imminent. According to their quarterly
distributions, between Q3 2013 and Q3 2014 ATC
Ghana added 67 new sites in Ghana, representing
3.5% organic growth. That pace of organic growth
is set to pick up; Eaton and Helios Towers Africa
forecast organic growth in the 10-15% range across
their SSA portfolios in 2015.
In rural areas it makes sense to have only one
tower, but towercos’ contracts do not oblige them
to build towers, and most won’t build a site if it is
likely to attract only one tenant in the medium term.
While only around 6% of the MTN network is hosted
on non-ATC Ghana sites, MTN has addressed most of
the addressable market: they have no competition
in many rural areas, and as such there is limited
commercial incentive for other operators, and
their towerco partners, to invest in rural network
extensions. The reality is that large parts of rural
Africa still have only one operator; not the market
dynamics that attract towerco investment, which
remains concentrated in urban SSA.
Integrating new acquisitions
In October 2014, when the round table on which
this article was based took place, the deal to acquire
Airtel’s towers in Ghana had been signed but not yet
been formally closed, so the assets hadn’t yet been
transferred.
The acquiring towerco had of course mapped
Airtel’s assets against the sites they already
operated, finding minimal overlap. As in several
other countries where Airtel’s Africa Towers had
already been marketing the sites, the acquiring
towerco will be starting from a tenancy ratio over
one. Post-close it’s always necessary to check the
safety of towers – improved meteorological data is
now available, and wind patterns have changed in
Ghana, so that has to be taken into consideration. It
seems very unlikely that the acquiring towerco will
need to decommission any towers in the combined
“
One of the Ghanaian towercos
apparently has a tenancy ratio of
2.1 in urban areas compared to 1.5
in rural areas. The combination
of relatively low tenancy ratios
and high costs of operation makes
the economics of rural network
extension challenging
“
exposure to forex remains.
portfolio, although they may mothball some.
However, with infill requirements, a duplicate
tower may be needed for capacity in many locations
in a few years.
Local skill resources and the management of
O&M subcontractors
Eaton Towers has an in-house O&M lead and
considers the management of subcontractors to
be of critical importance. Ghana’s towercos report
good availability of skilled local talent, and a culture
of continuous improvement in Ghana, requiring
minimal use of expat staff. ATC Ghana has a couple
if expats out of a staff of ~120.
This was echoed by the local managed service
providers, who commented on the quality of
engineering degrees and graduates from Ghana’s
universities. The returning diaspora - talented
Ghanaians with education or experience overseas
- has been another valuable human resource. One
of the managed service providers had 90% of their
100 staff from Ghana, another 95% of 200, and for a
third 86/90 staff were Ghanaian.
At ATC Ghana, the maintenance of construction
and electrical (fuel and security) are outsourced
separately – combining construction and electrical
didn’t work. ATC Ghana has three electrical and
three structural engineering partners.
American Tower has an ongoing exercise seeking
to optimise the performance of contractors in both
Uganda and Ghana.
The Ghanaian towercos’ experiences to date with
RMS and asset management systems
Both towercos on the panel reported familiar
challenges with RMS. They are not 100% happy with
the sophisticated systems on the market as their
complexity usually exceeds what local teams can
manage. There were also reports of people in the
field cutting sensors so they could steal batteries
and fuel. One towerco suggested “if you can service
the system cheaper than me, we’d consider that!”
At least one RMS contract is up for review at the
moment.
The financial and asset management systems
of American Tower were all already in place.
Alongside automation, permitting and managing
ground leases is a substantial human operation
which requires 21 staff – although the actual
permitting is outsourced.
Energy as a service
Investment in cell site energy solutions can only
be fully unlocked through the alignment of SLAs
right through the value chain, from tenant to
towerco, O&M and refueling subcontractors and
energy equipment vendors (or ESCO). “It’s going to
take time for the ESCO model mature, but I’d love
to not have to worry about DGs and fuel delivery.
My power costs have gone from 25-50% of my real
cost base between January 2011 to today,” said
one towerco. Another added: “I get proposals and
approaches on a monthly basis from startups to
companies that manufacture power equipment who
are diversifying into an ESCO model. I need to have
comfort that you can deliver against our challenging
SLAs. And it’s very complex to deliver against these
SLAs: 80% of my management time is spend on
this!”
One of the challenges of the ESCO proposition is
fundamental: “our performance is measured at the
EBITDA level – we like spending capex to improve
EBITDA!” African towercos benefit hugely from
the smart deployment of capex to improve energy
efficiency – if they can extend battery life from
three years to four, for example, or extend the
lifecycle of DGs from 20,000 to 25,000 hours, ROCI
across a portfolio of 10,000+ SSA sites can be huge
– it will take a compelling business model from
a credible ESCO to attract a towerco to set aside
the value creation potential of making their own
investments in power.
One towerco suggested that as much as a third of
their costs were linked to the complexities of linking
the utility company’s prepay and post pay meters;
trying to unify that data across good and bad
controllers in a single system to generate the bill.
American Tower’s migration from AC to DC
power service provision, and their appetite for
solar
Whereas under a power pass through model, the
towerco is not incentivised to invest capex in cell
site energy, commercial agreements are changing
and all the new towerco contracts in SSA (outside
South Africa) make energy the responsibility of the
towerco.
American Tower will invest US$10-30,000 per site as
they move from AC to DC power service provision
in Ghana. American Tower’s local subsidiary ATC
Ghana invested ~US$30mn in RMS and power
solutions in 2014, and will invest a similar amount
in 2015. The procurement process is complete for
most of the migration.
ATC Ghana have trialled some solar powered
solutions, but typically for single tenant sites. The
10-15kW required by multiple tenant sites tends
to require a 100sqm+ solar array, and the cost of
ground space is often prohibitive. Generally ATC
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“
Ghana’s incumbent operators into the 4G market.
Pressure of time to market, combined with the finite capex budgets
likely to be found among new entrants not back by a tier one MNO,
suggests Ghana’s new LTE service providers may be more likely to
lease than build passive infrastructure – indeed several of Ghana’s LTE
new entrants are already clients of Ghana’s towercos
There is a parallel migration from indoor to
outdoor equipment on the part of tenants. While
there remains a substantial legacy of indoor sites in
Ghana, the country’s MNOs are gradually installing
outdoor equipment with a much improved
tolerance range for temperature.
LTE and fibre in Ghana
While currency devaluation delayed the process,
at least three LTE licenses with spectrum in the
2,400MHz band have been issued. The process
was restricted to indigenous new market entrants
“
Ghana builds new sites with capacity for three
tenants and a 13kW typical load. ATC Ghana
remain open to anyone can offer a proven solar
solution working operationally for multiple
tenants.
in Ghana, of which two of three services had soft
launched at time of writing. Blu Telecoms and
Surfline Communications both launched in 2014.
Surfline Communications claimed to have 300 sites
in August of that same year, providing coverage in
Accra and Tema. Gold Key Properties also received
a license, but do not appear to have launched.
Fibre to the tower (FTTT) and shareable fibre
in general may be a significant opportunity for
towercos and fibrecos in Ghana. “Connectivity to
urban towers is okay in Ghana, rural fibre is nonexistent!” Said one participant. Another shared an
anecdote that three LTE operators on one of their
towers wanted to use fibre but were forced to use
microwave backhaul.
DAS, IBS and stealth systems
ATC Ghana has IBS 20 buildings in Accra, and feel
they have the majority of the current addressable
market covered. Eaton Towers has some DAS in
Uganda and South Africa, but none in Ghana yet.
However they feel DAS will inevitably be part of the
future as the skyline of Accra skyline evolves.
Leadcom provide a turnkey solution, adding
5-10 buildings per year. This represented a small
proportion of their business compared to core
construction projects, but growing.
Pressure of time to market, combined with the
finite capex budgets likely to be found among new
entrants not back by a tier one MNO, suggests
Ghana’s new LTE service providers may be more
likely to lease than build passive infrastructure –
indeed several of Ghana’s LTE new entrants are
already clients of Ghana’s towercos.
Other stealth or disguised systems, such as
signage or palm trees, are often pushed for by
permitting restrictions. One participant reported
that camouflaged towers typically cost double
compared to a classic tower, so they sign off each
business case one by one.
The prevailing opinion seemed to be that the new
entrant LTE operators will exit soon after they’ve
met the license conditions to be acquired, bringing
We’ll leave Eaton Towers’ words to to conclude this
report: “It is easy to register a company in Ghana –
I’d encourage people to come!”
Staying competitive in
Africa’s busiest tower market
Gareth Townley, MD of Eaton Towers Ghana shares his thoughts on the advantages
of a busy Ghanaian tower market and shares how they’re working to overcome
some significant challenges
As Ghana’s three towercos stop to draw breath
and consolidate their assets, we checked in with
Gareth Townley, Managing Director of Eaton
Towers Ghana, to find out how the market has
developed since he last spoke to us two years ago.
He talked to us about how currency and power
crises are hitting the market and about the future
of passive infrastructure in Ghana.
Gareth Townley, Managing Director, Eaton Towers Ghana
Keywords: Interview, Editorial, Tower People,
Towercos, Energy, West Africa, Ghana, Eaton
Towers, O&M, Market Overview, Capex, Lease
Rates, Opex Reduction, Batteries, Energy
Storage, Fuel Security, Risk, Loading, Energy
Efficiency, ARPU, Regulation, Country Risk,
Off-Grid, Unreliable Grid, Procurement, Change
Management, Rooftop, Masts & Towers
< How Eaton Towers Ghana is developing from an acquisitive towerco to an established market player
< The role of the Ghanaian regulator in shaping the country’s tower industry
< How the impact of power crises and currency devaluation have affected the market
< What a competitive towerco market means for network planners and operators
TowerXchange: Given the fact Eaton Towers
Ghana is well established in Ghana, where is
the company’s focus in terms of capex and
management time? Will this be significantly
affected by the new acquisitions in the country?
Gareth Townley, Managing Director, Eaton Towers
Ghana: The acquisition is a key step for us as it
gives us scale which means that we can offer a lot
more to our customers and blend networks into one
portfolio to create synergies. From an operational
view, we’ve been providing market-leading quality
of service, so the only issues we’ve been having
are the currency depreciation and energy price
increases. Energy prices are up 100% in the last 12
months in Ghana which together with the fall in the
cedi has put pressure on our margins.
None of us can control the energy price but we can
control our consumption, so for example we’re
removing air conditioners and using a free cooling
system on many sites: often the air conditioning
units use more power than the electronic
equipment.
We have been investing in building new towers and
we expect the demand for new towers to increase
significantly in future.
TowerXchange: How are buying decisions made
in Ghana at the moment and is this something
which is currently evolving?
Ghana: Our buying process is going through a lot
XX
of changes. Major purchases used to go through
Europe but now go through our new regional office
in Nairobi and we are using more vendors from
India and China. It also helps to bundle together all
of our African markets for purchasing purposes, to
get better prices from bigger scale.
TowerXchange: Talk to us about the integration
of new assets into your sales process and the
extent to which new acquisitions might overlap
with the existing assets you’re marketing from
the Vodafone portfolio.
Ghana: Overall the new towers fit well alongside
our existing portfolio. We will take the Airtel
network and do overlaps analysis based on site
distances with the Vodafone network. Then we
make it specific for the customer. For example for
MTN, we take our portfolio and their portfolio
including their co-locations on other towercos’
sites and work out what is needed from there. In
addition, we look at the local economic activity and
demographic information around each tower; for
example a young local population could consume
more data and enable an operator to sell more data
products. When towers are very close together we
can look at combining into one site or certainly
ensure we have cost synergy.
TowerXchange: Eaton Towers co –founder Terry
Rhodes talked about there being an ‘outbreak
of rationality’ in the acquisition of assets from
Airtel such that most countries in Africa now
have one, at most two towercos present in them.
How has the presence of three major towercos
affected the dynamics of the market in Ghana?
Ghana: Four, if we include Airtel Tower. It’s quite
ironic, when you speak to the operators they claim
it’s the most competitive telco market in the world
and I always claim we have the most competitive
tower market in the world to match it. Colocations
and sales have been strong and have been driven
by the Ghanaian regulator who has progressive
rules on colocation and won’t grant a permit to
build a tower if there’s one in the area where
you can colocate. Our tenancy ratio is high and
continues to grow.
As there are so many towercos, there’s a bit
of pressure on pricing. We are a very fast
moving, lean, private towerco, with no operator
shareholding, so it keeps us sharp, keeps our
uptimes high and keeps us competitive. Ghana was
the learning ground for Eaton Towers and we will
reach our targets here.
TowerXchange: A recent BMI report indicated
that Ghana is a strong market for towercos,
generating more revenue per site than most
other global regions – what do you think drives
this?
Ghana: If it is correct then great, it means we’re
in the right market! The biggest driver here is
that you’re forced to colocate in Ghana, the local
regulator won’t let you build a new tower within
400m of another one, so even if the MNO wants to
build their own, they’re not allowed. Because the
cost of operating in Africa is high, this is reflected
in the lease pricing and our clients are on long
term contracts with prices pretty much fixed with
contracted annual increases. This means we can be
confident that we have a good guaranteed revenue
base to build on each year and we can then look to
expand with new towers in locations that can be
shared. TowerXchange: Why is the Ghanaian regulator
so stringent in terms of tower construction?
Ghana: Initially when MNO’s started building
towers in Africa there was a proliferation of towers.
Colocation was rare as the network access was used
as a barrier to entry. Today it’s not sustainable to
have three towers next to each other in a small
village as we have had in the past.
The latest development is rooftops, people used to
stick ugly red and white towers on top of beautiful
buildings but we’re now working to take over
rooftop sites and disguise the antenna as flowerpots
or lights and offer access to all mobile operators.
The Environmental Protection Agency wants fewer
and less visible towers but with the data demands
we’ll need more towers in urban areas, so rooftop
and in-building solutions are the future.
TowerXchange: How will you develop your
rooftop portfolio? How does it differ from
towers?
In terms of what we can offer to our clients, it’s
exactly the same as a tower but we invest in
antennas and cabling rather than a steel structure.
TowerXchange: Given governmental pressure on
MNOs to improve QoS and the demand for better
rural coverage, how is this filtering down to the
towercos and what action are you taking?
Ghana: In terms of quality of service it can work
for us. The regulator will fine operators who don’t
deliver on QoS, so we will find the region where
they’ve have trouble and see what we can do to
help. In the end they will need more towers and
infill solutions.
Rural coverage has always been a challenge; Ghana
Investment Fund Electric Communication (GIFEC)
is a scheme where operators and towercos put 1%
of revenue into the fund to support rural solutions.
In deep rural areas the local economy can probably
only support one tower. So either the operators
divide and conquer – maybe they will pick five
areas each and have their own monopolies in this
village or the tower companies build rural towers if
more than one operator wants to share.
TowerXchange: How has the devaluation of the
cedi affected towercos and other participants in
Ghanaian telecoms trade?
Ghana: It caught everyone by surprise, it was
the worst performing currency in the world
January-August 2014, 70% depreciation in six to
seven months. The industry pressed the pause
button. Everyone was waiting to see when it would
stop. All we wanted was stability and we got that
a couple of months ago. We now feel the worst is
over and all the companies are committed to Ghana
and to the growth that will come from Data, Mobile
Financial Services and Entertainment.
TowerXchange: Isolated incidents aside, it seems
the grid is fairly good in Ghana. What is your
experience of that and what are the implications
for the depth of service you have to provide for
your tenants?
Ghana: By African standards Ghana has a good
grid and there are plans for significant investment
in power generation. But at the moment we are
experiencing load –shedding and I am spending
half my time dealing with power issues - I don’t
know what towerco execs in Europe do all day
when they can just plug in to the 24 hour mains
electricity grid! We’re having a blip at the moment but I’m positive
for the future. Hopefully we can remove diesel
element from half the sites – previously the average
“
I don’t know what towerco
execs in Europe do all day when
they can just plug in to the 24
hour mains electricity grid!
“
Gareth Townley, Managing Director, Eaton
Towers Ghana: We’re trying to work with
property management and property development
companies. For property managers there’s a benefit
in having good communications links offering all
networks across their commercial and residential
portfolio. downtime for the grid in Ghana was two to three
hours a day and our battery back-up can cope
with that. The reduction in diesel use is also good
for meeting the environmental targets, as green
initiatives are important to the Eaton Towers
Group. TowerXchange: How are network planners in
Ghana adapting to a market where almost all of
the towers are leased not owned?
Ghana: They prefer it! I come from the operator
side and I know that once you’ve planned a rollout,
it can take another 9-12 months to build a tower.
Now they can reach new areas more quickly and
just need to check if a tower is ready and be online
in a matter of weeks. From a capex point of view
too the operator only needs to fund the active
electronics and they are generating revenue from
day one
XX
Weathering the storm –
making a profit in Ghana
TowerXchange: How do you see Ghanaian
towercos dealing with power issues? How will
changes to power provision affect your offering
to clients?
Jean Farhat explains how Netis are evolving to protect profits in a market
where margins are reoded from all sides
Jean Farhat, Managing Director, Netis: There is
currently power crisis in Ghana, the grid is very
poor in quality and availability. In 2014 we had
a big crisis not just for the grid but also a huge
delivery crisis where the importers claimed they
were not paid by the government so fuel wasn’t
available at all at certain times. It has changed
the whole situation. Now fuel has to be paid for
upfront and even then you’re not guaranteed to
receive it. This results in more outages and has
impacted towercos’ opex given they offer a fixed
price for clients to rent the space and provide
power and maintenance. So when this crisis hit
and the need increases drastically, the towerco is
left quite exposed by the commitments in their
Service Level Agreements. I don’t think they have
any agreements in place with their clients to
compensate for or mitigate a situation like this,
but it won’t change the way towercos work. For
companies like us, we have to change the way we
work. In terms of how we supply fuel, we have
to make sure we are sourcing more effectively.
Before the crisis you could go to any supplier and
fuel was available. More and more now we have to
control the distribution and that means not using
too many subcontractors, so we have to buy our
own trucks and do our own distribution in order
to have better control over logistics.
2014 was a tough year for Managed Service Providers
in the Ghanaian market as the devaluation of the
Ghanaian Cedi threw the market into uncertainty and
a fuel supply crisis hit companies’ ability to deliver.
In this interview Jean Farhat, Managing Director of
leading end-to-end service provider Netis, explains
how they have worked hard to tighten up on controls
in order to maintain profits and deliver optimum
performance for their clients.
Keywords: Interview, Editorial, Managed Services,
Energy, West Africa, Ghana, Netis, O&M, Opex
Reduction, Fuel Security, Risk, Energy Efficiency,
Operational Excellence, Country Risk, Off-Grid,
Unreliable Grid, Procurement, Decommissioning
Jean Farhat, Managing Director, Netis
< How Netis are increasing control over their fuel supply chain
< The demand for, and costs of, camouflage solutions in Ghana and beyond
< The benefits of operating in a multiple towerco market for managed service providers
< How the decommissioning process will play out in Ghana
Another trend which is more and more common
with towercos is that instead of paying fuel on
delivery it is now paid on consumption which
is another difficulty for us, so we have to better
manage the delivery, staff control, losses during
transportation and losses on site. We have to use
more efficient tools like employing RMS all the way
from depot to site, and finding tools which allow us
to monitor really carefully.
camouflage as much as we can for our clients.
In part it’s driven by regulation but mainly by
the reception of the consumers; over the last few
years we have seen that more and more people are
reluctant to have structures close to their homes
and now in many markets some operators need to
densify their network by putting more structures
into urban areas and residents are reluctant to
have towers close to their houses.
TowerXchange: Do fuel problems like this make
Ghana a less interesting market for you?
Jean Farhat, Managing Director, Netis: We’re
used to these kind of challenges and this is just
an additional layer of complexity. Maintenance is
not a massive profit maker, you earn your profit
by saving costs, not on the margin. It pushes us to
be more accurate, professional and careful. The
trend of being paid on consumption pushes us to
be more careful with how we control the whole
supply chain, from taking orders or approvals
from the towerco up to being paid and invoicing.
At each stage we have to be very accurate, but this
trend is all across Africa, it’s the same in Uganda or
Burkina Faso, it’s a trend which is growing across
the continent.
TowerXchange: Will the recent 4G license
auctions impact demand for new sites? Will the
restriction of licenses to new market entrants
affect the market?
Jean Farhat, Managing Director, Netis: These
auctions mean new opportunity for the towercos,
but they have to be very smart in terms of being
TowerXchange: How did the devaluation of
the cedi affect your operations and is there
anything you can do to mitigate the risk of
currency devaluation?
Netis tower
more commercially attractive. I don’t see specific
impact in terms of O&M except that newcomers
might need to build infrastructure but there’s no
massive investment in terms of structures and civil
works to come. It doesn’t heavily impact us.
TowerXchange: What role will DAS and ‘special
structures’ such as camouflaged sites and lamp
posts play in urban infill and Ghanaian needs
moving forward?
Jean Farhat, Managing Director, Netis: We are
involved in lamp posts. We can see there’s more
and more need for camouflage but it’s not massive
for now. It remains very expensive for towercos
and operators. We see the demand growing and
we see the same trend in other countries, but given
the cost implications we try to avoid the need for
Jean Farhat, Managing Director, Netis: It’s
impossible to control it happening again and
of course there’s an immediate impact on your
costs. It hits transportation costs and it impacts
opex - most of the consumables and materials we
use are imported so even if you buy on the local
market prices can change six or seven times in a
year which means you just can’t control your costs.
Most of the time your process can’t change in the
same way, it’s just that your profit margin that is
eaten up. In terms of sourcing you have to be more
careful, watch your financial costs, keeps costs as
low as you can. Most of the time towercos prices
are fixed and you can’t negotiate adjustments.
TowerXchange: How does the fact there are
currently three towercos in the market affect
the requirements they have for you? Do you
find the presence of three players affects how
you work with your clients?
XX
Jean Farhat, Managing Director, Netis: Yes we feel
it is better to have this situation than to have a
monopoly with only one towerco in the country.
You have a choice and more possibilities to
negotiate and if one client is not doing well you
can catch up with another one. In some countries
with only one towerco and you can definitely
see the difference as they can dictate their terms
and if you cannot manage with it, you may close
down.
Have you missed one of the past ten editions of
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Tower
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Tower
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ISSUE 4 | June 2013 | www.towerxchange.com
TowerXchange: Has there been any
decommissioning in Ghana and what are the
implications for Managed Service Providers?
Tower
< Vodacom and Etisalat’s tower strategy
Xchange
< MTN’s tower strategy in Rwanda and Zambia
< HTN, SWAP and BMI on the Nigerian tower market
< Tanzania case study with exclusive HTA interview
< Tower deal news from Egypt, Mali, Senegal & Rwanda
< TowerCo of Madagascar, FTS and Eaton interviews
ISSUE 5 | September 2013 | www.towerxchange.com
< Who’s whos in Managed Services, RMS & TowerPower
Tower
Xchange
Marc Rennard: Why Orange Tower
is sharing
towers
Xchange
< A closer look at Telkom Kenya’s deal with Eaton
ISSUE 6 | December 2013 | www.towerxchange.com
Jean Farhat, Managing Director, Netis:
Decommissioning is happening in some cases
like for example where a towerco is taking over a
network and there will be some decommissioning
there definitely. Usually it won’t be big numbers.
Some towers will have to be decommissioned
because they’re duplicated. We will lose some
sites but if they’re still happy with us we’ll gain
some others in new areas. In the end it depends
on the towerco policy. When they take over a new
network they may introduce new contractors
with which we’ll have to share the new network,
so for us it generally means no major changes,
in the end the numbers will remain more or less
the same. If they don’t bring in a new contractor
it’ll be different but I believe they tend to bring in
a new one then reduce the numbers after some
time. Or they’ll keep things as they are for six to
eight months and determine whether to keep the
contractor or change to their usual contractors
African tower market heats up
The drivers of SBA
Tower
Xchange
in African
towers
TowerXchange
Meetup
TowerXchange
maps
past,invited
currentto
and
future tower transactions
Communications’
expansion
Exclusive interview with Kurt Bagwell,
President - International, SBA Communications
Let’s meet up!
Tower
Join 200 African tower decision makers at
the TowerXchange Meetup
< Airtel’s 15,000 African towers may be sold country by country
Tower
Xchange
< The risks and rewards of operating towers in DRC
in African Towers converge at TowerXchange Meetup
< Insights and images from the TowerXchange Meetup Africa
TowerXchange forecasts the growth of African towercos from 23k towers today to 54k by the end of 2014
< Brazil case study: 9,000 new towers needed for World Cup
Xchange
< Rural infraco pioneers Connect Africa and AMN
ISSUE 9 | August 2014 | www.towerxchange.com
Tower
< Accelerating new tower construction - the Lei das Antennas
Xchange
The TowerXchange Who’s Who:
18 advisory firms with experience
of emerging market tower deals Tower
Xchange
< Brazil’s Ministry of Communications’ view of the tower industry
< LatAm transactions to date, plus new deals by AMT and SBAC
< Cameroon and Cote d’Ivoire case study
< IHS acquires 2,136 Etisalat Nigeria towers
Tower on opportunities
Xchangein MENASA
TowerXchange extends our coverage to include Africa and the Americas!< Towershare
< CEO Olivier Puech on AMT’s BR Towers deal
< Maria Scotti on Central America and Mexico
< Torres Andinas: BTS in Colombia and Peru
TowerXchange Asia:
“With our latest acquisition from Airtel, HTA
now owns over 7,800 towers in Africa”
CEO, Helios Towers Africa
< Myanmar: 17,300 towers by 2017, Telenor interview
< Asian tower report, India and Indonesia tower counts
< Commentary on the new towerco for China
– Chuck
Green,
TowerXchange
Americas:
< Interview
withan
JoséESCO
Escobar,
President
of Catalina
Towerco or powerco? Views from a major
vendor,
and
a community
power venture
TowerXchange Asia:
Tower
Xchange
Tower
Xchange
For a limited period, you can download back issues FREE at:
Ensure you have the entire back catalogue of TowerXchange, which provides a record of emerging
market tower industry evolution, and a comprehensive index of proven solution and service
Special feature:
The TowerXchange Meetup
Africa 2014 report
It was fantastic to reconnect with so many TowerXchange readers at our
second annual TowerXchange Meetup Africa! Once again, both conference
and exhibition sold out, with 36 booths demonstrating products and
propositions ‘fit for Africa.’ For the expanded 2015 Meetup (October 1
and 2), we’ll be relocating to the prestigious Sandton Convention Centre
Ballroom - just a few steps away from the best steak restaurant in town!
We have a wealth of insights to share from the 2014 Meetup; highlights
from TowerXchange’s ‘state of the market’ opening address; lessons
learned from the towerco CXO and investor panels, an editorial identifying
four specific opportunities for middle market towercos, and an interview
with Dion Jerling of Connect Africa, who exemplify one of those four
opportunities. In this and other features, we also share reports from the
round tables on Burkina Faso, Ghana, Niger, Nigeria and Tanzania.
131 State of the market: SSA tower industry growth 2014-15
135 African towercos’ strategies to date and plans for the future
142 How and what Helios Towers Africa buys
146 Meetup Africa roundtable review: Nigeria country focus
149 Burkina Faso and Niger – two new tower markets created by the
Airtel tower sale
152 Raising equity and debt finance for today’s maturing African tower
industry
155 2015: The year of the middle market towerco in SSA
159 Turning a profit connecting rural Africa
XX
TowerXchange’s state of the
market: SSA tower industry
growth 2014-15
Majority of desirable towers now transferred; transactions to slow in 2015
Another sold out TowerXchange Meetup Africa
In the two years between the publication of the first
edition of the TowerXchange Journal in December
2012 and December 2014, the number of towers
owned and managed by independent towercos
rose from 17,000 (12% of Africa’s towers) to 47,600
(29%). The SSA towerco market is dominated by the
‘Big Four’; private equity backed towercos Eaton
Towers, Helios Towers Africa and IHS, plus publicly
listed giant American Tower, joined by a handful of
regional and ‘middle market’ towercos. In this article,
we reflect on the state of the SSA tower market at the
dawn of 2015.
Keywords: Editorial, Towercos, Market Forecasts, Bankability, ESCOs, Procurement, Sale & Leaseback, Private
Equity, Masts & Towers, RMS, Site Management System, Africa, Gabon, Madagascar, South Africa, Egypt,
Senegal, Mali, Guinea Bissau, Guinea Conakry, Eaton Towers, Helios Towers Africa, IHS, American Tower
< The state of the independent tower market in Africa today, and the unprecedented growth
achieved in 2014
< Four more African tower transactions in the pipeline for H1 2015
< Proof of tenancy ratio and TCF growth, plus pipeline transparency, drives the investibility of
SSA towers
< Implications of the ‘end of the parallel infrastructure era’ for the supply chain
State of the market
The African tower industry’s 47,600 towers are
divided between Africa’s ‘Big Four’ multi-country
towercos (IHS has 22,000 towers, American
Tower 9,936, Helios Towers Africa 7,800-8,300
and Eaton Towers just over 5,000), a couple of
significant single country towercos (Helios Towers
Nigeria with 1,300 and TowerCo of Madagasacar
with ~200), plus a handful of ‘middle market
towercos’, primarily in Nigeria and South Africa.
For more data on the middle market towercos, see
“TowerXchange’s analysis of the independent tower
market in Africa.”
With further transactions imminent in Gabon
and Madagascar (sold by Airtel); Senegal, Mali,
Guinea Bissau and Guinea Conakry (Sonatel /
Orange), Egypt (MobiNil), and perhaps South Africa
(Telkom) Africa’s ‘Big Four’ towercos will soon
reach the 10,000 tower count widely recognised as
representing ‘scale’, setting them on a new path
focusing on the drive to profitability and eventual
exit.
We’ve reached the end of the parallel
infrastructure era for much of SSA; the majority
of tier one MNOs’ towers in priority markets have
been transferred to towercos, most tier two and
new entrant operators prefer co-location to new
build, and the majority of build to suit programmes
are being executed by towercos and co-ordinated to
minimise proliferation of towers. Africa’s towercos
expect organic growth in the range of 10-15% per
annum.
provided in TowerXchange’s “What’s left? The
tower monetization strategies of SSA’s leading
MNOs” special feature.
With the pace of tower transactions slowing,
the ‘Big Four’ towercos are refocusing on the
evaluation and integration of newly acquired
assets, staffing up new local opcos, novating
leases, upgrading and co-locating new sites, and
driving toward profitability. Tenancy ratios are
approaching and, in a few cases, exceeding two,
driven by incumbent MNO’s needs for cell site
densification and next generation technology
upgrades creating amendment revenue,
supplemented by a couple of points contributed by
Wi-Fi, urban 4G plays, broadcast and other nontraditional MNO tenants.
Investibility
Network with a highly qualified audience of 238 decision makers
To acquire SSA’s most desirable towers, over
US$5bn of capital has been deployed by Africa’s
‘Big Four’ towercos over the last four years, with
many millions more invested in improvement
capex programmes to upgrade tower structures
and power systems for multiple tenants. That
investment peaked last year; the African tower
industry almost doubled in size in the second half
of 2014, when 23,800 towers changed hands for
an estimated US$3.6bn (excluding the value of the
51% stake in MTN Nigeria’s towers, retained by the
MNO).
The current wave of tower transactions is coming
to an end, with just the aforementioned four
packages of towers in the near term pipeline for
H1 2015. However, SSA will see further knock on
transactions triggered in 2015 – the Airtel African
tower sale has drawn Helios Towers Africa and
Eaton Towers into several new markets, where the
other credit worthy MNOs might consider divesting
their towers before the finite number of tenancies
is snapped up, leaving their passive infrastructure
assets stranded on balance sheets. A more detailed
analysis of potential knock-on transactions is
The transparency of the pipeline of emerging
market tower deals, not just in Africa but in Asia
and LatAm, combined with increasing comfort in
towercos’ ability to deliver the tenancy ratio and
tower cash flow growth in their business plans,
means existing investors have doubled down on
many investments, and new investors are coming
into the ecosystem capable of writing bigger
cheques. African telecom towers is now a more
proven asset class, and the three private equity
backed members of Africa’s ‘Big Four’ towercos
all have access to capital from existing and new
investors. Nonetheless, opportunities for earlier
stage venture capital and private equity funding
can still be found among middle market towercos,
XX
for future sale, so there are few single tenant
structures going up. While the migration to the
independent towerco model is important for static
asset manufacturers, it’s even more important for
managed service providers. The transition from
a single tenant, MNO-driven world to a multitenant, towerco-driven world unlocks upgrade
revenue and unleashes substantial O&M contracts
that can provide invaluable cash flow for turnkey
infrastructure firms.
Towercos want to know what they’ve acquired,
so replacing malfunctioning RMS with telcograde solutions, backed up with site intelligence
albeit with the caveat that there is more risk to be
found at that layer of the ecosystem.
new entrant towercos in our “2015: the year of the
middle market towerco” editorial.
For SSA’s handful of ‘middle market’ towercos,
the name of the game remains creating a solid
cash flow base through managed services and
targeted deployment of macro sites, IBS, rooftop
and special structures. The majority of SSA’s
middle market towercos are build-to-suit centric
plays. If they build robust towers in desirable
but unique locations, such companies could soon
become viable targets for trade acquisition by
one of Africa’s ‘Big Four’ towercos. TowerXchange
identify four opportunities for ‘middle market’ and
Implications for the supply chain
We’ve said it time and time again; towercos are
becoming the most important buyers of passive
infrastructure equipment and services in emerging
markets.
Towercos are building the vast majority of new
towers in the markets in which they are active.
Even in markets where towercos are not yet active,
MNOs have an eye on co-location and the potential
“
“
Unique round table breakouts
Once again the opportunity
to meet real decision makers
in the industry. Receiving
encouragement from these same
experienced and specialised
folk is incredibly valuable.
Kieron himself also provided an
introduction before the event
that has since led to a series of
meetings at TowerXchange and an
invitation to formally present to a
Tier 1 operator
4%
3%
Towerco
2%
MNOs
20%
5%
Managed service provider
5%
Energy equipment
RMS
6%
Energy storage
13%
8%
Tower manufacturer
Investors
OEMs
9%
13%
11%
platforms purpose built for towercos, remains a
priority. TowerXchange is tracking over a dozen
RMS vendors serving emerging market telecoms
– there are dominant market leaders in China
and India, but no preferred solution has arisen
for Southern and Southeast Asia or SSA, where
towercos have piloted multiple solutions and are
still seeking one which ticks all their boxes.
The emerging market cell site energy proposition
is increasingly about what investments make sense
under near-term improvement capex programmes,
and what innovations are more cautiously piloted
as part of efficiency programmes that may take
longer to hit the bottom line for vendors. We still
haven’t seen an ESCO or powerco of scale in Africa,
although TowerXchange expect to hear from
powercos managing 4-digit tower counts by the
Access control, H&S
Consultants and advisors
Others
TowerXchange Meetup Africa 2015. The attitude
of Africa’s ‘Big Four’ towercos toward the ESCO
proposition was surprisingly bullish at this year’s
event but, in a requirement echoed across all
supplier categories, the appeal was for solutions
that are ‘fit for Africa.’
TowerXchange Meetup Africa 2014 attracts 238
top decision makers in African towers
Now established as the must-attend event for the
telecom tower industry in Africa, the audience
at the TowerXchange Meetup Africa 2014 grew
36% year on year, and still maintained a decision
maker level audience that was 83% Director to
C-level. While TowerXchange is not the biggest
event in African telecoms, it represents the most
concentrated gathering of passive infrastructure
buying power you will find on the continent.
Renowned for it’s unique small group, round
table breakouts, the 2014 Meetup also featured an
expanded, curated exhibition of 36 equipment and
service providers, hand-picked as solutions ‘fit for
Africa’ and proven in Africa
“
This was no doubt the most
useful show of the year to have
attended. There is nothing I
would change
“
TowerXchange Meetup Africa 2014 audience breakdown by industry
The TowerXchange Meetup Africa 2015
relocates to the prestigious Sandton
Convention Centre Ballroom on October 1
and 2 this year. We have twice the capacity
for exhibit space, but half of our booths
have already been sold before we start our
promotional campaign! Every TowerXchange
Meetup has sold out weeks before the event, so
contact Annabelle Mayhew, TowerXchange’s
Chief Commercial Officer, at amayhew@
towerxchange.com to secure your booth today!
XX
African towercos’ strategies
to date and plans for the future
Insights gleaned from the keynote towerco CXO panel session at the TowerXchange
Meetup Africa, held in Q4 2014
Abhulime Ehiagwina, HTN, Chuck Green, HTA and Pieter Nel, AMT
This article summarises talking points from
the keynote towerco CXO panel session at
the TowerXchange Meetup Africa 2014,
featuring Chuck Green, CEO of Helios Towers
Africa; Terry Rhodes, then Co-founder and
Director of Eaton Towers (now interim CEO);
American Tower’s Africa CEO Pieter Nel; and
Abhulime Ehiagwina, CFO of Helios Towers
Nigeria. The panel was moderated by Marco
Cardoni of Analysys Mason.
Keywords: Towercos, Deal Structure, Opex Reduction, Batteries, Tenancy Ratios, Co-locations, Exit
Strategy, Energy Efficiency, Pass-Through, Fixed Price, Densification, Active Infrasharing, SLA, Tax,
Uptime, Off-Grid, Unreliable Grid, ROI, ESCOs, Renewables, DG Runtime, Procurement, Skilled Workforces,
IBS, DAS, Small Cells, Sale & Leaseback, Manage With License To Lease, C-Level Perspective, Infrastructure
Sharing, Africa, Nigeria, Tanzania, Ghana, Airtel, MTN, IHS, American Tower, Eaton Towers, Helios Towers
Nigeria, Helios Towers Africa
< How much growth is left in the African tower industry?
< Comparing business models and lease packages in SSA with the US
< The structure of the SSA tower market: SLB vs MLL, and what is the number of towercos per market?
< Towerco CXO priorities when investing to reduce energy opex, and their appetite for ESCO business models
< What is the one thing the SSA tower industry needs?
The dominoes have fallen in the sub-Saharan
African tower industry; over the last four years
independent towercos’ ownership of SSA towers
has risen from 0% to 29%. Given that the towerco
business model depends on the credit worthiness
of the anchor tenants, and towercos have little
appetite to acquire towers with overlapping
coverage, Africa’s towercos do not want to acquire
all the towers; 55% penetration might represent
market saturation.
If Africa’s largest towercos have indeed acquired
over half of the towers they targeted, that was
reflected in the comments of the panelists. “We’re
in five or six markets now, operating 7,800-8,300
towers in SSA – I hope we’re at least halfway!”
Commented Chuck Green.
How much growth is left in the African tower
industry?
“We’ve got a long way to go,” said American
Tower’s Pieter Nel. “We’re looking at every country
and environment in terms of the competitive
nature of operators, maturity of sharing and
existing barter agreements, which informs our
view of the lifecycle. The infrastructure sharing
and towerco concept is so well established and
embraced on the African continent that it bodes
well for tenancy ratio growth potential and for
organic growth. With lots of holes appearing in the
network, there are lots of opportunities for build
to fill and build to suit. For example, in Ghana
we’re seeing 12-15% organic growth,” concluded
American Tower’s African CEO.
The Middle East and North Africa
The MENA market remains a relatively fallow field for towercos, although Zain recently admitted
they are currently reviewing their tower strategy. The imminent Egyptian tower sale will be a
bellwether for the tower industry and their prospective MNO counterparts across the region.
However, the structure of any tower market in MENA is likely to be different from SSA, consisting
as the region does of quasi-rural developing markets and prosperous developed markets in
which leveraged buyouts might be a more common deal structure than sale and leaseback. In the
near-term, the PE-backed towercos don’t see as many opportunities in MENA with the promise
to deliver returns comparable to those they see in SSA. “Ask us again next year and we’ll let
you know!” Said one of the panelists, whose towerco is rumored to be in pole position to secure
MobiNil’s Egyptian towers.
There will be ongoing M&A, felt the panel, both
from MNOs divesting towers and trade acquisitions.
“If you look across a broad horizon at the African
telecoms industry,” commented Chuck Green.
“Multiple SIMs exaggerates reported penetration –
there is hidden growth potential. Unique subscriber
penetration rates are still relatively low but rising
rapidly. There is need for coverage expansion,
while regulators are increasingly concerned about
QoS. African mobile networks are operating with
4,000-10,000 subscribers per site compared to
less than 1,000 in the US and Europe. So there is
growth potential in both coverage and capacity. As
disposable incomes increase, as smart phones get
cheaper and more widely rolled out, growth in SSA
will be on the same track as developed markets.”
“Africa’s towercos have established footprints
strategically across the continent – the Airtel
transaction has helped a lot in that respect. The
liquidity events to which we’re all building, either
strategic sales or IPOs, should attract multiples
which will reflect the rate of growth,” concluded
Green.
Eaton Towers’ Terry Rhodes added: “Penetration
is already over 120% here in South Africa. Even
with American Tower already here, Eaton saw a
market opportunity to build towers in areas like
Gauteng where we felt the networks could do
with improvement. So we built towers focusing
on capacity and infill, generating tenancy ratios of
more than two. If we can achieve that in the richest
region of the continent, we’re confident of the need
for capacity and coverage elsewhere in SSA.”
Towers Africa CEO Chuck Green. “The fundamental
model is the same: robust tower sharing, long term
recurring cash flows, high leverage – the same as in
the US. The primary differences are that operations
and maintenance is a commodity for developed
markets, whereas in SSA there’s more exposure to
power and security, and more forex exposure. It’s
about becoming more efficient – doing everything
we can to reduce reliance on DG runtime;
converting from AC to DC power so we have more
control over power systems. So whereas in the US
operating leverage is limited to putting co-locations
on towers, in Africa we also have opportunity to
increase efficiency at an opex level.”
American Tower’s Pieter Nel added: “it’s a very
simple concept: lease up the towers and everyone
is happy – we get scale, the MNOs get efficiencies,
savings can be passed to the consumer. American
Tower are in 12 countries on five continents. In
other markets such as the US and Latin America,
many costs are passed through to the tenant –
energy, ground rent, maintenance. The business
model is more complex in Africa, but at least we
own it and control it.”
Comparing the independent towerco model in
the US with SSA
“We see the same growth in consumer demand
in Africa as anywhere else in the world,” added
Eaton’s Terry Rhodes. “Give an African consumer
a smart phone she’ll use it. The penetration curve
may be behind, but we still see a big wave of data
growth – operators are going need every bit of help
we can give them.”
“There are more similarities than differences
between the SSA and US tower markets,” said Helios
Abhulime Ehiagwina, CFO of Helios Towers Nigeria
added: “infrastructure is not as mature in Africa, so
XX
you have to devote time to look at innovative power
solutions. You have to ensure backups are up to
date. You have to follow through your contracts. You
have to ensure the sites are always up.”
Are African leases reflective of a bundled
approach whereas in the US every component is
priced?
Tower companies’ well-informed counterparts
at African MNOs have learned a lot from how
the tower business works overseas, so in Africa
standard equipment configurations are usually
bigger than in the US, giving the towerco less
flexibility. A menu pricing formula is typically
used, with the addition of 3G and 4G antenna
often accounted for. Once the anchor tenant’s
requirement is outside that standard equipment
“bucket”, the towerco has a similar opportunity for
growth. And of course there is the same opportunity
to lease extra space to other tenants. Towercos still
get significant additional revenue from additional
equipment in SSA, and they don’t count that in their
tenancy ratios, but it does of course contribute to
Tower Cash Flow, which is a more inclusive metric
to measure towerco performance.
Comparing Manage with License to Lease (MLL)
with Sale and Leaseback (SLB) business models
in terms of the generation of shareholder value
When their process started, apparently Airtel
considered keeping 26% equity in each market,
but so far African towercos have confirmed 100%
ownership of Airtel towers in 13 markets. “If it’s
a good business, we want to own it, and make the
independence as clear as possible,” said Terry
Rhodes.
The other panelists shared the view that SLB is
the preferred model. Under a SLB agreement, a
minority interest can be retained by MNOs. As
long as that remains below 49% and is a passive
investment to protect the independence notion
of this model, investors are comfortable. Anchor
tenants retaining more than 50% equity can impact
the perceived value to investors, as there is a risk
that the model loses it’s notion of independence,
making other operators reluctant to share. So there
should be a significant discount for that kind of
deal structure. In fairness it should be noted that
IHS, who recently announced a tower transaction
in which 51% of the equity was retained by anchor
tenant MTN Nigeria, had to withdraw from this
panel at the last minute, and thus were not present
to make the case for their innovative deal structure
– doubtless they would have asserted that the
independence of the towerco was enshrined in the
terms of the agreement.
American Tower tends to stay away from MLL deals
unless there’s a good strategic reason, feeling they
create unnecessary complexity. Initial concerns
were swiftly assuaged about how market would
react to their joint venture deal structures in Ghana
and Uganda – the market understood that their
MNO counterparty was a passive investor.
African towercos’ appetites for managed services
are declining – MLL and managed services
represented 31% of African towerco’s portfolios at
the end of 2013, that had reduced to 10% by the end
of 2015 as a function of the acquisition of thousands
of managed towers, the cancellation of MLL and
Managed Services contracts in Kenya and South
Sudan respectively, and the dilution of the MLL
share of market in a year where all the new deals
were SLBs.
One participant outlined their reservations about
Managed Services and MLL deal structures. He felt
Managed Services was not seen as a great business
relative to the towerco model – margins are
relatively skinny, early termination provisions often
have to be made flexible, which further reduces
the value perception by the market. If the MNO
can buy back the customers it also degrades value.
In summary, the valuation of a Managed Services
or MLL deal depends on the term, the termination
provision, who owns the co-locations, who is
responsible for investing capex, and the pricing of
the deal.
Another towerco defended the MLL deal structure,
explaining that it was critical to help investors
understand what could happen after the term of the
agreement. Tower Cash Flow is what delivers the
value, and excellent TCF growth can still be created
under an MLL deal, suggested the same panellist.
Nigeria
The TowerXchange Meetup Africa 2014 took place
after the announcement of IHS’s acquisition of 9,151
and 2,136 Nigerian towers from MTN and Etisalat
Abhulime Ehiagwina, CFO of Helios Towers Nigeria,
said “what we’re looking at in terms of demand
for capacity now in Nigeria is tip of iceberg. There
is congestion at base stations across networks. It’s
almost impossible to stream a YouTube video on a
smartphone in Nigeria during peak traffic hours,
and with smartphones for under US$100 coming
onto the market, the number of subscribers who
can afford mobile broadband is increasing. Nigeria
currently has a little over 24,000 towers, yet the
Ministry of Communications believe we should have
at least 60,000.”
The panel seemed to agree that with four
substantial MNOs in Nigeria, there was room for
two large towercos and a handful of niche players –
although there was speculation that a lot of smaller
towercos would get picked up.
What is the optimum number of towercos per
market?
“I don’t think there’s a one size fits all concept –
there are quite a few of us in Ghana, for example,”
said one of our panelists. “Being second to market
is workable, but if you’re the third to arrive and you
don’t have unique locations, you’re in trouble.”
“There was something of a mad rush in Ghana
where the first three operators to outsource ended
“
“
respectively, but shortly before American Tower
announced their acquisition of 4,800 towers from
Airtel Nigeria. Understandably, American Tower
weren’t at liberty to contribute to this section of the
discussion.
Being second to market is workable, but if you’re the third to arrive
and you don’t have unique locations, you’re in trouble
up with three different towercos,” said another.
“However, in Ghana we’re on a tenancy ratio
right where we expected to be in our acquisition
economics. We were realistic about the fact that
there’s some overlap. Ghana should probably have
no more than two towercos. Countries with 30-40mn
population can tolerate two towercos, but with the
exception of negative FX performance, Ghana has
been fine.”
“Ghana was first market to liberalise, and there
were six MNOs, plus 4G new entrants,” said another
panellist. “Would we all go in again now? Probably
not, but there’s just so much more opportunity
now. Our business is also doing well in Ghana,
although the currency has had more impact than
the competition. The only competition is where
towercos have overlapping locations, and that’s in
20-40% of cases at the most. Whether it’s Ghana or
another market in SSA, if we can meet service level
agreements at a price better than it costs MNOs to
build towers themselves, then the model works. It’s
that simple.”
Improvement capex
“For us it’s all about optimum return on capital
invested (ROCI) – making selective decisions on
capex to get optimum value for ourselves and our
customers,” added American Tower’s Pieter Nel.
“After a deal closes, there follows a natural cascade
of capex priorities,” said Chuck Green. “First we
shore up towers that are already overloaded, and
make improvements on to comply with our Health
and Safety standards. Then we look at strengthening
towers for co-location and investing in opex
reduction. In reality this all happens concurrently.”
“When you acquire a portfolio, some of it’s older,
some of it is newer and in better condition,” added
Eaton’s Terry Rhodes. “After you’ve made sure
everything is safe, after that it’s about individual
tower profitability. If we can improve cash flow
by spending capex, we’ll do it. If capex improves
EBITDA it looks good to the outside world, just like
in any industry.”
XX
Of course, it takes a while for a towerco to close a
deal then get their hands around the state of the
portfolio before it’s brought up to the operating
performance they’d like to achieve.
“In Nigeria one of our principal challenges is
that we get only four hours per day of usable
grid power,” added Abhulime Ehiagwina. “The
government has privatised the grid, so looking
ahead, our improvement capex budgets will depend
on how quickly power reforms improve uptime
from the grid. If we’ve moved from four to 18 hours
of good grid, capex will decline, and we’ll focus
more on upgrades for co-locations.”
Reducing energy opex
Q&A is when the panel sessions at the
TowerXchange Meetup really come alive, and this
one was no exception. The first question came
from Mecc Alte, who wanted to advice on how to
proposition towercos with innovations to reduce
energy opex.
“All the tower companies are interested in schemes
that improve efficiency and reduce costs. We see
a lot of good looking proposals – but we need to
see a proof of concept,” said Abhulime Ehiagwe of
HTN. “Pilot it at your own cost to prove it works and
delivers value. Successful pilot schemes are easier
to ramp up to scale.”
Helios Towers Africa’s Chuck Green added: “As this
industry has emerged from the aggressive land
grab phase to where we are now integrating towers,
we’re now more open to innovations. Our natural
question are: is it fit for Africa? Will it work in the
field? Can it be maintained easily enough?”
“The lifecycle of any innovation is going to be
important,” added Terry Rhodes. “We’ve recruited
experienced tower people from India – our COO
comes from American Tower in India – what he
wants to see is a solution that works well there
and comes at an Indian cost base, then we’re
interested.”
Pieter Nel echoed the same sentiment: “As our
operations reach maturity, there is more time to
spend running and improving networks. Come
with a reference site and/or proof of concept.
Reducing carbon footprints is absolutely a priority,”
continued Pieter, “but this can be complicated such
that every site needs it’s own design.”
“The consideration of renewables is on the same
path as the economic and security situation in
terms of reducing DG runtime,” added Chuck.
“When we’re looking at alternatives to DG – CDC
batteries, solar, wind et cetera - it’s driven by
economic reality than by being green per se. We
have framework for finding situations where it
makes economic sense.”
“Reducing energy opex has an important
administrative / security aspect to combat shrinkage
– it’s more about controls than technology,” added
Terry Rhodes. “We’re interested in capex models
as long as the African technician on the ground is
capable of making it working. We’ve seen too many
complex solutions – it’s got be simple, robust and
economical.”
With regard to the potential of ESCO or
powerco business models, the towerco business
leaders seemed more enthusiastic than at the
TowerXchange Meetup 2013. However Pieter Nel
voiced their primary continuing concern “it’s not
about the technology used to deliver power as a
service – it’s all about operational execution. It’s so
important that you understand what it’s going to
take to successfully execute.”
Chuck Green continued the perspective: “Helios
Towers Africa have considered ESCO type models,”
said Chuck. “We have a direct responsibility to our
tenants for uptime, governed by strict SLAs and
penalties apply. So far we’ve not been comfortable
with counterparty credit and capacity such that
we’re not prepared to delegate the heartbeat of
the service we provide to our customers. It doesn’t
matter if the party we’re outsourcing to takes on
penalties, what matters is that SLAs are met.”
The separation of power and non-power costs, and
packages inclusive of fixed energy prices per site
are commonplace now in SSA, but an evolution to
towercos buying and selling energy by the kWh
may be on the horizon.
However, towercos’ first line of offence in the battle
against energy opex is always going to be to connect
sites to the grid, where it makes economic sense.
That’s tough in Nigeria with its four hours of usable
grid power, but it’s a more attractive option in a
market like Tanzania where cell sites on the grid
American Tower embraces DC power
“There’s a misconception that American Tower
are not responsible for power equipment in SSA,”
said Pieter Nel. “Many African MNOs expect
service at DC level. We’re providing DC service
level in Uganda, and migrating to a DC service
level in Ghana. In South Africa, energy remains a
pass through cost. We’re embracing owning and
delivering power, and have achieved some great
successes. For example, in Uganda we’ve been
able to reduce fuel consumed per site by >30% in
24 months. Power is now a core competency of
American Tower in Africa.”
During later round table discussions, we learned
that American Tower typically invests US$10-30,000
per site to migrate to DC service provision.
Potential extensions of the passive
infrastructure sharing business model: small
cells, IBS and active equipment
“Growth has to come with ancillary extensions
along the value chain from where we are now
as passive equipment providers for largely 2G
operators,” said Chuck Green. “We are in the early
stages of rolling out IBS in developed residential
and commercial locations in Ghana and Tanzania,
“
“
get perhaps 19-20 usable hours. Towercos back off
from that grid connection preference, looking next
at CDC batteries, then solar and other renewable
sources according to local resource availability to
reduce DG runtime.
There are 400-500mn Africans without communications. We must
help to address that gap, improve penetration and extend networks to
where it never made sense for one company to go alone
a precursor to small cells. As broadband take up
increases, DAS and IBS will become increasingly
important in Africa’s major city centres.”
While active infrastructure sharing is more in the
interests of MNOs than towercos, a lot of regulators
don’t allow it, and it tends to become an option
for more mature telecoms markets than SSA.
The current levels of congestion across Africa’s
networks means the opportunity for and economics
of active infrastructure sharing remain quite
limited.
While in early towerco contracts, addressing
potential future active infrastructure sharing was
too challenging, Africa’s leading towercos now
have preliminary pricing in the event of active
sharing built into contracts. In that sense it’s not
that different from sharing the benefits of energy
reduction. While the towerco CXOs don’t see active
infrastructure sharing as a near-term issue in
Africa, they are anticipating it becoming a factor
over the ten-plus year lifecycle of contracts.
While the towerco leaders were obviously aware
of satellite providers seeking to compete with land
based cellular, and Google trying to get into the
business using balloons, the prevailing view was
that such approaches could change the economics
of rural coverage, “but right now we’re happy
being in tower business rather than the balloon
business!” Concluded one of the towerco executives.
What is the one thing the SSA tower industry
needs?
Pieter Nel, American Tower: “As much as providing
energy is a core competency of American Tower
and other African towercos, there is significant
opportunity for suppliers to come up with a model
for selling power as a service. If we get a credible
consortium or partner offering a complete service
with SLAs enabling us to focus on our core business
of leasing up our towers, we’ll be interested.”
XX
Abhulime Ehiagwina: “Governments need to
harmonise the different layers of taxes under a
unified tax scheme. MNOs have robust regulatory
teams, the tower industry needs to build up to those
levels.”
Chuck Green: “Until and unless there is universally
reliable grid we all have to deal with power and
security issues. We’re all searching for a silver bullet
giving us reliable, easy to maintain, fit for Africa
solutions so we can monitor in real time what’s
going on at our sites…. And talent development
is a huge issue across the continent from the
top management team to the field level staff we
employ.”
Terry Rhodes: “There are 400-500mn Africans
without communications. We must help to address
that gap, improve penetration and extend networks
to where it never made sense for one company to go
alone.”
Projecting IHS’s future plans
IHS smashed through their five year target to
acquire 20,000 towers in SSA in just 30 months. With
the company’s recent addition of the Airtel towers
to those already acquired from MTN in Rwanda and
Zambia, as well as IHS’s acquisitions from MTN and
Etisalat in Nigeria, where IHS now owns 14,222 or
56% of Nigeria’s towers, IHS has reaffirmed their
position as Africa’s largest independent towerco,
with over 21,000 towers.
IHS has always been a Nigeria-centric West African
tower play, with country risk diversification
provided by their acquisitions in Cameroon,
Cote d’Ivoire, Rwanda and Zambia. With ~80% of
Nigeria’s towers now transferred from operatorcaptive to independent towercos, and IHS’s initial
growth plan achieved, IHS may be refocusing on
driving toward profitability and a future IPO.
That’s not to say IHS wouldn’t look at further
opportunities that meet their investment criteria.
IHS’s original wish list of targeted countries
included several countries in North, East, Central
and Southern Africa, and they’re believed to have
looked at opportunities as distant as Afghanistan.
The current Sonatel process in Senegal, Mali,
Guinea Bissau and Guinea Conakry may be of
interest to IHS as an extension of their West African
footprint and relationship with Orange. If and when
the North African tower market opens, we’d expect
IHS to be bidders. And it would be interesting to see
whether they would go toe-to-toe with American
Tower should an opportunity of scale come to
market in South Africa – whether the current
Telkom process triggers such a showdown remains
to be seen.
However, elsewhere in SSA, IHS are not believed to
have bid for the Airtel towers acquired by Helios
Towers Africa, which reinforced their strongholds
in Central and East Africa, nor for the Airtel towers
which added to Eaton Towers’ footprint in both East
and West Africa. With the towerco business model
best suited to a ‘natural monopoly’, IHS may be
disincentivised and disinclined to enter previously
targeted markets where competitors are now active,
unless they have an appetite to try to acquire one of
the other PE-backed members of Africa’s ‘Big Four’
towercos.
IHS has raised record-breaking capital; over
US$4.5bn since 2012, the largest equity raise in
Africa since 2007. In seven tower transactions
to date, IHS has deployed ~US$2bn, with initial
acquisition expenditure phasing into improvement
capex programmes and efficiency programmes
in their more mature markets. IHS has funds for
more acquisitions, and their enthusiastic backers,
led by French family fund Wendel Group, have
been only too happy to re-invest and to help add
new members to the IHS’s growing tribe of PE and
sovereign wealth fund backers.
In terms of procurement strategy, IHS are believed
to be considering moving from a conventional
capex programme to an opex-oriented procurement
strategy in which they simply pay for energy by
the kWh – a move which may be mirrored by other
African towercos, as hinted at the TowerXchange
Meetup Africa 2014.
In conclusion, IHS has achieved scale in SSA. After
adding almost 13,000 towers and almost trebling
the size of the company in 2014, we think IHS’s
acquisitive growth may slow as the pipeline of
transactions slows in SSA, refocusing their existing
opcos on organic growth and driving TCF. But IHS
will doubtless remain active and aggressive bidders
for any further opportunities that meet their
investment criteria
How and what
Helios Towers Africa buys
Find out how one of Africa’s ‘Big Four’ towercos is structuring procurement,
both for services and sites
As African towercos mature and the ‘landgrab’
phase of the market settles down, there’s
increasing pressure to not only bring sites up
to scratch to meet Service Level Agreements
(SLAs) and support new co-locations, but also
to make increasing efficiency savings. At the
TowerXchange Meetup Africa 2014 Alex Leigh,
Business Development Director at Helios
Towers Africa, hosted a round table to talk us
through how these shifts are being reflected
in the Helios Towers Africa procurement
management and process structure and what
that means for their suppliers.
Keywords: Interview, Towercos, Africa, Helios Towers Africa, Deal Structure, Acquisition, Valuation,
Investment, EBITDA, Capex, Deal Structure, Lease Rates, Valuation, Transfer, Assets, Due Diligence, Opex
Reduction, Capacity Enhancements, Fuel Security, Risk, Energy Efficiency, Operational Excellence, SLA,
Anchor Tenant, Change Management, Sale & Leaseback
< How suppliers are added to the HTA supply chain
< Helios Towers Africa procurement structures and centralised vs local decision making
< How to pitch to Helios Towers Africa
< Methods employed by HTA to minimise corruption while still fostering innovation
TowerXchange: How is your procurement
structured now?
Alex Leigh, Business Development Director, Helios
Towers Africa: We have functional heads across
the business who report to the COO, Kevin Koch.
Rob Salbego is our technical specialist who looks
at solutions and makes evaluations together with
Jean-Marc du Buisson, our structural engineer for
tower solutions. John Welsh looks at O&M solutions
and how this can fit into his overall strategy of
delivering optimal processes. They look at the
specifications and then they review with help from
the commercial team.
TowerXchange: How do you vet new suppliers?
Towers Africa: In terms of becoming a supplier to
Helios Towers Africa it’s going through that KYS
procedure. We sometimes work with the Vodafone
Procurement Company team and some of our large
capital items are sourced with their assistance, such
as towers, generators, power cubes and batteries.
If you’ve been through their procedure you don’t
need to go through it again with us. For other
projects, such as remote monitoring systems and IT
projects we run a detailed procurement process and
often begin projects with a smaller scale test phase.
Admittedly, the level of detail and the robustness
of the process has created hurdles and stretched
timelines. But our experience has been that you
need to take your time and properly vet suppliers
and their products, because what might work in the
lab and what will provide results in Africa in the
XX
TowerXchange: How much autonomy do your
local operations have to make purchasing
decisions?
Towers Africa: In terms of interactions with the
local operations, they will usually choose from items
which have been approved by our functional heads
but they also have the ability to bring up things they
come across that are interesting. We have a standard
approval process, the same you would see in any
multinational, approvals that require different levels
of approval ranging depending on materiality that
range from local CEO to the HTA board. Services
and smaller value items are generally sourced
locally, whereas the purchasing of large CAPEX items
generally has more engagement from Head office.
TowerXchange: If a supplier had their product
agreed and budgeted by the MNO prior to
divestment of their sites, will you honour the
deal? Alex Leigh, Business Development Director,
Helios Towers Africa: If it’s a contract that is being
transferred as part of the deal then yes, but we
evaluate each contract on a case by case as all our
deals are structured as asset deals. Generally, we
find that operators are not usually asking us to take
on responsibility for in-process inventory as they
usually cease sourcing products in the time between
signing and completion of the sale and leaseback
transaction.
“
The light touch approach of ‘I have this and I want to meet with
you’ or dropping us notes through LinkedIn gets lost. We need
evidence of what your product does and bringing it to the right
person is key
“
field might be two different things..
TowerXchange: If you’re approved by Helios
Towers Africa does it apply to Helios Towers
Nigeria as well?
we necessarily inherit mixed equipment and mixed
needs but as we replace aging power equipment we
try to reduce unnecessary variation.
Towers Africa: No, Helios Towers Africa and Helios
Towers Nigeria are separate companies.
TowerXchange: If a supplier has a solution which
they feel clearly answers your needs, how can
they get to the point of pitching it to your team?
TowerXchange: How important is standardisation
across Helios Towers Africa’s portfolio?
Towers Africa: A lot of people who want to engage
with us, whether it’s power, commercial or technical
solutions; a lot of people want to get in. The light
touch approach of ‘I have this and I want to meet
with you’ or dropping us notes through LinkedIn
gets lost. We need evidence of what your product
does and bringing it to the right person is key. Do it
in a way which gives it context and clear agendas.
Make it clear what value we can get out of the
discussion from the beginning.
Alex Leigh, Business Development Director,
Helios Towers Africa: It is important to evolve to
standardisation. We are working to standardise our
processes as HTA is a tower platform built not only
to manage multiple towers but to manage multiple
markets. This does not mean all equipment must
be the same but the process to manage them should
be as consistent as possible. For the acquired sites
“
always needs to come first. Now we’re really starting
to focus on new solutions that have a track record of
performance.
Events like the TowerXchange
Meetup Africa are great because
we can meet a lot of new people
face to face and find out more
about what’s in the market
TowerXchange: How do you ensure Helios Towers
Africa is open to innovation?
Towers Africa: We try to embrace innovation as
part of a structured process. If you’ve got the buyin of our functional leads that will filter down very
well and any timing delays of a structured process
is a small price to pay to prevent corruption in the
system.
“
TowerXchange: How do you get hold of the right
person?
TowerXchange: Do you involve operations in
selecting products?
Towers Africa: Events like the TowerXchange
Meetup Africa are great because we can meet a lot
of new people face to face and find out more about
what’s in the market. If you can’t meet us face to
face then I suggest a clear email.
Towers Africa: There’s pretty open dialogue on a
day to day basis between operations and functional
heads. Project teams build sites and operations
teams deal with them on an ongoing basis so there’ll
usually be a handover. As we systemise our cashflow
we can see on a site level what equipment is there
and how it is performing, which feeds back into the
technical forums and inputs into why we should be
buying certain solutions.
We have taken over networks that need the level
of focus we bring to the table, and have had to deal
with lots of reactive maintenance tickets initially
rather than having time to invest in preventative
maintenance. This means that a lot of what we’ve
been buying has just been focussing on SLA delivery
and only in the last 6-12 months have we been able
to focus on optimisation. What we’ve done may
not be the most efficient as we were breaking new
ground but as a customer facing business the SLA
TowerXchange: How do you ensure the solutions
you select are ‘fit for Africa’?
Towers Africa: We’ve looked at solutions which look
good in the lab or European settings but which don’t
work in Africa. You need to understand and plan for
it because some turnkey products just don’t deliver
in Africa. You also need to have confidence in your
suppliers; SLAs don’t work if the company has gone
bankrupt.
We ask questions like: How do you train field
maintenance supervisors to use the product
properly? That partnership from group to
operational level is important. You have to be very
open about how to use a product and how a supplier
delivers it is very important. Where you have
advanced electronics or line conditioning it means
you need a different level of electrical engineer in
the country – how do suppliers deliver this? You
should defend the maintenance of your product or it
will fail and everyone loses.
TowerXchange: What if suppliers want to deal
with Helios Towers Africa directly?
Towers Africa: Sometimes people want to engage
more directly and there should be some benefit.
When you get into the specialist end of procurement
we need to evaluate if it’s working as well as it could.
However, the VPC way is what we’re doing at the
moment. For products that are not managed via the
VPC route (such as hybrid solutions and RMS) then
HTA will deal directly and if there’s a good reason
not to go through VPC we do so. If a local supplier
can deliver it quicker we’ll buy it if timing is an
issue. It’s the main way we buy, but not the only way
we buy. Because people are more familiar with it
they’re more comfortable with it
XX
How Helios Towers Africa acquires new portfolios
In terms of qualifying acquisition opportunities in the market, opinions
reason for the MNO to sell. Roundtable participants discussed how the scale
are taken from multiple sources, suggested Alex Leigh from Helios Towers
of the towerco also affects their decision-making processes, with centralised
Africa. Many of those are direct discussions with the market as bankers
functions reducing SG&A (Sales and General Administration) costs in a
are consulted less and less frequently.
market by over 50% in some cases.
Bilateral deals were judged the best way to structure an acquisition due
The role of operational gearing was something which the round table
to the bespoke nature of the product and difficulties in getting a balance
discussed, with DRC given as an example of a market in which high fuel costs
between low lease rates and high consideration. Airtel started with one
make cost efficiencies possible when measured against a market like Senegal,
structure for their deals which evolved over time and developed into a
where the opportunities are less given low reliance on non-grid power.
bilateral discussion where buyers were allocated markets.
The round table also discussed how a deal could take as little as four weeks
Two of the biggest considerations for a towerco are location and opex.
to sign in theory, but agreed that often the barriers to signing sooner involve
With low grid availability and hybrid hours in many networks, evaluating
reaching agreements with operators in terms of what they want out of the
energy consumption is critical. Due diligence for location and energy
contract. However the single biggest barrier identified in the discussion is
consumption is therefore one of the first important steps in the acquisition
permitting, ownership and right to occupy issues associated with the land.
process, followed by structural analysis. In terms of structural due
Alex Leigh mentioned that Helios Towers Africa often overcome this barrier
diligence, Helios Towers Africa survey 10% of the towers to evaluate the
with this by closing the deal once they reach a critical proportion of towers,
structure of the towers and efficiency of power systems.
then having subsequent phases of closing, which can make waiting very
frustrating. Permitting requirements can also change or slow the process.
Alex Leigh of HTA estimates that 90% of the work is done in-house,
This is one of the reasons why the details of many recent deals haven’t been
through the commercial team with access to internal functional heads,
announced.
meaning that they are able to move very quickly on preliminary numbers,
to the point of being able to make an offer within weeks.
Finally, participants discussed the concept of an MNO/towerco partnership
as a ‘marriage’ – how getting an easy win in the short term may subsequently
When selecting markets in which to make acquisitions, there are two
make the relationship very difficult. Towercos and operators spend a lot of
main approaches – either they have long-term strategic importance for
time discussing the what if’s to ensure that there are no divorces in the life of
the towerco or there has been an event in a market which means there’s a
the contract
Meetup Africa Roundtable
Review: Nigeria Country Focus
A group of 14 experts met and shared their views on the past, present and future of the
Nigerian tower market during the TowerXchange Meetup Africa in Johannesburg
Nigeria is the most populous country in Africa
with an economy valued at $500bn. BMI
project that the economy will grow by 70%
over the next few years driven mainly by the
oil industry, but also with strong growth in
FMCG and the Food and Beverage markets.
The Nigerian mobile market is substantial
with 110 million subscribers and an ARPU of
around US$6.
The discussion began with a review of the inhibitors
and catalysts in this growing market. Demand
was raised as a key factor – particularly as the
roundtable took place before the recent Nigerian
tower deals, during a period of uncertainty as we
waited for the winning bidders to be confirmed.
However the group agreed that the scale of the
market means that demand will remain high even
through periods of fluctuation.
Keywords: Helios Towers Nigeria, Nigeria,
The towercos present at the discussion suggested
that this period of uncertainty is an optimal time to
start engaging with new solutions which can help
them to deliver on their SLAs or make efficiency
savings once the acquisitions are complete. They
also feel it’s a good time for Nigeria to invest in
infrastructure both in terms of the national grid
and fibre roll-out. The Nigerian government is
currently encouraging heavy investment in fibre
infrastructure projects as the population grows
more and more data-hungry.
O&M, Market Overview, LTE, Capex, Opex
Reduction, Batteries, Energy Storage, Urban
vs Rural, Infrastructure Sharing, Fuel
Security, Market Forecasts, Build-to-Suit,
ARPU, Country Risk, SLA, Tax, Unreliable
Grid, ESCOs, Hybrid Power, Renewables,
Solar, Small Cells, Fencing, BMI Analysis
<
<
<
<
The scale of growth potential in the Nigerian Market
Plans and expectations for tower and infrastructure growth in Nigeria
How Nigeria’s political and economic situation affects companies doing business there
Present and future power solutions for Nigerian towers
The experts participating in the Nigeria roundtable
discussion at the TowerXchange Meetup Africa 2015
believe that there is still a large amount of pent-up
demand for telecoms services in Nigeria and that
the market has not yet hit a peak. They predict
that as operators jostle for critical market share, a
price war will emerge and as prices drop, capacity
requirements will rise sharply.
Nigerian fibre: an opportunity for towercos?
Delegates felt that towerco investment in fibre was
a natural next step and that soon the MNOs will sell
XX
“
“
One natural result of improved backhaul and more consistent
service will be a growth in ARPU as users consolidate their
phone usage and limit the number of SIMS they use
off the fibre infrastructure if there’s a viable market
for them. However margins for fibre are smaller
given the sheer landmass in Nigeria, meaning
there’s a long way to build out. The discussion
covered the fact that there has been a lack of
investment by the operators in network extension
and densification, therefore QoS is notoriously poor,
a situation the NCC is pushing to be rectified in the
near term.
The group talked about the importance of a good
transmission infrastructure to support the growing
tower network and whether the emphasis for
rectifying problems in this area would shift to the
towercos as network coverage expands, concluding
that in the immediate future the market is unlikely
to see towercos take responsibility for this without a
strategic shift into backhaul.
One natural result of improved backhaul and more
consistent service will be a growth in ARPU as users
consolidate their phone usage and limit the number
of SIMS they use on a regular basis. This will be
a clear win for the MNOs in the region as many
ARPUs in Nigeria sit at or under the loss-making
US$2 mark as users split their call time across
multiple networks to ensure the best coverage. The
group agreed that once the mobile infrastructure is
improved this consolidation will help the industry
as a whole.
Nigerian experts advised that as long as you
work with advisors, lawyers, agents and partners
who know the market and can ensure your
documentation is in order then the local banks
and authorities are keen to support business in the
country.
Security
In terms of security, the conversation centred on the
unsettled Northeast of Nigeria. However, serious
security concerns for towers in the region were
dismissed by local experts who underlined the fact
that rebels rely more heavily on mobile networks
than the authorities and therefore avoid causing
damage to key infrastructure such as towers and
petrol stations. Indeed MNOs find that mobile spend
increases in areas experiencing unrest as the local
population keeps abreast of news and needs a
safe way to share information. It was also pointed
out that the government views towers as a critical
part of national infrastructure and will make it a
criminal offense to attack telecoms infrastructure at
the next National Assembly.
Network extensions and BTS
In terms of reaching the rest of the country, several
members of the group referred to government
support for extending networks further, citing a
deal whereby the Nigerian government will provide
up to 25% of capex and opex for the first three
years once you are ready to deploy broadband in
a rural area. The discussion also touched on the
importance of employing solar power to cut rural
opex, with small solar power systems costing as
little as US$8,000, meaning in many low income
areas there is still a strong business case for
installation.
Hybrid power was also proposed as a viable option
for remote towers, as hybrid power can cut diesel
consumption by up to 80%. Now the towercos are
taking control of the towers their deployment of
improvement capex and efficiency programme
budgets will allow them to extract value through
these kind of investments.
In terms of build to suit opportunities, the
participants agreed that MNOs and towercos
Power in Nigeria
Power is of course a big issue in Nigeria. For a
towerco in Nigeria power represents 60% of opex
and the towerco participants stated that they had
often found that alternative energy solutions tended
to under-deliver on a long term basis. An example
was given of one system which cut diesel by 25%
and was deployed across the network but within
three years all the engines needed to be replaced
as they had been placed under huge strain. The
group agreed that more thorough on-site testing
was needed in collaboration with suppliers,
recommending trials of over six months in high
traffic sites with time taken to identify and minimse
operational issues before deployment.
Often the issue isn’t with the equipment but with
ongoing maintenance. One expert pointed out that
often towercos use subcontractors to run their
O&M and manage passive infrastructure on a tight
margin managed service fee. For these contractors
their revenue comes from the sale of diesel,
meaning that after a while there’s no incentive for
a hybrid solution to work and conflicts of interest
start to occur. For innovative players looking at
comprehensive hybrid solutions, all stakeholders
must have a vested interest in the site benefitting
from the investment, including O&M partners.
Ideally towercos need to find a technology partner
and a maintenance partner who will work hand in
hand and share incentives and penalties based on
the success of the investment, not based on their
own agendas. As a result, the complete outsourcing
of power will become more and more popular to
avoid these issues in the next few years.
Of course the group agreed that the ideal solution is
simply to be able to plug a tower into a reliable grid.
In this respect Nigeria is making good progress,
with private companies now investing in power
generation and distribution and a national grid
being created. However our experts predict that
demand will increase more quickly than capacity
for several years and few believed a reliable
Nigerian grid would be in place for another 10-15
years. As phone networks have become a critical
part of Nigerian life, there will always be a need for
a secondary power source.
Following the TowerXchange forecast that Nigeria
will need an additional 40,000 towers to achieve
full coverage, the group discussed the reality and
timescale of this prediction. Helios Towers Nigeria
stated that with 24,000 towers and 100 million
subscribers in the market currently, they average
4,500 subscribers per tower. This is a high ratio
when compared to India (around 2,000 subscribers
per tower) and the USA (about 1,100 per tower).
Low minutes of usage in Nigeria compared to India
(20 minutes) and the USA (40 minutes) mean the
high subscriber rate is possible but our experts
felt there’s a large amount of pent-up demand in
Nigeria and that call rates would be much higher
if costs were lower and quality of service higher.
In the past when free calls have been offered to
“
For a towerco in Nigeria,
power takes up 60% of opex
and towerco participants
stated that often alternative
solutions under-deliver on a
long term basis
“
need to work together to identify areas with no
coverage and to build commercially viable network
extensions.
subscribers at evenings or weekends, the network
has simply crashed. As MNOs compete for market
share and prices drop (and with an eventual LTE
roll out) the need for an additional 30,000-40,000
towers will become more and more critical.
At the current build rate of 2-3,000 towers per year
hitting the required number will take too long,
and HTN estimate that the network will need to
be at a total of 60,000 towers within the next five
years to meet market demand. Towercos will need
to drive growth and change in the market and as
Nigeria’s infrastructure will struggle to support
the construction of 10,000 towers a year. Towercos
are currently assessing the potential for network
gaps to be filled by small cells and other in-building
solutions
XX
Burkina Faso and Niger two new tower markets created
by the Airtel tower sale
As new frontier markets open up, TowerXchange investigates and challenges
and opportunities posed by doing business in these growing markets
Since Airtel announced the divestment of towers in 16
markets, Niger and Burkina Faso have opened up as new
markets for towercos and their partners. Given towers
in both markets are believed to be a part of recent deals,
it’s becoming critical for towercos and suppliers alike to
determine how best to tap into these growing frontier
markets.
TowerXchange Meetup Africa 2014 Roundtable
Keywords: Editorial, West Africa, Burkina Faso, Niger,
Sierra Leone, Eaton Towers, O&M, Construction,
Acquisition, Market Overview, Capex, Opex Reduction,
Batteries, Urban vs Rural, Co-locations, Fuel Security,
Risk, Health & Safety, Network, Rollout, Energy
Efficiency, ARPU, Off-Grid, Hybrid Power, Renewables,
Solar, Procurement, Logistics, Skilled Workforces, RMS
< How the economies of Burkina Faso and Niger will affect tower upgrades, profitability and
construction
< Where Towercos plan to make savings in these frontier markets
< How power challenges in West Africa can be met and overcome
< Setting appropriate benchmarks for new markets
As an areas addressing the challenges of social and
political unrest and the implications of the ebola
outbreak, operating in these West African states can
prove a challenge. Competition in the area is quite
high, with most markets served by three operators,
despite a market which does not yet have the scale
to support so many incumbents . With up to 70%
of populations based rurally, relatively low market
penetration and low ARPU, operations in this region
need to be as efficient as possible to unlock value for
towercos and their partners.
As part of their new structure, Airtel has separated
their regions into ‘leader’ and ‘challenger’ markets
and is taking different perspectives on each, which
helps their partners and suppliers to understand
how they operate in each market and making
market perspectives much clearer for their partners.
One of the main problems when dealing with these
‘frontier markets’ is that the economies and telecoms
markets are often very unstable, making it hard to
keep a consistent supervision quality.
Burkina Faso and Niger, often grouped together due
to a shared language, border, currency and central
bank, can offer substantial gains through shared
resources and control centres. Reports from the
region suggest that despite some administrative
roadblocks, generally western companies find the
two countries safe and straightforward once they
are familiar with local resources and culture. The
fact that the currency (CFA Franc) used in both
countries is pegged to the Euro is a huge benefit to
economic stability and ease of transactions within
these countries.
Human resources in the region are undoubtedly
a challenge but reports from Niger and Burkina
Faso suggest that education levels are higher here
than some other West African countries, which
helps in the development of local teams. Although
these countries are landlocked, it has been possible
to send equipment by truck through Ghana and
make the most of their operations in this market,
however relying on rail travel can result in long
delays.
This article is based on a round table which
originally discussed Sierra Leone as well as
Burkina Faso and Niger. However, we subsequently
learned that Airtel will retain their towers in Sierra
Leone as they are disinclined to share them with
aggressive competitor Africell. During the round
table, Sierra Leone was cited as the most difficult in
which to operate, with many companies currently
scaling back operations. Education levels in the
country are poor and recruiting and training staff
in Sierra Leone is considered a very hard task.
Of course most importantly the current Ebola
epidemic sweeping the country has brought many
activities to a standstill and has driven a large
number of western companies to scale back their
activities significantly. The feeling for the market is
very much ‘wait and see’.
Deals in these markets are signed but not closed
which means that suppliers will find themselves
facing a period of transition where Airtel are
reluctant to spend and towercos are not yet in
possession of the towers. Significant expenditure
in these markets won’t take place until the deals
A roundtable session at the sold out Africa 2014 Meetup
are closed in around six months. Suppliers in the
region largely state that they plant to work on
developing the network and reinforcing capabilities
until the market opens up, hopefully in early 2015.
A lack of knowledge in these markets, particularly
on the technical side means there are a lot of
mistakes made in design, architecture and
maintenance practices; towercos getting involved
in these countries will be a chance to bring in more
qualified teams and to bring up the local skillsets at
the same time.
In terms of costs and performance, India is being
cited as a good benchmark for batteries in West
Africa. Once the deals are closed towercos will need
to make batteries a priority in order to meet their
SLAs and bring the towers up to standard.
Of course, as towercos look to invest in more
efficient power solutions there should be
considerable opex savings to be made. New fast
recharge batteries can perform up to 4 cycles a
day and provide 4 hours battery power for every
one hour of diesel, which in theory should reduce
diesel consumption by up to 80%. RMS and more
intelligent technologies can increase maintenance
intervals as well as using fuel more efficiently.
Solar solutions can cut opex dramatically. However
despite these exciting new technologies and
solutions coming to market, energy opex continues
to rise.
XX
Coup in Burkina Faso
In the weeks since this article was drafted, Burkina Faso’s former President Compaore was ousted,
after seeking to change the constitution to allow the president another five years in power. After
the mass uprising, the military temporarily took charge, a move condemned by the international
community, and which would have compromised the investibility of the country and its
infrastructure. However, in November 2014 a civilian-led transitional government was established,
public order has been restored and elections are due later in 2015. Hopefully the worst is behind
Burkina Faso in terms of country risk.
What is the source of the energy opex problem
in West Africa?
Estimates place around 25% of the blame on the
‘wrong technology’ i.e. technology which doesn’t
deliver the efficiencies promised due to the location
or circumstances in which it’s used. Another 30%
of the problem falls on poor installation and the
remainder of the issue can be attributed to the
‘Diesel Mafia’ – theft and vandalism in the supply
chain and on site.
towercos will compete for market share in any one
market, although the geographic scale of Niger
makes it slightly more predisposed to competition.
In rural areas however, there is an opportunity
for middle market entrants or for small local
companies to take some market share and deliver
in areas which may be deemed not profitable
enough to require multi-tenant towers.
Although in some countries, such as Nigeria, steps
have been taken to increase power generation
capacity and improve the grid, reliance on diesel
opens up operations in most markets to the diesel
mafia. Petty theft is an issue but the real losses are
caused by highly organised crime and systematic
theft from both the supply chain and tower sites.
In these markets towercos are reluctant to be
labeled monopolies as they feel they constantly
compete to remain attractive to operators who
could rebuild parts of their own network if they
were unhappy with rates or service. In frontier
regions there’s also a higher risk of an indigenous
towerco entering the market and leveraging local
skills and knowledge to grab market share – many
experts believe there is more activity around this
than generally recognised.
As the new West African tower markets are small
markets with relatively low mobile revenues, it is
considered unlikely that more than one of the large
Given the fact that under 40% of the population
of these new West African markets live in urban
areas, there are fewer quick wins to be had and
increasing regulatory pressure on developing
the network into rural areas. However, towerco
appetite for moving into rural markets is greatly
enhanced by recent technological developments
in the market. The price of construction doesn’t
differ significantly from other landlocked
countries on the continent and innovative
developments like micro BTS, satellite technology,
smaller solar sets and more effective battery banks
mean different technologies can be combined
to create a low capex, low opex solution which
lowers the glass ceiling on the commercial
viability of rural sites..
Another consideration for towercos and suppliers
moving into this region is health and safety.
Irrespective of local practice it’s critical from
an ethical, environmental and financial point of
view to achieve high standards. In fact in some
countries it is a prerequisite in order to gain
access to IFC debt facilities. The biggest H&S risk
identified by regional experts at the recent Africa
Meetup was security guards interfering with
power systems, to which the most straightforward
solution is simply to harden the sites and do away
with the need for security guards on site at all.
Our sources tell us that in terms of network
growth in these markets there is a plan to build
new towers but the view is fairly conservative for
the short term. The acquiring towerco will commit
to take over any new build projects already
in Airtel’s pipeline and to honour contracts
with suppliers currently in place but have no
immediate plans for expansion
Raising equity and debt
finance for today’s maturing African
tower industry
Expert investor panel at TowerXchange Meetup Africa reflects on deal structures,
market structures and the availability of debt
An auspicious panel of investors in towers convened at the
TowerXchange Meetup Africa in October 2014. Moderated by expert
advisor Enda Hardiman of Hardiman Telecommunications, the panel
included Ed Stumpf from AIIM, Ayman Al Adl from Standard Chartered
Bank, Aniko Szigetvari from the IFC, and Nina Triantis from Standard
Bank. The debate spanned the maturation of the asset class, the
growing preference for SLB deals, and the structure of African tower
markets both in terms of the number of active towercos and potential
consolidation of MNOs.
Moderator Enda Hardiman
Keywords: Investors, 3G, 4G , LTE, EBITDA, Deal Structure, Tenancy
Ratios, Risk, Build-to-Suit, Bankability, Densification, Anchor Tenant,
Sale & Leaseback, Manage With License To Lease, Private Equity, Debt
Finance, Infrastructure Funds, Infrastructure Sharing, Africa, Nigeria,
MTN, Airtel, Etisalat, Orange, Vodacom, Hardiman Telecommunications,
IFC, AIIM, Standard Bank, Standard Chartered Bank
< The evolution of capital raising: from early pioneers to today’s different ballgame
< The growing preference for sale and leaseback transactions
< The tower business as a natural monopoly; where and when a second player makes sense
< The increasing availability and sophistication of debt
< Why consolidation of MNOs will have little adverse effect on the African tower industry
Maturation of the asset class
Enda Hardiman, Managing Partner of of
Hardiman Telecommunications, kicked off the
panel with a comparison of the maturation of
investment in African telecoms, from the days
when pioneers like Mo Ibrahim of Celtel were
first movers to the established entities we see
today, with the similar maturity achieved in
the tower sector; pioneering TMT funds and
development banks moved first into African
towers, then as the asset class proved itself,
more hard-nosed private equity capital is now
moving in. The IFC concurred – as an investor
since day one of the private equity backed
African towercos, they’ve seen an evolution
from the early days when it was relatively
difficult to raise funding, to the different
ballgame we see today.
Ed Stumpf from AIIM noted that each of the
African towercos is a different player, focused
on different deal structures and on different
markets. AIIM invested in IHS because they like
the markets that they’re in and the strength of
position they have in those markets.
Standard Bank’s Nina Triantis noted that as
the African towercos have scaled up, driven
by the 2014 Airtel African tower sale, the
differences between towercos have become
less pronounced. Initially some would pursue
certain models, for example some would
entertain managed services or manage with
license to lease deals, while others wouldn’t.
XX
Tower transactions and the structure of markets are
ultimately driven by MNO intentions. So while MTN
has disposed of their towers in most large markets
except South Africa, and retains very few additional
markets of interest to towercos, a minority of
operators still remain dead set against divesting
towers.
The panel felt that the tower market was somewhat
self-limiting; a period of deal hiatus is predicted
after the recent Nigeria and Airtel transactions,
with the exception of the pending Egypt and Sonatel
deals. The towercos might refocus on integration for
a couple of quarters after which we could see a few
more deals if new operators were willing.
Sale and leaseback preferred in long term
Ayman Al Adl of Standard Chartered Bank noted
that the differences between Africa’s ‘Big Four’
towercos were driven by the different interests
of their MNO counterparts. The differing goals of
MNOs include Orange, who were keen to retain
asset ownership in key markets, while Airtel
preferred full divestiture, and MTN often preferred
to retain a stake.
In the long term, it seems that the sale and
leaseback deal structure best meets objectives
of towercos – maximising their expose to sector,
securing full ownership, opening the door to
substantial build to suit programmes, and providing
the most incentives to maximise tenancies and
generate efficiencies. In comparison, managed
services agreements give a feel for the management
of towers, but do not release the same upside for
co-location, hence the addition of marketing rights
(‘manage with license to lease’). TowerXchange note
that over the course of 2014, African towercos have
acquired assets such that they own more than 90%
of the towers they market, up from 69% at the end
of 2013.
Is there room for multiple towercos in each
market? Will there be more deals in 2015?
The economics of the independent towerco business
makes it a natural monopoly in most markets.
The benefits of scale are regional in nature, and
towercos need to maximise colocations to maximise
revenue and value creation. Only the bigger
markets, such as Nigeria, can support two towercos
of scale, perhaps supplemented by a few smaller
towercos doing build to suit programmes and
flipping assets to the bigger players.
More sophisticated debt available
As more debt providers become familiar with the
African tower sector, there is a growing realisation
that the asset class is not as risky as one might
imagine. It took a while to build comfort, but
towercos secure ten year contracts with concrete,
investment-grade counterparties. As people better
understand the market dynamics, the big question
becomes one of tenancy ratios. Investors are looking
for 2-2.5, while a tenancy ratio below 1.5 often
means these companies get stressed.
With many tenancy ratios already approaching
two, the African tower industry is seen as relatively
mature, so the debt market is becoming more
comfortable at relatively high leverage levels. It’s
becoming a re-finance play from debt perspective
– most towercos have refinanced once, twice, even
three times. Until recently you couldn’t see how
an African a tower deal could be done as pure
acquisition finance – you needed to see co-locations
first. But 45-55% of African tower transactions are
funded through debt now.
withdrawing from several markets; and Vodacom’s
appetite for tower transactions limited, was there
a risk of systemic consolidation and withdrawal
of investment-grade counterparties in prospective
future tower transactions?
There are always stratifications of debt investors;
senior lenders lend purely on the basis of
contracted revenue from anchor tenants – there is
no risk taken on colocations and tenancy ratios. At
a mezzanine level, funders are willing to take a risk
on a certain subset of tenancy ratios.
While MNO consolidation has always been a major
concern for investors in African towers, for ten
years they’ve been waiting for it to happen and,
isolated instances such as Uganda aside, they’re
not convinced there’s going to be widespread
consolidation at levels that significantly affect
towercos. While typically only the top two or three
MNOs in any country are profitable, such MNOs are
usually the only counterparties towercos will buy
towers from.
The bond market becomes an option a bit later
in the transaction lifecycle, after a towerco has
acquired towers and has a track record. Three
years of statements are typically needed – so it’s an
option maybe a year post-transaction. The Helios
Towers Nigeria bond was two and a half times
oversubscribed, and to a wide investor base.
Access to local capital remains a challenge at times
in Africa. Where local rates and liquidity are
appropriate, local lenders can play a role, but not at
the scale one can source from international banks
and DFIs.
The impact of consolidation and the
restructuring of Africa’s mobile operator
markets
Enda Hardiman posed another provocative
question; with MTN making ~80% of its EBITDA in
Nigeria, South Africa and Iraq; Etisalat only making
money in Togo and Nigeria; Orange seemingly
While towercos only partner with credit worthy
anchor tenants, they also tend to focus on Africa’s
larger, more stable countries. Certainly there is a
scale below which the ‘Big Four’ African towercos
are not interested – they don’t want set up a team to
manage 200 towers.
Market risk remains one of the biggest risks in
making investments in this asset class. But while
investors evaluate the acceptability of downside
risk, there is also significant potential upside
particularly in a market like Nigeria.
The glass ceiling for tower cash flow isn’t solely a
function of the number of traditional MNOs able
to pay their bills in a market. Tenancy ratios are
important of course, but adding new services as
markets transition from 2G to 3G and 4G generates
important tower cash flow. In many markets,
established MNOs don’t have access to spectrum for
4G, enabling smaller new market entrants. While
the long term bankability of urban TD-LTE players
may have to be evaluated on a case by case basis
– many are ultimately built to sell to incumbents –
they generate demand for tenancies concentrated
in the urban regions where towercos are typically
strongest, and on the lower reaches of towers less
sought-after by traditional MNOs. The transition
to 3G and 4G also produces a vibrant build to suit
market, albeit more typically from incumbent
operators as new TD-LTE players often lack the
capital to invest in substantial new builds.
From a density perspective Africa has a long way
to go – Africa averages around 4,000 subscribers
to a point of service compared to 1,500 in India.
The only way to improve capacity is to increase the
amount of spectrum available; Africa is not close to
proper data coverage and 3G.
Africa needs more towers, more points of service,
and more co-locations. The real explosion in
demand for towercos’ services will not come from
today’s TD-LTE pioneers but from tomorrow’s
FD-LTE players and when the big operators are
able to secure the spectrum to rollout these new
services. While the African tower market has
matured considerably in this decade, it’s not yet an
infrastructure play. However, we’ve seen AIIM put
money into IHS and Providence Equity invest in
Helios Towers Africa; the doors have been opened
to these funds and the ticket size for investments in
African towers is getting bigger
XX
2015: the year of the middle
market towerco in SSA
Africa needs towercos able to economically deliver special structures, rooftops and
single tenant towers
Africa needs more towercos. But only at specific levels of
the tower industry. While Africa’s “Big Four” towercos are
snapping up the majority of towers in the most investible
markets through sale and leaseback transactions, often
bundled with build to suit programmes focusing on multitenant towers, gaps are opening up in the market for “middle
market” towercos able to focus on smaller transactions in
higher risk markets, or able to deliver low cost, single tenant
towers. Meanwhile, the Nigerian and South African markets
remain big enough to sustain entrepreneurial towercos
targeting niche opportunities in BTS, rooftops, billboards, IBS
and other “special structures.”
Keywords: Editorial, Towercos, Build-to-Suit, Business Model,
Exit Strategy, New Market Entrant, Opex Sharing, Country
Risk, Off-Grid, Renewables, Next Billion, Rooftop, IBS, DAS,
Small Cells, Community Power, Africa, Nigeria, South Africa,
Connect Africa, Africa Mobile Networks
< Definition of a ‘middle market towerco’
As 2014 concludes, we can declare it the “year of
the private equity backed towerco” in SSA. IHS,
Helios Towers Africa and Eaton Towers have driven
to scale, fuelled by an unprecedented wave of sale
and leaseback transactions that will soon draw to a
close. For Africa’s ‘Big Four’, 2015 will be a year of
integration and a drive toward profitability.
Whilst the “Big Four” towercos are immersed
in the improvement of large towers and large
tower portfolios in Africa’s larger countries,
TowerXchange has identified four specific gaps in
the market for “middle market” towercos.
1. Acquisitions in smaller / higher risk markets with
less established counterparts
2. Building low cost towers in locations where a
second tenant might not be added for more than
two years
3. Build-to-suit-centric towercos in prime towerco
markets such as Nigeria and South Africa
4. A finite opportunity for middle market towercos
to target rooftops, billboards and other ‘special
structures’
Let’s look at each of those opportunities in turn,
but first let’s define what we mean by a “middle
market” towerco.
What do we mean by a middle market towerco?
< Why there are finite opportunities left for SLB-centric towercos in SSA
< How the build-to-suit-centric towerco market works in Brazil in parallel with three SLB-centric
towerco giants
< Four specific opportunities that remain for middle market towercos in SSA
The top end of the towerco market consists of
publicly listed, established towercos with many
tens of thousands of towers. Companies in this
category, such as American Tower, Crown Castle,
Next is a tier of well-funded private equity-backed
towercos with many thousands of towers, each
progressing on a path to IPO or trade sale to one of
the publicly listed towercos. Three of Afrcia’s “Big
Four” are in this category: Helios Towers Africa,
Eaton Towers and IHS.
Then at the bottom of the market you’ve got “Mom
and Pop” towercos – highly localised portfolios with
single or low double digit tower counts generating
decent returns but with finite aspirations for
growth.
Between the “Mom and Pop” towercos and the
private equity-backed towercos are the “middle
market” towercos. Typically driven by an
entrepreneurial management team with direct
experience of scaling towercos or planning
networks, “middle market” towercos are typically
driven by organic growth, although they sometimes
indulge in smaller acquisitions of double digit
tower counts. There are a variety of flavors of
“middle market” towerco; some are driven by:
1. Build to suit programmes
2. Managed services contracts with license to lease
3. Opportunistic acquisition or access to a portfolio
of sharable structures such as billboards, energy or
rail structures
4. Rural network development, often under opex
sharing business models
While some middle market towercos aspire to
achieve the scale and credibility necessary to
raise capital and make the jump into larger sale
and leaseback transactions, many middle market
towercos exit through a trade sale to one of their
larger publicly-listed or maturing private equitybacked towerco cousins.
There are many middle market towerco success
stories in more mature tower markets such as the
US, Brazil and India, but the category is relatively
under-developed in SSA. TowerXchange has
identified four specific opportunities for middle
market towercos to take root in SSA.
First, where we think there is NOT an
opportunity for middle market towercos: large
scale sale and leaseback deals
Before I explain where I think there ARE gaps in
the SSA tower market, let me reiterate where there
AREN’T gaps.
If you want to get into the business of buying
portfolios of 500+ towers from SSA’s tier one MNOs,
unless you are part of the team at American Tower,
Eaton Towers, Helios Towers Africa or IHS, forget it.
The “Big Four” have the SSA tower market sewn up.
MTN, Airtel, Vodacom, Vodafone, Etisalat, Millicom
and (to a slightly lesser extent) Orange aren’t going
to entrust their towers to anyone who doesn’t
already own and operate at least 5,000 towers in
Africa.
“
While some middle market towercos
aspire to achieve the scale and
credibility necessary to raise capital
and make the jump into larger
sale and leaseback transactions,
many middle market towercos exit
through a trade sale to one of their
larger publicly-listed or maturing
private equity-backed towerco
cousins
“
SBA Communications and Bharti Infratel, benefit
from the low cost of acquisition capital resulting
from the tower cash flow generated by their mature
portfolios.
So the entry price to get into the top end of the SSA
towerco market is now well over a billion dollars,
which is what it would cost to acquire one of the
three private equity backed members of the “Big
Four”.
There are always exceptions to the rule of course,
but you’re going to need a lot of credentials and
capital to enter the top end of the SSA tower market
this late. You’re going to need the credentials from
operating many thousands of towers somewhere
else, and the low cost of capital that is generated
by a mature portfolio of towers to compete for
the few remaining obvious sale and leaseback
opportunities in SSA. So perhaps the door
hasn’t closed completely on Crown Castle, SBA
Communications, Bharti Infratel, TDF, edotco and
XX
other substantial towercos, but we don’t see those
towercos queuing up to get into Africa either – if
they wanted to be in Africa, they’d probably be in
Africa.
For everyone else, the following are the
opportunities I feel remain on the table in SSA
towers.
Acquisitions in smaller / higher risk markets
with less established counterparts
The “Big Four” towercos are unlikely to acquire
assets in many new markets – they will concentrate
on integrating their acquisitions and perhaps
adding one or two complimentary portfolios
in their existing markets. There will always be
exceptions of course – the issuance of a third
operator license would make Angola very attractive
for example, while North Africa has long term
potential, but generally the “Big Four” are in most
of the SSA markets they want to be.
The catch of course is that there are good reasons
why the “Big Four” aren’t in Somalia, Ethiopia,
Sudan, South Sudan, Central African Republic,
Burundi, Mozambique, Zimbabwe, Mauritania
and Namibia. Whether the market lacks scale, has
too few credit worthy prospective tenants, has
operators reluctant to engage in infrastructure
sharing, or scores high on country and market risk
metrics, virgin tower territory has been left well
alone by the Big Four for good reason. There may
be pockets of value to be found in the cooler SSA
countries on the TowerXchange tower transaction
heat map, but investment opportunities in these
markets should be viewed through a lens of
caution.
Building low cost towers in locations where only
a single tenant might be attracted
Towercos at the top end of the market are reluctant
to build towers that lack the potential to add a
second tenant within 12-18 months – few if any
have the obligation to build sites in less attractive,
typically less populace locations. Given that
many MNOs are divesting all their towers to the
large towercos, they are left with finite in-house
capability to manage the build and maintenance of
new towers. So if the coverage obligations of MNOs’
licenses requires network extensions in rural areas
where total Minutes of Usage (MoU) barely makes
an economic case for one MNO to provide coverage,
let alone two, then how do they get these single
tenant towers built?
What the SSA market needs is a new breed
of towerco with a business model that makes
economic sense with a single tenant, and with an
ability to share the risk of rural network extension,
perhaps under a revenue sharing business model
and maybe in conjunction with a community power
offering. Such a towerco would need to specialise in
low capex, low opex, deep rural sites. This sounds
like a good fit for renewable energy. TowerXchange
has encountered two or three funded entities that
have broken ground on pilot sites along these lines;
we catch up with Dion Jerling of Connect Africa
later in this edition, while Michael Darcy of Africa
Mobile Networks is making significant progress in
Benin.
Build-to-suit-centric towercos in prime markets
such as Nigeria and South Africa
Before I write about Nigeria and South Africa, I
want to tell you how this category works in Brazil.
While Brazil is very different from Africa (the grid
is more extensive and more reliable, for example),
there is a similar need for more sites; Brazil has
70,000 towers and needs at least twice that many,
Africa has 165,000 towers and needs at least twice
that many. Brazil is host to three towerco giants;
American Tower, SBA Communications and Grupo
Torresur have all been aggressively acquiring
towers under sale and leaseback (SLB) transactions.
Africa is host to four towerco giants all aggressively
acquiring towers under SLB transactions. But
neither market is saturated.
In Brazil, half a dozen decent sized build-to-suitcentric towercos are adding macro towers, rooftops
and special structures, and the market need is so
great that they are not significantly duplicating the
capacity of the big SLB-centric towercos – indeed
most commentators feel Brazil needs even more
tower building capacity. The end-game for Brazil’s
build-to-suit-centric towercos is a trade sale to one
of the three towerco giants; as recently completed
by BR Towers to American Tower. For a C-level view
of this dynamic, check out the interview with Dr
Chahram Zolfaghari, CEO of Brazil Tower Company,
also in this edition, who explains why he feels
towers built to share are worth a greater premium
“
So there’s almost a feeder system
of smaller, build-to-suit-centric
towercos in large markets such as
Brazil, creating additional build
capacity, and destined to be sold to
the larger towercos. There are also
a handful of smaller build-to-suitcentric towercos in Nigeria and
South Africa
“
than those acquired under SLBs from MNOs.
So there’s almost a feeder system of smaller, buildto-suit-centric towercos in large markets such
as Brazil, creating additional build capacity, and
destined to be sold to the larger towercos. There
are also a handful of smaller build-to-suit-centric
towercos in Nigeria and South Africa, such as
those owned by SWAP Telecoms and Technologies,
Hotspot Network, Communication Towers Nigeria
and Square1 Infrastructure in Nigeria, which is also
active in South Africa, where they are joined by
Infratel and Pro High Site Communication. While
one might imagine that the recent spate of SLB
transactions in Nigeria, in which MTN and Etisalat’s
towers were sold to IHS and Airtel’s to American
Tower, might be bad news for local middle-market
towercos, quite the opposite is the case. Why would
IHS or American Tower build a new tower adjacent
to where one already exists? If the structure is
sound and the contracts are sound, why not just
acquire the tower from the local incumbent and
save months of leasing and permitting wrangles? If
a company owns a portfolio of attractively located,
well-built towers with minimal duplication of sites,
why not look at buying the lot?
structure with capacity for multiple tenants can be
added, then there may be an opportunity even in
markets where large towercos are active. Similarly,
forming partnerships with substantial billboard
networks, railway and electricity infrastructure
companies may enable the creation of decent sized
portfolios of shareable structures.
The sale of ~80% of Nigeria’s towers to independent
towercos may have set the clock ticking on a trade
sale for Nigeria’s independent towercos, but as
Brazil has proved, such sales can attract good
premiums. Meanwhile, the independent towerco
business model has yet to fully penetrate South
Africa, where just 14% of the country’s ~17,000
towers are owned by towercos (1,912 by American
Tower, ~200 by Eaton Towers plus a handful by the
aforementioned middle market towercos). Middle
market towercos grabbing attractive locations
in Sandton, Cape Town, Pretoria et cetera could
find themselves ‘sitting pretty’ if and when South
Africa’s independent towerco market drives to scale
– which could be triggered if Telkom monetises an
estimated 6,000 sharable structures in 2015.
Finally, by ‘special structures’ I’m referring to
lamp-posts, micro-sites, small cells, DAS and other
flavors of in-building and outdoor solutions. This
particular window of opportunity is closing fast
as Africa’s ‘Big Four’ towercos accelerate their
own IBS strategies, but there remain opportunities
for middle market towercos to secure prime sites
where coverage is best suited to special structures
rather than macro towers.
A finite opportunity for middle market towercos
to target rooftops, billboards and other ‘special
structures’
Challenges around the legality and capacity of
rooftops doesn’t make them all worthy of large
towerco’s attention, but if a middle market player
has the appetite to clarify ownership and access to
rooftop sites, to ensure structures are safe, and to
target sites attractive to multiple tenants to which a
Conclusions: the secret formula for success
Not all middle market towercos have tapped the
right vein. Not all middle market towercos are
destined to be swallowed up by American Tower.
Some will tick along nicely in parallel with their
larger cousins. Some will falter and fall by the
wayside. Others have got the formula right and
will make very successful exits. Each of the four
opportunities for middle market towercos we’ve
identified is fraught with risk. None should be
tackled by a management team that lacks telecom
tower industry experience. But despite the tower
industry in SSA doubling in scale in 2014, we still
think there are gaps in the market for middle
market towercos who can crack the secret formula
for success
XX
Turning a profit connecting
Rural Africa
How Connect Africa is trying to work with government and communities to
provide a sustainable and profitable rural telecoms solution
Dion Jerling is clearly passionate about technology and about
using it to help rural and underserved communities in Africa.
Giving up his career in Europe, he has worked for the last ten
years on developing solutions which will bring network access
to communities across the African continent and enable them
to make the most of new services in healthcare, education and
commerce. But of course the problem isn’t the ideal – the problem
is sustainability, and this means turning a profit from small and
underserved populations.
Dion Jerling, Founder, Connect Africa
Keywords: Editorial, Towercos, Energy, Southern Africa, Connect
Africa, Zambia, Installation, Valuation, Investment, Lease Rates,
Valuation, Opex Reduction, Urban vs Rural, Risk, Loading, Buildto-Suit, Business Model, Site Level Profitability, Energy Efficiency,
Operational Excellence, ARPU, Off-Grid, ROI, Renewables, Solar,
Project Finance, Masts & Towers, Community Power
What solutions are working right now in the most remote and rural parts of Africa
How to monetise rural communities
The key stakeholders for improving network coverage and their level of commitment
Where opportunities for middle market towercos lie now the ‘Big Four’ are moving into a phase
of consolidation
< How OTT services are changing the shape of African networks
<
<
<
<
TowerXchange: Can you tell us more about the
history behind Connect Africa?
Dion Jerling, Founder, Connect Africa: The idea
is to use technology to bring services to rural
communities. I like tech and enjoy using it and even
ten years ago I felt that technology was available to
help people in rural and underserved Africa. I grew
up in South Africa and I wanted to come back to
Africa and make a difference.
Our first idea was to get a satellite payphone in
every school in Africa – it proved too expensive
back then and a bit idealistic but the research we
did on the concept showed that GSM was spreading
rapidly across Africa and might be leveraged. This
resulted in a mobile service centre in deep rural
Limpopo Province that travelled from village to
village using a boosted GSM signal from Vodacom,
South Africa’s largest MNO. A small area (50m) of
full coverage meant that people could come with
their own phones or use the Connect Africa JEMBI
payphones that we provided to place calls through
the Vodacom network. We also offered a scanner,
copier, printer and a mini office to service providers
and the community. At first we visited villages on a
weekly or fortnightly basis but as demand grew we
found people needed signal for longer periods of
time. We then looked at a trailered response which
enabled us to leave the mobile centre site for a day
or more. The solution was easily scalable and local
government became interested in using the mobile
units to extend their services in rural areas. We
got close to signing contacts but an eighteen month
delay before contracts could be signed prompted us
to escalate our ambition to take the service North,
into real Africa. Our satellite partner at the time had
a licence in Zambia so we moved in 2009 and have
been here ever since.
TowerXchange: How did the market in Zambia
differ from South Africa?
Dion Jerling, Founder, Connect Africa: South Africa
is well covered geographically (upwards of 85%) so
there were few remote communities that didn’t
have access to a mobile signal. Zambia has vast
areas of zero coverage with distributed small rural
communities, a much bigger challenge to cover,
particularly when up to 65% of the population live
in rural areas. This meant we needed a low cost
fixed coverage solution to service rural Zambia.
We partnered with MTN Zambia to test a new –
lightweight, ‘low-tower, low-power GSM solution’
that used a smaller outdoor BTS requiring only
80 watts of power. The smaller coverage footprint
(between three and five kilometers radius) suited
Zambia’s small communities.
Our aim is to facilitate the delivery of multiple
services to the underserved and we need ICT to
be able to do that. This means that extending GSM
coverage serves two purposes – it brings mobile
coverage to underserved communities and enables
us to facilitate the delivery of multiple other
development services such as education, health and
agriculture support and information.
The MTN relationship was a breakthrough in
that we were able to integrate our CORE into the
Connect Africa & SA Home Affairs
MTN switch and use their microwave backbone to
successfully backhaul our test site traffic into the
MTN Zambia network. Typically VSAT is used to
backhaul deep rural sites so our future deployments
have been designed for VSAT backhaul.
With two of Africa’s leading mobile networks
(Vodacom and MTN) in two different countries we
were able to prove both the concept and that the
technology works - but to date there is still no large
scale commercial roll-out of rural coverage.
The commercialisation of rural solutions with the
Tier 1 operators is proving a surprising challenge.
TowerXchange: How easy is it to monetise these
rural areas?
Dion Jerling, Founder, Connect Africa: Our business
model was built around around three key stages:
first, prove the technology works, secondly, develop
a commercial agreement with an MNO and then,
third, deploy the rural network. Stage two proved
elusive – Tier 1 operators are reluctant to agree
the revenue share percentages or the minute rate
XX
we need to make the risk we take in building the
infrastructure worthwhile. Demand in rural areas
is obvious and no one has met that demand with
a commercial solution yet, despite some very
innovative tech vendors out there at the moment.
This will change however. Technology is evolving
at a rapid rate and with some of the new ultra light
BTS and VoIP solutions coming on-stream the OTT
commercial models get more and more interesting.
TowerXchange: So why aren’t operators rolling
into rural areas now?
Dion Jerling, Founder, Connect Africa: There are
several reasons. Firstly, they don’t see enough of a
market there. They see ARPUs of US$1-2 a month
and don’t believe it’s worth their investment against
ARPUs of US$8-20 in urban areas. However we
know from our experience that if you choose the
right site you can get ARPUs of US$4+ where people
have some cash in their pocket. It won’t be as much
as what MNOs are used to in urban areas but is
more than many people think and it is enough
to justify a small site. Margins won’t be huge but
there’s a business there.
MNOs are also working more with the Universal
Service Funds (USF). Without USF support MNO’s
have a challenge to cover underserved and
potentially non-profitable areas particularly when
they are focused on the transition to data driven
service provision, 2G licence renewals, new 4G
licences and legacy 2G and 3G commitments. These
distractions mean there is room for specialist rural
service providers to fill the underserved gap.
Operators are also understandably wary of giving
their brand to new vendor solutions being rolled
out by new relatively small businesses. This means
we’re left with a situation where operators are
unwilling to risk a rural partnership to cover rural
areas and underserved communities are therefore
left with no service at all - it’s a problem we are
working on.
There are a number of ways to address it. We
as the specialists in rural coverage need to up
our game and prove to the MNOs that we can
deliver by partnering with proven technology and
already established telco specialists (towercos,
telco engineering specialists, traditional vendors).
Technology evolution is close to delivering network
solutions that do not require the current large
infrastructure installations we’re all used to. This
makes our initiatives even more feasible though
regulators will have a challenge to manage the
delicate balance between innovation and stability.
USF supported projects are also finally gaining
momentum and, while they should offer an ideal
solution to the coverage of underserved areas, it is
critical that these projects are managed efficiently,
honestly and transparently.
TowerXchange: Tell us about governmental
initiatives to improve rural services
Dion Jerling, Founder, Connect Africa: There are 23
USFs in Sub Saharan Africa and 13 of these have
little or no activity, according to the GSMA USF
report. Universal Service Funds levy operators
between 2% and 3% of pre-tax revenues to subsidise
the establishment of coverage infrastructure in
potentially loss-making underserved areas. Few
countries do this transparently and effectively.
Regulators who are often responsible for these
funds are in a difficult position trying to stimulate
innovation while simultaneously trying to support
the incumbent MNOs who prefer the more
traditional vendor solutions. Political pressure also
plays a disruptive role particularly when 19 of these
funds had US$400 million to disperse in 2011 – a
tempting number to keep on treasury’s bottom
line. This number will be significantly higher today
but no-one is certain who has what.
It is up to the MNOs, towercos and rural coverage
specialists like us to lobby the USFs and encourage
the support of innovative coverage solutions, not
just stripped down versions of traditional solutions.
A common feeling among operators is that their
payment of a USF levy means they have contributed
enough to underserved areas and therefore need
not do any more. Another unfortunate consequence
of inefficient and ineffective USF deployments is
where operators are reluctantly left to manage an
inferior rural infrastructure network built by an
ineffective fund. This makes it virtually impossible
to get a MNO to agree to work with us commercially
to extend the rural network even further.
The end result is a stifled rural coverage
programme and millions of underserved who don’t
deserve to be underserved.
Forward thinking, transparency and a genuine
passion to connect the underserved will solve this.
TowerXchange: Do you feel the increasing
prevalence of the independent towerco model
has changed the market?
Dion Jerling, Founder, Connect Africa: Yes, there is
a definite shift in the MNO’s attitude to us once a
towerco deal has been concluded. All responsibility
is shifted to the towerco and it is difficult for us to
determine who the ultimate decision maker is to “go
rural”. The operator is focused on transferring his
infrastructure, not building new infrastructure, and
the towerco is focused on absorbing the operator’s
existing infrastructure and making it work
commercially, not on building new infrastructure
in less profitable areas. Some forward thinking
and risk acceptance from the MNOs and towercos is
required for us to address the immediate needs of
the underserved.
The combination of ineffective USF projects,
towerco asset transfer deals, outsourced network
operations, planned network extension, our non
standard vendor solutions and lack of track record
all come together to make operators reluctant to
consider any kind of rural coverage or innovative
network extension.
This situation does however provide the towercos
with an unique opportunity to partner with us as
a focused specialist to develop and rapidly deploy
innovative rural coverage solutions and secure the
future (first mover advantage) while they absorb
their new assets from the MNOs.
TowerXchange: Once you secure a commitment
from an operator, how will you structure the
deal?
Dion Jerling, Founder, Connect Africa: There are
multiple commercial options, revenue share,
minute rates, lease agreements and hybrids of them
all.
Revenue share is complex as the split we require
does not fit with MNO’s traditional understanding
of revenue share percentages that evolved in the
VAS and App sectors. The definition of “revenue” is
difficult to nail down (pre or post marketing/promo)
and there is a reluctance to share the CDRs we need
to monitor revenues. Tier 2 and Tier 3 Operators
are however more receptive to pure revenue share
type agreements so there is scope to develop these
clients.
Minute rates, while also difficult to negotiate,
offer a simpler and more transparent commercial
model. Once a “blended” rate or tariff is established
this is applied to all minutes of traffic delivered
by our rural network. This mechanism can be
applied in conjunction with a revenue share though
it can prove complex. Simplicity is ultimately
what we should all want to achieve. Agreeing a
mutually equitable “blended rate” takes time, trust
and transparency – elements not traditionally
synonymous with the telco sector.
Standard monthly lease agreements are understood
and accepted, particularly since the towercos
have established themselves so the first purely
Shakumbila Site - Central Province Zambia
XX
“
and we own both the active and the passive
infrastructure. We fill the rural “Middle Market”
category.
We are in many ways very similar to a towerco. The main
differences are that we serve the least profitable areas, we build new
infrastructure networks and we own both the active and the passive
infrastructure
A hybrid of fixed lease to cover capex and a minute
rate to cover opex and motivate us to optimise
local traffic is a good commercial solution for us
currently.
If the USFs worked transparently with the towercos,
MNOs and us to deploy effective rural coverage
solutions we could all immediately escalate rural
coverage and dramatically and rapidly reduce the
number of underserved across Africa.
“
commercial agreements are likely to be lease
driven.
crazy but it’s focused on an end result - coverage.
There are several innovative network solutions
being tested around the world and more in
development. All of them do not require traditional
MNO infrastructure and this will be a threat to the
traditional operator model.
Regulators also have a challenge with OTT. They
will have to deal with balancing innovation with the
currently stable MNO sector. The MNO sector will
in turn have to adapt to embrace these innovative
solutions or risk being bypassed.
The mobile revolution is only beginning.
TowerXchange: Can you tell us more about what
OTT means for rural services?
Dion Jerling, Founder, Connect Africa: The OTT
models are revolutionary and very exciting – solar
powered planes bringing Wi-Fi to rural Africa may
be a crazy idea but Facebook are prepared to think
about it. The Google balloon project may also be
TowerXchange: How do you see yourselves in
relation to the big towercos in Africa?
Dion Jerling, Founder, Connect Africa: We are in
many ways very similar to a towerco. The main
differences are that we serve the least profitable
areas, we build new infrastructure networks
We can work with towercos and other ‘Middle
Market’ specialists who are not yet ready to enter
our less profitable market sector. We do service
the only new subscriber/user market left in the
world and it has volume plus exponential future
potential. It is only a matter of time before this
new market is properly opened and first mover
advantage will secure these rural subscribers. In
our view it is an ideal opportunity for an MNO
and/or towerco to use us to lock down these
communities, build the user base and boost rural
ARPUs with our specialised value added services.
TowerXchange: Which markets will you look at
next?
Dion Jerling, Founder, Connect Africa: We are
currently focused on Southern Africa but have
opportunities in Central and East Africa.
For scale the future is West Africa - Nigeria is
Africa’s biggest market and the opportunities
are immense. Kenya is a very competitive and
innovative environment, taking the lead from
South Africa in many ways. Tanzania has the least
infrastructure and is using their USF to address this.
North Africa offers different but well established
and sustainable communities. Conflict areas offer
niche markets – Sudan and Somalia are letting
some specialist middle market players take the lead.
Even small countries like Lesotho and Swaziland
have remote areas and opportunities for small cell
technology deployment.
Africa as a whole is the fastest growing mobile
sector in the world with millions of underserved
and thus tremendous potential for us. The trick will
be to strategically target the markets where we can
deliver the fastest and have most effective impact.
TowerXchange: What new technologies do you
find exciting?
Dion Jerling, Founder, Connect Africa: The
convergence of voice and data is fascinating. It
will be interesting to see how the traditional GSM
operators submit to data. GSM will be here for
decades yet but 4Gs are already starting to link the
two together.
GSM to SIP conversion on a commercial scale offers
some interesting rural solutions – converting that
battered old Nokia into a VoIP phone. Imagine,
millions of users connected to the latest low cost
data network without having to buy a new phone?
Then there is the “affordable” smart phone that
will soon be under US$25. This will herald the
large scale introduction of e-learning, e-health,
e-commerce, e-agriculture – all elements critical to
the future of Africa.
With an average age of under twenty, compared to
thirty-five plus in Europe and Asia, the workforce
of the world will come from Africa in less than
fifty years from now. This means dramatic and
fundamental developmental support for the African
people needs to be delivered now.
Moshuka Community, Limpopo 14 Feb 2006
The effective channeling of the mobile revolution
can make this happen.
TowerXchange: As well as mobile networks and
government, who do you work with?
Dion Jerling, Founder, Connect Africa: We will
work with anyone who can add value or who we
can add value to. NGOs, the larger Charities and
Development Agencies make good partners. We’ve
just met with the World Food Programme who are
working with the Zambian government to provide a
square meal a day to school children in Zambia.
A challenge is to enable routine reporting on
the delivery and utilisation of the food using an
SMS and App driven monitoring system - which
of course won’t work if there’s no coverage.
We’re looking at introducing coverage in these
areas and we can then use this infrastructure
as leverage to extend coverage deeper into
rural areas. Similarly with corporates, we can
help them with infrastructure in the field while
also offering ICT driven enterprise solutions
nationally.
Our value added service portfolio includes
education, health, energy, agriculture, business,
finance and government services. All of these
sectors offer multiple mutually beneficial
partnership opportunities and we see opportunity
everywhere.
Rural coverage is the first step
XX
Special feature:
Special guest perspectives
Four guest columnists and interviewees for you this month. Lars Stuber of Ericsson
advocates revenue sharing models in which MNOs, towercos and OEMs all get
a share of margin through the integration of passive and active infrastructure
managed services.
The latest chapter in EY’s ‘tower transaction bible’ covers commercial due diligence,
including an insight into the black arts of forecasting tenancy ratios, operating
margins and build costs.
Our second guest column from our friends at Norton Rose Fulbright explores
how towercos might need to amend leases when acquiring sites from MNOs; the
challenges of proving title in emerging market tower transactions; and what can be
done if foreign companies are not permitted to own land. Whether you’re building,
buying, selling or investing in emerging market towers, you need to read this article.
Finally, Dave Tanner from Mott MacDonald looks at the drivers behind the recent
exponential growth of emerging market towercos, but then looks into a future of 4G
networks trading off coverage and capacity, drawing towercos into small cells and,
perhaps, active infrastructure sharing.
This month’s guest columns and interviews:
166 Ericsson propose business models for cooperation between operators,
towercos and OEMs
171 EY’s guide to commercial due diligence on tower transactions
175 Norton Rose on “How to perfect imperfections in leases”
179 Mott MacDonald propose strategies for a changing landscape
If you have an opinion or some advice to share with the 10,000 readers of
TowerXchange, drop me an email and I’ll explain our simple editorial guidelines:
[email protected].
Business models for
cooperation between operators,
towercos and OEMs
Ericsson advocate revenue sharing models in which all parties get a share of margin
As Ericsson’s Head of Engagement Practice in SubSaharan Africa (SSA), Lars Stuber’s role extends from
traditional active and passive network managed services,
to IT managed services and opex sharing business
models. However, Lars believes the managed services
model remains relatively immature in SSA, creating
opportunities to develop innovative new business
models. A good example is transformation from network
managed services into customer centric managed
services (see figure 1).
Lars Stuber, Head of Engagement Practice,
Managed Services, SSA, Ericsson
Keywords: Interview, Managed Services, Active
Equipment, Capex, Opex Reduction, Tenancy Ratios,
Co-locations, Build-to-Suit, Business Model, First Mover
Advantage, Densification, Active Infrasharing, RoI, ESCOs,
Private Equity, Stakeholder Buy-In, Wholesale Network
Sharing, Infrastructure Sharing, Africa, Nigeria, Ericsson
< The integration of passive and active infrastructure managed services, particularly in Nigeria
< The ‘Joint Planning Setup’: partnering with OEMs for network design and performance
< Where and when Wholesale Network Sharing might work in SSA
< How Managed Rural Coverage reduces the uncertainty of rural network extensions
TowerXchange: Where does passive
infrastructure management services fit into your
role and into Ericsson’s priorities in SSA? And
how has the entry of the independent towercos
into Africa affected that business?
Managed Services, SSA, Ericsson: I spend most
of my time covering network managed services,
within which management of active equipment
remains Ericsson’s core business. However, we also
have several large-scale engagements in passive
infrastructure management and maintenance for
Africa’s leading operators such as Airtel and MTN.
Ericsson has over 100 customers across 43 countries
in the SSA region. While most of our passive
infrastructure management services contracts
are in markets where towercos are not present
yet, we feel that with the entry of towercos, the
passive infrastructure segment gets even bigger
for Ericsson. This includes power solutions and
maintenance. We are currently seeking a suitable
model for co-operation between the MNO,
towerco and Ericsson to deploy resources most
efficiently across active and passive infrastructure
maintenance.
With the entry of independent towercos into
a market, towers assets are typically spun off
and transferred to the towerco, together with
responsibility for maintenance of the passive
infrastructure. We feel this represents and
opportunity to change the relatively old-fashioned
business model to a situation where OEMs can take
XX
responsibility for the entire network surveillance
and create synergies for passive maintenance
providers that could cover multi-operators in one
country. Typically the towercos could work with
such passive maintenance providers.
TowerXchange: Given the bifurcation of
ownership of passive and active networks,
with towercos increasingly acquiring Africa’s
towers, does there have to be a bifurcation of the
provision of managed services for the same?
Lars Stuber, Head of Engagement Practice, Managed
Services, SSA, Ericsson: Due to the nature of towerco
deals, it is a given that responsibilities will be
split between active and passive infrastructure
management services.
Should active and passive infrastructure managed
services be consolidated under the same supplier?
For smaller scale operations, it might be better to
have a split where an OEM such as Ericsson drives
active infrastructure and another entity drives
passive infrastructure services. Within larger scale
operations like Nigeria, the ultimate benefit for the
operator lies in encouraging the creation of scale
for passive infrastructure providers, for example
synergies related to field operations.
TowerXchange: How do you see the future of
telecoms infrastructure outsourcing in SSA?
Services, SSA, Ericsson: I believe that by the end of
2015, approximately 80% of the networks in SSA
Figure 1
will be outsourced, whether to towercos or to OEMs.
Beyond 2015, the discussion will be about the
power aspect of the network and evolving business
models. Today, traditional power business models
work around a fixed fee for power. Business models
involving a price per kWh are widely discussed, but
have not yet been implemented to the fullest extent.
I drive a lot of discussions with private equity
companies interested in various commercial power
models.
Working with reputable power solutions vendors
the towerco would then be able to focus solely on
leasing out space. In Africa, towerco CEOs spend 5070% of their time on operational issues instead of on
increasing tenancy ratios.
Established emerging market towercos say that
the market is providing sufficient capital to fund
new acquisitions and BTS opportunities. Typically
towercos are spending 15-25% of their available
capital on power, which typically returns a lower
yield than investing in assets and upgrades to
increase tenancy ratios.
TowerXchange: What business models would you
consider for OEM co-operation with towercos?
“
services in Nigeria, what opportunities are
there for partnerships between Ericsson and the
towercos in Nigeria?
Ericsson has a strong position in Nigeria. Today we service around 50% of
Nigeria’s towers, with the remaining 50% split between other OEMs and inhouse by management by MNOs. Due to the scale of Ericsson in Nigeria, we
provide the lowest possible cost base for passive infrastructure maintenance
We are also in favour of risk sharing models with
KPIs and SLAs governing power availability, so
if you underperform there is a penalty, if you
overperform, there is a reward.
Any form of revenue sharing attracts more and
more interest in the telecoms industry – this is the
ultimate form of risk sharing and participation
in a towerco’s success. Revenue sharing is widely
discussed, but requires a very entrepreneurial
company that is not afraid of risks and genuine
partnerships.
Towercos are ultimately real estate businesses;
“
Services, SSA, Ericsson: We are in favour of models
that are related to existing cost structures. Where
the cost of providing 24 hours of runtime is stable,
in theory there is little difference between a kWh
model or a fixed fee.
much of the attractiveness of their business model
is based on minimising risk, passing on risk and
operating within the optimal cost structure. As
such, towerco’s DNA is not predisposed toward
revenue sharing and ensuring partners participate
in success. Some might say that OEMs don’t have
best DNA either for revenue sharing model! For
example, in Indonesia Ericsson’s commercial offer
was based on a revenue sharing model which took
the quarterly income statement as the source of
the revenue share calculation and a revenue share
percentage was applied. The scope covered active
maintenance, passive maintenance and all the
power (both diesel and grid).
TowerXchange: Let’s talk about Nigeria. Given
that Airtel, MTN and Etisalat’s towers have all
been sold or are in the process of being sold, by
the end of 2014 80% of Nigeria’s towers could be
owned and operated by independent towercos.
Given Ericsson’s dominant position in managed
Services, SSA, Ericsson: First let me say that I agree
with TowerXchange’s forecast; whether it’s by the
end of 2014 or Q2 2015, we believe all the Nigerian
towers except Glo’s will be offloaded to towercos.
Ericsson has a strong position in Nigeria. Today we
service around 50% of Nigeria’s towers, with the
remaining 50% split between other OEMs and inhouse by management by MNOs. Due to the scale of
Ericsson in Nigeria, we provide the lowest possible
cost base for passive infrastructure maintenance.
So the towercos have all approached Ericsson to
discuss forms of collaboration if and when they
purchase all these towers.
I feel there are four options for the structure of
partnerships between OEMs and towercos in
Nigeria, or any other country for that matter. First
you have a standard subcontractor relationship,
secondly you could have what we call a ‘Joint
Planning Setup’, thirdly you have an option for
wholesale network sharing, and fourthly you have
the option to decouple and have no relationship at
all.
The pure subcontractor relationship is not
an attractive option for OEMs. I’ve seen some
maintenance and power service contracts offered
by towercos that transfer all the risk to their service
partners, but also drive down prices and margins,
XX
resulting in poor subcontractor relationships.
Ericsson has exited such contracts in other
countries where the only winner was the towerco.
Figure 2
We prefer a more mutually beneficial partnership
structured as a “Joint Planning Setup”. Under a Joint
Planning Setup, the OEM becomes the exclusive
network design and network performance partner
of the towerco. Ericsson would plan the network
rollout, taking into account all of the towerco’s
different tenants’ requirements in terms of coverage
and capacity. We are able to develop sophisticated
coverage and capacity forecasts, and consolidate
all customers requirements together to plan the
optimal network rollout and develop a capex
deployment plan for the towerco that results in an
optimised tenancy ratio.
From a Joint Planning Setup it would be easy to
extend the partnership to wholesale network
sharing. Wholesale network sharing doesn’t have to
be a threat to towercos if the contract is structured
to the benefit of all parties. My colleague Patrik
Jakobson described Ericsson’s vision of Wholesale
Network Sharing in a previous edition of the
TowerXchange Journal, wherein all the stakeholders
work together to plan coverage and capacity and as
partners in providing wholesale capacity.
Of course the final option is no collaboration– you
decouple the business and split the value chain so
towercos escape SLAs related to power and just
sell colocations, powercos sell power, OEMs sell
and maintain active infrastructure and MNOs sell
airtime. There still has to be some dialogue between
stakeholders around network availability KPIs, but
it can quickly degenerate into a culture of blame
as parties try to avoid SLA penalties for service
interruptions.
TowerXchange: How would your ‘Joint Planning
Setup’ impact positively on capital deployment
into build-to-suit programmes?
Services, SSA, Ericsson: As well as acquiring towers,
towercos typically also secure first refusal to lead
their anchor tenant’s build-to-suit programmes.
The towerco might build 100 sites for their anchor
tenant, and if they’re lucky they get a second tenant,
then they’re asked to build a further 100 sites for
another operator, and again they’re lucky if they
get a second tenant on some sites. Meanwhile, the
towercos might acquire 300 sites at locations they
think are attractive for co-location, which they hold
until two tenants want a tower at a similar grid
reference. Ultimately I think there’s a high degree of
inefficiency in deploying capex in this manner.
As Africa from moves from 2G to 3G and 4G, there
are a lot of radio network planning and technology
development issues that influence coverage and
capacity, and that is not a core competency of
towercos. Network design and optimisation is
dominated by OEMs, and there is no-one better
than Ericsson at designing networks for optimum
coverage and capacity. MNOs should insist on OEMs
Similarly, if a regulator wanted to ensure that
network extensions were as extensive as possible,
they would need to ensure the most efficient capital
allocation. Again, it’s not the regulator’s core
competency to optimise site locations and network
build out strategy – regulators might be able to
see that two sites for which permits have been
requested are only 50m apart, but it’s important to
take both coverage and capacity into account. In an
area where now you might need 10 sites to provide
good QoS, in five years there may need to be 40 sites,
including macro cells and small cells. When you
overlay the coverage and capacity requirements of
multiple operators, it becomes more complex than
just comparing site lists – this is where Ericsson can
help.
TowerXchange: What can be done to improve the
economics of rural connectivity in countries like
Nigeria? Tell us about Ericsson’s ‘Managed Rural
Coverage’ proposition.
Services, SSA, Ericsson: Managed Rural Coverage
is a business model to drive network sharing in
rural areas by translating capex into opex. We
are discussing a number of commercial options
for Managed Rural Coverage, but currently the
most widely discussed in where the MNO to OEM
business model works not on the basis of the cost
of hardware and software, but is evolved toward
a revenue sharing model related to the number of
“
“
being involved in build-to-suit projects as it results
in the most efficient allocation of capex.
there is no-one better than Ericsson at designing networks for optimum
coverage and capacity. MNOs should insist on OEMs being involved in
build-to-suit projects as it results in the most efficient allocation of capex
minutes pushed through the network. The incentive
is that there are no upfront capital investments
required by the MNO.
Ericsson has started deploying Managed Rural
Coverage in Latin America, and we see several
opportunities in Africa. A Managed Rural Coverage
network consists of 10-15m self-mounting masts
with three legs and a concrete plate for stability –
or it could be just as easily consist of a trailer for
ease of relocation. These smaller, compact sites can
be moved, so if you’ve overestimated the revenue
potential of a village with 5,000 inhabitants and
the location doesn’t work commercially, you can
easily relocate the equipment (if the community
allows given that they have experienced cell phone
coverage and might not want to let go!) Managed
Rural Coverage runs over satellite connections, so
it’s not bound to existing transmission networks,
and you can be extremely flexible about where you
provide the coverage.
There is a lot of guesswork and uncertainty about
planning rural network extensions. If operators use
more conservative estimates of revenue potential,
then their models don’t reach typical investment
criteria of payback within 18 months, and the
network is not extended
TowerXchange: Do you see towercos as potential
clients of Managed Rural Coverage?
Managed Services, SSA, Ericsson: Towercos are not
necessarily interested in building these small sites
unless there’s a clear cut business case. Managed
Rural Coverage provides an opex solution for areas
where this clear-cut capex business case does not
exist. However, it only works in situations where
there is no existing coverage, in this context the first
mover advantage is a killer competitive advantage.
Whichever operator offers a service first will take
all the traffic and subscribers – these areas don’t
generate enough ARPU to share with a second
operator. I see an opportunity where towercos and
OEMs together could provide such a solution
XX
Why commercial due diligence is an
essential aspect of a towers transaction
for both towercos and MNOs
How EY tests the commercial viability of top line projections for buyers and sellers alike
At EY, we continue to be at the forefront of transactions in
the tower market. We provide our clients the full range of
advisory services to ensure a successful transaction from
lead M&A advice to commercial, financial and tax due
diligence and tax structuring. EY has advised on tower
infrastructure transactions with a total consideration
of cUS$6.0bn in the last 24 months, and on 12 of the 15
most significant processes in the African tower sector.
We provide unrivaled sector knowledge and know-how
combined with local presence.
Oliver Wolf, Partner, Strategy, TMT, EY
Keywords: How to Guide, Strategic Consultancy, Acquisition,
Valuation, Investment, 3G, 4G , Lease Rates, Due Diligence,
Tenancy Ratios, Market Forecasts, Data Room, Site Level
Profitability, Densification, Regulation, Asset Register, Sale &
Leaseback, Manage With License To Lease, EY
< Why a robust commercial evaluation is both challenging and necessary to a towers transaction
< Key commercial considerations for buyers and sellers, including forecasting tenancy ratios,
operating margins and build costs
< The role of commercial due diligence in towers transactions
In our last article we discussed the preparation of
data for, and approach to financial diligence. This
article will cover the key considerations, role and
importance of commercial due diligence for tower
transactions.
Similarly to our last article, the towerco business
model referred to here is the own and operate
model, although the purpose and benefits of
commercial diligence are equally applicable to
managed services and management and marketing
models.
As noted in our previous article, the assets
comprising towerco sales offerings are often not
material components of MNO businesses, and as
a result detailed metrics, including all relevant
revenue and cost data, may not be provided by the
seller. In addition, as a result of the non-core nature
of tower asset portfolios, MNO sellers may not
have fully considered the wide range of scenarios
potentially affecting commercial viability of the
portfolio on a stand-alone basis. In the section that
follows, this article considers a number of these
scenarios, and other commercial issues that are of
paramount importance in towers transactions.
Which commercial considerations are most
pertinent to the deal process?
The commercial viability of top line projections is a
key consideration for buyers and sellers alike, and
the area of focus for commercial due diligence.
< The benefits of robust due diligence for buyers, sellers and for attracting investment
Examples of key areas buyers, sellers and providers
Forecast tenancy ratios are of fundamental
importance given return on investment is largely
a factor of ability to generate additional revenue
per tower. In order to understand future revenue
drivers, sellers and investors need to consider sector
technology and consolidation trends, often out to
a time horizon of 10 to 15 years from the date of
investment. A consolidation of MNOs in the target’s
region may substantially impact a towerco’s ability
to increase co-location, while 3G and 4G rollout
plans may have the opposite effect.
Local regulation is also of central importance in
assessing the outlook for towercos, in particular in
relation to minimum levels of coverage to become
licensed; the releasing of spectrum from, for
example, television which is then made available to
MNOs; and antitrust laws prohibiting consolidation.
An intelligent investor must be confident in their
understanding of the regulatory landscape and its
likely evolution over time.
In the European market, trends towards RAN
sharing must be considered with extra care based
“
Forecast tenancy ratios are of fundamental importance given return on
investment is largely a factor of ability to generate additional revenue
per tower. In order to understand future revenue drivers, sellers and
investors need to consider sector technology and consolidation trends,
often out to a time horizon of 10 to 15 years from the date of investment
on recent trends. Since the active infrastructure
is retained by MNOs in the majority of towerco
deals, RAN sharing may allow the incumbent
tenant to effectively share the tower without colocation benefitting towerco revenues. Detailed
understanding of the current strategies of senior
MNO decision makers is essential in predicting
whether RAN sharing is likely to become
widespread in a particular region.
In addition, thorough commercial due diligence
considers significant supply-side factors potentially
impacting the projected profitability of the target
post-acquisition, including but not limited to:
< Forecast operating margin of the passive
infrastructure relative to comparable towercos in
the region
< Local cost to build relative to value per tower (i.e.
opportunity cost and barriers to entry)
“
of finance need to understand include:
< Key assumptions underpinning revenue
projections, in particular forecast tenancy ratios
< MNO industry consolidation
< Historically achieved top line growth rates for
towercos in the region
< Where multiple assets are geographically diverse,
TCO segmented by key geographies
< Proximity of current and anticipated third party
towers
Since the attractiveness of tower deals hinges on
the ability of towercos to either extract additional
revenue (primarily through co-location) and/
or reduce tower operating costs below those
incurred by MNOs, revenue and cost management
is equally important to the commercial viability of
the transaction. If the seller appears to operating
at a lower than average margin, this may present
an opportunity for an experienced towerco
management team to increase the rate of return
through operational improvements. Where margins
are substantially above expectations, investors
may question whether the seller has correctly
apportioned all costs and revenue streams to the
towers for sale.
Competition and barriers to entry are key aspects
to consider. A bottom up analysis of costs to build a
new tower is typically required; such analysis needs
XX
“
the region and the target assets in particular.
the relative lack of materiality of a
tower portfolio to an MNO business
may result in a lack of quality data
for tracking the performance of the
target assets historically
“
to be overlaid with current and potential leasing
rates to assess the potential for new entrants.
In addition, market development scenarios need to
assess the possibility of other MNOs selling all or
part of their tower portfolio.
How does commercial due diligence help?
Commercial due diligence is a powerful tool to
robustly evaluate the commercial viability of
a towerco investment. In the first instance, we
often seek to understand the key assumptions
underpinning, and historical precedent for
projected returns, and to ensure these are grounded
in reliable data. In addition, high quality diligence
providers are able to draw on an extensive network
of industry experts and key decision makers to
establish a market-leading view of the outlook for
As noted earlier in this article, the relative lack of
materiality of a tower portfolio to an MNO business
may result in a lack of quality data for tracking
the performance of the target assets historically.
Commercial due diligence providers draw on years
of experience on comparable deals to evaluate the
metrics available, and share unique insights into
the industry and competitive landscape with clients
to better inform their investment or divestment
decision.
When working with buyers, commercial due
diligence seeks to address issues including:
< What is the future demand for mobile
communications, both voice and data?
< What are the MNO scenarios (number of players,
propensity to share towers, RAN share, sell towers)?
< What is the future demand for towers and what
are the tower ownership scenarios?
< What is the potential tenancy ratio of the target
tower(s), and what does this mean for revenue?
< Is the proposed leaseback rate sustainable based
on the historic performance of the towers, and how
resilient is the rate in a range forecast scenarios?
< How will regional factors including densification,
regulation, MNO consolidation and 3G/4G rollout
impact the attractiveness of the investment? Have
these been incorporated into the forecast?
< What other towercos and MNOs are operating
in the region? What will our client’s competitive
position be following investment?
< How do operating profit / EBITDA forecasts
compare to towercos operating in the same or
comparable regions? If below, is there scope to
bring these in line with best in class margins?
Commercial due diligence can also help optimise
the sell side of the transaction by performing:
< Robust and credible business forecasting,
reducing the need for prospective bidders to
allocate time and resources to constructing their
own, potentially more cautious model
< High quality, granular analysis of historical data
to provide clear insights into the past performance
of the investment and its key organic growth drivers
< Evaluation of the performance of the asset for
sale relative to appropriate market indicators such
as cost to build over time, tenancy ratios and market
leaseback rates in the region
EY’s market leadership in the sector is underpinned
by unparalleled levels of access to key MNO decision
makers (including Heads of Network), as well as
strong relationships with key towerco operators and
regulators globally. We are able to leverage a truly
global network of professionals, both within and
outside the firm, to provide our clients with unique
commercial insights to inform their investment and
divestment decisions. Our towerco commercial due
diligence scope may include:
< Evaluation of a range of technological, regulatory
and competitive scenarios out to a time horizon of
ten to fifteen years from the date of transaction;
quantifying the impact of these on present value of
the investment
< Performing numerous structured interviews
with key industry decision makers, including
MNO senior management, regulators and industry
experts to inform a view on the outlook for market
demand
< If required, detailed site-by-site analysis (with
appropriate radio planning base data) facilitating
bottom-up evaluation of the attractiveness of the
portfolio of towers for sale
It is also worth noting that many of the towercos
that diligence providers serve have wider
operations in addition to the core sale and
leaseback of towers to the MNO, such as separate
M2M operations or other uses of the passive
infrastructure. Depending on their contribution
to forecast rates of return, it may be necessary for
diligence efforts to be split to some extent between
the core sale and leaseback business and other
sources of profitability. With detailed knowledge
and broad experience in the sector, EY is ideally
placed to quickly understand and robustly analyse a
wide range of business models.
As commercially astute advisors, we are primarily
concerned with creating value for our clients.
Understanding the importance of robustly
challenging investment opportunities to identify
red flags warranting bid reduction; but equally in
recognising overlooked upside potential to ensure
our clients are able to be competitive in the bidding
process for an attractive investment. Commercial
diligence bolsters the negotiating position and
confidence of the parties benefiting from it, often
improving their bargaining power. Moreover,
commercial diligence reports authorised for
release to financing institutions provide credibility
to lenders, and help secure competitive finance,
improving overall returns on investment
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax,
transaction and advisory services. The insights
and quality services we deliver help build
trust and confidence in the capital markets
and in economies the world over. We develop
outstanding leaders who team to deliver on our
promises to all of our stakeholders. In so doing,
we play a critical role in building a better
working world for our people, for our clients and
for our communities.
EY refers to the global organization and may refer
to one or more of the member firms of Ernst &
Young Global Limited, each of which is a separate
legal entity. Ernst & Young Global Limited, a UK
company limited by guarantee, does not provide
services to clients.
For more information about our organization,
please visit ey.com.
Information in this publication is intended to
provide only a general outline of the subjects
covered. It should neither be regarded as
comprehensive nor sufficient for making
decisions, nor should it be used in place of
professional advice. EY accepts no responsibility
for any loss arising from any action taken or not
taken by anyone using this material.
Please feel free to contact the TowerXchange team
Kieron Osmotherly
Founder & CEO
M: +44 7771 148001
For editorial & speaking enquiries regarding Americas or Asia:
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M: +39 338 111 2103
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XX
How to perfect imperfections
in leases to maximise the value of
tower assets
Establishing title and transferability
Experienced tower transaction advisors Norton
Rose Fulbright review the key issues affecting the
transferability of leases from MNOs to towercos,
and explain how to overcome common challenges,
such as proving title, protecting against ground
lease aggregation, and overcoming any restrictions
on foreign companies owning land.
Oliver Stacey and Daniel Metcalfe, Partners, Norton Rose Fulbright
Keywords: How to Guide, Lawyers & Advisors,
Valuation, Transfer Assets, Co-locations,
Infrastructure Sharing, Leasing & Permitting,
Novation of Leases, Regulation, SPA, Asset
Register, Masts & Towers, Ground Lease
Aggregation, South America, Africa, Indonesia,
Norton Rose Fulbright
< How towercos might need to amend leases when acquiring sites from MNOs
< Licenses versus leases, and the duration and payment terms for rent
TowerXchange: Please introduce Norton Rose
Fulbright and your experience in advising on
emerging market tower transactions.
Daniel Metcalfe and Oliver Stacey, Partners, Andrew
Savage, Senior Associate, Norton Rose Fulbright:
Norton Rose Fulbright is one of the first legal
practices to observe the trend for the transfer of
tower assets from MNOs to towercos in emerging
markets, leveraging excellent relationships with
the operators and bank contacts to secure many of
the early mandates in African towers. More often
(although not exclusively) found advising operators
selling towers and lenders to towercos, members
of the Norton Rose Fulbright team have advised on
tower transactions involving Eaton, Helios Towers
Africa, Helios Towers Nigeria and IHS across Africa
and advised Tower Bersama on a transaction in
Indonesia. They have also advised ABSA on the
financing of Cell C for their landmark acquisition
deal with American Tower, advised Vodacom
Tanzania on their deal with Helios Towers Africa,
and advised Etisalat on their recent deal with IHS in
Nigeria.
Having recently gained offices in Colombia and
Venezuela, as well as opening in Rio, the firm stands
ready to advise on tower transactions in South
America. Key contacts for towers include Oliver
Stacey and Andrew Savage for acquisitions and
disposals and Daniel Metcalfe for finance.
< The challenges of proving title in emerging market tower transactions
< The problems and costs caused by professional ground lease aggregators
< What can be done if foreign companies are not permitted to own land
TowerXchange: What do MNOs need from leases,
how does that differ from what towercos need,
and how much should MNOs do to get leases
Daniel, Oliver and Andrew, Norton Rose Fulbright:
As long as an MNO is operating effectively from a
site and it has unfettered access for maintenance
of its active and passive infrastructure then it
generally has few reasons (at least on a day to day
basis) to consider the efficacy of its leases. For
instance, if a ground lease restricts co-locations
then this is often not a cause of particular concern
for an MNO because any co-locations are generally
non-core to its operations and, in practice, some
co-locators may well have been on a tower for a
number of years without the ground lessor having
raised any complaint.
This contrasts with the requirements of a towerco
where the leases are a central component of their
business, albeit again if the towerco can operate the
tower effectively and have unfettered access to do
so then on a day to day basis the lease terms will be
of little concern so in this sense the needs are to a
large degree aligned. Both an MNO and a towerco
will be concerned to ensure they do in fact have a
valid lease (so as to ensure ability to operate and
access) and with a continuing term, and will seek to
renew as expiry of the term approaches. A towerco
will in particular require that a ground lease has
a certain term or require that the lease is renewed
prior to a site being transferred from the MNO to
the towerco. If a ground lease contains a restriction
on the ability to co-locate then this will obviously
be a fundamental issue for the towerco and in
these circumstances the lease would ordinarily be
“
A towerco will in particular require that a ground lease has a certain term
or require that the lease is renewed prior to a site being transferred… If the
parties need to obtain the ground lessor’s consent to transfer a site then they
may also take this opportunity to include an express right to co-locate in the
revised ground lease if this is restricted. A towerco will also want to ensure
that there is no restriction on granting security over its rights
“
ready to be transferred to a towerco, thus
maximising the value of those assets?
amended to remove this restriction before the site
can be transferred. If the parties need to obtain the
ground lessor’s consent to transfer a site then they
may also take this opportunity to include an express
right to co-locate in the revised ground lease if this
is restricted. A towerco will also want to ensure that
there is no restriction on granting security over its
rights in relation to the leases so as to pre-empt any
lending requirements; this will be of less concern to
an MNO whose lenders are unlikely to require this
level of real property security.
that when leases are renewed they are renewed on
terms that would be acceptable to towercos such
that as many sites as possible can be transferred
over to the towercos at the first closing of the
transaction. One practical step that an MNO can
take prior to commencing a sale and leaseback
transaction is to have a full site list which shows,
amongst other things, the number of years left on
a ground lease, whether the landlord’s consent to
transfer or encumber is required and whether it
restricts co-locations.
Ideally, the portfolio of sites which an MNO is
seeking to dispose of would have long leases which
did not require the landlord’s consent for a transfer
of (or security in relation to) the ground lease and
which do not restrict co-locations. As such, if an
MNO is considering a tower sale and leaseback in
the coming years then it should consider ensuring
TowerXchange: Tell us about the nature of the
leaseholds - how are cell site landlords typically
paid and what consents might be required of
them?
The leases are often long leasehold interests (for
XX
“
procedures) although these should include the main
characteristics of a lease (despite being termed a
licence). Similarly, certain jurisdictions will not have
the concept of a lease (or licence) as such but the
law prescribes an equivalent interest.
there may be a Land Registry this does not necessarily mean that all titles
(or even any significant number of titles) are registered (and if they are then
the Registry is not necessarily determinative of registration due to delays in
updating for example) and there are further complications if certain local
consents need to be obtained
TowerXchange: What’s the difference between a
lease and a license? Why is consent important?
In broad terms, a lease is the grant of a right to
“
instance fifteen years) with the MNOs often having
paid five years rent in advance with the remaining
rent being payable at years five and ten of the
lease. As such, any advance rental payments need
to be taken into account in the sale and purchase
agreement. The ground lessor’s consent is often
required for the transfer of the lease from the MNO
to the towerco and, as stated above, there may also
need to be amendments to the lease to deal with
any restrictions on co-locations. It may be that the
interests in land are not always leasehold – they
may be a simple licence arrangement (or other
equivalent interests by reference to the nature of the
legal system involved).
exclusive possession of land (i.e. it can exercise
the rights of the landowner and exclude both
the landlord and third parties from the land) for
a determinable period of time. It is also both a
contractual relationship and an estate in land and
therefore capable of existing independently of
contract.
A licence is simply permission for a licensee to do
something on a licensor’s property – in the case of
a towerco to access, build, operate and maintain
the tower and ancillary assets such as generators.
The permission given to the licensee prevents the
permitted act from being a trespass but does not
grant them a right of exclusive possession.
In some African jurisdictions lease agreements
are termed licence agreements in order to comply
with local law requirements (or if this would avoid
the need for timely and expensive registration
Often the lease itself will expressly state that the
ground lessor’s consent is required to transfer
the lease from the MNO to the towerco (or for the
towerco to grant security over its rights in the
lease) or the consent will be required as a matter
of law. As such, in these circumstances, a tower
cannot be transferred or encumbered without the
ground lessor providing its consent and as such
it is essential (at least in relation to transfers, but
preferable also for encumbrances in order to preempt any lender requirements) that this is obtained
for each tower that forms part of the portfolio to be
sold.
TowerXchange: How does one prove title in
emerging market contexts?
This is often a jurisdiction specific question and
something that towercos will be focused on in
their due diligence exercises of the relevant tower
portfolio. Although in some jurisdictions there
may be a Land Registry this does not necessarily
mean that all titles (or even any significant number
of titles) are registered (and if they are then
the Registry is not necessarily determinative of
registration due to delays in updating for example)
and there are further complications if certain local
consents need to be obtained (such as governor’s
consent) or other requirements satisfied (such
as stamping requirements) before title can be
registered.
Proving title is therefore often interpretative
and a purchaser will need to try and deduce
title (including the ground lessor’s title) by
reviewing disclosed documentation including any
applicable freehold documentation, leases and any
assignments of the leases. In certain circumstances
affidavits from the freeholders and leaseholders
may also be used if other forms of suitable title
documentation are not available. We would note
that across Africa freehold land is typically now the
preserve of the State/government (certain historical
interests may exist) and as such leasehold (or
equivalent) is the most senior category of interest in
real property that can be obtained.
TowerXchange: Is a leasehold enough to protect
against the threat of ground lease aggregators,
or should freeholds be secured under high value
sites?
Professional aggregators are a growing problem
for towercos. If ground leases are acquired by
professional ground lease aggregators then
negotiations over any ground lessor consents and/or
ground lease amendments that are required as part
of the transaction may become more protracted and
difficult (and more expensive) to obtain. Although
these problems do not exist when the MNO owns the
freehold title to the sites that it wishes to transfer
and an MNO may consider attempting to secure the
freehold interest for certain critical sites (if this is
possible, and it may not due to state control over
freehold titles) it is unlikely to wish to do these on
any great scale because of the significant capital
investment that this would entail and as such it will
consider the value and importance of any particular
site (and the availability of any alternative land) as
part of this analysis.
Have you missed one of
the past 10 editions of
TowerXchange?
Tower
Xchange
Tower
Xchange
TowerXchange: What can be done if foreign
companies are not permitted to own land in a
given tower market?
Marc Rennard: Why Orange is sharing towers
It is sometimes the case that the relevant local
law prohibits freehold interests being owned by
owned by foreign individuals or companies but the
prohibition may not extend to leasehold interests
which can be helpful in the context of the number of
leasehold interests in a typical tower portfolio.
Tower
Top 200 decision makers in African towers invited to TowerXchange Meetup
Tower
Xchange
Tower
Xchange
Xchange
In some jurisdictions (and typically this is the case
across Africa) there are more extensive prohibitions
on foreign ownership, extending to leasehold and
other interests, and if this is the case then the parties
can take appropriate local law advice in an attempt
to structure around the prohibition, although often
there is no restriction on indirect foreign ownership
so a local company can be established (as it would
ordinarily in any event for licensing and operational
purposes) with foreign ownership above. However,
this depends on the relevant restriction as the
applicable law may be deliberately broadly drafted
to prevent any interest in land being directly or
indirectly owned by foreign companies
< Interview with José Escobar, President of Catalina
TowerXchange Asia:
Tower
Xchange
For a limited period, you can download back
issues FREE at:
Ensure you have the entire back catalogue of
TowerXchange, which provides a record of
emerging market tower industry evolution, and
a comprehensive index of proven solution and service
XX
Mobile operators and towercos:
Developing strategies for a changing
landscape
Evolving opportunities in site efficiency, small cells and active infrastructure sharing
During the past couple of decades, tower operating
companies (towercos) have moved from being a few,
largely national operations to a wider proliferation of
well-established national and multinational businesses
in many countries around the world. In the process,
existing towercos have grown, new towercos have
been established, some towercos have consolidated
and various Mobile Network Operators (MNOs) have
divested their passive site assets.
Keywords: Active Equipment, Strategic Consultancy, 4G,
The changing landscape
Historically towercos were centred on developed
countries. Since the late-2000’s, growth has
particularly been driven in Asia, Africa and South
America, in part as MNOs look to benefit from the
capex and opex savings that a towerco can deliver,
as well as the cash injection that can result from
the sale of their sites. These are significant enablers
for an MNO, allowing them to fund network
development and new technology deployment,
and to grow market size and share. Less focus on
coverage as a differentiator has also been a key
facilitator, as individual networks cover ever higher
levels of population and differences in coverage
reduce (for example, over 75% of the sub-Sarahan
population in Africa now has mobile coverage).
The introduction of third party towercos, offering
sites to all with a focus on cost and quality (such
as power availability), has also unlocked the use of
shared sites (and so shared costs) in many countries.
LTE, Business Model, Energy Efficiency, Densification,
Active Infrasharing, ARPU, Change Management, Small
Cells, RF Design, Infrastructure Sharing, Africa, Asia,
By Dave Tanner, Digital Infrastructure, Mott MacDonald
South America, Mott MacDonald
<
<
<
<
The evolution of emerging market towercos: an idea whose time has come
The trade off between coverage and capacity in an LTE cell
The role of towercos in future heterogenous networks
Active infrastructure sharing: opportunity or or threat?
A new business model
This change in landscape represents a significant
shift in operators’ ways of implementing their
networks which still remain a key element in
their business. Operators are increasingly ‘letting
go’ of their networks – particularly the passive
infrastructure (although, in some cases, active
elements are also being released) – implementing a
recognition that their infrastructure is really only
a means to an end (of providing service to their
customers).
These developments are the result of the ever-wider
acceptance of a business model where towercos
can play an important part in the value-chain –
operating and managing operators’ macro sites – see
Figure 1.
Figure 1: The changing site build and management value chain
New site build: Market Planning Network Planning & Design Acquisi7on Design Construc7on Installa7on I&C Increasing costs as traffic and technology change
It is well accepted that a major change is underway
in how mobile networks are used. Data is replacing
(or, for many networks, has already replaced) voice
as the dominant traffic, with data traffic growing
exponentially across networks around the world, as
illustrated in Figure 2.
To address this increasing demand, technologies
are changing significantly – and not just in terms
of the move from 2G to 3G to 4G. The fundamental
nature of how these technologies are best deployed
Figure 2: Mobile data traffic growth
since 2008
Source: Cisco
TowerCo Site/ network management: Opera7on Maintenance Op7misa7on Key ‘Tradi:onal’ MNO opera:ons TowerCo opera:ons TowerCo is changing. 2G technologies delivered a specific
set of low-data rate services (voice and SMS). Later
versions of 3G technologies and the 4G technology
(LTE), in particular, deliver a multitude of services
across low to high data rates. 4G can easily tradeoff data rate (i.e. capacity) against individual site
coverage; large cells with limited capacity can be
implemented (in rural areas, for example), as can
small cells with high capacities (in dense urban
areas, for example) – as illustrated in Figure 3.
4G implementations will no doubt use both; a
wide-area macro layer providing coverage (as
opposed to capacity) and a small cell layer providing
capacity (but not coverage). Whilst this separation of
coverage and capacity layers also occurred in earlier
technologies, it is central to the implementation
of 4G. And it is the implementation of small cells,
with sites located proximately to demand, that will
enable 4G to provide large increases in data rate
capabilities. Note that within the definition of small
cells here we include the integration and greater
use of Wi-Fi. It is important to stress that these small
cells need to be located ‘on top’ of demand. Both
3G and 4G deliver capacity most efficiently closer
to the radio antennas (as also illustrated by Figure
3); hence trying to serve high demand from remote
locations wastes radio resource, requiring greater
network expenditure.
And, whilst mobile operators implement ways of
addressing ever increasing user demand, they
XX
Figure 3: Trading off coverage and
capacity in an LTE cell (illustrative)
Source: Mott MacDonald
also continue to push coverage out to previously
‘uneconomic’ areas – particularly rural areas, and
particularly in the developing world.
This implementation of new radio technologies,
deployment of small cells, and pushes into remoter
regions continue to increase the cost demands
placed on MNOs.
ARPU challenges and pressures on business
Set against this growth in data, new technology
implementations, increases in coverage and
(resulting) increases in costs, is the fact that, in
many countries, ARPUs continue to fall. Figure 4
illustrates this across various global regions. The
fall is typically driven by competitive pressures, as
well as increased penetration bringing ‘lower value’
subscribers onto networks.
The regional view presented in Figure 4 does hide
the fact that ARPU in a few countries has risen in
recent years. For example, ARPUs in the USA have
recently being rising by 1-2% pa and by up to 3% pa.
in Japan. However the cost of providing the network
infrastructure needed to meet increasing traffic
demands is often not compensated for by any ARPU
increase. And, for networks with falling ARPUs,
these infrastructure cost increases are also often a
second ‘whammy’ that they experience.
Rising costs and falling ARPUs place increasing
pressures on MNOs – and it is these business
pressures that have, in part, helped towercos
flourish through the business model developments
discussed above. They have encouraged MNOs to
look into deeper site sharing and site consolidation
– looking towards the relatively easy step of cost
savings and cash injections that towercos can
deliver.
Figure 4: Falling ARPU 2005-2014
Source: GSMA
regularly reviewed. We believe that the following
three actions (amongst others) will become
increasingly important to every towercos business:
1. Developing a strategy around small cells
The implications for a towerco
Whilst the issues of rising traffic, rising costs
and falling ARPU have, in part, facilitated the
establishment and development of towercos, we
believe that towercos themselves must focus on
these issues as they will be directly pertinent to
the future shape of their businesses. And, in those
terms, there are a number of actions that towercos
should be considering, whilst continuing to deliver
on macro sites. Some towercos have already
developed and implemented strategies in these
areas (to a greater or lesser degree) - however,
even here, these strategies should be actively and
As discussed, small cells are the future of urban
capacity delivery; indeed, new macro cell
deployments will ultimately reduce to very low
levels (and in some countries, they already have).
There will, of course, still be the need for macro
coverage – and towercos can still provide this
(maintaining respectable margins – particularly if
they are the only source of sites in areas). However,
the MNOs are, and will, increasingly focus their
efforts on meeting the demands of their customers
in high capacity (urban) areas – as this is where the
revenue is.
Towercos should therefore continually assess the
needs of their market, explore with MNOs what
small cells business models could work, and develop
a strategy for moving this forward – at the right
time. Small cells are cost intensive (in terms of the
coverage that they deliver), and towercos can carry
these costs for MNOs whilst recovering them from
multiple parties by delivering technology neutral
infrastructure. This is already happening, in some
countries and to some degree, in places such as
shopping malls, stadiums, conference halls, and (to
a lesser degree) outdoor city centres. Small cells
will become an increasing important part of how
networks move forward though, and towercos can
position themselves to provide a pivotal role by
building and maintaining heterogeneous networks.
2. Continually examining costs; identifying and
implementing savings
The pressures on MNOs (increased costs/ falling
ARPUs) have provided towercos with a significant
source of business – both in increasing tenancy
numbers, as well as in increasing portfolio size
(through portfolio acquisitions). However these
pressures won’t disappear. towercos should
therefore expect MNOs to apply price pressures to
them, as the MNOs will do to any of their suppliers
and despite any (portfolio acquisition) agreements
that currently exist. Towercos must continually
examine their cost base, to see where developments
can deliver savings and then work to implement
these developments. For example, in the developing
world power provision can be a significant part
of site costs – but new power technologies can
help reduce this, with expectations that future
developments will further assist. Staying close to the
cutting edge, and implementing new technologies,
will enable towercos to maintain their financial
security.
3. Developing a strategy around deeper network
sharing
For a number of years, MNOs have examined
deeper network sharing (beyond passive site
sharing), and the associated potentially increased
cost savings, but it is only relatively recently that
‘active’1 sharing has been implemented (on a wide
scale within a network). If and when, this becomes
more commonplace, towercos are in a good position
to be a facilitator, provided that a suitable business
model can be established and the prices to the
MNOs are right. As a first step, towercos should
look at ‘adjacencies’ – other services/areas in the
business model/network provision that they could
easily and reasonably move into. These could be, for
example, the provision of shared site backhaul or
the wholesale provision of network2 in challenging
areas (as is being done by some ‘towerco’ operations
in a few African countries). Beyond ‘adjacencies’,
towercos must work with MNOs to understand their
strategies around deeper network sharing – and be
ready with considered propositions to enable them
to play a significant part.
The implications for an MNO
There are very few MNOs globally who are not
examining ways of reducing cost. And – for those
that haven’t already – we believe that all MNOs
should carefully examine the benefits delivered by
towercos in this regard, as well as in the potential
for releasing cash from their passive sites assets.
It is a given that sites are only a means to the end
of delivering services to subscribers (with service
differentiation being the key to competition), and
that towercos provide better focus on these site
resources.
However MNOs should look beyond the simple
cost reductions and cash injections of passive site
sharing. Shared infrastructure must become central
to their strategies going forward, at a macro level as
well as at the small cell level. These strategies must
also address deeper network sharing. However,
none of these considerations are straightforward
and many strategic options exist. Regulators are
a significant stakeholder that must be engaged,
for instance. Examining and implementing these
strategic options can deliver significant benefits to
the MNOs and their subscribers – and towercos can
play a significant role in these strategies, if the right
environment is established
Footnotes
1 Sharing of active network antennas, feeders and
Developing and implementing strategies in these
areas will greatly assist a towerco in increasing
their valuations beyond models centred on only site
and tenancy numbers.
electronics
2 Provision of shared towers, antennas, base stations,
backhaul and switches in remote areas that interface
with, and deliver traffic to, MNOs existing networks
XX
Lessons learned at the
TowerXchange Meetup Asia 2014
Several key Asian markets migrate toward
independent towerco business model
When independent towercos enter a market and
build towers for, or acquire towers from, MNOs, the
towerco assumes responsibility for the procurement
of passive infrastructure equipment and services.
The independent towerco business model originated
in India. India is therefore a mature market with
two thirds of the country’s 450,000 towers owned by
towercos, and almost all the new build undertaken
by towercos. The Indonesian towerco market is
similarly well established, 51% penetrated, and highly
lucrative.
Investor Keynote Panel from TowerXchange Meetup Asia 2014
TowerXchange Meetups attract senior representatives from all segments of the telecoms
infrastructure ecosystem, including MNOs, investors, equipment and service providers, but what
is unique about this community is it’s ability to engage with CXOs at the tower companies who are
acquiring an increasing proportion of the telecom towers in some of Southern and Southeast Asia’s
most important markets.
The TowerXchange Meetup Asia attracted senior representatives of 74% of the region’s towercos who own
or are contracted to build >1,000 towers, including critical players such as Apollo Towers, Digicel MTC,
Indus Towers, Irrawaddy Green Towers, Protelindo, STP, Viom Networks and Axiata’s new towerco edotco,
who were the Diamond Sponsors of the event – most of the executive management team from edotco were
present including the CEO, COO and CSMO.
The phenomenon of independent towercos building
and acquiring towers is newer elsewhere in Southern
and Southeast Asia. Most noteworthy is the greenfield
rollout in Myanmar, where the ~1,800 towers owned
by MPT and the additional 250-400 being built by
Huawei for MPT notwithstanding, all the new towers
being rolled out by newly licensed international
operators Telenor and Ooredoo will be built and
owned by independent towercos. TowerXchange
forecast that 85% of Myanmar’s towers will be owned
by independent towercos by 2018.
The independent towerco business model is starting
to take root in several new countries, driven by the
launch of Axiata’s towerco, edotco. edotco owns 13,000
towers across Malaysia, Bangladesh, Sri Lanka and
Cambodia, plus 12,000km of fibre and plans to build
towers in Pakistan. There are also small local towercos
in each of these markets, as well as in Vietnam
Appendix 1: Summary of estimated tower count and penetration of
the independent towerco model in Southern and Southeast Asia
Est # of towers in country
Est % of towers owned by towercos
Bangladesh26,000
20%
Cambodia4,500
33%
India450,000
66%
Indonesia72,000
51%
Malaysia20,000
33%
Myanmar4,400 today
60% today
17,300 by y/e 2017
85% by y/e 2017
PakistanUnknown
Unknown
Sri Lanka7,000
31%
Vietnam30,000
~10%
“
“
Country
I thank you and your team for organising such a wonderful
professional event from which we all benefited
- Mohammad Razaul Karim Rizvi, Teletalk
XX
Appendix 2: Key players represented at the TowerXchange Meetup Asia 2014
Apollo Towers Myanmar
Deploying 1,001 towers in the initial phase of rollout
for Telenor
Representative(s):
HB, Head of Corporate Finance
Axiata
One of Asia’s leading MNOs
Representative(s):
DB, Advisor to the CEO
Common Tower Technologies
Malaysian towerco, operating over 250 towers in the
country
Representative(s):
MH-M, CEO
“
Digicel Myanmar Tower Company
Rolling out 1,250 towers in the first phase for Ooredoo
Representative(s):
OC, CEO
edotco Group
Axiata’s carve out towerco. Owns over 12,000 towers
across Malaysia, Sri Lanka, Pakistan, Bangladesh and
Cambodia
Representative(s):
SS, CEO
ThR, CFO
NE, COO
WZA, CMO
JM, Founder
GK, Director, Group Strategy and Commercial
It was indeed a pleasure to be part of TowerXchange Meetup Asia 2014.
Please accept my heartiest congratulations for bringing the who’s who of
the Asian telecom ecosystem under one roof and for flawlessly executing
an event of this scale. Perhaps, it wouldn’t be an overstatement to term
it as the first of its kind in Southeast Asia. I would look forward to such
events organized by you across emerging markets including Latin
America, Eastern Europe, Africa and of course Asia
- Umang Das, Viom Networks
“
NIA, Head, Electrical & Power System Design
RD, Advisor, Regulatory
edotco Bangladesh
edotco recently completed a transaction with Robi in
Bangladesh, where they market 5,300 towers
Representative(s):
DS, Country Managing Director
AS, Director, Business Development
edotco KH
edotco markets around 1,500 towers in Cambodia
Representative(s):
PW, Country Managing Director
edotco Malaysia
edotco owns over 3,500 towers in Malaysia, carved out
from Axiata’s local opco Celcom
Representative(s):
HHZS, Country manager – Malaysia
CWL, Specialist, Marketing Communications
MSBM, Key Account Manager
edotco Pakistan
edotco owns 12,000km of fibre in Pakistan and is
building a towerco organically
Representative(s):
MRF, Head of Business Development
edotco Sri Lanka
edotco markets 2,150 towers in Sri Lanka, acquired
from Dialog
Representative(s):
MV, Country Managing Director
Global Tower
Operator-led towerco carve-out from Turkey, where
they own 20,000 assets. Owned by Turkcell. Also has
a subsidiary, UkrTOWER, in Ukraine, where they own
500 towers
Representative(s):
CNB, General Manager
ET, Director
GTL Infrastructure
Indian towerco, where they operate 29,432 towers.
Representative(s):
TK, VP, Strategic Initiatives
Hutchison 3
Majority owned by Hutchinson Whampoa, Hutchinson
3 operates in Australia, Austria, Denmark, Hong Kong,
Macau, Indonesia, Ireland, Italy, Sweden, and the
United Kingdom
Representative(s):
FK, Site Sharing Roll-Out Manager
Indosat
One of Indonesia’s ‘Big Four MNOs
Representative(s):
FP, Division Head Tower Commerce - Tower
Management Group
TF, DH Administration and Compliance
Indus Towers
World’s largest towerco, operating 114,101 towers
across India
Representative(s):
BD, COO
MS, Management Officer
SS, CSMO
Rolling out 1,500 towers in phase one for Telenor
Myanmar
Representative(s):
PT, Chairman
AK, Vice Chairman
KD, CFO
KDDI Summit Global Myanmar
Japanese operator and Sumitomo Bank injected
around US$2bn into incumbent Myanmar operator
“
MPT earlier in 2014
Representative(s):
TN, Manager
Komet Infra Nusantara (KIN)
Building an interesting Indonesian towerco one
acquisition at a time. Current tower count is around
500
Representative(s):
DB, CEO
Ooredoo
Ooredoo launched services in Myanmar in August
2014, with coverage available to 7.8mn citizens in 71
cities, attracting a million subscribers in its first three
weeks of operation
Representative(s):
NS, Chief Strategy Officer
SW, Senior Director and General Counsel
I would like to thank you and TowerXchange for organising such an
effective conference for the various operators, investors and vendors within
the Asian tower space to meet and exchange ideas and discuss trends. We
hope TowerXchange will be organising another Asian conference next year
and Macquarie will certainly be interested to participate
- Tharma Kunaratnam, Macquarie
“
Globacom
One of Africa’s fastest growing MNOs, with licenses in
Nigeria, Ghana, Benin and Cote d’Ivoire
Representative(s):
AG, CTO
XX
Protelindo
Leading towerco in Indonesia, where they operate
10,300 towers. Protelindo is also involved in Pan Asia
Tower in Myanmar, where they are rolling out an
initial 1,250 towers for Ooredoo
Representative(s):
SW, CFO
Robi
MNO from Bangladesh – recently divested towers to
edotco
Representative(s):
MK, Board Member
SACOFA
Independent towerco from Malaysia, where they own
over 700 towers
Representative(s):
SO, CEO
Representative(s):
MRKR, Manager of Network Planning and System
Engineering
Representative(s):
SK, Principal Category Manager, Energy & Network
Sites Infrastructure
Towershare
Operates 400 towers across the Middle East and
Southern Asia, including in their original market of
Pakistan
Representative(s):
RH, President & CEO
SG, Legal Counsel
FM, Manager Strategy and Investments
IS, Director
BK, VP Business Development
Young Investment Group
Owner of Eco Friendly Tower Pte., newly formed
towerco in Myanmar
Representative(s):
TA, Chairman
Tower Vision
Operate 8,600 towers in India
Representative(s):
MS, Founder and Director
PT Solusi Tunas Pratama (STP)
Third largest towerco in Indonesia with ~7,000 assets.
Recently announced major transaction with XL
Representative(s):
NT, President Director
JG, Finance Director
EAS, Operations Director
Vimpelcom
One of world’s leading MNOs with opcos in Bangladesh
and Pakistan
Representative(s):
AM, Business Development Director
FK, Business Development Executive
Tata Communications International
Indian mobile network operator
Representative(s):
AS, Head of Sales, Asia Pacific
Viom Networks
Operate 43,000 towers in India
Representative(s):
UD, Chief Mentor
Teletalk
Bangladeshi operator
Vodafone
The world’s second largest mobile network operator
Tower
Xchange
April 28-30, Westin Diplomat Resort &
SPA, Hollywood, FL
Meetup Africa 2015
October 1-2, Sandton Convention Centre,
Johannesburg
Meetup Asia 2015
November 24-25, Marina Bay Sands,
Singapore
Meetup Asia 2014 - Country Breakdown
Series1
0
5
10
15
20
25
30
Meetup Asia 2014 - Seniority Breakdown
35
Hon
Net
Sout
Unit
Ban Cam
Den
Ger
Indo
Kaza Leb Luxe Mal Mya
Sing
Sri
herl Nige Paki
h
ed
Aust
Can Chin
Fran
Gha g Indi
Irela Isra
Japa
Swe Thai Tuni Turk
glad bodi
mar
man
nesi
Italy
khst ano mbo aysi nma
apor
Lank
UAE
USA
ralia
ada a
ce
na Kon a
nd el
n
den land sia ey
and ria stan
Afric
King
esh a
k
y
a
an n urg a
r
e
a
g
s
a
dom
8%
2
2 Australia
2
2 Bangladesh
21%
1
1 Cambodia
1
1 Canada
8
8 China
3
3 Denmark
19%
C-level
2
2 France
VP, SVP, Partner
5
29
26 India
8
8 Indonesia
3
3 Ireland
4
2 Israel
1
1 Italy
4
4 Japan
1
1 Kazakhstan
2
2 Lebanon
1
1 Luxembourg
21
21 Malaysia
5
11 Myanmar
2
2 Netherlands
1
1 Nigeria
1
1 Pakistan
17
14 Singapore
2
2 South Africa
1
1 Sri Lanka
4
4 Sweden
1
1 Thailand
1
1 Tunisia
2
2 Turkey
7
7 UAE
7
7 UK
11
11 USA
TXMUP Asia 2014 - Country Breakdown
1
1 Ghana
5 Hong Kong
Director-level
Managing Exec/Senior Manager
26%
Middle Manager
26%
“
“
1
1 Germany
Congratulations on putting together a truly world class
event - Pankaj Agrawal, Capitel Partners
XX
Special feature:
edotco 360
edotco is the first pan-Asian infrastructure services company, with 13,000 towers
across Malaysia, Bangladesh, Sri Lanka and Cambodia, and 12,000 Km of fibre in
Pakistan, where they will build 200 towers in 2015. TowerXchange recently travelled
to Kuala Lumpur to interview the C-suite at edotco.
This special feature opens with coverage of edotco CEO Suresh Sidhu’s keynote
presentation at the recent TowerXchange Meetup Asia, where edotco were our
Diamond Sponsors. Sidhu suggested that the changing shape of the telecom
value chain, in which operators were experiencing exploding data usage without
significant revenue increases, coinciding with escalating licensing and technology
costs, would lead to the unbundling of the mobile operator.
Malaysia’s first Six Sigma Master Black Belt Nashad Emir is now the COO of edotco.
Nashad is on a quest to change the mindset of the tower industry to focus on
resolving downtime rather than measuring uptime - read all about it in his interview.
In his interview, CFO Thivanka Rangala explains the economics of shared towers
from operational models to create efficiencies at site level, to a strategic perspective
on whether and when operators should sell their towers.
Finally, CSMO Wan Zainal Adileen Wan Puteh talks to us about standardising and
localising best practices to meet needs of different markets and customers. Wan
also has some interesting views on new product development that reflect edotco’s
proposition as a diversified provider of infrastructure services and enabler of
connectivity.
Featuring exclusive insights from:
190 Suresh Sidhu, CEO, edotco
194 Nashad Emir, COO, edotco
198 Thivanka Rangala, CFO, edotco
201 Wan Zainal Adileen Wan Puteh, CSMO, edotco
Unbundling the mobile
operator
Suresh Sidhu, CEO of edotco Group, identifies the new drivers for mobile
infrastructure in Asia
During the inaugural TowerXchange Meetup Asia
held in Singapore this past December, Mr Suresh
Sidhu, CEO of edotco Group, took center stage and
delivered a keynote speech sharing his views on the
evolution of the telecoms value chain, driven by shifts
in technology, consumer behaviour and regulatory
regimes, resulting in the “unbundling of the mobile
operator” and the emergence of a new class of
specialist infrastructure service providers.
Suresh Sidhu, CEO, edotco Group
Keywords: Who’s Who, edotco, 3G, 4G, LTE, Market
Overview, New License, Capex, Universal Access,
Transfer Assets, Tenancy Ratios, Infrastructure
Sharing, Malaysia, Bangladesh, Sri Lanka,
Pakistan, Market Forecasts, Business Model, MNOs,
Bankability, Regulations, Cambodia
< What edotco has achieved to date, and Sidhu’s vision for its future
< Standardising best practices across edotco’s five local businesses
< What is driving spin offs and carve outs?
< A call for the licensing of infrastructure providers across Asia
< Extending infrastructure services from traditional tower acquisition and co-location sales to energy
and operations management, customised site planning and optimised site design
edotco is an integrated telecommunications
infrastructure services company providing end-toend solutions from towers, energy, transmission
and operations & maintenance (O&M) in the region
of Southeast Asia with 13,000 towers and 12,000
Km of fibre across Malaysia, Bangladesh, Sri Lanka,
Cambodia and Pakistan. Some of these assets relate
to traditional portfolios which the Axiata Group
owned which were then transferred to edotco, and
others are part of the company’s organic growth
plan. In many of the countries where edotco
operates, infrastructure sharing is not a new
concept, and the challenge the company has to face
is to make sharing commercially viable.
edotco want to be a globally admired, world class
infrastructure brand by 2017. To date, edotco enjoys
a tenancy ratio across its portfolio of 1.45. Their
goal is to achieve a tenancy ratio of 2.0 and a panAsian portfolio of 20,000 towers by 2017. edotco
is the largest tower operator in Malaysia and in
Bangladesh, where it has carved out its tower assets
from the operator. The towers are run as a managed
service in Sri Lanka and Cambodia with full carve
out expected in Q2 2015.
edotco Pakistan is currently being set up. In the
country, edotco owns 12,000 Km of fibre, a critical
resource and yet a very different one to edotco’s
core business. According to the CEO, a towerco can
succeed even if it owns as little as ten towers but
when it comes to fibre, a company needs to own
thousands of kilometres to make it commercially
viable. In light of the different proposition required
to run a fibre business, it’s likely that edotco will
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keep running its fibre business in Pakistan without
looking at expanding it elsewhere in the region.
Pakistan
12,000km Fiber
Standardising best practices
Bangladesh
~5,700 Towers
In order to create Asia’s first genuinely pan-Asian
towerco, standardising best practices across their
five countries is already paying huge dividends for
edotco.
The acceleration of construction scheduling and
ultimately of network rollout has been achieved
as a result of specialisation and standardisation of
processes and designs across the footprint.
Cambodia
~1,400 Towers
Sri Lanka
~2,100 Towers
There are significant economic benefits of having
a single point of purchasing for all materials and
items, namely, in the aggregated economies of scale
arising from bulk procurement exercises that is
denied to smaller purchasers.
edotco are deploying a single vendor site
management system across all countries. And
edotco is creating of a pool of talent, both at a
regional and country-wide level, focused on
ensuring efficient operation and uptime at all their
sites.
Savings through standardisation are reaching 20%
of the original capex.
Unbundling the mobile operator
“Unbundling the value chain of the mobile
operator” is a fundamental shift which edotco’s
Malaysia
~3,500 Towers
Source: edotco Group presentation at the TowerXchange Meetup Asia 2014
customers, shareholders and team see across the
region. In fact, Mr Sidhu believes that “the mobile
industry is going through an unprecedented set
of challenges, driven by shifts in technology,
customer behaviour and regulatory approaches”.
These changes in the value chain present new
opportunities for infrastructure companies as well
as other players in the broader telecom industry.
The time is now right to ask the question: what
should be the shape and form of the ideal telco
value chain? While convergence and its opposing
force, deconstruction, have been talked about for
years, the forces at play today are probably mature
enough to finally force the unbundling of the
mobile operator. edotco is focused on “convergence
and deconstruction”.
An MNO is multiple businesses into one:
infrastructure, customer, content, brand and
pricing, distribution and retail. And whereas today
the drivers for disaggregation and unbundling are
felt strongly in the infrastructure space and in the
digital space, further disruptive changes to the
business model will doubtless follow.
What is driving spin offs and carve outs?
The telecom CFO today has several key concerns in
mind, according to Mr Sidhu: exploding wireless
data usage coming without considerable revenue
increase, spectrum scarcity, rising capex and opex,
and the constant need to refresh technology. Given
New customer-oriented regulations have been
created in various countries and universal coverage
is high on everyone’s agenda; in the meantime,
the whole concept of “fair value to customers” is a
key component of MNOs modern strategies. On the
other hand, auctions are proving very profitable
and effective and governments will keep promoting
them as Asia’s operators move towards 3G and
4G. License revenue is becoming a major source
of income for many governments. And as a result,
countries are starting to assess how much money
operators are ready to pay to obtain a license.
Meanwhile continuing investment in coverage
and new technology is requiring higher levels of
financial commitment.
Revenues are flattening due to OTT and price
competition, the traditional consumption model
is shifting from voice to data, and an integrated
offering is now the standard approach. Bundles
is the new buzzword every MNO needs to adapt
to. However, Mr Sidhu challenged whether these
comprehensive, all-inclusive types of offerings will
still be the norm in a few years or whether MNOs
will move in different directions, offering services
with a “portfolio approach”.
“
An MNO is multiple businesses
into one: infrastructure, customer,
content, brand and pricing,
distribution and retail. And whereas
today the drivers for disaggregation
and unbundling are felt strongly
in the infrastructure space and in
the digital space, further disruptive
changes to the business model will
doubtless follow
“
Source: edotco Group presentation at the
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tower industry will need strong regulatory and
licensing regimes across Asia, especially in
countries such as Sri Lanka and Bangladesh with
less mature regulation relating to infrastructure
providers. However, positive moves towards the
adoption of tower infrastructure licensing regimes
are being made across the region.
In conclusion, Mr Sidhu suggested that edotco and
the tower industry at-large were at the leading
edge of operator business model unbundling. The
growth of Asia’s tower industry is being fuelled
by increasing wireless usage, limited spectrum
availability, and the need to control capex budgets.
edotco is more than just a tower sharing provider;
they have evolved the business model to offer
specialised telecom infrastructure services with
skills focused in energy management, operations,
customised site planning and optimised tower
designs
The elegant edotco booth was heavily trafficked
that consumer dynamics have changed so much,
speed to market is now more critical than ever
before. Yet against this backdrop, the fixed cost
structure of the business is forcing CFOs to look at
ways to increase return on capital invested.
With this mindset, infrastructure becomes less core
and is seen as an asset to monetise – generating
capital is definitely another factor CFOs have
high on their agenda. Therefore, the industry is
witnessing the number of passive infrastructure
mega-deals increasing, values going up and
“considering the interest of bankers in the room”,
we are all likely to see this trend continuing!
However, Mr Sidhu rightly noted how a successful
edotco were the Diamond sponsors of the
edotco 360: Applying Six Sigma
mindset to performance measurement
in the tower industry
Changing mindsets to focus on resolving issues causing downtime, not measuring uptime
Nashad Emir was the first Malaysian to be certified as a GE Six
Sigma Master Black Belt. He’s brought that philosophy of zero
defect tolerance to a telecom tower industry which he feels need
to refocus on resolving downtime rather than measuring uptime.
Nashad also explains some of the monitoring and management
tools he is deploying at edotco, from RMS and access control
systems to asset lifecycle management back at the TOC, and
describes the structure of the O&M function at edotco.
Nashad Emir, COO, edotco Group
Keywords: How to Guide, Towercos, Access Control, Monitoring
& Management, O&M, Construction, Transfer Assets, Capacity
Enhancements, Fuel Security, QoS, SLA, Uptime, KPIs, Change
Management, Site Surveys, NOC, Asset Register, C-Level
Perspective, RMS, Asset Lifecycle Platform, Job Ticketing,
Stakeholder Buy-In, Asia, Malaysia, Bangladesh, Sri Lanka,
Cambodia, Pakistan, edotco
< How to change mindsets to focus on resolving downtime rather than measuring uptime
< How the KPIs used by telcos differ from those used by towercos
< edotco’s business models for managing O&M and power
< How edotco is leveraging RMS, asset lifecycle management and access control / time attendance monitoring
< edotco’s different approaches to building and managing distributed generation and backup power systems
within each country
TowerXchange: What’s your background
Nashad, and what do you bring to the
management team at edotco?
Nashad Emir, COO, edotco Group: I have a
background in operations and manufacturing
from many different industries, including working
for Sony and General Electric. I was the first Six
Sigma Master Black Belt in GE Malaysia, so I’m
very focused on quality and productivity, and on
a project management approach to reducing and
eliminating defects.
Six Sigma is a good philosophy – it’s a passion
of mine. In my experience, we focus too much
on ‘average’ in this business, we fail to focus on
variation. To be at 99.8% uptime looks good, but it
means there are still a few sites at very low or 0%
at times. I want to know how much variation there
is in performance at sites where power is down for
a couple of days. I don’t want to measure the 99.8%,
I want to measure the 0.2%. I want to subdivide
that into categories of downtime. This requires a
major change of mindset to a Japanese philosophy
of zero defects. The language we use to describe
performance has got to change – we should be
asking how to reduce downtime, not how good is
my uptime.
We need accountability and visibility into the
causes of downtime to create an appropriate sense
of urgency to facilitate that change of mindset.
Remote Monitoring Systems (RMS) and the Tower
Operating Centre (TOC) are crucial – you’ve got to
have a real time speedometer and fuel gauge to
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drive a tower business.
TowerXchange: How does the management
and measurement of the performance of O&M
differ as assets are transferred from MNOs to
towercos?
Nashad Emir, COO, edotco Group: All edotco’s
current assets have come from the carve out
from the Axiata Group. Within a telco, the way
performance is measured is a bit different. The
main Key Performance Indicators (KPIs) and
drivers of value are about subscribers and revenue,
driven by marketing and branding – towers and
passive infrastructure aren’t top of the list of KPIs.
“
our primary KPIs are focused
on minimising downtime,
and ensuring that any
inefficiencies that might create
downtime are reduced to a
minimum… Another set of
KPIs measure how fast we
deliver towers
“
When passive infrastructure assets are transferred
from telcos to towercos, it’s necessary to undertake
a transformation in mindset, process, and a change
in the way we approach managing O&M to become
more productive. We need to focus on adding value
within the supply chain in terms of cost efficiency
and speed to market.
TowerXchange: Is there a significant step up
required in uptime as assets are transferred
from MNOs to towercos?
Nashad Emir, COO, edotco Group: Most countries
are at 99 point something percent uptime already,
so when we take on assets it’s mostly fine tuning
and incremental improvement – even 0.1% or
0.01% downtime translates into a lot of lost
revenue! So our SLAs often require improved
uptime but it’s not a “significant step up.”
TowerXchange: What KPIs are on your
dashboard?
Nashad Emir, COO, edotco Group: Our first
KPI is quality of service measured in terms
of uptime, or as I said earlier, reduction and
elimination of downtime. We are managing power
systems on behalf of our tenants so as soon as
the site goes down it means a loss of revenue
and a compromised Customer Experience. So
our primary KPIs are focused on minimising
downtime, and ensuring that any inefficiencies that
might create downtime are reduced to a minimum.
The specific targets in our KPIs related to uptime
Menara Tower, Kuala Lumpur
are defined in negotiation with each customer –
critical sites have different grading as defined by
the Master Service Agreement, and each customer
has their own Service Level Agreements (SLAs).
Another set of KPIs measure how fast we deliver
towers, whether new builds or co-locations on
existing towers, in order optimise the management
of those projects. Our KPIs measuring speed of
delivery vary from market to market and according
to local conditions. We coordinate the project
coming together using internal and carefully
selected third party subcontractors. Different
processes may overlap or happen concurrently
from site acquisition, leasing and permitting,
ordering equipment, installing foundations, and
above ground level tower construction. Each step
in the process has it’s own cycle time, but much
depends on how good the customer is in giving us
reliable forecasts of their build requirements in
advance.
Of course we also have a number of KPIs around
cost, both costs to edotco and to the telco, helping
us identify efficiencies that benefit both parties.
Our biggest challenge is not to measure the current
performance of the business, but to forecast growth
on a Quarter to Quarter basis as telcos are seldom
able to share their forthcoming tenancy and tower
orders in advance. So our processes have to be
agile and flexible to changes; we have to be able
to deliver towers within a short period of time
with minimal notice. This is a natural challenge
of working within the telecoms industry – the
dynamics change fast, and cycle time is critical.
TowerXchange: What are the implications of
pressure on time to market for the maintenance
of contingency capacity within supply chain?
Nashad Emir, COO, edotco Group: We make sure
we have vendors who can ramp up if they need to.
However, everyone is trying to save cost by keeping
minimal stocks and raw materials, so having better
planning and forecasting is critical, as is having
secondary and tertiary sources of vendors. This
gives rise to challenges in countries lacking a good
base of local suppliers, at which point we have to
select partners who can import quickly and easily.
Alternatively we may create new designs that
require different raw materials.
Nashad Emir, COO, edotco Group: Our core
service proposition in all markets will include
power and passive infrastructure O&M but in
selected markets, such as Bangladesh, we’re going
into active infrastructure management as well.
We intend to expand our offerings to meet the
changing needs of our customers.
We are investing in a state of the art approach to
remote monitoring. We’ve signed the deal with
our vendor partner and are in the process of
implementation in our TOC. This will enable us to
offer a value added service to monitor and manage
different tower components such as the remaining
charge in the batteries, the level of fuel in tanks,
temperature inside the cabinets, and it will help
minimise fuel pilferage.
TowerXchange: Do edotco manage O&M in
house or is it outsourced?
TowerXchange: What performance
measurement systems do you use?
Nashad Emir, COO, edotco Group: Our O&M
business model is defined by a balance of what
makes sense in each country, together with trying
to standardise the way we manage O&M.
Nashad Emir, COO, edotco Group: Across all our
towers, edotco are investing in tools designed
specifically for passive infrastructure performance
measurement, tools which telcos wouldn’t
necessarily invest in.
In most countries we outsource O&M, but we
manage the projects. But in Bangladesh we
undertake maintenance of passive and active
infrastructure in house.
TowerXchange: How deep is edotco’s service
proposition? From pure steel and grass to full
service inclusive of energy, maintenance et
cetera?
We have already awarded a contract to a proven
asset management system provider that will
enable us to ensure that all the documentation
about a site is in the right place, to ensure assets
are tracked, to monitor the delivery timeline, and
to automate the collection and analysis of data
to ensure visibility at country and headquarters
level.
XX
Nashad Emir, COO, edotco Group: Our asset
lifecycle management platform has modules
for project management, billing, inventory
management, and resource management. So we’re
able to track assets from when we inherit or build
them all the way to decommissioning.
Real time data from our RMS is fed into our
TOC, enabling edotco to be more focused on
performance on a day to day basis.
We are also implementing digital lock access with
time attendance monitoring. Data will be integrated
between this and the RMS to create a more
complete dashboard monitoring performance.
TowerXchange: How important is having an
accurate and up to date asset register?
Nashad Emir, COO, edotco Group: We want to
improve the accuracy of inventory data at all sites.
Given the number of different countries edotco
is already operating in, we need to automate the
maintenance of a reliable asset register, otherwise
data literally will be all over the place.
We’ve commenced our audits, gathering complete
documentation on lease agreements, tower loading
data, and site inventories. Once the asset lifecycle
management system is up and running, the data
“
“
TowerXchange: How do you translate data into
actionable intelligence, for example integrating
RMS data into job ticketing and project
management workflows?
Having a reliable and up to date asset register is also critical for sales,
who are then equipped with the tools they need to tell the customer
exactly how much space is available on any given tower
will be input and all future orders will be through
this platform, providing valuable visibility for us
and for our customers so they can see where orders
are, and potentially improve forecasts.
In contrast grid availability is very poor in
Bangladesh, basic transport infrastructure is
lacking, and flooding creates havoc – so our focus is
more on availability and site autonomy.
Having a reliable and up to date asset register is
also critical for sales, who are then equipped with
the tools they need to tell the customer exactly how
much space is available on any given tower.
TowerXchange: Do many of your towers need to
be upgraded to co-locate multiple tenants?
TowerXchange: Talk to us about the challenge of
building and managing distributed generation
and backup power systems within your
networks.
Nashad Emir, COO, edotco Group: Our approach
differs from country to country. For example
Malaysia has good grid supply, so our dependence
on redundancy is less. Therefore our focus in
Malaysia can be on the delivery of new towers, and
structural upgrades, because uptime is stable.
Nashad Emir, COO, edotco Group: The specification
of the majority of towers we’ve acquired to date
allow us to put additional tenants on – most towers
don’t need to be upgraded, they tend to be built
over-spec. Moving forward we want to optimise
and right-size tower design
Nashad will be among the roundtable leaders
at the TowerXchange Meetup Asia. Join him
and many other senior executives from the
regional tower industry in Singapore, 9-10
December 2014.
edotco 360: How to deliver
telecoms infrastructure at the ‘right cost’
How edotco make the business case to lease rather than build towers, or to sell rather
than retain passive infrastructure
CFO Thivanka Rangala’s job is to oversee
standardisation and efficiency programs, adding
value to inherited assets with a potential future
IPO in mind. Of course edotco’s first responsibility
is to create value for its customers, while creating
a business case where it makes more sense
for operators to lease than build towers, and
persuading operators to avoid the risk of ‘last
mover disadvantage’ by transferring their assets to
a towerco.
Thivanka Rangala, CFO, edotco Group
Keywords: Towercos, Market Overview, Valuation,
Transfer Assets, Tenancy Ratios, Co-locations,
Build-to-Suit, Business Case, First Mover Advantage,
Bankability, Anchor Tenant, ROI, Procurement,
Decommissioning, Carve Out, Infrastructure
Funds, C-Level Perspective, Infrastructure Sharing,
Asia, Malaysia, Bangladesh, Sri Lanka, Cambodia,
Pakistan, edotco
< How to create a tight operational model to maximise efficiency
< What should be managed locally, what should be standardised and managed centrally
< How to add value to assets in a mature market like Sri Lanka
< “Last mover disadvantage” – the risk of towers becoming stranded assets on the balance sheet
< The economics of building versus leasing towers
TowerXchange: Please could you introduce
yourself to TowerXchange’s readers – what is
your background, what is your role, and what
attracted you to join the edotco team?
Thivanka Rangala, CFO, edotco Group: Prior to my
current role, I was the VP Regional Development
and Investor Relations of Axiata Group, looking
after the Regional Development of the holding
company subsidiaries which includes performance
monitoring and analysis, KPI setting and
management, strategy and investors relations.
In January 2014 when Axiata first set up edotco,
I was assigned as the CFO of edotco Group, with
a mandate to run standardisation and efficiency
programs to ensure edotco is operating at the ‘right
cost’.
In comparison to MNOs, infrastructure companies
can be straight forward and trickier to manage.
Controlling infrastructure means controlling
somebody’s life blood for five, ten or fifteen years
down the line.
The advantage with edotco is that we are the
carved out assets from Axiata and that gives us a
solid footprint from day one.
TowerXchange: How does the opportunity
compare in markets where you have to build
compared with markets where assets can be
carved out from an existing Axiata Group opco?
Thivanka Rangala, CFO, edotco Group: The country
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where edotco’s business consists of completely new
build is Pakistan, a market which is as complicated
as it can be. In Pakistan we have the opportunity to
start afresh, with no anchor tenant.
You have to show you made it better after you
inherited it - consolidating and growing the
footprint, otherwise it’s tough to realise the
valuation you’re looking for.
Operations, sales and marketing are done at
ground level by our country operational teams.
The rest of the business is fairly standardised,
in turn allows us to manage centrally and create
economies of scale.
TowerXchange: Thivanka, you might recall
speaking for me when I used to run the Mobile
Money Group and associated events. Is there an
opportunity to synchronise towers with mobile
money branch network extensions?
TowerXchange: How is edotco financed? Is there
the possibility of a future IPO?
Thivanka Rangala, CFO, edotco Group: With respect
to the potential synergies between mobile money
branch extensions and network extensions, I think
any sort of speculative build can be dangerous,
but if there’s a roadmap for an operator to extend
into a new geographical area where the potential
ARPU made the business case marginal, mobile
money might make a couple of percentage points
of difference. However, the first mover in such
remote locations might have two to three year’s
head start before the market can sustain a second
operator and co-location becomes an option.
Thivanka Rangala, CFO, edotco Group: edotco is
fully equity based today - 100% owned by Axiata
Group. It’s not efficient to be 100% equity funded –
we’d look to leverage at some point or other.
“
There were a lot of tower swap
deals before we inherited towers
in Sri Lanka – the tenancy ratio
was already 1.8 – a typical sign
of a mature market. Co-locations
are just ticking over 2.0 now so
sharing is close to the maximum
“
TowerXchange: Focusing on your old home of
Sri Lanka, are edotco operating in a well served
market where decommissioning of parallel
infrastructure may be necessary, or are more
sites needed to densify cell sites and extend
coverage?
Thivanka Rangala, CFO, edotco Group: Sri Lanka
is a relatively mature tower market with close to
100% coverage. edotco is marketing 2,150 of Sri
Lanka’s ~7,000 towers.
Sri Lanka
There were a lot of tower swap deals before we
inherited towers in Sri Lanka – the tenancy ratio
was already 1.8 – a typical sign of a mature market.
Co-locations are just ticking over 2.0 now so
sharing is close to the maximum.
Sri Lankan operators have already rolled out LTE,
but there’s more build work to be done particularly
smaller sites to supplement capacity. There is
“
“
operators can’t build or operate towers at the cost of towercos are
offering. We benefit from sharing costs two or three ways. In general
capex recovery is ten years – that’s in line with tenor that you sign up for
greater potential if there’s an upturn Sri Lankan in
the economy; with the addition of new buildings,
IBS and aesthetic towers, structures that blend in
with environment, are likely to be in demand.
Towercos don’t have much incentive to
decommission towers, which is seldom necessary
as parallel capacity is often found in high yield
locations where one tower may be at capacity, so
someone else will want capacity on the other tower
– there’s often potential to monetise the lower part
of the tower to non-telco tenants.
TowerXchange: Do you agree with the threat of
“last mover disadvantage” applying to operators
who bring their towers to market late, whose
towers become stranded assets on the balance
sheet?
Thivanka Rangala, CFO, edotco Group: As operator
you have legacy thinking that coverage is king,
but in every market it’s only a matter of time
before parity is achieved and the competition
catches up. If you are a market leader, you have an
opportunity to be a first mover in infrastructure
sharing and co-location. If you are a new market
entrant with financial resource and planning to
deploy, you can get to market quicker with colocation.
From towerco’s perspective, we can’t push out the
tower network speculatively; it doesn’t make sense
to buy idle towers. But if we get into a market early
we can do amazingly well in terms of co-locations
and tenancy ratios, even in markets with two or
three towers in a GPS location, as long as there’s
more than one tenancy the business model works.
For operators who sell late in game, it’s a bit of
a trick. Operators who are a last to sell may not
attract any interest from towercos, and if they do
they are likely to only attract a valuation which is
a product of the replacement value of those towers
are minus the potential co-locations they have
missed. Similarly there is no logic for operators
thinking about retaining their most strategic and
valuable sites until later, if they bring less attractive
towers to market first, they’re a headache and
won’t attract the same interest.
TowerXchange: How do the economics of
building versus leasing towers compare?
Thivanka Rangala, CFO, edotco Group: The reality
today is that operators can’t build or operate
towers at the cost of towercos are offering. We
benefit from sharing costs two or three ways. In
general capex recovery is ten years – that’s in line
with tenor that you sign up for.
The economics are slightly different in remote
areas where we might have to charge a slightly
higher lease rate to recover capex.
The replacement cost of a tower in Southern
and Southeast Asia can vary from US$30-200k
depending on the size of the structure. Camouflage
adds a lot of, and often doesn’t co-locate very well,
but is a necessary option in some locations and
regulatory environments.
These costs will go down with the use of new
designs, structures and materials
Thivanka will be among the roundtable leaders
at the TowerXchange Meetup Asia. Join him and
many other senior executives from the regional
tower industry in Singapore, 9-10 December 2014.
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edotco 360: Localising sales and
product innovation to meet the needs
of each market
Wan Zainal Adileen Wan Puteh is the Chief
Sales and Marketing Officer of edotco Group.
He is responsible for managing and setting the
various key strategies for the overall spectrum
of regional sales and marketing, corporate
communications and branding for edotco
Group.
Wan Zainal Adileen Wan Puteh, Chief Sales and
Marketing Officer, edotco Group: I have vast
experience in telecommunications and IT industry
having served in leadership positions in various
multinational conglomerate over the last 20 years.
My successful milestones include the deliverance
of multimillion complex projects; setting up and
operationalised country businesses in Pakistan,
Indonesia, Malaysia and Singapore. I was also
instrumental in delivering record breaking sales
orders and closing of key projects in South East
Asia, Australia and Japan.
Keywords: Towercos, Market Overview, Tenancy
Ratios, Co-locations, QoS, Skilled Workforces,
Multi-Country Partner, Rooftop, Asset Register,
C-Level Perspective, RMS, Infrastructure Sharing,
Asia, Malaysia, Bangladesh, Sri Lanka, Cambodia,
Pakistan, edotco
Throughout my career, I’ve had significant
involvement in corporate exercises in the areas of
Project Management, Business Development and
Sales and Country Management for companies namely Maxis, Logica CMG, IBM and Tekelec (now
known as Oracle).
Monetising towers, power and fibre at Asia’s new multi-country infrastructure business
Wan Zainal Adileen Wan Puteh, Chief Sales
& Marketing Officer, edotco Group
< Standardising best practices while localising edotco’s our proposition to meet the needs of different markets
and customers
< More than just a towerco – a broader vision of how to ensure edotco’s customers and their subscribers
receive a better service
< A closer look at the tower markets in Bangladesh, Sri Lanka and Pakistan
< How edotco sell co-locations and BTS programs
< The relationship between sales and marketing and new product development
TowerXchange: Please could you introduce
yourself to TowerXchange’s readers – what is
your background, what is your role, and what
attracted you to join the edotco team?
My philosophy in building edotco’s regional
sales organisation has always been to embed the
aforementioned standard best practices across
the organisation, whilst creating a sales structure
that adapts to local requirements and is scalable
whether we’re in five, six, seven, eight or more
countries.
TowerXchange: Let’s talk about the marketing
side of your role. How do you market
‘enabling connectivity’? How do you promote
an intangible concept to your unique target
market?
Wan Zainal Adileen Wan Puteh, Chief Sales
and Marketing Officer, edotco Group: ‘Enabling
connectivity’ is deliberately a very broad concept.
We wanted our name to be generic so as not to
focus on a hard sell on the tower itself, but rather
to position ourselves with social responsibility,
environmental conscience and a broader portfolio
of infrastructure solutions. Ultimately our goal is
to ensure our customers and subscribers receive a
better service, and how we support the end user in
“
While our main focus may be
on towers, we want to expand
into energy management, the
improvement of tower structures
and provision of special
structures, remote monitoring,
and other ways to monetise
infrastructure not limited to
telcos – we don’t want to limit
ourselves
“
Dhaka, Bangladesh
having that better service is through the delivery of
a solid base for the deployment and management
of passive infrastructure.
While our main focus may be on towers, we
want to expand into energy management, the
improvement of tower structures and provision of
special structures, remote monitoring, and other
ways to monetise infrastructure not only limited to
telcos.
TowerXchange: I understand edotco are
currently marketing 6,300 towers in Bangladesh.
Can you share some insights from your initial
months of serving the market?
Marketing Officer, edotco Group: Robi is one of
the top three operators in Bangladesh. A division
within Robi itself has been established as a forum
to promote co-locations.
XX
Reducing costs for our customers is a key objective
in Bangladesh, but so is ensuring safety. There
are a lot of rooftop structures in Bangladesh,
and unfortunately some challenges with the
architecture of buildings, so we have to be mindful
of the weight of rooftop structures, which can in
some cases limit co-location capacity.
TowerXchange: How does your business change
in the more build to suit focused environment
in Pakistan?
Marketing Officer, edotco Group: We plan to
develop excellent relationship with Pakistan’s local
operators and to build 200 towers in the next 12
months – to build best in class sites, leveraging
new products and enhancements as a showcase for
the country and edotco.
The concept of an independent towerco is
relatively new in Pakistan, hence edotco is
committed to establish its operations and points of
contact in the country.
TowerXchange: How do you sell co-locations? Is
it a proactive or a reactive sale?
Marketing Officer, edotco Group: Relationships and
“
Planning new sites has to be driven to an extent by
marketing. Site planning is effectively a funnel for
us.
Our sales team are equipped
with comprehensive, reliable
data on our assets, combined
with market data so they know
where the high yield sites are,
where we know competitors
have found it difficult acquiring
a permit to build
“
As an independent infrastructure business, edotco
is marketing around a fifth on Bangladesh’s towers
(our most recent estimates suggest there are 25,858
towers in the country).
knowledge about our assets and our customers’
assets are crucial.
Our sales team are equipped with comprehensive,
reliable data on our assets, combined with market
data so they know where the high yield sites are,
where we know competitors have found it difficult
acquiring a permit to build.
Our target customers are typically network
planners within the CTO’s organisation, although
initially we need to convince the CTO and CFO to
lease not build, to move from capex to opex, but
this is all hypothetical if we don’t have the sites
they need, so the endorsement of the network
planner is essential.
While we are proactive in forming relationships
with our customers, co-location sales can to an
extent be a reactive sale – it is real estate; either we
have the location or we don’t. It’s a more proactive
sale when we’re doing build to suit, both in terms
of promoting the service to anchor tenants, and
proactively selling site that are built to other
operators to ensure they know what’s coming up.
TowerXchange: Talk to us about the
relationship between your sales and marketing
team and R&D when it comes to new product
innovations.
Marketing Officer, edotco Group: It is a task for
me and my team to package edotco products and
services, combined with innovations and bring
them to market.
Special structures, such as new tower designs, are
an important part of our offerings in urban cities
where we must meet local regulations concerning
to the visibility of towers.
edotco is more than a towerco. We offer energy
management, remote monitoring, special
structures and we’re looking into provision of
O&M for active infrastructure. It’s all driven by the
needs of our customers and integrated under our
vision to ‘enable connectivity.’
Special feature:
The Myanmar tower
dossier, part four
At the start of 2014, we reported that contracts had been issued for the rollout
of 5,000 new towers in Myanmar by Q1 2015. Now it is Q1 2015, we thought
we’d report on how many had actually been lit. The report makes for sobering
reading. Myanmar was the ‘world’s great greenfield market,’ and we christened
it “the great infrastructure sharing experiment’. One year on: delays. Import
delays. Delays in permitting. Delays licensing towercos. Delays due to the rainy
season. TowerXchange’s updated Myanmar FAQs lay out the structure of the
Myanmar market, contracted and actual.
At the recent TowerXchange Meetup Asia, where all five towercos contracted
to build macro towers in Myanmar were represented, the hot topic on the
Myanmar round tables was the incompatibility of Telenor and Ooredoo’s
differing approaches to cell site energy, and the suppressing effect this could
have on tenancy ratios. Read all about it in ‘How to resolve the Mexican
standoff on tower power in Myanmar’.
Getting everyone together at the TowerXchange Meetup resulted in the
proposition of an Association for the key stakeholders in the Myanmar tower
rollout, enabling the industry to speak with one voice to regulators, and to
share best practices. This venture wholeheartedly supported by TowerXchange,
and you can read more about it in this special feature and future editions.
In part four of the Myanmar tower dossier:
205 The Myanmar tower rollout: FAQs (updated)
215 How to resolve the ‘Mexican standoff’ on tower power in Myanmar
217 Myanmar Tower and Infrastructure Provider Association proposed
XX
The Myanmar tower
rollout: FAQs (updated)
40 frequently asked questions cover Myanmar’s MNOs, towercos, powercos
and the relationships between them
The Myanmar tower rollout often
throws up more questions than answers.
Having visited Yangon earlier this year,
TowerXchange thought we’d share an FAQ;
sometimes answers are simple, sometimes
they are complicated, sometimes there are
no answers at all! Due credit must be given
to the kind folks at Apollo Towers, IGT,
MTC, MIG, Ooredoo, Telenor, Leadcom,
GSM TP and the GSMA GPM whose insights
contributed to this FAQ. This FAQ was first
published in August 2014, subsequently
updated November 2014.
Keywords: MNOs, Towercos, Research, O&M, Construction, 3G, Tenancy Ratios, Loading. Network Rollout, Exit Strategy,
Pass-Through, ARPU, Off-Grid, Unreliable Grid, ESCOs, Hybrid Power, Renewables, Greenfield, DG Runtime, Dimensioning,
Logistics, Skilled Workforces, Warehousing, Rooftop, Private Equity, Debt Finance, RMS, Infrastructure Sharing, Asia,
Myanmar, Ooredoo, Telenor, MPT, YPT, MECTel, KDDI, GSMA, Digicel, Myanmar Tower Company, Apollo Towers, Irrawaddy
Green Towers, Pan Asia Tower, Myanmar Infrastructure Group, Leap Power Solutions, Flexenclosure, Heliocentris, Cummins
< Who are Myanmar’s MNOs and towercos, and how fast are they rolling out?
< How many towers are in Myanmar now, how many will there be by year-end 2014 and by year end 2017?
< How many of Myanmar’s towers will be off-grid or on unreliable grids and what power solutions will be used?
< What are the contractual relationships between Myanmar’s MNOs and towercos and is there an opportunity
for an ESCO?
< Does Myanmar have local potential construction and O&M partners for towercos?
1. What was the state of mobile
telecommunications in Myanmar at the start of
2014 before the rollout?
According to data from the Myanmar Ministry
of Communication, Posts and Telegraphs, at
the beginning of 2014 Myanmar’s existing
5.44mn mobile subscribers (representing >10%
penetration), were made up of 66% 2G, 14% 3G and
20% CDMA.
2. Who are Myanmar’s operators and how are
they progressing?
Oordeoo launched in August, with coverage
available to 7.8mn citizens in 71 cities, attracting
a million subscribers in its first three weeks of
operation. Telenor launched in Mandalay in
September and in Yangon in October, achieving
their millionth subscriber on 25 October, 2014.
Meanwhile, incumbent operator MPT, freshly
rebranded and with a US$2bn capital injection in
partnership with KDDI-Sumitomo joint venture
KSGM, claimed to have sold a million SIMs in
September 2014 alone.
The future roles of MECTel and ISP Yatanarpon
Teleport (YPT), to be restructured as a private
company, remain unclear.
3. What spectrum has been allocated to
Myanmar’s two new international MNOs, and
have any LTE trials taken place?
According to Hardiman Telecommunications,
Telenor and Oordedoo each received 2 X 5 MHz in
the 900 MHz band, and 2 X 10 MHz in the 2100 MHz
band. Both have suggested a future migration to
LTE. MPT undertook trials of LTE using 20 MHz in
the 1800 MHz band during the course of 2013. YTP
currently operates WiMAX, and claims 40 MHz in
the 2600 MHz band and has announced plans to
migrate to LTE.
4. Who are Myanmar’s towercos?
Two towercos each have been appointed by
Ooredoo (Myanmar Tower Company and Pan Asia
Towers) and Telenor (Irrawaddy Green Towers
and Apollo Towers) to lead the rollout. A fifth
tower company, Myanmar Infrastructure Group
(MIG) owned by Square1 Infrastructure, recently
launched in Myanmar with an initial focus on IBS
and DAS, but with a near-term target to build 1,000
macro sites. A sixth towerco, funded by a leading
international private investment company in
Myanmar, is rumored to be launching imminently.
TowerXchange will share further details when
confirmed.
Meanwhile, MPT have refurbished many of their
existing towers for co-location and awarded a
contract to Huawei to build a further 250-400
towers.
5. How are Myanmar’s towercos financed?
Myanmar’s towercos are well financed. Despite
Pan Asia Towers’ (PAT) management DNA in
common with Protelindo, Apollo’s links with Eaton
and Myanmar Tower Company’s (MTC) links with
Digicel, each towerco represents a distinct investible
platform for investors comfortable with Myanmar’s
risk profile.
There is no shortage of capital being made available
from private equity investors excited by the
Myanmar green field tower roll out. For example,
backed by TPG (Texas Pacific Group), Apollo Towers
may be the single largest US direct investment in
Myanmar. PAT and MTC are more entrepreneurial
ventures backed respectively by telecom billionaires
Michael Gearon, who merged his company Gearon
Communications with American Tower in 1998,
later becoming Vice Chairman of AMT, and Denis
O’Brien. O’Brien made his fortune building and
selling Esat Digifone in Ireland before turning his
attention to the Caribbean with Digicel. Digicel
had bid aggressively but ultimately unsuccessfully
for one of Myanmar’s international MNO licenses.
The consortium behind MTC also includes Yoma
Strategic Holdings, one of Myanmar’s leading
real estate companies, 37% owned by Serge
Pun, Myanmar National and Singapore’s 43rd
richest man, according to Forbes. There has been
speculation that Ooredoo is considering acquiring
XX
Estimated current state of Myanmar rollout
1,800
2,400
< Pre-existing towers
< Phase one towers complete
< Phase two towers complete
< Works in progress
800
1,800
come by, Myanmar lacks a sophisticated domestic
banking sector, with only a handful of small local
banks and until now no foreign banks allowed,
making the raising of debt a greater challenge. A
pending change to the law will allow foreign banks
to have formal subsidiaries in Myanmar.
8. What is the population of Myanmar?
As revealed in Myanmar’s first census for 30 years,
the country’s total population is 51,419,420, a little
lower than the 60mn rule-of-thumb previously
used, but concentrated in the Yangon (14.3%),
Irrawaddy (12%) and Mandalay Regions (12%) as
expected. 29% of citizens of Myanmar live in urban
areas.
9. How fast are the towercos moving?
a 10% stake in MTC, although this has not yet been
confirmed. As for Myanmar’s fourth towerco, IGT
raised US$150mn in their first round of financing,
and their original partners can extend that total to
US$300mn. Alcazar Capital and SREI Group have
set up IGT as a company not a fund with a given
expiration date, in anticipation of a liquidity event
within as little as four to five years. MIG is funded
by Singapore Windsor Holdings.
6. What are the potential exit strategies for
investors in Myanmar’s towercos?
As international sanctions on Myanmar continue
to relax, trade sale options may not be limited
to regional players, while a leveraged recap
or, perhaps less likely, IPO remain options.
TowerXchange are also tracking several
infrastructure and sovereign wealth funds with
an appetite for emerging market towers. For now,
Myanmar’s towercos’ priority is all about driving to
scale.
The Myanmar market won’t support six towercos
indefinitely, so in the medium term TowerXchange
expects to see some consolidation among towercos,
with the PAT-Protelindo axis believed to be
particularly acquisitive.
Fast. But not fast enough! The site hunters are out
hunting morning, noon and night, permits are being
granted. While most of the first phase of towers
will be lit by January 2015, there are delays with as
many as half the contracted towers falling behind
schedule. With as yet informal zoning regulations
seldom permitting two towers within 500m of one
another, a parallel race to market, and a race to
secure the best sites, has been engendered among
the towercos. So if you’re a reader with interest
in supplying equipment or services to Myanmar’s
towercos, consider this: they may be rolling out 250
sites per month – can you keep up?
7. Is debt finance readily available?
While equity finance may be relatively easy to
10. What tenancy ratios are achievable in
Myanmar?
Modeling and forecasting prospective tenancy ratios
in Myanmar will not be easy, and there are no
precedents for a green field rollout using towercoowned, shareable assets. In the near term, the
difference in energy equipment ownership strategy
(Ooredoo owns the power assets on their phase 1
and 2 sites, Telenor’s towercos own their power
solutions) effectively makes Telenor incompatible
with Ooredoo’s towercos’ sites. On the one hand,
you have the MCIT’s current policy of refusing to
grant permits for towers within 500m of each other.
If such strict zoning restrictions are made law,
then it may generate near-term location-specific
territorial squabbles, but in the long term tenancy
ratios should be excellent as Ooredoo, Telenor, MPT,
(and whatever role YPT and MECTel play) plus ISPs,
broadcast and wireless data tenants are all going
to need to co-locate on the same tower if they want
coverage at a specific location.
Contracted towers in phases one and two of Myanmar rollout
On the other hand, how dependent are the tenancy
ratio forecasts on the sale of co-locations to
incumbent operators MPT? And what impact does
KDDI’s investment in MPT have on their appetite to
build their own towers?
citizens can only lease land. If foreign companies
secure an investment permit they are allowed to
enter into long term leases of up to fifty years, with
two ten year term extensions.
MPT
1800
Irrawaddy Green
Towers
1500
Pan Asia Towers
1250
MTC
1250
Apollo Towers
1001
0
500
*Removal of duplicate sites at the request of MCIT notwithstanding
12. How many towers are needed?
Data demand is another unpredictable variable
which will demand drive capacity.
The GSMA estimates tenancy ratios of 1.2 to 1.4 in
Myanmar by 2017.
11. Can the towercos acquire the land under the
towers in Myanmar?
No. All land belongs the government in Myanmar;
1000
According to TowerXchange research, Myanmar’s
four towercos have been contracted to build an
initial 5,000 towers for Telenor and Ooredoo by
2015, with MPT adding a further 500-600 sites per
year for the next three years. The GSMA agrees
with and extends the forecast; 17,300 cell sites will
be rolled out in Myanmar by 2017, providing 70%
coverage.
1500
2000
Source: TowerXchange research
It’s interesting to note that in his TowerXchange
interview Ole Martin Gunhildsbu, Chief Operating
Officer of Telenor Myanmar talks about rolling
out “up to 8,000 towers,” while at the GSMA GPM
Working Group, Ooredoo were talking about rolling
out 4,500 towers by 2018. Throw in a few thousand
MPT towers, and you get pretty close to the GSMA’s
forecast of 17,300 by 2017.
Addendum, October 2014: based on the volume of
orders they are seeing, the tower installation firms
TowerXchange have spoken to are more bullish
than the GSMA’s forecast of 17,300 towers by 2017,
with many feeling that the tower count in Myanmar
by 2017 will be 25-30,000.
XX
13. Who is building the towers in Myanmar?
The towers being built for Telenor and Oordeoo
will be owned by the towercos, but they are
subcontracting most of the construction work to
specialist managed service providers. While most
subcontractors employ substantial local workforces,
it seems the lion’s share of the business to date
has been won by proven international turnkey
infrastructure firms such as Camusat, Leadcom,
i engineering and firms like GSM Telecom Partners
are being drawn up the value chain from tower
manufacture into project management.
14. What do we know about the first 5,000 towers
to be deployed in 2014?
Myanmar’s four towercos have been contracted to
build the first two phases, consisting of a total of
5,000 towers by year-end 2014 (see TowerXchange’s
“The structure of the Myanmar tower industry”).
MTC’s sites for Ooredoo and Apollo’s sites for
Telenor are focused on relatively urban areas,
whereas PAT’s (for Ooredoo) and IGT’s (for Telenor)
are more rural. Subsequent phase contracts have
already been secured by several towercos, for
example IGT’s Telenor contract now extends from
the initial 1,500 sites to a further 500 sites by the
end of Q1 2015. It should be noted that all forecast
tower counts will doubtless be subject to some
rationalisation as parallel infrastructure is not
permitted.
Addendum, November 2014: With Ooredoo getting
to market several weeks ahead of Telenor, and with
many of their first phase of towers deployed before
the rainy season, it seems that the tower count
of Ooredoo’s partners MTC and PAT may exceed
that of IGT and Apollo, who’s phase one network
for Telenor remains at time of writing a work in
progress.
2G ecosystem driven by voice, SMS and basic VAS
like SMS-based mobile money, and a smaller 3G
ecosystem for affluent personal and business smart
phone users generating high ARPU.
15. What technologies will be rolled out? And
what are the implications for devices and VAS?
Ignore the current inflated ARPU figures in
Myanmar as mobile communication is currently
limited to relatively affluent people in Myanmar’s
big cities. While bullish estimates suggest a postrollout ARPU as high as US$9, the majority of
stakeholders I met in Yangon anticipated ARPU
around US$4, lowered by a significant proportion of
subscribers receiving not making calls.
Ooredoo will rollout 3G. Telenor will rollout 2G plus
3G.
Telenor’s 2G plus 3G strategy invites low cost
prepaid handsets at or below US$10, while
Ooredoo’s 3G only strategy suggests a keen interest
in the availability of sub-US$50 smartphones, and
the potential for MNO subsidies.
Telenor and Ooredoo’s differing strategies hint at
the possible creation of two overlapping markets; a
16. What will be the ARPU in Myanmar?
17. Will microwave backhaul be used? Is there
any fibre? And will the Myanmar military play a
role in the telecoms rollout?
The precise role of MECTel, part of the military-
Forecast tower site growth and grid connections in Myanmar
2013
Off grid
540 450 810
2015
2,850
2017
2,043
Unreliable grid
Reliable grid
2,707
9,640
0
5,000
3,498
10,000
4,162
15,000
20,000
owned Myanmar Economic Corporation which
had been announced as a joint venture partner of
MPT, remains unclear. Military participation in
the Myanmar tower rollout has its advantages. For
example, the assumption that many rural towers
will need to be built with capacity for microwave
backhaul may be incorrect as apparently there are
thousands of military bunkers connected by fibre.
In addition to possibly making this fibre available
as a transmission network, the military continue to
own a significant amount of land.
Breakdown of GSMA’s ~38,000 Green
Powered Sites Worldwide
1,200
700
35,000
1,200
21. So what are the contractual arrangements
between the towercos and operators concerning
power?
18. What proportion of Myanmar’s towers now
and in the next four years will be on-grid, on
unreliable grid connections and off-grid?
Of an estimated 1,800 MPT towers in Myanmar
now, 45% are on reliable grid connections, 25% on
unreliable grids and 30% off grid.
The GSMA forecast Myanmar will have 17,300
sites by 2017, providing just over 70% population
coverage.
The GSMA GPM suggested there would be 9,990
potential green power sites in Myanmar in 2017,
requiring an investment of US$388.5mn but
yielding US$137.4mn in annual opex savings for
a 2.83 year RoI period, based on reducing diesel
consumption by 83%. For detailed breakdowns of
the business model and opportunity, including a
forecast that an ESCO could generate US$157mn
in Myanmar in 2017 based on an investment of
US$465mn, download the GSMA’s excellent “Sizing
the Opportunity: Green Telecoms in Myanmar –
Market Analysis” report.
Power for Mobile working group in Yangon was that
the first 12-18 months of the Myanmar tower rollout
would be more focused on grid-connected and DG
backed up sites, rather than deploying renewables,
the experiences of many vendors on the ground
has contradicted that. TowerXchange know of
several green power vendors reporting orders
from Myanmar in high triple to quadruple digit
site counts already, suggesting that the majority of
greenfield sites are being equipped with modular,
green power solutions from day one.
Solar
Solar+wind
Wind
Fuel cells
Source: GSMA GPM
19. Put that in context for me; how many green
powered sites are there worldwide?
The GSMA uses a tight definition of green powered
sites, excluding for example the 60-90,000 CDC
battery hybrid sites worldwide. Solar hybrids
represent the significant majority. It’s notable that
around 4,500 green powered sites are delivered
under ESCO business models, the majority of which
are in India, and 84.5% of green powered sites are
in Asia, with the majority in China.
20. When will green power solutions be deployed
in Myanmar?
While the prevailing view shared at the Q2 Green
According to the GSMA GPM Myanmar report
“Ooredoo… has adopted a mixed deployment
model during the first phase of network rollout.
The tower assets (in phase one) are owned by the
Tower Company (MTC in this case) and leased back
to Ooredoo on a tower lease agreement, whereas
the power assets are owned by Ooredoo (MNO
led CAPEX model). In the second phase of rollouts
given to PAT (its second partner Tower Company),
Ooredoo is looking at completely outsourcing their
power provision to the Tower Company.”
The GSMA report continues, “On the other hand,
Telenor… has outsourced both tower and power
ownership to the Tower Companies (IGT and
Apollo towers in this case). However, the power
outsourcing is partial OPEX model where the
diesel consumption and electricity costs are a pass
through. In this case, both the Tower Cos would be
investing and owning the power assets (Tower Co
XX
lead CAPEX model).”
22. Okay, that’s the current state – what’s the
ownership profile of power assets likely to be in
the long term?
Myanmar’s operators seem to agree that power
sharing is essential in the long term, to avoid the
inefficiencies of each tenant needing their own
generator and deploying their own maintenance
crews. This suggests power assets will be owned
and maintained by towercos. Whether contract
structures revert from power pass through to a
fixed lease rate inclusive of a capped amount of
power remains to be seen.
Shared power releases significant savings, as high
as 20%.
Some or all of Myanmar’s towercos may eventually
carve out or outsource power operations.
24. Is there an opportunity for an ESCO in
Myanmar?
Ooredoo acquired their own power solutions for
their first 1,000 or so sites under a conventional
capex model, but they have an RFP out seeking to
contract a third party power company on turnkey
basis (effectively an ESCO). Ooredoo may want to
sell the power solutions at those initial 1,000 sites to
that ESCO, converting to a pure opex model.
Most stakeholders feel the structure of the Myanmar
tower market is evolving toward towercos or third
party powercos (ESCOs) assuming responsibility for
power in the medium term.
Solar radiation is sufficient for solar power to be
a viable option in all but the farthest Northern
reaches of Myanmar, although wind resources are
finite; seldom above the 5.5-6m/s generally held to
make wind power a viable option.
26. How will power be provided at rooftop sites?
Rooftop sites represent a challenge for backup
power – even if the landlord has a backup
generator, is he allowed to sell power to the owners
of a rooftop installation?
With the structural capacity and permissions
limiting the number of rooftop sites suitable for DG
backed up power, fuel cells may be an option for
many sites.
27. How extensive is the grid in Myanmar?
23. So are Myanmar’s towercos likely to become
powercos?
Maybe. Maybe not.
Towercos create more value through co-location
sales that they do through energy efficiency, so if
they can get away without managing power, they
will. In the words of one towerco executive “We
dig a hole, we put some steel in it, and watch the
revenue grow – investors like the steel and grass
model; you get an annuity without risk! However,
the predictability of cash flow is impacted by a
towerco’s ability to deliver a reliable network, and
most SLA’s are primarily concerned with power
availability.”
Based on the GSMA Green Power for Mobile’s
recent Myanmar market analysis report, “there
is a significant saving opportunity for MNOs by
engaging with a 3rd party ESCO for the provision
of their energy. The savings will amount to US$79
million in opex every year by 2017. For an ESCO, the
market potential will amount to an annual revenue
of US$157 million per year, with an investment of
US$466 million by 2017.
Addendum, November 2014: While it has not yet
been announced, it’s widely assumed that Ooredoo’s
maiden ESCO contract, with a quadruple digit site
count, has been awarded to Leap Power Solutions.
25. Is the climate in Myanmar conducive to solar
and wind power?
Electrification in Myanmar stood at 29%, growing
at approximately 5% per annum, with rural
electrification at 25.54% in 2013 according to the
Ministry of Electric Power, with load-shedding
common during the dry season.
28. What is the quality of grid power in
Myanmar?
Myanmar’s towercos have yet to measure the
quality of the grid in many locations, so most initial
plans are being made on the assumption that all ongrid sites will have poor quality grid power. Sites of
high importance, such as major transmission sites,
will need a good backup generator regardless of
grid quality, but tower owners are expected to resist
the temptation to install backup generators at all
poor grid sites until they have monitored the site.
crossover between solar hybrid and CDC hybrid
was after two and a half years, pushed out over five
years with a 2.5kW load and over six years with
4.5kW multi-tenant loads.
29. Will off-grid sites be connected to the grid?
of any renewables. Integrating and aggregating
data from different suppliers is key, based on
which performance metrics can be generated
for the comparison of sites and the evaluation of
equipment and service providers.
32. How important is vendor finance?
The grid is often too distant to for grid connection to
be an option. However, one of Myanmar’s operators
expressed a preference to connect to the grid if they
could, no matter what quality or reliability of power
was available: “even if the grid costs US$20-30k, it’s
better to connect from a TCO perspective”
30. If grid connection is not an option, what
power solutions are being considered at off-grid
sites?
CDC+DG hybrids, where the DG charges the
batteries. “Looks simple, but it’s easy to get wrong if
you don’t do it properly,” according to one operator.
Given the multi-tenant, higher load environment
likely to evolve in Myanmar, MNOs and towercos
will find justifying the funding of renewables
difficult, particularly with so many other demands
on their finite capex. So vendor finance is critical.
For example, Flexenclosure’s access to European
export credit agencies provides good interest rates
for opex models, which has helped them secure
their largest order to date from Myanmar.
Solar+DG hybrids, typically relying 60% on the
generator, 40% on solar, and anticipating 3-4 hours
of DG runtime.
One Myanmar operator summed it up succinctly:
“we’ve got to ensure alignment between technical
requirements and financial realities to ensure the
best TCO solution is adopted – not simply cheapest
capex solution. If we can’t get funding, we can’t do
it.”
Solar only, low power consumption sites only for
lower priority sites.
33. What are the opportunities for RMS and site
intelligence solutions in Myanmar?
31. How do Myanmar’s operators figure the
TCO compares between solar hybrid and CDC
hybrids?
Data on grid availability and quality is non-existent
in Myanmar, and is necessary to inform the
selection and configuration of power solutions. RMS
also provides important data on which to base the
optimisation of fuel usage (and reduction of fuel
theft); DG start/stop and runtime; battery charge,
discharge and replacement; and the efficient use
One Myanmar operator revealed that their TCO
comparisons, inclusive of the cost of installation,
suggested that at a low power 1.5kW site, the TCO
Ooredoo talk about having a “smart controller at
every site to maximise operational efficiency.”
34. How do you dimension cell site energy
solutions for multiple tenants, and what are the
implications for lease pricing?
Dimensioning sites and power solutions in an
unpredictable multi-tenant environment is never
easy. Do you build for one, two or more tenants?
How do you price leases? Do you discount for
certain operators whose equipment requires less
space and less power? How do you right-size a
generator, or lease sufficient real estate to add a
substantial solar array, if you cannot be sure how
many tenants you’ll have an what their power
requirement might be? How pragmatic are tenants
prepared to be about SLA terms as these decisions
and associated investments are made?
Flexibility is going to be key for Myanmar’s
towercos. Power solutions must be readily
upgradable. As Myanmar’s race to market results
in stringent delivery schedules, putting pressure
in turn on towercos’ supply chain of partners, it
becomes critical to be able to integrate multiple
vendors.
The complexity of planning power solutions for
XX
Myanmar’s new towers is exacerbated by the lack
of data available on the pattern of grid availability,
making it tough to dimension solutions for on grid
sites.
Flexenclosure are deploying close to 1,000 multitenant renewable energy eSites in Myanmar.
After sales support is critical to long term success,
particularly given the scarcity of skilled local
resources. This is where the larger and more
established energy equipment suppliers like
Cummins, with local after sales service offices in
Myanmar, are going to have an edge.
35. How should Myanmar’s cell site energy
solutions be made modular to accommodate
multiple tenants?
The power equipment provider (or ESCO) may have
to provide a solution to support a 4.5kW load for
three tenants in the medium term, but from day
one tenancy ratios are one. So to what extent can
vendors modularise?
IGT CFO Karim Dakki on modularity: “we spent
time understanding the upgradability path
of different solutions with our partners from
Heliocentris. We wanted to understand how many
extra batteries we would need to achieve a given
level of autonomy, and whether the batteries would
fit in one cabinet or two? Was there enough free
cooling? When should we install a 15 KVA versus a
20 KVA generator to avoid having to deploy a new
generator to accommodate a second tenant?” The
prevailing view among Myanmar’s towercos was
that it was better to overinvest initially than redeploy.
36. What’s the delivered cost of a litre of diesel to
a remote cell site in Myanmar?
Nobody knows, because there are no remote cell
sites in Myanmar. Nobody knows the impact of fuel
theft either.
38. What do companies need to know about
importing telecoms equipment into Myanmar?
Quoting Polastri Wint & Partners in their recent
TowerXchange interview: “Until recently, private
telecommunications operators and contractors
were not permitted in Myanmar. Only Governmentowned enterprises had the right to import
telecommunications equipment – the market has
only just liberalised.
37. Which energy vendors are already on the
ground in Myanmar?
Lots. But of particular note are Cummins,
Heliocentris and Flexenclosure. Heliocentris offer a
“managed power solution.” Heliocentris has some
shareholders in common with IGT and are well
positioned to support a significant number of their
sites.
With an investment permit issued by the
Myanmar Investment Commission and an
import permit, issued by the Ministry of
Commerce, foreign towercos and their suppliers
can import telecommunications equipment,
with the recommendation of the Ministry of
Communications and Information Technology,
and where relevant, with the issuance of a
telecommunications equipment license issued by
the Posts and Telecommunications Department
(which list of equipment will be formalised once
the Telecommunications Rules have been enacted).
Importers will be required to provide detailed
information on the equipment proposed to be
imported including the volume and specifications
of such equipment, as part of the application for an
investment permit.”
39. What is the impact of Myanmar’s underdeveloped transport infrastructure?
Quoting John Stevens, IGT CEO in his recent
TowerXchange interview: “Everything in Myanmar
flows through Yangon. There’s a decent port with
warehousing capacity, and roads from India, China
and Thailand. However beyond Yangon, there’s not
much infrastructure. The single biggest challenge
in Myanmar is the lack of transport infrastructure
– there are good roads to Naypyidaw and Mandalay,
but beyond that, the roads and bridges often can’t
handle heavy goods vehicles, so we have to limit the
physical weight of loads, and we expect to use oxen
and mules to get construction products to remote
sites. In Northern sites where we have site hunters
out, it can take a two to four day round trip to get
information back to Mandalay!”
40. Does the rollout get stuck in the mud and
slow down during Myanmar’s notorious rainy
season?
Inevitably the rainy season slows down the
deployment, but work continues. In the words of
Ofer Ahiraz, CEO of Leadcom: “when we return to
sites surveyed in March, April and May, some are
now under a meter of water! This wasn’t a surprise
because our surveys had indicated the sites were
prone to flooding, and we will be installing many
elevated sites, but it’s difficult to commence civil
works when the soil is sodden!
Recommended further reading
The GSMA’s Green Power for Mobile’s excellent
“Sizing the Opportunity: Green Telecoms in Myanmar
– Market Analysis”
www.gsma.com/mobilefordevelopment/wp-content/
uploads/2014/06/GPM-Market-Analysis-MyanmarJune-2014.pdf
TowerXchange’s introduction to the structure of the
tower industry in Myanmar
www.towerxchange.com/the-structure-of-the-towerindustry-in-myanmar/
TowerXchange’s Interview with Ole Martin
Gunhildsbu, COO, Telenor Myanmar
www.towerxchange.com/internet-for-all-telenorsplans-in-myanmar/
TowerXchange’s Interview with John Stevens, CEO of
www.towerxchange.com/how-irrawaddy-greentowers-plans-to-rollout-1500-towers-for-telenormyanmar/
Hardiman Telecommunications’ introduction to the
Myanmar tower rollout
www.towerxchange.com/myanmar-the-last-frontier/
Local law firm Polastri Wint & Partners on the legal
and regulatory environment and site acquisition
challenges in Myanmar
www.towerxchange.com/site-acquisition-challengesin-myanmar/
Camusat’s perspective from the front line of the
Myanmar tower rollout
http://www.towerxchange.com/camusat-secures-
contract-to-rollout-500-towers-in-myanmar-for-apollotowers/
A tower manufacturer’s view of Myanmar’s unique
requirements, from GSMTP
http://www.towerxchange.com/how-to-adapt-towerdesign-and-packaging-to-the-unique-challenges-ofdeployment-in-myanmar/
For an insight into the project management platform
used by Ooredoo Myanmar, NeXsysOne, checkout
www.towerxchange.com/how-one-user-interfaceenables-management-of-complex-network-rolloutsand-maintenance/
To put Myanmar in the context of the broader
Southeast Asian tower industry, checkout
www.towerxchange.com/introduction-to-thesouthern-and-south-east-asian-telecom-towerindustry/
Myanmar Census, May 2014
countryoffice.unfpa.org/myanmar/drive/
Censusobservationmissionreport_ENG.pdf
Assessing the potential for Green Power for Mobile:
Telenor Myanmar
www.gsma.com/mobilefordevelopment/wp-content/
uploads/2014/10/Best_Practice_Myanmar-FINAL.pdf
Meet key stakeholders in the Myanmar
tower rollout at the TowerXchange Meetup
Asia, taking place on December 9 and 10 in
Singapore.
www.towerxchange.com/meetups/asia/
XX
How to resolve the ‘Mexican
standoff’ on tower power in Myanmar
Myanmar Tower and Infrastructure Providers Association initiated at
TowerXchange Meetup Asia
TowerXchange don’t want to critique a Myanmar tower rollout
that is already transforming the lives of the citizens, but the
reality is that operational challenges continue to delay “the last
great greenfield telecoms rollout”. We should emphasise at the
outset that subscribers are signing up in their millions, inflated
tariffs have plummeted, and towers are being lit on a daily
basis – commendable progress is being made. But significant
challenges remain in importing equipment, permitting sites,
licensing towercos and in the incompatibility of Telenor and
Ooredoo’s approaches to cell site energy, which in the nearterm is stifling tower sharing and slowing progress.
By Q1 2015, 5,000 new towers were supposed to
have been installed in Myanmar. TowerXchange
sources suggest that, by the end of 2014,
approximately 2,600 of those towers have been
‘lit’ with a further 2,400 in various stages of
‘work in progress’. Most of the initial rollout is in
areas relatively well connected by transport and
electricity infrastructure, so if phases one and two
are being affected by delays, the rollout is only
going to get more challenging as it pushes deeper
into rural Myanmar.
What is causing the delays to the Myanmar tower
rollout?
25 key stakeholders in the Myanmar rollout
squeezed onto a very popular round table at the
recent TowerXchange Meetup Asia. This is what
they felt was causing the delays:
< Import delays and the high cost of import duties
Keywords: Editorial, Energy, Batteries, Tenancy Ratios, Co-locations, Network Rollout, Business Model,
Pass-Through, Off-Grid, On-Grid, ESCOs, Hybrid Power, Solar, Dimensioning, Procurement, Customs,
Microgeneration, Infrastructure Sharing, Asia, Myanmar, Irrawaddy Green Towers, MIC, Telenor, Ooredoo
< What is causing the delays to the Myanmar tower rollout?
< Why Telenor and Ooredoo’s differing approaches to power is adversely affecting tower sharing
< Could the ESCO business model be the answer?
< How consolidation of towercos and separation of powercos could redefine the tower ecosystem in
Myanmar
< The formation of the Myanmar Tower and Infrastructure Providers Association to create a single
voice to liaise with the MIC and to share best practice
< Continuing delays in the licensing of towercos
< A disconnection between Central Government
policy and State-level implementation, particularly
affecting permitting
< A fundamental lack of bureaucratic capacity to
keep up with the volume of activity generated by
the rollout
< The continuing impact of sanctions on the flow
of international funding, especially from the US
But perhaps the single biggest concern was how
the different business models for cell site energy
adopted by Telenor and Ooredoo were adversely
affecting the potential for co-location.
How co-ordinated is this rollout?
While each towerco reports good co-operation
with their partner MNO – they are “tied with
an umbilical chord” according to Arun Kapur,
Executive Chairman of IGT – the potential to create
a genuinely shared network is not currently being
fulfilled.
Telenor has ‘muscle memory’ of co-ordinating
shared networks, at least at a corporate level. For
example they invested virtually no capex and took
19,000 tenancies on shared towers to rollout in
India. However, Ooredoo has had less exposure to
partnering with towercos in the provision of cell
site power. For example the towercos in Indonesia
provide a ‘steel and grass’ business model; power
costs are “passed through” to tenants such as
Indosat, in which Ooredoo has a substantial stake,
and thus Indosat retains responsibility for investing
in and maintaining power. Similarly, there is
minimal towerco activity across the Middle East,
Ooredoo’s heartland, so the company has not been
exposed to towercos with a track record of energy
service provision.
Incompatible tower power strategies of Telenor
and Ooredoo
but Telenor’s towercos have found it easier to secure
co-locations with Ooredoo than Ooredoo’s towercos
have found with Telenor. Telenor want third parties
to supply the power. At Ooredoo’s sites the operator
must install and maintain their own power systems,
or share Ooredoo’s own power systems. This
‘Mexican standoff’ on tower power in Myanmar
cannot continue.
The fact of the matter is that whilst Telenor’s
towercos own and operate the power systems, and
Ooredoo currently prefers a model where they
retain power equipment, their opportunity to colocate is limited. Tenancy ratios were always going
to be much closer to one than two in the early years,
While phases one and two of the rollout has
concentrated on Myanmar’s larger cities, and thus is
largely on-grid, the power strategy incompatibility
problem will be exacerbated as the rollout pushes
deeper into rural areas – by 2017 GSMA’s Green
Power for Mobile research suggests 56% of
Myanmar’s cell sites will be off-grid, another 20%
on unreliable grids.
To add extra complexity, Ooredoo is installing
innovative equipment on their sites, equipment
that needs a lot of power. Ooredoo is using 4 way
Rx diversity with a dual antenna configuration,
an innovative approach that requires 30% less
sites to generate the same coverage. This is a
great approach from an holistic network planning
perspective, but each site consumes ~20% more
power than traditional solutions, so they are
complex sites to dimension. Where possible,
Ooredoo is using grid power, while at off grid sites
the most common approach will to be to install
XX
Myanmar Tower and Infrastructure
Provider Association proposed
Umang Das was the first to propose the idea
of creating an industry association to enable
the key stakeholders in the Myanmar rollout
to speak with a unified voice, lobbying
Myanmar’s MIC to change the shape of the
regulatory regime and processes affecting
towercos. Such an association could also
identify and disseminate legal and technical
standards and best practices; and consolidate
tower locations to co-ordinate FTTT.
TowerXchange has pledged our support
in the creation of the provisionally named
“Myanmar Tower and Infrastructure Provider
Association”. All five towercos with contracts
to build sites in Myanmar have verbally
expressed an interest in joining the association,
and we’ll be hosting an invitation-only dinner
for them at the Mobile World Congress in
Barcelona this March.
At time of writing, our initial focus remains
on engaging Myanmar’s towercos, but we’ll
be soliciting the support and participation of
MNOs, suppliers and of course the MIC in due
course. If you’d like to be kept informed of
developments with the Myanmar Tower and
Infrastructure Provider Association, please
email me, Kieron Osmotherly, at
[email protected].
a DG+CDC battery hybrid solution, but they are
looking at solar where possible. The problem is that
the finite amount of GLA (Gross Leasable Area) at a
site means that if power is not shared, each tenant
must find space for their own dual DGs, or DG and
battery bank. A hybrid solar array already needs
~35sqm to supply a single tenant, add a second
tenant and the space savings are minimal – you still
need ~66sqm, 97sqm for a third. You can see why
it’s difficult for Telenor to meet their requirements
if they co-located on Ooredoo’s unique sites.
In the long term, all four of Myanmar’s operators,
MPT and YPT included, want to share towers
AND power. Resolving the Mexican standoff on
tower power is essential to the efficiency and
sustainability of Myanmar’s new communications
infrastructure.
Facilitating ESCO business models in Myanmar
One potential approach to ensuring the
compatibility of cell site energy would be for the
Energy Service Company (ESCO) business model to
become prevalent in Myanmar. If Ooredoo has an
interest in moving toward an ESCO business model,
as their recent RFP and contract award to Leap
Power Solutions suggests, then they will have to
work out how to delink their unique legacy power
assets. However, with most of Myanmar’s off-grid
rollout still greenfield, delinking legacy assets is less
of a challenge in Myanmar than it has been in India,
for example.
Another challenge is that ESCOs want to build
distributed, micro-generation with telecom towers
as anchor tenants. But ESCOs need permission
to sell excess power to local communities and
businesses, and to sell excess power back to
the grid. That permission has not, to date, been
forthcoming from Myanmar’s regulators.
The big question is whether ESCOs can provide
energy at a kWh rate that Myanmar’s MNOs and
towercos find digestible? In virgin territory like
Myanmar, pricing is going to be a challenge – for
example, nobody knows the delivered cost of a litre
of fuel in the Northern States beyond the reach of
the better roads, and in an environment where
unrest persists.
For an aspiring ESCO the risk is not just in the
selection and installation of capitally intensive
hybrid power systems, it’s also in the Service Level
Agreements that MNOs and towercos use to assess
quality and consistency, and in the application of
penalties when performance targets are not met.
ESCOs’ capital requirement and risk exposure is
multiplied when one considers the scale required
to make an ESCO a credible business partner in
Myanmar – is 100 sites enough? 500? 1,000? Indeed,
do any ESCOs have the balance sheet to finance
power at the 5,000 or so sites each MNO might have
in Myanmar by 2018?
ESCOs need time to refine their business models,
raise capital and execute, but Myanmar’s MNOs
won’t wait. They, or their towercos, will rollout their
own power solutions and create a legacy of owned
power assets which they may have to restructure in
due course.
Conclusion
The first signs are already evident of the resolution
of the Mexican Standoff on tower power strategy
in Myanmar. The ‘cleanest’ medium term solution
would be if Ooredoo’s ESCO project yields successful
results, they could de-couple existing power assets
and divest them to one or more ESCOs that also
build the energy solutions at greenfield sites. Power
being provided by third parties at all Telenor and
Ooredoo sites would unlock the potential for colocation, and drive tenancy ratio growth.
In the longer term, the market will inevitably be
restructured. Myanmar does not need five or six
towercos and an additional layer of ESCOs serving
three MNOs (or four, if YPT – with Viettel? – gets
their act together). A sensible scenario might see
Ooredoo’s tower assets consolidated under a single
partner, a partner who would be unlikely to want
to include energy in their service proposition. Thus
Ooredoo or Ooredoo’s towerco would themselves
partner with an über ESCO owning and operating
all the power systems.
Telenor’s ecosystem is less urgently in need of
consolidation and reorganisation, but the more we
study Myanmar, the more it looks like several of the
country’s towercos could build to a given scale and
make very successful exits. We think there will be
two, at the most three towercos in Myanmar in the
long term. We think MNOs will not retain power
assets in Myanmar in the long term. And when that
happens, we think we’ll see healthy tenancy ratio
growth at or above 0.2 per year
Stop press: joint rollout RFP issued by Telenor and Ooredoo for 1,100 tower in next phase
On the day this edition of TowerXchange went to print, we verified through multiple sources that
Telenor and Ooredoo had gotten together to issue an RFP for the joint rollout of a little over 1,100 towers
in Myanmar, with the winning towerco to provide the power solution, subject of course to the usual
review and approval of their MNO partners.
We understand that Telenor is running the RFP, with Ooredoo intending to co-locate on the same towers
rather than build parallel infrastructure. Shortlisted counterparts were being informed in the first
week of February, 2015.
Meet Myanmar’s towercos at the TowerXchange Meetup Asia 2015!
To connect with Myanmar’s towercos F2F, add a date to your diary now; the TowerXchange Meetup Asia
2015 will take place on November 24 and 25 in Singapore. Exhibit space is already almost sold out –
contact Annabelle at [email protected] to reserve a booth.
XX
Special feature:
Indonesia case study
Since 2008, Indonesia has witnessed the exceptional growth and
evolution of its telecom tower sector such that it is now host to one
of the most mature and profitable markets in Asia, as admired as
the mature US tower market whose business model some would say
Indonesia has improved upon .
Two recent deals - reported in the news section - reconfirm the
growth and potential of the Indonesian tower market. We analyse
the innovative Telkom-Tower Bersama share swap agreement under
which Telkom is set to receive a 13.7% stake in Tower Bersama in
return for Mitratel’s 3,928 towers. We also look at the XL Axiata-STP
deal which transfers 3,500 sites to STP for an approximate value of
US$460mn, enabling STP to become the third largest towerco in the
country.
At the TowerXchange Meetup Asia, we welcomed on stage three key
executives in representing Protelindo, STP and KIN who discussed the
evolution and future of the national tower market.
Don’t miss:
220 The Indonesian towerco success story
223 Meetup review: The evolution of Indonesia’s highly
successful tower industry
228 Entelecom on building and monitoring Indonesia’s networks
Plus TowerXchange analyses in the news section:
36 Telkom Indonesia agrees unique share swap to divest
Mitratel to Tower Bersama
40 XL Axiata drives a bargain in US$460mn tower deal with STP
The Indonesian towerco
success story
What can we learn from the well-oiled machine that is the Indonesian tower market?
Indonesia’s towercos now own and
operate ~51% of the country’s towers.
They’ve established the trust of the
country’s operators and regulators, and
the pipeline of sale and leasebacks flowed
freely in Q4 2014, leading to two landmark
transactions. Meanwhile, towercos build
more towers in Indonesia each year than
they do in Myanmar, and the three market
leaders have all undertaken successful
IPOs, with Protelindo and Tower
Bersama’s valuations having increased
2.5-3.2x since listing.
Keywords: Towercos, Market Overview, Tenancy Ratios, Market Forecasts, Build-to-Suit, Bankability,
Pass-Through, Off grid, DAS, Small Cells, Sale & Leaseback, Indonesia, PT Telkom, Telkomsel, Mitratel,
XL Axiata, Hutchison, Tower Bersama, Protelindo, STP, KIN
< How many towers are in Indonesia and who owns them?
< What has been the history of tower transactions in Indonesia and what might still be in the pipeline?
< What has been Indonesian towerco’s growth trajectory in the last four years?
< What levels have tenancy ratios reached and how much further could they rise?
It didn’t used to be this way. As recently as 2008,
Indonesia was over-populated with MNOs suboptimally deploying capex to build parallel
infrastructure – it’s a familiar emerging market
telecom story. But Indonesia really isn’t an
emerging market. It’s the world’s #4 mobile
market, with thriving endemic industries – now
including a thriving local tower industry that
owns 51% of the country’s towers, and which
serves a more sustainably structured operator
market led by five key players.
Some credit the start of the Indonesian tower
industry success story as the 2006 regulatory
policy change that enforced tower sharing. Others
point to Tower Bersama’s initial transactions
to ‘roll up’ passive infrastructure assets from
Telenet Internusa, Bali Telekom, Mobile-8,
Prima Media Selaras and SKP, soon followed by
Protelindo’s landmark sale and leaseback deals
with Hutchison. Whoever started it, Indonesian
towercos, particularly Tower Bersama and
Protelindo, became the darlings of the telecom
investment community. Debt was made available
and capital flowed enabling further organic and
inorganic growth. Successful bond issuances and
IPOs followed.
The ebb and flow of sale and leaseback deals since
2008 has led to Tower Bersama, Protelindo and
STP deploying around US$3bn to acquire 16,467
towers from Indonesia’s operators, and they’ve
built a similar number of build-to-suit and buildto-fill sites over that period.
XX
Estimated breakdown of tower ownership in Indonesia y/e 2014
Towerco-owned
5,800
Tower Bersama*
Protelindo
15,195
STP
6,500
IBS Tower
KIN
Retower Asia
Balitowers
11,216
Others
Operator-captive
23,000
Telkom + Telkomsel*
XL
6,625
Indosat
*3,928 Mitratel towers consolidated into Tower
Bersama’s count
823 208 450 600 2,079
Tower deals in Indonesia 2008-2014
Year
Seller
Buyer
US$/Tower
Towers/Sites
Value US$
2014
PT Telkom
Tower Bersama
$230k
4000
$904mn*
2014
XL Axiata
STP
$131.4k
3500
$460mn
2012
Hutchison
Protelindo
N/A
503
N/A
2012
PT Central
Investindo
Protelindo
N/A
152
N/A
2012
Indosat
Tower Bersama
$207.6k
2500
$519mn
2011
Infratel
Tower Bersama
N/A
595
N/A
2010
Hutchison
Protelindo
$112k
1482
$165.9mn
2008
Bakrie
STP
$64.4k
543
$136mn
2008
Hutchison
Protelindo
$135.4k
3692
$500mn
*Structured as a share swap agreement, PT Telkom receiving ~13.7% stake in Tower Bersama over two phases in return for 100% of
Mitratel Tower Bersama also acquired Telenet Internusa, Bali Telekom, Prima Media Selaras and SKP between 2004 and 2010, plus 295
towers from Mobile-8 in 2006
Today Indonesia’s towercos’ valuations have
skyrocketed, and they just made global telecom
news headlines with STP’s acquisition of 3,500
towers from XL Axiata and Tower Bersama’s
acquisition of 3,928 Mitratel towers from Telkom
in a unique share swap deal (both transactions
are analysed in the news section of this edition).
While Tower Bersama (with 15,195 towers)
overtook Protelindo (11,216) as Indonesia’s
market leader, and STP (6,625) consolidated their
position as #3, Indonesia is host to a ‘long tail’
of diverse tower businesses. Foremost of these
other towercos are IBS Tower with 2,079 sites,
Retower with 450, and innovative newcomers
KIN (600 towers), flush with a capital injection
from telecom and towerco thoroughbred PE-firm
Providence Equity and fuelled by a strategy to
roll-up selected small local towercos, of which
Indonesia has dozens.
Indonesian towercos’ EBITDA and tenancy
ratios have long been admired. While tenancy
ratios may have temporarily stabilised at 1.71.8, co-locations are being added – it’s just
that Indonesian towercos are building new
and acquiring less mature inventory which
suppresses topline tenancy ratio growth. Tenancy
ratios over 2.5 remain achievable in the long
term.
For now at least, Indonesia’s towercos remain
unencumbered by the complexities of energy
management; even though, according to KIN’s
David Burke, around 25% of Indonesia’s cell sites
are off-grid and another 15% on unreliable grids,
Growth story for Indonesia’s ‘Big Four’
Tower count:
20,000
2011
2012
2013
YTD 2014
Source: Quarterly and annual company reports,
TowerXchange research
power is a pass through, and Indonesia’s largest
towercos are currently concentrated in areas
where the grid is more extensive.
What’s next in Indonesia?
15,000
For Indonesia’s ‘Big Three’ towercos, the prized
assets are Telkom / Telkomsel’s estimated
23,000 remaining operator-captive towers, the
most pervasive network in the country. Tower
Bersama’s eyes are clearly on the prize, and they
may have maneuvered themselves into pole
position with the acquisition of Mitratel from
Telkom in exchange for stake of up to 13.7%
in Tower Bersama. Meanwhile, XL Axiata has
already hinted that a further 4,500 towers could
be divested as the company pursues it’s ‘asset
light’ strategy.
10,000
5,000
Tower Bersama
Protelindo*
STP
IBS Tower
*Excludes 261 towers acquired by Protelindo in the Netherlands
Growth story for Indonesia’s ‘Big Four’
Tenancy ratio:
2.0
2011
2012
2013
YTD 2014
Source: Quarterly and annual company reports,
TowerXchange research
1.5
1.0
1.63
1.75 1.73 1.70
1.70 1.76
1.88 1.85
1.53
1.62 1.68 1.68
1.20
0.05
Tower Bersama
Protelindo
STP
1.39
1.50
IBS Tower
The other major factor in the future of
Indonesia will be diversification of product
offerings to adapt to LTE. STP appears to be
on the front foot in this regard with their
diversification into fibre, microcells and DAS in
Jakarta, but the other towercos are following
suit.
It’s difficult to forecast the future of the
Indonesian tower industry because there are
no readily comparable benchmark markets.
Protelindo, STP and Tower Bersama learned
what worked and what didn’t work in other
tower markets, and they’ve created a unique
and highly lucrative tower industry in a
dynamic and rapidly expanding mobile market
XX
The evolution of Indonesia’s
highly successful tower industry
Lessons learned from the Indonesia panel, featuring Protelindo, STP and KIN,
at the TowerXchange Meetup Asia 2014
Moderator Enda Hardiman (Hardiman Telecommunications), David Burke
(KIN), Nobel Tanihaha (STP) and Steve Weiss (Protelindo),
At the first TowerXchange Meetup Asia,
executives from Komet Infra Nusantara (KIN),
Solusi Tunas Pratama (STP) and Sarana Menara
Nusantara (Protelindo) joined us and shared
their views on the status of the Indonesian
telecom and tower industries, how burgeoning
data demand and a favourable competitive
and regulatory environment stimulated
infrastructure sharing, and how the Indonesia’s
tower companies are supporting their
customers’ requirements for BTS projects and
co-locations.
Keywords: Who’s Who, Towercos, Protelindo, KIN, STP, Komet Infra Nusantara, Solusi Tunas Pratama, Sarana
Menara Nusantara, Indonesia, 3G, 4G, LTE, Capex, Lease Rates, XL Axiata, Telkomsel, Hutchison, Indosat, Deal
Structure, Valuation, Co-locations, Urban vs Rural, Infrastructure Sharing, MNOs, Market Forecasts, Build-toSuit, Business Model, QoS, ARPU, Off-Grid, On-Grid, Small Cells
< The evolution of the Indonesian telecom sector and the advent of the local tower industry
< Spectrum and coverage challenges faced by key players
< BTS and co-locations in Indonesia
< How do towercos compete?
< Is it easy to access capital in Indonesia?
KIN was the smallest towerco in terms of
portfolio to join the panel discussion but
they have become renowned for their
entrepreneurial flair. The company started
operating in Indonesia in 1995 and was created
on the basis of the simple notion of introducing
infrastructure sharing in a relatively virgin
market by its CEO, David Burke, who was then
employed by Telkom (David was credited as
being one of the architects of Mitratel). David
was one of the few expats to work for the stateowned company, to whom the whole concept of
tower sharing was very new. To date, KIN enjoys
a portfolio of 600+ towers built thanks to both
organic and inorganic growth.
STP, represented by its President, Nobel
Tanihaha, announced a deal to acquire 3,500
towers from XL Axiata a few weeks before
the TowerXchange Meetup Asia and took
stage as third largest towerco in the country.
Starting with a very regionalised, Jakarta-based
approach, the company is now expanding
into twenty-nine Indonesian provinces out of
thirty-four. The company has been diversifying
its revenue stream since 2012, with its move
into fibre and is now focusing on value-adding
opportunities such as small cells.
Protelindo is currently the second largest
towerco in Indonesia with a strong portfolio
of over 11,000 towers. Steve Weiss, CFO of the
company, joined us in Singapore and shared his
precious insights on the company’s evolution
since 2008, year of its initial financing.
The changing face of the Indonesian telecom
sector
Over the past five years, the evolution of the mobile
market in Indonesia has been exceptional. In fact,
the country moved from a market over-supplied by
by a plethora of operators, of which just a handful
were actually offering GSM services, to a fiercely
competitive mobile broadband-driven market led
by three key players, namely Telkomsel, XL Axiata
and Indosat, with Hutchison being a strong fourth
rival.
One interesting aspect that was discussed during
the panel was the necessity for top MNOs to rethink
the way the do business and fully understand the
usage pattern of their customer base. The country
is number four worldwide in terms of Facebook
usage and Jakarta is the number one in the world
for Tweets. A recent study showed that people use
such technologies for as long as nine hours a day
and in a country where the rural population is still
very high, data usage tends to be concentrated in a
few metropolitan hubs.
While most of the population doesn’t have internet
at home, data usage through their phones is skyrocketing, forcing MNOs to come up with creative
bundles, offers and propositions to attract the evergrowing mass of users to their brand.
Declining ARPUs combined with new contentled demands are driving MNOs to reassess their
business models which were traditionally focused
on pre-paid offers that didn’t necessarily motivate
Jakarta
operators to push new innovative services and
content. This is where a change of mindset is
needed and where operators can generate new and
creative revenue streams.
the company was able to restructure its business to
position itself as the second largest data operator.
This illustrates how disruptive and exciting data
has been for the industry as a whole.
A successful case study is represented by Hutchison
who were thinking about exiting the market a few
years ago but focused their attention on data at a
time when demand was experiencing a tremendous
increase. Thanks to a few smart moves, combined
with tower transactions dating back 2008 and 2010,
A vibrant tower sector
The growth of the Indonesian tower industry,
which didn’t exist in 2008 but which currently
owns ~51% of the country’s towers, has been a
result of the swift increase in mobile internet usage
XX
There remains plenty of room for growth in mobile
internet penetration rates and usage. Considering
that cable TV hasn’t boomed, it is safe to say that
Indonesians are and will keep opting to use the
mobile platform to enjoy most entertainment
services. And although the market is still filled
with a variety of smaller operators, our panellists
noted that only five out of the ten operators have
been consistently investing and upgrading their
network and services. As a natural consequence,
the other operators are falling further behind –
Indonesia is one market where the total number of
licenses differs from the effective number of active
operators.
What is making the Indonesian tower industry
so vibrant?
One factor to take into consideration is that in a
market with plenty of MNOs, only the top two or
three can afford the luxury to own any towers.
The 2008 deal between Hutchison and Protelindo
was a landmark transaction that contributed to
other smaller players realising that there were
alternatives to owning passive infrastructure.
Towercos constantly inject capital into the market
whether they build towers for MNOs or they
acquire existing portfolios.
At the outset, the Indonesian tower industry
looked closely at the Indian model and used it as a
benchmark. However, the two countries ended up
“
The 2008 deal between Hutchison
and Protelindo was a landmark
transaction that contributed to
other smaller players realising
that there were alternatives to
owning passive infrastructure
“
which forced MNOs to rethink their capex/opex
models.
taking very different paths with Indonesia being
able to allocate risks and rewards more evenly
between towerco and MNO and more closely
replicating the American tower industry model.
And the profitability of the Indonesian tower
industry is one very obvious measure of its success.
It’s interesting to note how panellists agreed on
one very simple and yet often understated point.
In a market where 80% of the revenue of the top
towercos comes from four MNOs, it’s not only
important but fundamental that these operators
keep thriving. While towercos will keep looking
at new market entrants and different revenue
streams, the solidity of the industry as a whole very
much depends on the top MNOs performances.
In a complex market characterised by challenging
permitting requirements, community policies
to comply with and a very strong local culture,
the government has operationally supported the
tower industry. The starting point was represented
by a 2006 law that forced tower sharing in areas
where a tower already existed. This regulatory
change opened doors to the sharing concept and
represented a major turning point.
Coverage ain’t quite there yet…
Every day, during rush hour, five to six million
people travel in and out of Jakarta which makes
it complicated to simply plan and cover necessary
capacity. Jakarta represents a distinct market of
its own within Indonesia and is the region with
the highest data consumption. Outside of Jakarta,
smartphone penetration is quite low although the
market is expected to slowly grow.
David Burke provided an interesting anecdote: “if I
drive from one side of the city to the other, I can get
cut off as many as six times during one single call.
But as soon as I get out of the city, I can speak for as
long as I want without getting cut off…”
Jakarta is far from fully covered but the advent
of 4G will put even more pressure on cell site
densification to improve the quality of service.
Small cells and other technologies referred to as
“street furniture” such as bus stops and lamp posts
will all contribute to a giant leap forward in terms
of coverage and capacity.
In the meantime, there is still uncertainty with
regards to spectrum and while the 900MHz is
expected to be allocated soon, the 1800MHz
still needs to be cleared up from 2G congestion.
According to the panel, many subscribers are still
using 2G but it’s obviously not a profitable business
for operators anymore. Switching and clearing
spectrum will be a tricky process but a necessary
one to correctly work on 4G, which will need more
than shared frequency to work properly.
On the towerco side, as operators roll out more
4G, more sites will be needed and, in those areas
where towers are already in place, sharing will be
the obvious and fastest option. The tower industry
has experienced healthy years for both build-to-suit
(BTS) and co-locations with BTS often being the last
resort as operators were increasingly incentivised
to colocate by a combination of regulatory and time
to market pressure. To date though, a tower that is
“
Thanks to the existing
regulation, Indonesian
towercos cannot overbuild
and competition keeps rental
fees ‘honest’ and ensures
speed to market and smart
site hunting
“
200 meters away from the target area may not be
close enough to work with 4G technology, so a new
PoS might be the only option.
The panel agreed that while other markets such
as Malaysia are generally well covered, this isn’t
the case for Indonesia which still has a long way
to go to achieve world class services. And while
this isn’t necessarily true for Telkomsel which
dominates the market, the other operators are left
with considerable financial pressure and often see
outsourcing as the only option.
How do towercos compete?
Towercos compete differently than other industries
as the product they offer isn’t interchangeable and
business opportunities arise as a function of an
operator looking for a site in a specific location.
The towerco that has a presence there wins and
often, the operator will only care about the location
and the financial conditions offered. In the case
of BTS, the situation is different and the primary
consideration is speed to market.
Thanks to the existing regulation, Indonesian
towercos cannot overbuild and competition keeps
rental fees ‘honest’ and ensures speed to market
and smart site hunting. However, if a tower is
located in the right spot, operators aren’t likely to
mind paying higher prices if they know their ROI is
safe.
Indonesia’s towercos react differently when BTS
projects call for a tower that might initially attract
only a single tenant. STP is mainly focused around
Jakarta and they are more open to opportunities
with medium-term (24 month) potential for
additional tenants. Protelindo manages its finances
in such way that allows it to build single tenant
towers and KIN is open to do so in specific areas.
The power issue in Indonesia: steadily
improving
The government has done a good job in improving
the status of the grid and cost of power is coming
down as more sites are connected to the grid. The
need for backup power is slowly decreasing and
overall, the local power industry is moving in the
right direction which is surely good news for the
telecom sector.
Power is a pass through in Indonesia; operators
retain responsibility for power even if they’ve sold
or co-located on a towerco site. In fact, a few years
ago electricity used to be part of the lease price
which meant that any changes in the utility cost
would reflect in the final bill to operators. Right
now, the two prices are disconnected which seems
a win-win situation for both parties.
How easy is it to raise debt in Indonesia?
KIN raised its first debt back in November 2014
and the process was relatively painless. Being the
first debt in months, banks were quite open to
discussion and this is in line with the growing flow
of investments in the country. In fact, as long as
Indonesia and its native industries keep doing well,
XX
“
Smaller towercos which
have now been acquired by
larger organisations used to
borrow from local banks and
were being treated like SMEs.
Therefore, they often had to
securitise everything in order
to access any credit
“
A view of Mount Blomo
investors will look favourably at injecting cash into
the country.
On the currency side, as local banks aren’t involved
in the debt business within the towerco sector,
offshore banks tend to step up. That said, local
banks could potentially get involved by learning
and understanding the business model. Smaller
towercos which have now been acquired by larger
organisations used to borrow from local banks
and were being treated like SMEs. Therefore, they
often had to securitise everything in order to access
any credit. Tough conditions made it very hard for
them to do business and when acquired, they were
glad to free themselves from that burden.
Protelindo recently issued their first rupiah bond
which they defined as an education process. The
company has come a long way since its first loan
in U.S. dollars back in 2008 and dealing with local
bond investors has been easier now that they are
more aware of local dynamics.
On the equity side, towercos do have money lined
up in case a good deal comes up and conditions
to access capital improve as the companies grow
and expand – as we’ve seen in the case of Tower
Bersama, Protelindo and STP.
In conclusion, the panel once more agreed on one
key concept. The tower industry is complementing
and working with the telecom industry and needs it
to thrive. And although sometimes in disagreement,
the basic concept of cooperation between parties
and healthy competition appeared very clearly
during this insightful debate among key players of
the Indonesian tower sector
Entelecom’s insights into
the state of the tower industry in
Indonesia
Offering cheaper options to monitor assets and enhance QoS in Asia and beyond
Entelecom is a private wireless telecom organisation that
specialises in cellular, drive testing, optimisation and building
coverage. The services they offer enable customers to gain fast
network analysis and reports. The company has developed a series
of new innovative test and monitoring tools and services that could
be used by towercos as well as contractors and operators.
Entelecom’s solutions are cost, labour and time effective compared
to tools being used today. In this article Mikael Bruun, CEO of the
company, discusses the current state of the telecom tower market
in Indonesia and the future of their operations in this region.
Mikael Bruun, CEO, Entelecom
Keywords: Interview, Entelecom, Indonesia, Southeast
Asia, Monitoring & Management, Ramboll, Retower, IBS,
Europe, Denmark, Australia, Capex, QoS, Business Case, RMS,
Towercos, C-Level Perspective
< Entelecom’s footprint and solutions
< Insights into the status of the tower industry in Indonesia and beyond
< How to save money and monitor assets properly
< How local governments are impacting the telecom industry across the region
TowerXchange: Could you tell us about your
career in the telecom industry so far?
Mikael Bruun, CEO, Entelecom: In 2012 I moved
from Ramboll to Retower, one of the smaller tower
companies in Indonesia. I joined to help them
develop their business and when the contract ran
out, I was headhunted for IBS, another medium size
towerco here in Indonesia.
While working for them I helped them shift
their focus from passive infrastructure to radio
equipment. It is my belief that this is the only
future for tower companies hoping to develop their
business further in this local market.
We were able to move away from the traditional
towerco concept onto more modern network
architecture. That is what we have been doing in
Europe for fifteen years or so and it’s something
large towercos are increasingly aware of. The
ideal scenario is for operators that fall within
national infrastructure to outsource all their active
equipment. And this is where towercos come into
play.
TowerXchange: How would you define the
Indonesian tower market?
Mikael Bruun, CEO, Entelecom: I would say that
this industry isn’t really black and white. We
have had a lot of bad experiences and there is a
generally widespread mistrust among players.
Some companies are highly experienced and
capable but there is also a lot to learn and room
XX
for improvement. Honestly, the whole country has
an issue with corruption and this reflects on many
industries, including telecommunications.
TowerXchange: But you are still active in
Indonesia with Entelecom… Where does your
business position itself in the value chain?
Mikael Bruun, CEO, Entelecom: My partner and I
have come up with a process to make deploying
our monitoring tools into an operator’s network
more economical. We developed a whole new set
of tools and services. We can do drive testing in a
mobile network, as well as monitoring and testing
for indoor networks. Our service can also be used
to assess the coverage prior to and after designing a
network.
This can now be done a lot cheaper than before.
The most significant reason for this change in cost is
that all of our equipment is running automatically,
engineers are not required to operate it. Also, after
drive testing, engineers have often been required
to make reports. We have developed computer
technology that develops the same reports which is
also automated and ensures significant savings.
TowerXchange: When it comes to offering your
solutions, do your systems focus primarily on big
cities?
Mikael Bruun, CEO, Entelecom: Potentially yes but
we could also work in rural areas. However, when
it comes to indoor networks in metropolitan areas,
we often face a conflict as most of them are run by
Mount Sindoro in Java, Indonesia
third party companies rather than operators and
these companies don’t always have an interest in
ensuring QoS.
We often see that these systems - which could have
great potential - are plagued by lack of quality and
proper monitoring.
TowerXchange: Is the main problem a lack of
capability or a lack of available products? Why
are these products not at the right standard in
Indonesia?
Mikael Bruun, CEO, Entelecom: Our market
research found that 97% of Indonesians being asked
“
positive changes to the political system as their
economy grows then this could result in greater
opportunities in the telecom sector. There are great
hopes for the new president and the changes that he
is implementing.
If Indonesia experiences
more positive changes
to the political system
as their economy grows
then this could result in
greater opportunities in the
telecom sector
“
about the quality of their networks said they were
generally unsatisfied with the coverage, which
proves the need for our services. Everyone in the
industry knows the quality could be better but it
seems no one is really working hard to improve it.
TowerXchange: Has Entelecom faced any issues
dealing with the Indonesian and Asian culture?
Mikael Bruun, CEO, Entelecom: It has taken time but
the mind-set of the people here is starting to change.
The company’s success depends on its ability to
connect with some of the key decision makers in
the industry. Politics can be a considerable issue in
the industrial sector. If Indonesia experiences more
Countries such as Myanmar are great examples of
how quickly the industry can develop as a result
of greater political stability. It is very similar
to Indonesia ten years ago. However, it is very
challenging as the rollout targets are extremely
aggressive.
TowerXchange: Which companies are likely to
invest in your solutions?
Mikael Bruun, CEO, Entelecom: There is a small
group of towercos that are striving to be different
and they are driven to really improve the level of
their service. Tower Bersama is a good example
of this and they are really working hard to build a
legitimate business. I have worked very closely with
them in the past.
Our clients are willing to invest in our tools and
services as they are very innovative solutions.
There is a worldwide interest as there are no other
companies that matches our products and services.
At this moment we are involved in projects in
Australia, Myanmar and Denmark and in discussion
with parties from various other countries showing
interest for our products and services.
In terms of our international operations, we are
looking for qualified partners worldwide. We aim
to expand through joining together with partners
that have knowledge of their local market. They
have the connections and a better understanding
of the market. Our company targets partners with
experience in the field of testing and monitoring.
These companies have a better grasp of the industry
and can move in faster on possible projects
TowerXchange: Which trends have you been
seeing in the market in terms of tools and
services being adopted?
Mikael Bruun, CEO, Entelecom: Several tower
companies are starting to implement more drive
testing. However, if it is done in the traditional
way it can be very expensive. Also, if you use an
external source you will only receive a one-time
report, whereas our service allows all the data to
be displayed at any time via our unique online
Graphic User Interface. They will always be able
to follow up on their progress. Using our services
tower companies would be able to firstly prove the
value, towards their clients, of using their towers.
Secondly they would be able to spot out best places
to position new towers ahead of competitors. The
market is always developing and companies must
keep up to date with these changes to surpass their
competition.
Tower companies have struggled with the financial
implication of using these kind of services in the
past due to high costs. Using our services is much
more affordable and can open lots of opportunities
for us and to generally improve the QoS of the
telecom industry in Indonesia and beyond
XX
Special feature:
Towerco or powerco?
Part two
Who should get their hands dirty managing energy logistics for
emerging market cell sites?
Bhaskar Panigrahi, Chairman of CCE, pulls no punches: “When
towercos take the plunge into energy management and
energy logistics, I strongly believe they are taking on too much
complexity; it is difficult to have core competencies in creating
tower cash flow through long-term contracts AND in achieving
the lowest possible unit cost per kWh of energy.”
Drawing on the experience of managing thousands of cell sites
in India, CCE has developed the Energy Management Solution
as a Service (EMSaaS™) proposition, a fixed price, guaranteed
performance programme, meeting the definition of what
TowerXchange would call a ‘powerco’. Acutely aware that success
in India carries finite weight with African decision makers, Clean
Power Systems, a CCE Company, has embarked upon a proof of
concept with UTL at Seeta Hill near Kampala, Uganda. We take a
close look at the performance of, and investment in, that PoC site
in the second section of this must-read double interview.
Don’t miss:
232 CCE: Fixed price, distributed renewable power: can
towercos deliver?
236 CPS shares their EMSaaS™ proof of concept
Fixed price, distributed renewable
power: can towercos deliver?
CCE, through its pending merger between CER and CPS, made the breakthrough
providing fixed price, guaranteed availability energy services to towers in India; can they
make the same impact in Africa?
In the opinion of Cambridge Clean Energy (CCE); a specialised powerco
optimises value creation by maximising long-term energy efficiency, as
opposed to a towerco, who may look no further than the quick wins that
yield 15-20% improvements. As such, CCE believes that African towercos
will eventually follow a similar path to those in India, who ultimately
realised that they could only achieve their target valuation multiples
by partnering with powercos. CCE advocate a fixed price Energy
Management Solution as a Service (EMSaaS) proposition with guaranteed
99.9% uptime that MNOs find appealing.
Bill Bubenicek, President/CEO, CCE
Keywords: Who’s Who, Meetup Preview, Energy, Valuation, Investment,
Opex Reduction, Batteries, Business Model, Exit Strategy, Bankability,
Site Level Profitability, SLA, Improvement Capex, Uptime, Off-Grid, Line
Conditioning, ROI, ESCOs, Hybrid Power, Renewables, Solar, DG Runtime,
Private Equity, Debt Finance, Africa, Asia, India, Clean Power Solutions, CPS,
Cambridge Clean Energy, CCE
< CCE’s experiences managing energy as a service in India and how Africa is following the same
evolutionary path, though trailing by 3 years
< How towercos and powercos add value to assets to realise target valuation multiples
< The tipping point that convinced Indian towercos to partner with powercos
< Contrasting towercos’ improvement capex with powercos’ more capitally intensive investments
< Quantifying the addressable market for EMSaaS in Africa
TowerXchange: Please introduce CCE – where do
you fit in the telecom infrastructure ecosystem?
Bill Bubenicek, President/CEO, CCE: Cambridge
Clean Energy (CCE), is a London based distributed
renewable energy company, founded with the
vision to take forward the leading Clean Power/
Renewable Energy companies in the emerging
markets of the world in an effort aimed at
displacing over 1.76 billion liters of diesel in
the next few years, while providing the most
competitive per kWh price to our customers.
Cambridge Clean Energy (CCE), is in the process of
finalising a merger between CER and CPS. CER has
partnered with every major operator and towerco
in India to provide its Energy Management Solution
as a Service (EMSaaS).
In parallel, Clean Power Systems (CPS) has deployed
a significant number of clean power solutions
in Africa, with expected EMSaaS contracts on
the continent in 2015. We also are also targeting
acquisitions in Latin America for 2015/16.
CCE’s proprietary technology, combined with our
local services and workforce development program,
allows us to provide EMSaaS on a fixed cost,
guaranteed availability basis, complying with MNO
and towerco SLAs requiring 99.9% uptime. The
fixed price model typically provides a long-term
discount as compared to the customers existing
opex, and requires zero capex from the customer
over the life of the ten year contract.
XX
Bill Bubenicek, President/CEO, CCE: The merger
with CPS is intended to bridge these two key
markets.
We view India and Africa as parallel markets, with
India approximately three years ahead of Africa in
terms of market adoption. Therefore, we believe
the India EMSaaS market is also three years ahead
of Africa. As such, there are parallels in terms
of adoption of EMSaaS, and most of the same
incremental steps can be taken at the same time just
three years trailing. Effectively India is our crystal
ball for where Africa is heading, and we are well
positioned to introduce EMSaaS to Africa in line
with market demand and lessons learned in India.
“
When towercos take the plunge into
energy management and energy
logistics, I strongly believe they are
taking on too much complexity; it is
difficult to have core competencies
in creating tower cash flow through
long term contracts AND in
achieving the lowest possible unit
cost per kWh of energy
“
TowerXchange: How would you contrast the
EMSaaS markets in India and Africa?
TowerXchange: How would you characterise
the current attitude of African towercos toward
energy management services?
partnerships with firms like CCE. We believe
Africa will follow a similar path separating energy
management from the towercos in the coming two
to three years.
Bill Bubenicek, President/CEO, CCE: We’ve had
conversations with the management teams and the
private equity firms behind two of Africa’s leading
towercos, and their view is that power remains
a key part of the towerco’s core expertise, with
the idea that investments to reduce energy opex
will yield better multiples on exit. This was not
surprising to us, as in India the towercos believed
the same three years ago, and started with a similar
integrated business model. However, despite their
efforts, keeping energy management in-house
ultimately proved unsuccessful, leading to deep
That being said, while the towercos move forward
with their objectives, CCE is positioned to support
them through supply of power systems and
management of those systems on a guaranteed
performance basis. We have worked with the
towercos over the past three years and they
purchase intelligent, clean power hardware but
rarely achieve the desired results in-house. CCE is
well positioned to provide the solutions and include
performance guarantees, which is not something
that most companies would sign up for.
Bhaskar Panigrahi, Chairman, CCE: Towercos fall
into three categories; pure real estate businesses
that focus on co-location sales; towercos that
“pass through” energy costs plus a markup, as one
towerco still does in Africa; and the other three
large towercos, who provide a blended portfolio
based on a fixed price or cost plus energy service
model.
Investors in towercos might typically buy Tower
Cash Flow at a six to seven times EBITDA multiple,
figuring on expanding the multiple by adding
new revenues through co-location sales, with
energy management improvements yielding
a further 20-30% uplift in performance. But
towerco management teams often have a more
sober expectation of the cash flow expansion that
is possible, and CCE feel we can bridge the gap
between the reality and private equity investors’
expectations.
We saw a similar evolution three years ago in
India, where Indus Towers and Bharti Infratel were
created to strengthen the balance sheets of their
MNO owners, to release capital to acquire licenses
and subscribers, and to build toward an IPO of the
new tower businesses.
When towercos take the plunge into energy
management and energy logistics, I strongly
believe they are taking on too much complexity; it
is difficult to have core competencies in creating
tower cash flow through long-term contracts AND in
achieving the lowest possible unit cost per kWh of
energy. Over the next 18-24 months, analysts might
start to feel that maximising both the cash flow
“
“
The towerco just looks for ANY
energy efficiency, but the powerco
looks for the MAXIMUM energy
efficiency
expansion and the multiple expansion in-house
within the towerco is a pipe dream.
TowerXchange: What pushed the Indian market
over to EMSaaS rather than the power pass
through business model?
Bill Bubenicek, President/CEO, CCE: In the early
days of the tower industry in India, whatever
towercos spent on power, they passed it through to
the tenant, with an X percent markup. As a result,
there was no incentive for towercos to disrupt their
low-risk, pass through, cost-plus model and replace
it with a fixed pricing model, so we went direct to
the MNOs to offer fixed pricing. In turn, the MNOs
went to their towercos and demanded fixed pricing,
as it was a better deal for them than the power pass
through.
Bhaskar Panigrahi, Chairman, CCE: In India we
reached a tipping point around 2010-11. There was
growing pressure on the costs and profitability of
MNOs as competition led to declining ARPU, whilst
spectrum costs continued to rise. The cost of diesel
increased by 19%, while the cost of renewable
energy fell from US$1.50 to US$0.75-80 cents.
One of our key MNO customers had kept 10,000 of
its towers out of its partner towerco portfolio, and
they successfully implemented a good renewable
energy solution, reducing diesel consumption
significantly. So they could see there was the
opportunity to reduce costs below what they were
paying under the power pass through model, which
led to pressure on the towercos to offer a fixed price
model.
Once the market moved toward a fixed price model,
the question became “who has a track record of
achieving 99.9% uptime SLAs?” This brought CCE to
the forefront.
TowerXchange: What do you feel were the
lessons learned in India that are transferrable to
the African tower industry?
Bhaskar Panigrahi, Chairman, CCE: The main
lesson we learned was that towercos are good
asset managers, but there is a difference between
how towercos and powercos think about energy
management.
A towerco may feel that reducing diesel
consumption at a typical dual DG site from 2,000L
to 1,800L by reducing fuel theft represents a good
result, but perhaps they needn’t burn more than
300L of diesel. The towerco just looks for ANY
energy efficiency, but the powerco looks for the
MAXIMUM energy efficiency. My feeling is that
towercos are putting lipstick on a pig; implementing
quick wins to improve energy efficiency by 15-20%
within a couple of years, but thereafter they feel the
law of diminishing returns on investment apply.
TowerXchange: If the powerco business model
is to invest beyond the point where towercos
see diminishing returns on investment, how
do powercos invest differently in energy
management? And how do you raise capital for
powercos?
Bhaskar Panigrahi, Chairman, CCE: Towercos
initially think they are going to get a better return
on their investment in power management
assets. After one or two years they start to realise
investments such as upgrading battery banks
won’t deliver the results suggested by the lab
specifications, and that their combined investments
in power assets aren’t going to enable them to
achieve the uplift in valuation multiple they are
seeking.
Powercos like CCE design energy assets with a
Total Cost of Ownership (TCO) over 10+ years in
mind. We can achieve a 99.9% SLA and still come
in way below towerco’s energy cost per kWh
over that period. While a towerco might invest
around US$15,000-20,000 per site to yield those
quick wins in energy efficiency, a powerco might
spend US$40,000-50,000 per site, investing in grid
connections and line conditioning units at sites
on or near the grid, upgrading DGs and switching
to renewables where possible at off grid sites,
XX
“
a long term fixed price energy contract – they
know energy efficiency programmes will reduce
costs, so they want a stepped rather than a
straight line price.
Powercos have to be able to attract
and generate returns for investors,
and have to be able to recover that
initial capital outlay. So in CCE’s
case, we have a five to seven year
lock-in provision in our contract to
protect us
“
investing in batteries, sophisticated controllers and
in the rolling costs of O&M.
Where a towerco’s investment of “improvement
capex” might reduce rolling energy and
maintenance costs from US$22,000 to US$20,000
per year, our deeper, more capitally intensive
approach might reduce rolling costs from US$22,000
to US$10,000. So as long as our cost of capital isn’t
prohibitive, you can see that we can recover the
difference in two to three years.
Proven powercos represent an attractive investment
opportunity. Investors like long-term contracts with
a good return on capex in static infrastructure.
TowerXchange: In TowerXchange’s experience
of talking to the African towercos, one of the
reasons they have not bought into the powerco
or ESCO proposition is that they won’t accept
Bhaskar Panigrahi, Chairman, CCE: Powercos
have to be able to attract and generate returns for
investors, and have to be able to recover that initial
capital outlay. So in CCE’s case, we have a five to
seven year lock-in provision in our 10-year contract
to protect us.
Towercos, powercos and our respective investors
share the intent to acquire and add value to
telecom infrastructure assets, and then get sold at a
premium.
TowerXchange: Further to CCE’s entry into
Africa via the pending merger with CPS, what do
you see as the addressable market for EMSaaS in
Africa?
Bill Bubenicek, President/CEO, CCE: The lowest
hanging fruit are the off-grid sites. Approximately
30% of Africa’s towers are off grid, which roughly
translates into 50,000 towers. Taking into account
the countries where you can secure debt, and
whether contracts are enforceable, market and
currency risks, et cetera, it boils down to an
immediately addressable market of around 20,000
off-grid towers.
The on-grid market can also be addressed by CCE,
which opens up the other 70% of Africa’s towers
which, subject to the same provisos, suggests a
second tier of addressable market consisting of
a further 60,000 on-grid towers. We can clean up
unreliable grid power with our iAVR and Intelligent
LCUs, reducing DG runtime – it’s still a profitable
opportunity, just not at the same margins or
immediate customer value as off-grid.
I would estimate that 60-70% of this addressable
market overlaps with the sites that are currently,
or will be under the control of Africa’s towercos. In
the short term our obvious strategy is to target the
MNOs – EMSaaS is a no brainer for them, but in the
medium term we feel the towercos will also come to
the party, as CCE can help them achieve predictable
results through our guaranteed performance
EMSaaS model, where they still keep the power
assets on their balance sheets.
Our target is to expand the EMSaaS product across
Africa signficiantly over the next three years. We
have live proof of concept pilot sites in East Africa
now – contracts or MSA’s are under discussion,
letters of intent have been signed, and we are even
in discussions for joint ventures with operators.
We expect to have a healthy number of sites under
management by the end of 2015.
In India we are under contract for a large number
of EMSaaS sites already, with a growing demand for
our EMSaaS across both MNO’s and Towercos. If
capital was unlimited and at a low cost, we could
rollout 15-20,000 sites in India – it’s no secret that
every credible powerco is seeking to raise cheaper
capital, and that is the key to increasing our
portfolio in India
Case study: Proof of concept for
Energy Management Solution as a Service
CPS slashes OPEX by 86.5% for UTL in Uganda
Those who would advocate the energy as a service proposition
to African MNOs and towercos run into two common objections;
prove it works in Africa, and prove you have the balance sheet
to ride through the capitally intensive early years. CPS’s alliance
with CCE provides the robust balance sheet necessary. CCE had
proved the Energy Management Solution as a Service (EMSaaS™)
concept to scale in India, while CPS provided TowerXchange with
an exclusive insight into their proof of concept site for Africa,
developed in partnership with UTL.
Chris Luckhurst, MD, Africa, CPS
Keywords: Access Control, Energy, Monitoring &
Management, Capex, Opex Reduction, Batteries, Business
Model, Bankability, Energy Efficiency, Fixed Price, SLA,
Uptime, Off-Grid, ROI, ESCOs, Hybrid Power, Solar, DG
Runtime, Dimensioning, KPIs, Site Visits, Skilled Workforces,
NOC, RMS, Africa, Uganda, UTL, CCE, CPS
< The full EMSaaS™ compared to EMSaaS™ Light – an option allowing towercos in invest capex and
retain power assets but still guarantees performance
< Why UTL piloted EMSaaS™
< The before and after of the PoC site; what was installed, how it performed, what it cost and how
much it saved
< Lessons learned for scaling the EMSaaS™ proposition
< The criticality of training and retaining key people
TowerXchange: Please re-introduce the
EMSaaS™ proposition for our readers who are
not familiar with it.
Chris Luckhurst, Managing Director, Africa, Clean
Power Systems, a CCE Company: Under an Energy
Management Solution as a Service (EMSaaS™)
model, CPS provides a full energy service on
a fixed cost, guaranteed availability basis,
complying with MNO and towerco SLAs requiring
99.9%+ uptime. The fixed price model typically
provides a long-term discount as compared to the
customers existing opex, and requires zero capex
from the customer over the life of the ten-year
contract.
TowerXchange: Before we move on to talk
about your full implementation of EMSaaS™,
tell us about the different model you’ve come
up with for towercos, EMSaaS™ Light.
Power Systems, a CCE Company: With the full
EMSaaS™, CPS owns the renewable power assets
by raising the necessary debt, and then takes
control of all site management over the life of
the contract and guarantees power availability
according to the SLAs. Whereas with the
EMSaaS™ Light the customer invests the capex
for the renewable assets, while CPS only provides
the management of power and SLAs according
to performance guarantees. This model can be
especially attractive for towercos as they already
have the capex budget and can retain the assets on
their balance sheets over the life of the contract.
XX
EMSaaS™ Light is much more than a regular O&M
service that maintains generators and refueling;
EMSaaS™ Light is a guaranteed performance
programme under an SLA. The only significant
difference is who owns for the assets, CPS or the
customer.
Often towercos build a business case for investment
in energy efficiency, but struggle to deliver
the full efficiency savings as promised by the
technology. Under our EMSaaS™ Light model, CPS
will guarantee the savings as projected – in order
to provide that guarantee, we also take on the site
management, including O&M, security, refueling,
and most importantly power optimisation. So our
engagement often includes analytical consultancy
work to dimension the energy requirements and
potential savings on a site-by-site basis, for example
suggesting a spec to change AC air conditioning to a
DC air conditioning.
TowerXchange: Let’s talk about your EMSaaS™
proof of concept site in Uganda. What were
the drives for UTL to explore the EMSaaS™
proposition?
Power Systems, a CCE Company: UTL want to invest
in their network to reduce opex but, like many
African operators, struggle to raise the necessary
capital budget. So UTL explored various models
from vendor financing to a full Energy Services
Company (ESCO) model. With the Ugandan market
saturated from towercos’ perspectives – American
Tower and Eaton Towers didn’t need to buy
CPS and UTL’s PoC site: Seeta Hill
another set of assets – monetising UTL’s passive
infrastructure was not an option. CPS viewed this
as a perfect opportunity to introduce the EMSaaS™
model proof of concept and UTL have benefitted
significantly on this site as a result.
TowerXchange: Tell us about the proof of concept
site you have in Uganda.
Power Systems, a CCE Company: Together, UTL and
CPS selected a proof of concept site that would be
remote enough to be representative of the typical
challenges of rural cell sites, but close enough to
Kampala to visit to easily study performance. So
we chose Seeta Hill, located 70km from Kampala.
The site is on top of a hill with a poor road so
access is challenging, and our team had to carry the
equipment up to the site during the rainy season.
Seeta Hill was originally powered 100% by diesel,
with typical aging dual diesel gensets, one 12KVA
the other 14KVA, with over 15,000 runtime hours
on each (DGs are typically removed after 18-20,000
hours). The total site load was 2.85kWh, and
the battery bank was on its last legs. Before we
“
We have better than halved site
visits to approximately once
every two months. We have
reduced DG runtime from 720 to
112 hours, a reduction of 84.5%
“
upgraded Seeta Hill, the O&M agreement required a
site visit every 250 hours of runtime, so two to three
visits per month.
Our site survey revealed that the location and size
of the site made it very friendly to adding a solar
system based on location and size of site.
TowerXchange: What equipment did you install
at the proof of concept site?
Power Systems, a CCE Company: We installed
an 8kW solar system with 1,200ah battery bank,
consisting of 2V OPzV batteries, and retained the
existing DG after a full service.
We also added a state of the art security system. The
current security on the site consists of an individual
guard, who is located in a nearby village 3-4km
away. The site also has a camera and infrared
beams – this solution serves as an example of
alternative ways to secure a site, rather than simply
constructing massive concrete perimeter walls.
There have been no issues with theft or vandalism
since installation.
to track the KPIs for individual task completion
in Uganda – to get dialed in will take three to six
months.
We’ve also added a full Remote Monitoring
System (RMS), managing access control, security
systems and all the environmental monitoring and
performance metrics. This is managed from our
NOC in Uganda, from where we can dispatch O&M
engineers through our tablet-based dispatching
system.
Power Systems, a CCE Company: We have better
than halved site visits to approximately once every
two months. We have reduced DG runtime from 720
to 112 hours, a reduction of 84.5%. We have reduced
monthly opex costs by 86.5%.
This enables us to track where the O&M guys are
in the field through sensors in their tablet and/
or vehicle, so when a site goes down we locate
nearest engineer, send them a work order, which
they accept and feed back to us. So we know when
they’ve accessed the site and completed the job,
which they then report to the NOC clearing the
alarm – everything is technology based. It’s a bit like
an Uber taxi service! It was initially a third party
system, but we’ve Africanised it, for example adding
a dual SIM card to maximise connectivity, making
it tamper proof, and have made it into our own
proprietary system.
TowerXchange: Are you measuring the time each
task takes to complete to establish KPIs for your
O&M team?
Power Systems, a CCE Company: We’re starting
TowerXchange: What has been the performance
of the site since?
In a fully-fledged EMSaaS™ we would optimise
the site to reduce the load, and continue to make
manpower, SG&A more efficient, bringing our
payback period down to a level where we know
our investors will get the return they require.
Reducing investment in each site required to
optimise efficiency – this is the key parameter
behind EMSaaS™, as it is a key parameter in our
ability to raise the required debt to service these
contracts. This is our core business, whereas it’s
not the core business of MNOs and towercos and
this is why we believe our value proposition is so
appealing. TowerXchange: If I don’t ask the CTOs among
our readers will – what was the capital outlay to
upgrade the proof of concept site?
Power Systems, a CCE Company: Inclusive of
batteries, the security system and the all-important
XX
installation, the all-in cost was north of US$50,000.
That is more than most towercos are prepared to
spend per site, but EMSaaS™ is a different business
model. We work on long-term contracts, with a high
capital outlay for the first three to four years and
a focus on reducing opex significantly enough to
achieve the required economics as predicted in the
business model. This is where the mechanics of the
contract become so important as we need to ensure
that the cash flows are predictable and sufficient to
service the debt and provide the required return to
our investors. TowerXchange: How critical is the management
people and skills are critical to making the
EMSaaS™ proposition succeed?
Power Systems, a CCE Company: The scarcity of
engineering skills in Africa is one of the biggest
differences as compared to India. India has a
manufacturing base from which to source a
deep pool of qualified engineers, those skills are
less readily available in SSA, and sometimes the
individuals ‘in the know’ don’t want to share their
knowledge as they feel it might make it more
difficult for them to get another job. That culture is
starting to change, but it’s not easy.
It will be critical for ESCOs to spend a lot of
time and money training and maintaining good
personnel – that’s where we believe CPS won’t have
a problem. In two and a half years in Uganda we’ve
had zero churn. This also contributes to keeping
kWh cost down. I have to give credit to our system
for employee on-boarding, training and career
development as the key reason for our success in
this regard. Our people are our greatest asset and
we focus our efforts on their development and
training as much as we do the performance of our
systems in the field.
TowerXchange: What have been your key
learning points at an individual site level, and
in terms of the potential to scale EMSaaS™ to a
much larger portfolio of sites?
Chris Luckhurst, Managing Director, Africa,
Clean Power Systems, a CCE Company: Our
primary learning point has been that these large
scale investments in solar do work, the security
technology does work – we can make a good
business case – if it’s installed and managed
correctly. You can’t take any shortcuts in product
quality, installation quality and quality management
– if you get those three right, you can realise the
required savings.
As one of the CEOs of the African towercos
pointed out at the TowerXchange Meetup Africa
in Johannesburg last month, the energy as a
service business model looks great under desktop
analyses, but with mismanagement and a failure to
overhaul old processes, systems don’t achieve the
performance suggested by that desktop business
case, so the systems are perceived as a poor quality
product. It needs a proper ESCO to investigate why
the business case didn’t work and for what reasons,
and how do we change? CPS have been doing this
as long as anyone in Africa – we’ve completed real
analyses, and we’ve learned how to correct the
ESCO proposition and make it scalable. The proof of
this is in our Indian operations and in our African
PoC.
Our core business is to utilise every kWh of
produced energy against the load required, to dialin the design and operational parameters of sites to
maximise the investment and to reduce the cost per
kWh by any means possible. That’s where we find
our margin and our investors find their return. It’s
about optimising opex across the board; technology,
process, personnel, and the management of the
entire ecosystem, to achieve the most efficient
generation of power. There are literally hundreds
of different parameters that we analyse and
implement to keep the kWh price as low as possible.
TowerXchange: What’s it going to take for the
ESCO proposition to achieve scale in Africa?
Power Systems, a CCE Company: Another one of
the takeaways from the TowerXchange Meetup
Africa was that African towercos and MNOs aren’t
interested in proofs of concept from the Indian
market, so our focus is Africanising the EMSaaS™
proposition, taking on towers and contracts in
Africa, building and leveraging a track record
that proves it can be done in Africa. ESCOs have
to have a track record of installing and managing
renewables at scale in Africa.
Chuck Green, CEO of Helios Towers Africa, likened
the ESCO proposition to the early days of towerco
startups five years ago – it’s history repeating itself.
Back then the MNOs told the towercos to prove
they could manage their towers better than they
could, and they asked them to show a balance sheet
capable of handling the capital outlay. Now the
towercos are asking the same questions of us. As
soon as ESCOs can tick the same boxes the towercos
did five years ago, you’ll see the adoption curve take
off – and it could be as imminent as in the next six
to twelve months.
Towerco CEOs and COOs realise that to maximise
their valuation at IPO in the timeline they are
aiming for, they can’t optimise energy efficiency
themselves – they don’t have the time and
personnel. CPS’s proof of concept site with UTL is
already demonstrating the potential of EMSaaS™ to
maximise energy efficiency at African cell sites
XX
Special feature:
Energy storage tradeoffs,
part three
Choosing the right battery for a particular grid availability situation, to achieve
a desired level of autonomy, to fit a certain budget … There’s a multitude of
factors influencing energy storage solution selection, and a multitude of different
vendors offering different chemistries at different price points and with different
replacement cycles.
TowerXchange have interviewed some of the most proven and innovative energy
storage solution providers. In this edition we feature EnerSys, GS Yuasa and
Coslight, but here’s an index of past energy storage interviews.
Index of energy storage solutions for emerging market cell sites:
< Amara Raja Batteries, issue 10, pages
201-203
< Coslight, issue 11 (this edition!),
pages 250-252
< EnerSys, issue 11 (this edition!), pages
242-246
< GS Yuasa, issue 11 (this edition!),
pages 247-249
< Imergy Power Systems, issue 9,
pages 204-208
< NorthStar Battery, issue 10,
pages 196-200
< GE Energy Storage, issue 5, pages 124-129
< Saft, issue 5, pages 130-133
< Gildemeister, issue 5, pages 117-123
< Trojan Batteries, issue 9, pages 209-212
There are a few other companies who TowerXchange have not yet interviewed
but who should also be considered for your RFPs, including China Shoto Battery,
Fluidic Energy and Narada.
If you’d like introductions to any of these vendors, or if you represent an energy
storage solution that you think should be featured in TowerXchange, drop me an
email: [email protected].
Image courtesy of GILDEMEISTER
Pay it now or pay it later!
Making advanced lead acid batteries
the primary energy source
Global stored energy leaders EnerSys® present a case study comparing Diesel
Genset (DG) battery hybrid with 24/7 DG
Cheng Heng Hong and Robert Pounder, EnerSys
In the quest to reduce DG runtime and OPEX,
an increasing proportion of cell sites which
previously ran dual Diesel Gensets (DGs)
24/7 are now combining Charge Discharge
Cycle (CDC) batteries with a diesel genset – in
many cases with the battery bank becoming
the primary source of power. In order to
understand the economics of this transition,
and the relative merits of different energy
storage solutions, TowerXchange spoke to
market leaders EnerSys®.
Keywords: Who’s Who, Energy, Opex Reduction, Batteries, Energy Storage, Energy Efficiency, Off-Grid,
Unreliable Grid, ROI, Hybrid Power, DG Runtime, Site Visits, Asia, Indonesia, Myanmar, EnerSys
< EnerSys®’ credibility and experience as a proven leader and innovator in energy storage
< TCO comparisons of different energy storage solutions in a DG/battery hybrid context
< The suitability of Thin Plate Pure Lead (TPPL) batteries for PSOC conditions
< How EnerSys® works with project partners to ensure that the requirements to fulfill warranty
terms and conditions reflect the practical capabilities of the system and application
< Installation examples from Indonesia and Myanmar
TowerXchange: Please re-introduce EnerSys® for
any readers unfamiliar with your company.
Cheng Heng Hong, Vice President Sales &
Marketing, Asia and Robert Pounder – Reserve
Power Marketing Director, Asia, EnerSys®: EnerSys®
is the global leader in stored energy solutions for
industrial applications in reserve power, motive
power, aerospace and defense. Our extensive range
of quality products includes Premium Thin Plate
Pure Lead, Tubular OPzV and OPzS, Ni-Cad, Li-Ion
and outdoor cabinet enclosures.
With over 125 years’ experience in battery
manufacturing, EnerSys® is the proven leader
and innovator in reserve power batteries with
customer-centric solutions. As mobile telephone
networks evolve and continue to rapidly expand
in emerging markets, there is great demand for
reliable, improved power capacity solutions that
can perform in harsh conditions. EnerSys® works
in close partnership with leading companies and
offers complete answers to a diverse range of
telecom applications requiring stored energy. As
part of the offering of energy storage solutions
we also provide online support tools such as the
battery sizing program (BSP). BSP is an advanced
battery sizing engine with a built in battery layout
configuration tool for all critical applications
such as telecom, data center, rail and utilities. It
also includes advanced calculations for use with
telecom including hybrid sites. Together with our
customers we effect smart decisions which combine
our expertise and service with leading products
resulting in the most effective, powerful and
XX
reliable energy storage technology available.
TowerXchange: Please compare the TCO for a
fairly typical off grid cell site running dual DGs
with a similar site where deep cycle batteries
have been installed.
Cheng Heng Hong, and Robert Pounder, EnerSys®:
Compared to sites running on dual DGs, a site
with single DG having cyclic batteries as back up
generates savings if the batteries were actually used
for longer duties.
While a battery with cyclic capability is important,
it is equally important to size the battery to
maximise OPEX savings balanced with a calendar
life that reflects the rate of cyclic usage and the
charge acceptance capability of the battery.
Typically a three year calendar life is desired
before a battery is replaced, therefore based on
one cycle per day the battery requirement is thus
approximately 1,100 cycles life. For EnerSys®
TPPL SBS Eon technology this number of cycles
equates to a percentage depth of discharge (DOD) of
approximately 75%.
Case study example of DG/battery hybrid comparison with DG (24/7)
Savings
TPPL
Gel
Flooded
Fuel savings/year
5074.075
1
2954.49
0.58
2856.4
0.56
Maintenance reduction/year
12589.22
1
11326.77
0.90
11234.68
0.89
Genset replacement avoidance/year
6748.17
1
6154.639
0.91
5520.086
0.82
Total savings/year
24411.47
1
20435.9
0.84
19611.16
0.80
Hybrid site TCO comparison Lead acid technologies
This example gives a comparison of a site running
24/7 on diesel genset compared to a genset/battery
hybrid. It also gives a comparison of different lead
acid technologies with EnerSys® TPPL (SBS Eon
Technology) providing the greatest OPEX savings.
The result is reduced OPEX cost through reduced
generator runtime and therefore reduced fuel
consumption, extended generator maintenance
intervals, reduced storage space, reduced transport
and installation costs.
Even further reduction of TCO can be seen from a
hybrid site that employs a second input of power,
such as Solar PV. This significantly increases battery
life. Often we offer pure lead battery solutions,
which could more efficiently capture any additional
surplus energy from the sun or DG by using a higher
charge regime which will in turn increase the site
efficiency, thus less DG run hours.
TowerXchange: Where the battery bank has
become the primary instead of the secondary
energy source, what are the implications for DG
runtime, and for battery replacement cycles?
In the aforementioned TCO comparison, the battery
has become the primary power source with for
example, the TPPL SBS Eon Technology battery
providing back up for 17.25hrs (72%) per day and
genset 6.75hrs (28%) per day. In this scenario, the
number of cycles provided by the battery is approx
2,700 with 2.16 cycles per day and a calendar life of
approximately 3.4 years.
The concept is therefore to use the battery in a
cyclic operation instead of a standard float backup.
The system would typically control the discharge of
the battery every day during the night, and recharge
using the DG during the day.
Telecom cellular energy setup
Significant fuel and maintenance costs are saved,
and that payback would justify such an investment.
XX
“
“
reduced impedance allows the batteries to be charged in about half
the time of conventional batteries, without sustaining damaging
effects. Therefore TPPL batteries are suitable to use in a partial state
of charge condition
How this can be made possible? This application of
battery is classed as cyclic, used in partial state of
charge, which means not each cycle will return the
battery to 100% state of charge, thus enabling more
diesel savings.
The thin-plate grids in TPPL batteries offer
greater plate surface area and shortened ionic
pathways, resulting in an overall reduction in
internal impedance. With lower impedance, the
TPPL batteries sustain a higher average voltage on
constant power discharge. Additionally, reduced
impedance allows the batteries to be charged
in about half the time of conventional batteries,
without sustaining damaging effects. Therefore
TPPL batteries are suitable to use in a partial state
of charge condition.
In summary, the following key advantages of TPPL
batteries make EnerSys® PowerSafe SBS an excellent
choice for hybrid applications:
< PSOC (Partial Stage of Charge) compliant
< Up to 1,800 cycles (50% DOD) with operating
temperature up to 50C
< Recharge time < 2 hours (50% DOD, 2.4Vpc,
1.0C10 re-charge current)
< Low self discharge – 24 months shelf life
< Up to 50% more capacity (in same foot print
compared to tubular gel OPzV)
< 15 years design life according to Eurobat
< Wide operating temperature range (-40°C to
+50°C)
< Made in Europe and USA
TowerXchange: Forgive my being rude, but
it’s often suggested that lead acid battery
manufacturers’ warranties are meaningless as
they require compliance with installation and
usage guidelines that are not practical in an
emerging market context. How does EnerSys®
ensure your warranty is more meaningful?
EnerSys® works very closely with project partners
to ensure that the requirements to fulfill the
warranty terms and conditions reflect the practical
capabilities of the system and application, i.e. duty
cycle control features, system monitoring, data
recording.
We are involved from design, implementation to a
complete end to end solution. This ensures having
the right products together with other peripheral
equipment such as the enclosure, systems,
distribution and controllers that suit the application
and environment.
EnerSys® has a flexible approach to the primary and
secondary control features of the Charge/Discharge
Cycle (CDC) that allow the tower owner to optimise
the operating strategy to suit the limitations of the
system and in addition, extensive testing allows
EnerSys® to provide the user with preferential
warranty terms whilst minimising risk.
For hybrid applications, we have separate manuals
which are different from ones we use for normal
float charge applications. We also educate our users
on using the products, provide training and offer
maintenance program.
There must be a reason why EnerSys® is a global
leader in stored energy solutions, and remain
strong after 125 years. We deliver what we promise.
EnerSys® manufactures and supplies the highest
quality and most reliable products in our chosen
markets and then consistently meet and strive to
exceed our customers for service, technical support
and value for money. Our warranty is backed up
the SBS Eon Technology’s characteristics.
Another success story comes from our tireless effort
in Myanmar whereby over 8,000 blocks of EnerSys®
batteries were supplied to over 600 sites with
various on-grid and off-grid conditions, including
hybrid applications. These are only the orders
received from the first entry phase of installation
in Myanmar, we are working toward upcoming
projects too.
Installation in Myanmar
by sales and manufacturing locations in over 100
countries around the world.
TowerXchange: Please share one or two
examples of tower portfolios where EnerSys®’
energy storage solutions have been installed.
As we are unable to name our customers, I can only
cite a few of these examples.
We successfully supplied over 40,000 blocks of
EnerSys® PowerSafe SBS Eon Technology to several
of Indonesia’s largest telecommunication networks
and services providers utilising the ruggedness of
The mission was made possible through joint
efforts between distributors and EnerSys®. This
demonstrates our commitment by working closely
with users to understand and meet all technical
requirements. EnerSys® is now the preferred
supplier for unstable grid applications to the
operators and the installation base of EnerSys®
batteries has continued to grow.
TowerXchange: Finally, please sum up how you
would differentiate EnerSys® from other energy
storage solution providers
EnerSys® has a global and worldwide presence
and coverage through its own subsidiaries in all
continents – Americas, Europe, Africa, Middle East
and Asia-Pacific.
In Asia, EnerSys® has presence in seven countries
and 18 local offices for sales and application
support.
We have a comprehensive product range and access
Installation in Indonesia
to all commonly used battery technologies and
are therefore in a position to help end-users to the
most cost-effective (TCO) solution technically and
commercially.
EnerSys® has 17 research laboratories situated
in the USA, Europe and Asia and are constantly
looking for new chemistries, plastics, separators
and advanced technologies. It is our mission to
ensure these new technologies are able to work
together to form a battery with an expected life.
Process improvements, measuring consistency in
the manufacturing cycle is also a major part of the
engineering and research teams effort to maintain
the higher standards that EnerSys® sets for itself
XX
Lithium ion batteries could
eliminate the need for diesel generators
Perspectives on a new generation of energy storage solutions
GS Yuasa is a leading manufacturer and distributor
of energy storage solutions which has been serving
various industries for decades prior to its final merger
back in 2004. The company has been supplying mobile
network operators with its solutions and is now
actively doing business with independent towercos and
ESCOs.
In this exclusive interview, GS Yuasa’s General
Manager, Mr Soichi Hanano, shares his views and
insights on the dynamics of the energy business and
how the company can support green targets as well as
cost reduction initiatives.
Soichi Hanano, General Manager,
Industrial Battery, GS Yuasa
Keywords: GS Yuasa, Southeast Asia, Japan, Southern
Asia, East Asia, China, India, Bangladesh, Pakistan,
Australia, Thailand, Hong Kong, Asia Pacific, Interview,
Batteries, Opex Reduction, Energy Storage, Lithium, OffGrid, Unreliable Grid, ESCOs
< GS Yuasa’s footprint, client base and evolution
< Why lithium ion batteries are the right choice for off-grid sites
< How the right battery can support green initiatives
< The evolution of the industry business model and the arrival of towercos and ESCOs
TowerXchange: Tell us about GS Yuasa and its
footprint in Asia.
Soichi Hanano, General Manager, Industrial Battery
Department, Marketing Division, International
Business Unit, GS Yuasa: GS Yuasa is a Japanese
company formed in 2004 by the merger of two
large, 100-year old battery manufacturers; Japan
Storage Battery Co., Ltd., known as GS, and Yuasa
Corporation. At US$3.5 billion in sales, GS Yuasa
is currently one of the world’s largest battery
manufacturers.
GS Yuasa manufactures a full line of technologies
including lithium ion, lead acid, nickel metal
hydride, and nickel cadmium for the automotive,
industrial, telecommunications and specialty
battery markets. With thirty-six affiliates in sixteen
countries, GS Yuasa has a worldwide presence
operating under the GS Yuasa, GS, and Yuasa
brands.
GS Yuasa’s major achievement in terms of supplying
long life VRLA and lithium ion batteries in the
Asian telecommunication market come from our
relationships with major MNOs in China, India,
Bangladesh, Pakistan, Australia, Thailand, Hong
Kong and Japan, where we have been supplying
lead acid batteries for several decades and where
lithium ion is rapidly gaining acceptance.
TowerXchange: Who are your key clients and
which products are they showing their interests
the most?
Business Unit, GS Yuasa: Our key clients in the
telecommunications sector are mobile network
operators who own telecom towers to whom we
have been supplying batteries for many years.
However towercos and ESCOs, who have started
managing passive equipment including batteries,
are becoming a very relevant part of our business.
We are aware that the independent towerco model
is widely accepted in developing countries, where
the need for cell site densification and extension is
urgent and capex intensive.
In terms of customers’ requirements, we experience
a variety of scenarios. Although our principle
service is to supply batteries for site backup, the
choice of product depends on a combination of
factors, including peripheral devices, renewable
generation, remote monitoring, electricity condition
and grid stability.
GS Yuasa is a well established battery manufacturer
with exceptional experience of supporting new
applications. It is our strength to have a wide lineup of products such as long life VRLA, advanced
VRLA with superior cyclic life performance and
lithium ion batteries. Our new lithium ion products
have cutting edge performance, which allows us to
offer new approaches to energy storage that were
not previously feasible.
The lithium ion battery has especially superior
characteristics for cyclic life performance, quick
charging and deep discharging and is attracting
One of GS Yuasa solutions
a huge amount of interest from MNOs as well as
towercos, who use lithium ion batteries as a core
power component for the telecom base stations in
areas with poor electricity networks.
TowerXchange: What is the percentage of your
business coming from MNOs versus towercos?
And how big of a change the entrance of
towercos represented for your business?
Business Unit, GS Yuasa: I’d say to date 60% of our
business comes from MNOs and 40% from towercos.
However, the percentage of business coming from
towercos has been increasing and we presume the
trend will continue in the future, as the business
model for managing telecom towers continues to
change.
Today towercos are focusing intensely on reducing
opex as this is the primary way for them to increase
profitability. GS Yuasa has had to provide much
support to towercos in their pursuit of efficient
operation as we have considerable project
management experience in terms of recognising
and analysing telecom base station load patterns
by data logging and proposing the most suitable
power system, depending on the site condition. We
then follow up with a field trial and, eventually,
with the commercial implementation. Our approach
is particularly useful for MNOs and towercos who
have experienced site instability due to poor power
quality.
TowerXchange: How does GS Yuasa address the
environmental issues in markets where green
initiatives are flourishing?
Business Unit, GS Yuasa: Our batteries are usually
deployed as components of larger systems. Their
use in the power delivery system of a telecom
base station is a typical example. We believe that
the environmental impact of our products should
be evaluated as part of the whole assessment of
a particular application, rather than a narrow
definition of battery production and disposal
impacts.
In off-grid and unreliable grid scenarios, the choice
of battery can strongly influence the selection
of the primary energy source. Our lithium ion
technology is allowing our clients to avoid utilising
any fossil fuel based solution thanks to its high
charge acceptance and long cycle life at elevated
temperatures. In some sites we are able to avoid
the deployment of diesel generators altogether by
harnessing intermittent grid supplies or renewable
power sourcess more effectively.
Having an overall cost benefit, in addition to
environmental advantages, generally helps
promoting green initiatives. Luckily this isn’t hard
“
The lifecycle of lithium-ion
batteries is five to ten times
greater than currently utilised
lead acid technology and their
performance is not degraded,
even if they never experience a
full charge
when diesel generators are involved!
“
GS Yuasa is working not only as a battery
manufacturer and supplier but also proposing
green power solutions that can contribute to
reducing opex as well as CO2 in the long term.
Local operating conditions can have an enormous
impact in the choice of the appropriate green
storage solution. The lead acid battery is often
perceived as an environmental hazard because
of its heavy metal content. In reality, lead is
exceptionally recyclable, therefore we can easily
demonstrate its advantages as long as a safe
recycling infrastructure is locally accessible.
Our company is unique in our range of traditional
and new battery technologies, which allows us to
provide an unbiased view of the most appropriate
green solution to a particular application.
TowerXchange: What performance and RoI
can be achieved with lithium-ion batteries at
unreliable or off-grid sites? How do life-cycles
compare with lead acid batteries?
Business Unit, GS Yuasa: Utilising lithium-ion
batteries in unreliable or off-grid sites can deliver
great opex savings and overall financial benefits.
In fact, full charge can be obtained in less than
two hours, which means that even in the case of
frequent power outages, the need for diesel fuel
purchases and delivery costs can be greatly reduced
or eliminated altogether. For some sites we have
shown that DG capex can also be avoided which
allows companies to achieve the payback point
within one or two years.
The lifecycle of lithium-ion batteries is five to ten
times greater than currently utilised lead acid
technology and their performance is not degraded,
even if they never experience a full charge. These
characteristics greatly improve the flexibility of
operation and reduce maintenance requirements
of our products. Soon after the payback period, our
clients start realising the advantageous opex savings
which last for many years until replacements are
required.
Finally, the electronic state of health monitoring
system is an integral component of our products. It
allows remote monitoring to be applied throughout
the life of a telecom base station to provide long
term operating efficiencies. In particular it means
that there is no need for local input from skilled
technicians to maintain the operation of the battery.
The optimum performance and replacement
strategy can be applied to every site across a whole
network
Coslight India’s energy storage
solutions contribute to green initiatives
A battery manufacturer’s perspective on the tower industry and the adoption
of green energy solutions
Coslight India is a subsidiary of Coslight Technology
International Group and is a Lithium-ion and VRLA battery
manufacturer with production units in India. The Group
has twenty-one subsidiaries including offices in Russia,
Germany, UK, Italy, Turkey, the U.S. and Canada.
In this interview, Mr Gupta, VP for Sales and Marketing
of Coslight India, discusses the company’s growth and
footprint as well as its evolution since the entrance of
towercos in the telecom industry.
Manoj Gupta, Vice President, Sales
and Marketing, Coslight India
Keywords: Interview, Energy, India, Southeast Asia,
Southern Asia, EMEA, North America, Latin America,
Asia Pacific, Coslight, Batteries, Energy Storage,
Lithium, Energy Efficiency, Hybrid Power, Vodafone,
Bharti Infratel, Indus Towers, Reliance Jio, Idea
Cellular, China Mobile, China Telecom, STC, Telcel,
Vivo
< Coslight India’s footprint, products and key clients
< How lithium-ion solutions are contributing to green initiatives
< How the battery business is evolving since the arrival of towercos
< A comparison of optimum use case scenarios for lithium-ion versus VRLA batteries
TowerXchange: Please tell us about Coslight
background and foot print in Asia?
Manoj Gupta, Vice President, Sales and Marketing,
Coslight India: Coslight India’s core business
activities include manufacturing of Lithium-ion and
VRLA batteries as well as system integration for
mobile network operators and tower companies in
Southeast Asia, EMEA, North and Latin America and
the Asia Pacific region. Coslight India started operation in 2007 in India
and has established manufacturing plants in India
at Una and IMT Manesar, Gurgaon. Coslight India
is technologically and financially supported by
Coslight International Group which was established
in 1994 and listed at the Hong Kong United Stock
Exchange in 1999.
TowerXchange: Which companies are you
serving and which products are they demanding?
Coslight India: Coslight India is directly serving
leading mobile network operators and tower
companies including Vodafone, Bharti Infratel,
Indus Towers, Reliance Jio and Idea Cellular, in
addition to its global presence through OEMs
and distributor partners. Coslight international
customers include China Mobile, China Telecom,
STC (Saudi Arabia), Telcel and Vivo, among others.
Lithium-ion enabled energy storage products and
solutions are in demand in regions like Southeast
Asia, Latin America, Africa and Asia Pacific due to
their effectiveness in addressing ground challenges
like revenue leakage, high diesel consumption and
theft issue at telecom sites. Whereas our VRLA
products are usually adopted in North America and
Europe.
TowerXchange: Please would you make a
comparison between the use case scenarios
where lithium-ion delivers the lowest total cost
of ownership (TCO) and where VRLA is the better
choice?
Coslight India: Lithium batteries are ideal for cyclic
usage in off-grid/unreliable grid sites whereas VRLA
batteries are suitable for standby application in
locations with a very good power grid. The life cycle
of a lithium battery is more than ten times longer
than a VRLA battery. Moreover, lithium batteries
perform very well even at high temperatures and
don’t require air conditioning. All these factors
result into high opex savings and carbon footprint
reduction due to very low DG runtime.
The economics are very sensitive to environmental
conditions, charge-discharge rates, remoteness of
installation and even local laws and regulations.
For us, the electrification of rural villages is
playing an important role and emerging as a new
business opportunity. These villages do require
a reliable energy storage system as the cost of
running transmission lines is just prohibitive.
Renewable systems with energy storage solutions
offer an attractive option. Coincidentally, many of
Coslight Hybrid Power System
the projects under development happen to be in
warmer locations, which tip the balance toward
lithium-ion.
TowerXchange: How is Coslight addressing
environmental issues in the Asian towerco
industry?
on experiential learning as an integrated service
provider. Moreover, our Lithium-ion products
and hybrid applications contribute to the effort of
telecom players to achieve green targets and covert
their sites to eco-friendly solutions.
TowerXchange: How did the entrance of towercos
in the region change the way you do business?
Coslight India: Coslight India’s Lithium-ion storage
products and solutions make it possible to reduce
carbon footprints by minimising or completely
eliminating the usage of diesel generators at
telecom sites. Using these batteries contributes to
reducing opex and capex as well as the total cost of
ownership.
Coslight India: Towercos work on the basis of
the tenancy model and always seek to achieve
scalability. Therefore, they look for solutions that
can address space constraint issues, contribute
to facilitating tower sharing as well as assuring
reliable backup power at telecom sites.
Coslight India adopts a holistic approach to power
provisioning and management solutions based
Coslight India has evolved to support towercos’
basic business model and concept by providing
advanced energy storage solutions and hybrid
applications. We are very committed to provide endto-end solutions to towercos and open to discuss
their specific needs and find the optimal solution for
each site.
TowerXchange: What’s the proportion of
business from towercos versus operators?
Coslight India: To date, a considerable proportion of
our business comes from telecom operators as they
often still retain ownership of capex/opex. Towercos
are slowly entering the game and approaching
operators with a variety of business models.
Depending on the adopted business model, they will
or will not seek power solutions and take over this
important operational aspect.
TowerXchange: Are you involved in R&D? Which
products are you working on?
Coslight India: Our advanced offering is made
possible thanks to Coslight’s continuous focus on
R&D, design innovation, streamlined manufacturing
processes, proactive quality management systems as
well as our capability to customise and “size-to-suit”
our products to meet our clients’ requirements.
Our current offering of Lithium-ion and
VRLA products have been designed with high
quality standards and meeting all international
certifications such as ISO-9000, ISO-14000, DIN and
UL
Visit the TowerXchange.com website
< Access to the “Internet of People” in emerging market
towers – a trust web of over 7,500 decision makers in
passive infrastructure
prospects for tower transactions in selected countries
Journal, accessible 24/7 from desktop, tablet or mobile
interviews and analyses, searchable by topic, country,
company or grouped by category (e.g. interviews or
how to guides)
Tower
Xchange
Special feature:
TowerPower - reducing energy opex
for emerging market telecom tower
operators, part ten
In your latest edition of TowerXchange’s ongoing TowerPower
special feature, Eltek report their experiences meeting the
requirements of cell sites on- and off-grid in Myanmar.
Leading DG designers and manufacturers PRAMAC have more than
10,000 units installed in Africa. CEO Paolo Campinoti introduces
their Hybrid Qube, a containerised, plug and play solution for
remote BTS power.
Shashikanth Suryanarayanan, Chairman of SEDEMAC, proposes an
innovative approach to retrofitting DGs to run at variable speeds,
enabling a substantial reduction in fuel consumption.
Finally, in our new regular “Reflexions” column from hybrid power
guru David King, CEO of Flexenclosure, he asks “Do you trust your
data?” Making the case for an integrated approach to power system
control and monitoring.
In this edition of TowerPower:
254 Eltek on the challenges and opportunities in Asia
257 PRAMAC delivers BTS power with less opex
259 SEDEMAC’s low capex variable speed AC DG retrofit solution
262 Flexenclosure Reflexions: “Do you trust your data?”
Eltek on challenges and
opportunities of green solutions
in Asia
Expectations and reality of doing business in frontier markets
David Leal, Regional President
(incoming)-APAC, Eltek
Kenneth Bodahl, Regional
President (current)-APAC, Eltek
Eltek is a world leader in high-efficiency
power electronics and energy conversion,
providing a range of power solutions
to secure continuous, safe and efficient
operation of the telecom network, from the
central office to remote cell sites. Eltek has
deep commitment and experience in the
telecom tower market in Asia, Africa and
LatAm, and have been at the forefront of the
debate about who should ultimately provide
energy to cell sites, MNOs, towercos, or a new
breed of ‘powercos’. TowerXchange caught
up with Kenneth Bodahl and David Leal to
find out Eltek’s stance in the Asian market.
Keywords: Who’s Who, Meetup Preview, Energy, O&M, Opex Reduction, Batteries, Fuel Security, Business
Model, ESCOs, Hybrid Power, Renewables, DG Runtime, Procurement, Site Visits, Skilled Workforces, RMS,
Africa, Myanmar, Eltek
< Eltek’s challenges and opportunities in the Asian market
< The company’s proposition in poor grid markets such as Myanmar, Bangladesh and Pakistan
TowerXchange: Please tell us about Eltek’s
footprint in Asia. Who are your clients and which
products are they seeking to buy?
David Leal, Regional President (incoming)-APAC,
Eltek: Eltek have been the number one power
vendor for all major MNOs in the Asia region over
the last ten years. We pride ourselves on providing
our customers with reliable solutions using stateof-art technology, including high efficiency and
density.
Eltek works closely with all key MNOs in the region
including Singtel, Axiata’s and Telenor’s companies
providing DC power solutions from base station
power to mobile switching centres throughout their
network.
We have also been leading the way in green
solutions thanks to our solar hybrid products for off
grid sites and for sites connected to unreliable grids.
TowerXchange: Talk to us about some of the
more challenging grid markets where you
operate such as Myanmar, Bangladesh and
Pakistan
Eltek: Yes, these areas present great opportunities
for everyone but also huge challenges. These
countries not only have grid reliability issues but
other issues such as poor infrastructure, vandalism
and political instability.
< Green initiatives in Myanmar and the involvement of the Norwegian trade mission
We work closely with our customers to provide
XX
development country in the region. It provides
opportunities to all vendors but the amount of
challenges it includes are also great.
Prior to the official award of the licenses, we had
had deep discussions with our many partners and
customers on the rollout plans including towercos,
ESCOs, OEMs and MNOs. It’s a challenging place
to do business due to the current political reform,
its geography and issues with local material
procurement but despite all of this, we see great
promise. Eltek’s solar solutions
alternative power solutions to those sites which have
grid issues to ensure their uptime requirements are
met at the lowest possible cost. In this process we
also test and evaluate third party products that work
with our solutions to ensure what we have proposed
will solve the customer’s problems. We believe in a
“win-win proposition” with our customers and that
all problems can be solved!
TowerXchange: What has been Eltek’s experience
of opening the doors to do business in Myanmar?
How has the involvement of the Norwegian trade
mission facilitated that?
Kenneth Bodahl, Regional President (current)-APAC,
Eltek: Myanmar is currently the highest profile
Yes, since Eltek is a Norwegian company we have
been working with the Norwegian trade mission
and focused on developing Myanmar. In fact,
we are currently building a solar hybrid system
to be donated to Myanmar’s Green Economy Green Growth Association (GEGG). This solution
will be installed at the Myanmar Scientific and
Technological Research Department in Yangon. The
grand opening will be in December 2014 and will be
attended by the Norwegian Royal family. TowerXchange: When TowerXchange visited
Myanmar in spring, there was a general
assumption that off-grid sites would rely on DG
or DG and batteries. It now looks like the local
industry is going straight into green power. What
has been your experience?
Eltek: The initial rollouts are all in cities where the
grid is available and all the vendors are rushing
against tight rollout deadlines in order to meet
MNOs’ launch dates.
In spite of the fact that we are receiving more
and more RFPs on green solutions, the actual
deployment remains slow and we put this down to
the fact that everyone is learning the challenges of
doing business in Myanmar as they move forward.
We do believe green deployment will be a long term
reality in Myanmar so Eltek will continue in its
investment in this area.
TowerXchange: Which model is going to be
prevalent in Myanmar and beyond, in Asia?
Upfront-capex or pure-opex? (as exemplified by
Ooredoo’s shift from retaining power to sending
out an RFP for an ESCO).
Eltek: We really think that the model battle will
continue on for some time and is often dominated
by where the financing is coming from and whether
some of the new pop up companies will survive
in the long term. From our side no matter which
model is chosen, power is always needed so Eltek
will always be there to support. We look forward
to working with them all in light of Eltek’s slogan
“Always On”!
Eltek will host a round table at the
TowerXchange Meetup Asia 2015, taking
place on November 24 and 25 at the Marina
Bay Sands in Singapore. For more details,
visit: www.towerxchange.com/meetups/asia
PRAMAC delivers BTS power
supply with less fuel consumption,
lower opex and less site visits
From portable and stationary DGs to hybrid solutions
PRAMAC is a private manufacturing company that specialises in
power generation equipment and materials handling equipment.
They offer a wide range of power solutions including portable
generators, handling generators, as well as customised and
standard stationary generators. They operate worldwide, with
a presence in Italy, Spain, France, China, Brazil and many other
regions.
CEO of PRAMAC Paolo Campinoti talks to TowerXchange in this
article about the energy solutions PRAMAC offer their clients
operating in the telecom industry.
Paolo Campinoti, CEO, PRAMAC
Keywords: Who’s Who, Energy, Opex Reduction, Batteries,
Energy Efficiency, Hybrid Power, DG Runtime, Site Visits,
Shelters, Africa, PRAMAC
< PRAMAC’s role in the telecommunications industry
< Telecom clients’ power requirements
< About PRAMAC’s operations in the African telecom market
< How PRAMAC is responding to the growing demand for hybrid energy solutions
< The benefits of PRAMAC’s services over other power solutions in the industry
TowerXchange: Please introduce PRAMAC
and your role in the telecoms infrastructure
ecosystem.
Paolo Campinoti, CEO, PRAMAC: We are a solid and
dynamic company dating back to 1966. We now
operate worldwide through five manufacturing
plants, located in Italy, France, Spain, China and
Brazil. We focus ourselves on two main core
activities: Material Handling Equipment and the
Power Business.
As far as the power business is concerned, we
design, manufacture and install a complete range
of portable and stationary generators from 1 to
3360 kVA as standard production and provide also
tailored solutions that can be adapted to every
specific requirement.
Our Material Handling Equipment production is
one of the most vibrant realities in the European
panorama, with a strong historical presence in the
continent and a clear market identity, based on
pedestrian warehousing with a complete range of
products for the light duty professional use, such as
manual and electric pallet trucks, stackers.
Our high technological experience and our vertically
integrated manufacturing processes ensure that
all our products are designed and delivered with
top quality and high performance, especially in the
telecommunication sector. We are a key player in
this industry thanks to the strong relations we have
created with the main business operators and to our
worldwide local partners.
Paolo Campinoti, CEO, PRAMAC: Customers usually
require an installation power range between 10
and 22 KVA. Most of the requests we have are about
using one tenant for each generator instead of
multiple tenants. This is given to the fact that the
generator will suit a perfect service.
TowerXchange: Please tell us how many
generators you have installed in telecom, and
how many are in Africa?
Paolo Campinoti, CEO, PRAMAC: Thanks to the
great work of our local partners we have installed
more than 10,000 generators in Africa serving
telecom needs. We have served several important
telecommunications clients such as Tigo, GT,
Vodafone and ZTE.
TowerXchange: Reliability, efficiency, capital
cost and lifetime define the value of a generator
used at an emerging market cell site – how
do PRAMAC’s generators score on those four
measures?
Paolo Campinoti, CEO, PRAMAC: PRAMAC has more
than 20 years of experience in electric generator
manufacturing; for this reason we can offer a very
high standard of quality and service. We are one
of the few generator companies that are capable of
creating customised solutions that attend to almost
every customer need.
TowerXchange: Tell us about your local market
partners and the after sales support you can
provide in Africa.
Paolo Campinoti, CEO, PRAMAC: PRAMAC can rely
on a well-structured network of local partners in
different African countries, selling our products to
the final customers and providing service and after
sale support, under the supervision of our branches,
always ready to assist them, when needed.
TowerXchange: How has PRAMAC responded to
increasing demand for hybrid energy?
Paolo Campinoti, CEO, PRAMAC: In order to satisfy
the increasing need of telecom operators for BTS
power supply with less fuel consumption, lower
operating costs, fewer maintenance trips to the
field, PRAMAC has developed new solutions which
allow coupling a traditional AC diesel genset with an
energy storage system.
The heart of the system is the Hybrid Module which
integrates latest-generation power electronics and
top class battery technologies such as Lithium.
A further step to meet remote BTS power supply
needs is our Hybrid Qube which is a complete
electrical power supply system that can be easily
configured to meet a broad range of power needs
for telecom applications. It’s a cubic 10’ container
specially designed to easily accommodate 10 -45 kVA
“
“
TowerXchange: What power range do your
telecom clients typically require, and do the
towercos typically want a larger generator
capably of supporting multiple tenants, even if
they start out with a single tenant?
our Hybrid Qube… is a complete
electrical power supply system that
can be easily configured to meet
a broad range of power needs for
telecom applications
gensets interchangeably. Its flexibility and security,
along with a plug and play configuration and an
easy system to start and stop the genset make this
solution the ideal one for remote installed BTS.
TowerXchange: Please sum up how you
differentiate PRAMAC’s solutions from other
diesel generators
Paolo Campinoti, CEO, PRAMAC: PRAMAC can offer
to the telecom industry a wide range of solutions
for every kind of power demand, from continuous
operations to emergency stand-by in the two main
fields such as Data Center power back up and BTS
power supply. To get the highest level of reliability
PRAMAC assemble top class engines and alternators
on its generators and top quality material for the
other components.
Our partnership with many companies working in
telecom applications and the high attention paid by
PRAMAC to new technologies will bring new product
developments which will allow satisfy the most
demanding customers
XX
SEDEMAC’s low-capex variable
speed AC DG retrofit solution
How an innovative technology could change the energy game in India, Africa and beyond
Shashikanth Suryanarayanan, Chairman, SEDEMAC
SEDEMAC offers energy efficient
and innovative controls for small
engines and power-trains and is
currently offering technologies
to support telecom operators and
towercos in reducing their level of
fuel consumption. With a focus on
the Indian market but an eye on
international expansion, Shashikanth
Suryanarayanan, Chairman of the
company, discussed with us his views
on how telecom and tower companies
can save energy and how SEDEMAC’s
offerings can support them.
Keywords: Interview, SEDEMAC, India, Southern Asia, Southeast Asia, Africa, Capex, Energy Storage,
Off-Grid, Unreliable Grid, ROI, Solar, DG Runtime, Energy Efficiency, Who’s Who, Mahindra Powerol,
Eicher Motors, Towercos
< SEDEMAC’S footprint, activities and background
< Challenges of energy opex reduction in India and beyond
< Options available for telecom and tower companies to go green
< How can SEDEMAC’s products help telecom companies and towercos reduce fuel consumption
TowerXchange: Please introduce SEDEMAC, its
activities and footprint
Shashikanth Suryanarayanan, Chairman,
SEDEMAC: We focus on creating mechatronic
solutions for engines and power trains. The
company was created by a research group I led at
the Indian Institute of Technology in Bombay.
Our primary two sectors of interest are gen-sets
and two-wheelers. We are very active in the twowheelers side as India is the largest market for
internal combustion engines for motorbikes and
scooters in the world. This is one of our main areas
of focus at SEDEMAC due to the constant growth in
demand in India.
On the small gen-sets side, we have created two
solutions. On one hand we focus on the retail
market and on the other one, on the telecom
industry. These are two very well established
markets in India and we have been able to acquire
key engine and gen-set manufacturers as clients.
TowerXchange: What has been your company’s
involvement in the energy sector for
telecommunications companies so far?
SEDEMAC: Around 2009 to 2010 we started to focus
on the telecom sector. In India, telecom towers
currently consume an average of 4,000-6,000 litres
per year of diesel. In several rural and remote
locations in India access to the national grid is very
poor. In these instances the back-up power solution
can become their main source of power. Diesel
generators are key in most of these locations.
In 2011, a new technology was introduced that
would allow diesel generators to run at a variable
speed mode through a product popularly known
as the “DC DG”. This technology enabled the speed
of the generator to vary depending on its load and,
as a result, allow a substantial reduction in fuel
consumption. SEDEMAC was the primary enabler
of this variable speed technology. However, DC DGs
haven’t yet reached the scale expected in India,
primarily because of capex challenges, and because
many gen-sets are not retrofit-ready, while new DG
deployments are decreasing substantially.
Our new solution, Econoseek, specifically
addresses these two problems. Econoseek can be
retrofitted and the capex involved is substantially
less compared to traditional DC DGs. In fact, we
have achieved proven savings of 15-30% in diesel
consumption.
TowerXchange: Does SEDEMAC plan to develop
operations in different countries?
SEDEMAC: Globally, GSMA estimates that there
are one million poor grid telecom sites of which
a significant proportion are in South Asia and
Africa. The company is now starting to reach out to
potential clients in Africa after having deployed this
technology successfully in India for around a year
and a half. Given that the capex problem is more
defined in Africa than in India we believe that this
Econoseek
product has significant potential. The Southeast
Asian market also presents some opportunities.
DG manufacturers for the telecom tower segment in
India.
TowerXchange: Who are SEDEMAC’s main
clients?
TowerXchange: How can SEDEMAC’s products
help telecom companies achieve green targets/
reduce energy waste and carbon emission?
SEDEMAC: A few thousand deployments of our
variable speed control products have already
been made across the Indian sub-continent. We
work with some of the leading telecom companies
in this sector. This has primarily been achieved
through our deployment partners. We work with
Mahindra Powerol and Eicher/TAFE who are active
Shashikanth Suryanarayanan, Chairman, SEDEMAC:
For each litre of diesel you save, you avoid emitting
about 2.5 Kg of carbon dioxide. In India alone,
variable speed technology has the potential to save
about 300-400 million litres of diesel per annum,
translating to about an emission reduction of
about a billion kilograms of carbon dioxide. This
XX
“
“
For each litre of diesel you save, you avoid emitting about 2.5 Kg of carbon
dioxide. In India alone, variable speed technology has the potential to save
about 300-400 million litres of diesel per annum translating to about an
emission reduction of about a billion kilograms of carbon dioxide.
technology is a relatively cheap option for telecom
companies looking to reduce their level of diesel
consumption and power waste.
I believe that any product that offers a significant
ROI is viewed positively in the telecom tower
market. On the demand side it enables operators
and towercos to reduce their overall energy
requirements. Alternative sources of energy such
as solar have significant capex requirements, while
the maintenance of solar panels can also be a
challenge in remote areas.
We are confident that variable speed technology
could prove to be an important part of the basket of
opex reduction initiatives available to the telecom
industry.
TowerXchange: What are the key challenges of
adopting this type of energy saving technology?
SEDEMAC: The primary challenges of alternative
energy and energy efficiency products is on-site
deployment. As previously mentioned, Indian
and African towers that depend on diesel are
often located in rural or remote areas and the
deployment and maintenance is a challenge and
requires highly reliable solutions.
A towerco looking at energy saving options will also
have to navigate through a variety of solutions and
select the best option which could differ depending
on each site’s characteristics. So the optimal choice
of the energy saving option can be a challenge in
itself.
With regards to our business in India, we are now
right at the verge of mass deployment, which for me
means reaching 10,000-20,000 towers per year. We
aren’t there yet and the decision is in the hands of
towercos. However, we are optimistic as SEDEMAC
has already proved itself in the Indian market and
we are now ready for an exciting venture in Africa
Visit the
TowerXchange.com website
< Access to the “Internet of People” in emerging
market towers – a trust web of over 10,000 decision
makers in passive infrastructure
prospects for tower transactions in selected
countries
Journal, accessible 24/7 from desktop, tablet or
mobile
interviews and analyses, searchable by topic,
country, company or grouped by category (e.g.
interviews or how to guides)
Do you trust your data?
Site power monitoring and data analysis for
informed decision-making
By David King, CEO, Flexenclosure, a designer and
manufacturer of eSite hybrid power solutions
REFLEXIONS
Are you in control of your business?
Network energy costs can constitute
up to 60% of operating expenses for
towercos, yet many lack the tools
they need to effectively control this
significant and ever increasing cost.
With no clear, real-time view of their
hybrid power systems, it has been
virtually impossible to proactively
monitor and manage opex efficiencydriving activities and costs. Power
related site data is massively important
to towercos and as networks increase
in both size and the number of tenants
hosted, data will drive the difference
between profitability and failure.
Keywords: Energy, Monitoring & Management, Opex Reduction, Fuel Security, Energy Efficiency,
Hybrid Power, KPIs, Site Visits, RMS, Site Management System, Flexenclosure
< The implications of sensor failures and network connectivity interruptions when using
stand-alone hardware based sensors
< The case for integrating intelligent monitoring with the power system
< Using reliable data analysis to minimise network energy costs
< Leveraging reliable data to make informed decisions on the deployment of capex
Data is useless if there’s no structure to how it’s:
1. Monitored and captured
2. Compiled
3. Analysed and reported, and
4. How it’s used in informed business decisionmaking
Oceans of unstructured data are impossible to
navigate, while gaps in data mean you won’t
have enough information to make truly informed
decisions. Data must be both complete and
organised. But that in itself is not enough - precise
reporting and analysis turns data into an invaluable
tool that can properly inform major opex and capex
investment decisions. Data that you can truly trust.
Monitoring data
“Trust” is a big problem here.
The limited nature of most site energy systems
means that the only way to gain a network overview
is to monitor a disorganised stream of alarms,
data sets and KPI values from multiple sources – a
process that is time consuming, expensive and
extremely prone to error.
Many towercos (and more broadly, mobile
operators) find themselves frustrated with
the systems they have today - typically simple
standalone hardware-based systems that use sensors
to plug into various elements of the site. Typically
sensors monitor the gate entrance, temperatures,
power generated from available sources, power used
by tenants, and fuel usage. www.towerxchange.com | TowerXchange Issue 11 |
XX
fails, how do you know if the grid is still providing
reliable power or not? And for what period of time?
If you then multiply this problem by the hundreds
or perhaps thousands of sites in a network, and then
again by the number of monitoring sensors at each
site, it’s a very cost and time intensive issue to try to
stay on top of and it’s not hard to see why towerco
business analysts are having a nigh on impossible
time coming up with meaningful and trustworthy
numbers on which to base critical investment
decisions.
The solution
An eSite in Western Sahara
A lot of money is spent on installing these systems
to collect data, but the associated hardware can be
very unreliable which in turn impacts the reliability
of the data itself. This is compounded by the fact
that these sensors are most often added after the
main site power solution has been installed, with
external placement and additional exposed cabling
increasing the potential failure (and tampering)
points. It’s not simply the fact that sensors can fail
though, but that these hardware-based systems have
no intelligence built into them to trigger an alarm
that a sensor has indeed failed. So not only is no
data being captured, but there’s also no record of
the moment data capture ceased, leaving whatever
data had been collected up to the point of failure
next to useless. And at a practical level it means
that people have to constantly travel to the sites
to (somewhat ironically) monitor the monitoring
system! This is because if a sensor is not delivering
any data, you have no idea if the sensor has failed
or if the site element it’s monitoring has failed, or
perhaps even both. For example, if the grid sensor
The solution is having a software-driven intelligent
monitoring system fully integrated with the power
system right from the start, rather than adding
it after the fact. This reduces the number of
potential failure points and the performance of the
sensors themselves can be monitored, with alarms
flagging issues in real time, allowing for immediate
action and resolution. This also allows for the
easier combination of sensor output and system
behaviours into smart alarms, like combining
voltage generated and power used.
Compiling data
Capturing accurate data at the sensor level is one
challenge. Compiling complete data at both site and
network levels is another. This requires connectivity
from all the sites to a central database, but with
network connectivity often breaking down, data that
has successfully been captured at the sensor level
can then just as easily be lost during transfer. And
And whose responsibility is it? Towercos spend a lot
of time fighting with monitoring system suppliers
about responsibility, but it’s always a discussion
that’s being had too late - whether the monitoring
system or the network was at fault, the end result is
the same.
The solution
The solution is an intelligent system that organises,
time stamps and stores all collected data locally
and checks with the central energy data warehouse
what has been sent versus what has been received,
so that any data lost during a network outage can
be retransmitted. For example, Flexenclosure’s
eManager site monitoring system guarantees 100%
complete and accurate site reports regardless of
communications breakdowns, thus ensuring that
data is never lost.
Analysing and reporting on the data
Collected data needs to be analysed or it remains
a combination of virtually useless numbers.
Typically, Towercos need to have analysis scripts
written bespoke in efforts to try to make sense of
enormous workbooks of Excel data compiled by
disparate sensors on site. This is a complicated and
incomplete solution compared to having the analysis
and reporting capability fully integrated into the
system from day one. This can be done for the most
crucial data points like fuel consumption, genset
performance, power generated, power used, cooling
data, battery use and equipment temperatures,
as well as logistics data such as diesel refuelling,
generator servicing, cooling filter replacements,
and data required for battery warranty issues. The
system also needs to be customisable, allowing
users to create bespoke easy-to-read reports
that seamlessly overlay with the standard ones,
supporting every aspect of their business. This
provides better opportunities for data analysis,
management of opex, tighter tracking of assets,
immediate bad site detection, faster response times
to site critical failures and reduced frequency of site
visits.
Informed business decisions
Reliable data is very important to inform major
business decisions spanning both network energy
opex cost control and broader asset investment and
management. These fall into two key categories:
Operational (opex) and Investment (capex).
< Operational: Accurate real-time performance
data and alarms allow for effective planning and
budgeting of maintenance and refuelling, and
enable energy managers to make better commercial
and technical decisions. It also means they have the
crucial data required for the proactive management
of unforeseen events, ensuring reliable site power
and optimised performance across their networks
by always having the right technician at the site,
exactly when needed and with the right tools and
parts.
“
The solution is an intelligent
system that organises, time
stamps and stores all collected
data locally and checks with
the central energy data
warehouse what has been
sent versus what has been
received, so that any data lost
during a network outage can be
retransmitted
“
with standard hardware based monitoring systems,
there is often no way to recover the data once it is
gone.
For example, diesel management and refuelling is
often impossible to do accurately using hardwarebased systems. Did we really use that much fuel?
Has any been stolen? Was it ever delivered in the
first place? Is there no data because we haven’t
needed to use any diesel for this period? Or is the
sensor faulty again? These are all typical questions
that most often can’t be accurately answered using
a hardware-based system. But a fully integrated
intelligent solution can combine the output of, for
example, fuel level, fuel flow, power generated and
power used sensors to give a remarkably complete
picture that can accurately inform critical questions
such as diesel planning.
XX
“
Now, rather than making
broad decisions based on
overall and incomplete
network-level results, reliable
data is available to help drive
profitable business planning.
Data you can trust
The operational issues go far beyond daily site
planning though. In order to bill tenants correctly,
sensors and monitoring systems really need to be
reliable, especially if they are connected directly to
a billing system detailing tenant energy use. The
scope for undermining good customer relationships
through system failure does not bear thinking about.
whether a given grid connection is reliable enough
to merit paying the fixed connection fee charged by
most power companies… or if investment can be
justifiably made to upgrade the power system... or
whether in fact it would be more cost effective to
move to an off-grid solution with solar power.
Conclusion
< Investment: Reliable data is also critical for
informing future investment decisions. For example,
with the right data it’s relatively easy to calculate
Data should be providing accurate quantitative
and qualitative historical performance analysis,
“
eManager screenshot
trend benchmarking, forward planning and realtime monitoring for true energy optimisation. But
towercos are struggling to understand how to best
crunch the data they have in the most useful way,
with incomplete raw numbers and a lack of analysis
and reporting tools resulting in a lack of trust in
the data that seriously impairs informed business
decision-making.
The answer is a fully integrated intelligent solution
like Flexenclosure’s eManager, that lets you look
across your entire network as well as performing
deep dive analyses on a site-by-site basis. Now,
rather than making broad decisions based on overall
and incomplete network-level results, reliable data is
available to help drive profitable business planning.
Data you can trust
eManager by Flexenclosure
Operation
Site logistics
Engineering
Data
Property
Local server
Dew Point
Local Server
Humidity
Local Server
Pressure
0.1
22.8
991.8
Normal
Low
Rather Low
Temperature
21.8
Humidity
24.4
Computed value
0.6
Event
Info=Job execution started
L vell
Level
d Connect
Discover and
Information
Info=Device is online
Information
Status=21, Comment=Online
Status Changed
Info
rver (SNMP)
Local Server
Notice
rver (SNMP)
Local Server
Notice
Info=Device is offline
Information
al Server (SNMP)
MP)
Local
Notice
Local Server
Temperature
21.6
Rather low
Temperature Limit High
300.0
Status=20, Comment=Offline
Status Changed
ocal Server (SNMP)
Local
Notice
Local Server
Temperature
22
Low
Humidity Limit Low
5.0
Info=Disconnection detected
Information
Lo
Local
Server (SNMP)
Warning
Local Server
Humidity
23.1
Low
Temperature Limit low
-200.0
Local Server
CPU 1 Load
43
High
Humidity Limit High
100.0
Local Server
CPU 2 Load
40
Moderate
Computed Value Limit Low
-50.0
Local Server
Physical Memory
31815
Computed Value Limit High
Temperature alarm delay
Humidity alarm delay
Computed value alarm delay
Temperature hysteresis
Humidity hysteresis
80.0
20
30
30
1.0
1.0
Computed value hysteresis
0.1
Temperature *10
218
Network Overview
Business Control
1.50
1.25
1.50
1.00
1.25
0.75
1.00
0.50
0.75
0.25
0.50
20.00
0.25
20.00
in
00.00
04.00
08.00
12.00
16.00
00.00
04.00
08.00
12.00
16.00
Special feature:
From RMS to ILM and Site
Management platforms, part 10
TowerXchange are pleased to introduce the world’s largest RMS vendor: ZNV
Technology, spun out of ZTE, is monitoring half a million cell sites in China and
another 100,000 in the rest of the world. Of particular note are ZNV’s unique
approaches to video surveillance compression, and to service and support - the
company maintains a staff of 1,000 post sales service technicians.
In this edition of TowerXchange’s regular RMS, ILM and access control special
feature we also present a direct comparison of the proposition and products
of two of the leading mechatronic lock solution providers to remote cell sites;
our old friends Acsys and our new friends from Abloy. We revisit two other old
friends in Udhay Mathialagan, CEO of Tarantula and Asher Avissar, CEO of AIO
Systems. Asher and TowerXchange have teamed up to launch the RMS and ILM
Working Group - for details, email [email protected].
Here’s an index of the 23 solutions featured in this and past editions:
Abloy in this issue page 271
Accruent in issue 7
Acsys in this issue page 268
AIO in this issue page 280
AKCP in issue 6
azeti in issue 8
Broadnet in issue 3
Caryon in issue 8
Galooli in issue 4
HMS in issue 5
Inala in issue 3
Infozech in issue 7
InfraSTAT in issue 6
Invendis in issue 4
NAAP in issue 7
NeXsysOne issue 9
Qowisio in issue 4
Quintica in issue 4
Tarantula in this issue page 277
Telemisis in issue 3
WebNMS in issue 10
Westell in issue 7
ZNV in this issue page 274
Download FREE back issues of the TowerXchange Journal
at www.towerxchange.com/publications
How towercos and their
subcontractors can ensure adherence
with challenging SLAs
Using time attendance monitoring and watermarked photos to reduce reliance on
‘guesstimates’ and focus on data
David Meganck, COO, Acsys
Acquiring towers is only phase one for emerging market
towercos. In order to secure the confidence of operators,
and thus maximise tenancy ratios, towercos must prove they
can provide a full service, often inclusive of power, while
consistently adhering to challenging Service Level Agreements
that might call for 99.5%+ uptime. TowerXchange spoke to
David Meganck, COO at Acsys, market leaders in provision of
mechatronic locks and associated time attendance monitoring.
Acsys equipment is deployed on over 50,000 sites globally,
giving them a unique insight into the front lines of tower
management and maintenance where the battle to adhere to
SLAs is won and lost.
Keywords: How to Guide, Access Control, Monitoring & Management, O&M, Opex Reduction, Operational
Excellence, SLA, KPIs, Site Visits, Asset Register, RMS, Site Management System, Job Ticketing, Acsys
< The data you need to achieve 99.5% SLAs
< The cost of non-adherence to SLAs
< How to leverage data to manage and motivate subcontractors
< Setting KPIs for recurring tasks to optimise O&M performance
< Combining site attendance monitoring, job ticketing, event management and a mobile App to transform data
into information that can be monetised
TowerXchange: Please re-introduce Acsys for
any readers who might not be familiar with your
company.
David Meganck, COO, Acsys: Acsys is originally a
French company that is now based in China and
was originally a military and defense solutions
manufacturer. Our programmable locks, padlocks
and remotely controlled keys are our main product
lines and we are today deployed in various sectors
from banking to ports and airports and for utility
companies as well as Oil and Gas and retail; there
is no limit as to where our solutions can be used
as they are very easy to install and require no
wiring or power. Acsys has installed solutions in
the telecom market since 2007 in Africa and is now
present in over 50 countries worldwide.
TowerXchange: Who ‘owns’ the challenge of
keeping emerging market towers are functioning
99.5%+ of the time?
David Meganck, COO, Acsys: The value proposition
of the towerco is to insulate tenants from
operational challenges, so where towers have been
transferred from MNOs to towercos, they ‘own’ the
problem.
However, most towercos are lean enterprises.
Construction, maintenance and refueling are
typically outsourced to subcontractors. Towerco
contracts may now be the largest engagements these
subcontractors can secure, but the towercos have
exacting standards and negotiate tight margins,
so performance measurement and management
XX
Keeping towers functioning 99.5%+ of the time is
a win-win-win for tenant, towerco and managed
service provider but is sometimes difficult to
enforce in the absence of realistic data to confirm it.
Traditional methods such as remote site monitoring
are not sufficient as they will often stop functioning
when the site is down so ‘other’ data is needed to
confirm that the site was serviced according to the
terms of the SLA.
SLAs; in some cases they were there but access was
hindered in the absence of keys or for other reasons
but overall in the absence of real proof they are
in an ambiguous situation versus the tenant and
towerco. Proving adherence to SLAs is a big issue
for tenant, towerco and subcontractor. The tenant
imposes stringent terms in their SLA, usually driven
by uptime, which the towercos then impose on
their O&M subcontractor partners. But if there is
no technology to measure and monitor site visits
and demonstrate the achievement of SLAs, then
the frontline O&M vendor can feel alienated and
unmotivated and sometimes unwilling to continue.
TowerXchange: Why is adherence to SLAs
becoming such an important issue for emerging
market towers?
TowerXchange: Can you share an example of
how tower owners can measure and maximise
the productivity of maintenance contractors?
David Meganck, COO, Acsys: As emerging market
towercos mature, perhaps six to twelve months
after the handover of new towers, attention turns
to the optimisation of the productivity of their O&M
subcontractors, and to measuring and maximising
their performance against SLAs. Moreover every
towerco is in the business of ‘looking better’ than
its counterpart so any technology they can use to
show prospective new tenants that their sites are
run better (which includes showing compliance of
vendors with SLAs) is one of those selling points.
David Meganck, COO, Acsys: One of the world’s
leading towercos examined the performance of
three different vendors at three sites with identical
configurations, identical generators et cetera. Using
the time attendance monitoring data provided by
Acsys’ mechatronic locks and keys, we discovered a
serious disparity in the vendor’s site visits to replace
an oil filter, which were timed at 15 minutes, 45
minutes and 120 minutes on each of the three
identical sites.
One of the world’s largest managed service
providers, who shall remain nameless, is believed
to have paid out US$35mn for non-adherance to
SLAs last year for Africa alone, as they were unable
to prove site visits and hence compliance with
As you might guess, the technician whose visit
was only 15 minutes simply didn’t do the job.
The technician who was on site for two hours
replaced the filter, but hung around for two hours
so his company could invoice for more time. The
technician who was there for 45 minutes replaced
“
From this simple time attendance
monitoring analysis, the towerco was
able to create a KPI stating that for the
replacement of an oil filter on a given
type of genset they would only pay
for a one hour site visit… this one KPI
alone saves the towerco US$80,000
per year
“
is critical to success. With SLAs ‘back to backed’
to their managed services partners, towerco’s
subcontractors ‘own’ the problem too.
the filter, and promptly moved on to the next job.
From this simple time attendance monitoring
analysis, the towerco was able to create a KPI stating
that for the replacement of an oil filter on a given
type of genset they would only pay for a one hour
site visit. Given the poor quality of fuel in Africa,
oil filters that would last six months in the US have
to be replaced every four to six weeks as they clog
up with sediment, so this one KPI alone saves the
towerco US$80,000 per year.
It’s all about data – you can’t run a business with
guesstimates!
TowerXchange: Thanks for the example David
– that is explains how to measure if a task was
completed and how long it should take, but
how do you measure how well a task has been
completed?
“
In order to ensure towercos meet
MNO’s challenging SLAs, it’s
important they establish strict but
realistic KPIs for all their equipment
and service partners, monitoring
performance, and giving more
business to vendors who help
them meet SLAs, while phasing out
those who don’t. This eventually all
translates into improved bottom-line
results for everyone
“
David Meganck, COO, Acsys: One solution is to
leverage smart phone technology. A leading
Southeast Asian towerco has now imposed a
requirement that all site visitors must have a smart
phone. Why? Because Apps like ours enable the
gathering of critical performance data from remote
cell sites efficiently and at very low cost – our app is
free to minimise the barriers to adoption from the
user-side.
Using our App, a site visitor can now request and
receive a unique entry code for each mechatronic
lock he needs to access in real-time through the App
or SMS (SMS in case data network is poor), then fix
the fence, fill the fuel tank, or replace the filter –
whatever the task assigned is. Using our reporting
module they take a picture before and after the job
to demonstrate that the task has been completed
effectively. Our pictures have watermarks that
show latitude, longitude, time and date so you can’t
upload a fake or even take a picture of a previous
task as the camera is native to the App. Moreover
our ticketing system integrated with the most
deployed event management software in Africa,
which also allows the NOC to know when a ticket
was issued, and when it was received, and the App’s
GPS function will alert the NOC as to when the user
has arrived on site providing them with valuable
real-time adherence and performance information
but more importantly inform their tenants of the
support progress, this helps avoid getting caught in
escalations.
Acsys’ App is a compliment to our existing solution
to make it more complete but also to allow better,
more controlled and quicker on-site reporting than
waiting until the vendor goes back to his office and
sends a report by email.
To give another example, a major Asian towerco has
a contract with a vendor which requires them to
cut the lawn surrounding their towers on a regular
basis. As you can imagine, there is no Remote
Monitoring System sensor to detect the length of
the grass! So using our App the user gathers photos
which are then sent back to the NOC and become
part of the reporting which is then also connected
to the Billing and Procurement department to
give everyone a clear overview of what is being
spent, for what and without having to rely on the
contractor’s words and goodwill only, and that is
what makes the difference.
We recently also launched an RFID based tag
solution which can be read by smartphones and
which is placed at strategic locations, confirming
the user was there, and extending our operational
scope from access control to asset management also.
TowerXchange: As you said earlier David, ‘It’s
all about data – you can’t run a business with
guesstimates!’ Please summarise how tower
owners can leverage the data you can provide to
improve adherence to SLAs.
David Meganck, COO, Acsys: The reason why there
is preventive maintenance is to avoid un-forecasted
emergency maintenance which often leads to downtime. We transform our site attendance and asset
attendance records into information that can be
monetised. Other data such as reaction times are
a good indication of the motivation of a vendor.
Vendors who are persistently on time are obviously
motivated, those who are persistently late, don’t get
more business, and risk being replaced.
In order to ensure towercos meet MNO’s
challenging SLAs, it’s important they establish strict
but realistic KPIs for all their equipment and service
partners, monitoring performance, and giving more
business to vendors who help them meet SLAs,
while phasing out those who don’t. This eventually
all translates into improved bottom-line results for
everyone
An integrated approach to
telecom site security
ABLOY’s expansion in the telecom tower industry
ABLOY is one of the leading manufacturers of locks, locking
systems and architectural hardware in the world. They are also
a leading developer in the field of electromechanical locking
technology. The company has been providing security locking
solutions to telecom companies globally since the early 1970s,
with increased presence in the Southeast Asian market since 1987. Alan Goh, Business Development
Manager, Abloy OY (Finland)
With the evolution of the telecommunication industry, the
company has also streamlined its product offering and developed
new locking solutions using the latest technology available to meet
the challenging demands of providing telecommunication services
to end users. In this interview, Edward Lee, Business Development
Manager for Abloy South East Asia and Alan Goh, Business
Development Manager for Abloy OY (Finland) introduce the
company, its footprint, products and strategy in relation to their
security solutions and services in the telecom tower industry.
Keywords: Abloy, Southeast Asia, Interview, Access Control, Urban vs Rural, Fuel Security, Site
Visits, Shelters, Fencing, Batteries, Diesel Generators, MNOs, China, Singapore, Bangladesh, India,
Philippines, Thailand
< Abloy’s footprint and client base
< Key security issues in remote telecom sites and how to solve them
< Abloy’s cutting edge solutions integrating mechanical and electronic technology
< The need for a change in mindset: a joint approach to site security
TowerXchange: Could you introduce us to
Abloy? Which countries are you active in?
Edward Lee, Business Development Manager,
Abloy South East Asia: We are a Finnish company,
and we are a leading manufacturer of electric
locking systems and architectural hardware. We
develop easy to use locking solutions to satisfy the
needs of end users. Abloy has a global presence
spanning over 90 countries in all continents. Our
presence in Asia is represented by our direct
sales offices in China, India and Singapore where
Singapore is the regional co-ordinating office for
the Southeast Asian market.
TowerXchange: Who are your main clients?
Edward Lee, Business Development Manager,
Abloy South East Asia: Our main clients are in the
high security and infrastructure segment where
we provide solutions to professional end users
such as banks, government institutions, transport
and logistic companies. Essentially, we supply to
installations with a wide network of applications
including utilities and telecommunications
companies. In the telecoms industry we work
primarily with the operators. Telecom tower
companies is a relatively new concept in Asia
for us, although securing telecommunication
equipment has been one of our major strengths.
The route to market has changed and we look
forward to grow as a partner of choice with all
telecom tower companies, as we believe we have
the technology, know-how and capability to service
them.
TowerXchange: What kind of security issues is
the region exposed to? And how can Abloy help
solving them?
Alan Goh, Business Development Manager, Abloy
OY (Finland): Security issues that our telecom
clients usually encounter are related to the size of
their operational sites; managing the various groups
of people and individuals with access to them. They
need to integrate an efficient locking mechanism
into their current processes. Often many of these
sites are in remote areas and they are subjected
to harsh environmental conditions and they need
to ensure that these sites are well secured and
also when they need to be accessed, they have to
be certain that the locks will work when access
rights are granted. Over the years, our clients have
continued to choose and recommend Abloy as their
preferred security locking solution partner.
With regards to remote sites, these are high risk
areas and most of these sites hold very expensive
and important equipment and consumables that
are required to keep the site itself operational.
Hence, they are subjected to theft and pilferages
with most incidents resulting in loss of fuel, cables,
generators and batteries, often rendering the sites
non-functional, resulting in performance downtime
for the clients. A reliable locking solution, enhanced
with technology and process management –
which Abloy offers, creates a stronger barrier and
resistance for intruders and saboteurs.
TowerXchange: How does the demand for
security solutions differ between Asian
countries? And between Asia and other regions
Abloy serves?
Edward Lee, Business Development Manager, Abloy
South East Asia: Currently, our primary business
clients are telecom companies located in India and
Bangladesh. Other countries, where our locks have
been deployed in traditional landline installations,
such as Philippines, Thailand and Singapore
are exploring and starting to move towards the
independent towerco model. We understand very
well, that every country has their own culture
and management processes, and hence we know
that it is very important to customise our products
and solutions according to our customers’ specific
requirements, and not roll out a standardised model
across the region.
Most of the sites we serve in Bangladesh are located
in remote areas, although we do operate in urban
areas as well. In the city there are many options
for protecting expensive equipment. For instance,
some telecom companies store their equipment in
residential areas near the site rather than on it.
Remote sites have limited options.
In India, our focus has been on mobile network
operators rather than tower companies. A tower
company runs a site with two or three network
operators, and each of the them contracts us
individually to provide a locking solution for
their equipment. We are working towards getting
tower companies to understand the importance
of a consolidated security system, taking into
consideration that each tower is likely to have
Abloy CLIQ
multiple vendors. We are also learning how we
can work and collaborate more effectively with
tower companies in this region. The opportunity
to network with key players in the tower industry
through TowerXchange Meetups is extremely useful
to us.
TowerXchange: Why have tower companies been
slower to adopt your solutions?
Alan Goh, Business Development Manager, Abloy OY
(Finland): There are probably a couple of reasons.
One would be that tower companies are unaware
of our solutions, as our brand has traditionally
been associated with mechanical locking, although
they are highly reliable and secure. We welcome
the towercos to experience our high-tech electronic
XX
“
CLIQ technology allows for
audit trails so you can see
events and times of occurrence
from all locations
TowerXchange: What are telecom companies
typical requirements for site security?
which are geographically dispersed.
Alan Goh, Business Development Manager,
Abloy OY (Finland): We offer many different
security products for telecom companies, and
these are usually tailored to fit the needs of each
individual customer. Most of our clients in the
telecommunications industry have been purchasing
our master key solutions and some are using
electronic locking solutions.
Mechanically, Abloy’s patented and controlled key
profile with detainer discs technology is bump proof
and virtually pick-proof. Our high product quality
and reliability is also ideal for harsh environmental
conditions. Not forgetting the endless masterkeying capabilities from our comprehensive range
of locking products that include padlocks, door
cylinders, cam-locks, cabinet locks and key deposits.
To further enhance the mechanical solution, our
electronic technology known as CLIQ provides more
flexibility in key control for infrastructure projects
“
locking solutions. Secondly, towercos currently rely
on operators to each adopt a locking solution for
their own equipment, whereas we firmly believe
that there are many advantages to be enjoyed with a
joint approach to site security. We are most willing
to discuss further with the towercos and deploy
pilot trials with them to understand how they can
save on operational costs over a specific period
of time and the possibility of monetising their
investment in our solutions.
CLIQ technology allows for audit trails so you
can see events and times of occurrence from all
locations. Easy-to-change access rights are based
on time and calendar; e.g. enabling cleaners to be
automatically granted access only at predetermined
times. CLIQ technology provides unique
identification for every opening through encrypted
communication.
The integration of mechanical and electronic
technology is double-checked and secured with
Abloy Protec2 CLIQ wherein the CLIQ technology is
further tested on top of the mechanical durability
and resistance force of our product.
However, if our client wishes to have an immediate
communication with various sites, Abloy’s
electromechanical locking solution can offer a
variety of monitoring signals to inform the security
system of the status of the site.
Setting the lock to fail secure is a plus point in
terms of power consumption. With this setting,
the lock does not consume any power at all unless
an authorised user presents his or her card to
gain access. As such, our electromechanical lock is
“greener” for the environment, creating savings in
power consumption versus other locking devices
that require constant power supply to them.
Testing standards have been raised and Abloy
electromechanical locks are tested not only for
their mechanical durability and resistance. The
individual electrical components encased in our
electromechanical locks are tested as a complete
unit under the new EN14846 standard, where
a complete test is done instead of testing the
component parts separately, thus ensuring the best
product life cycle of our electromechanical locks to
our customers.
TowerXchange: Did the entrance of towercos
in the telecom industry change the way Abloy
works? And if so, how?
Alan Goh, Business Development Manager, Abloy OY
(Finland): We understand that telecom companies
are divesting their assets to tower companies and
we have to adapt our business approach to reach
out to attract new clients; namely the towercos.
There is likely to be exponential growth and we are
quite excited about this. Abloy is ready to ride on
the wave of opportunities in this fast developing
sector, by partnering closely with towercos to
implement the best possible high-tech electronic
security locking solution for them
ZNV’s RMS and security
solutions installed at 600,000 cell
sites worldwide
ZNV marries environmental and security monitoring with a proven service support proposition
Robert Zhu, Chairman and CEO, ZNV Technology
Robert Zhu, Chairman and CEO of ZNV Technology, was
born and grew up in China. He completed his postgraduate
studies in Australia in engineering, before completing an
MBA. He worked at ABB for 10 years, rising from product
manager to General Manager and Head of Asia Operations
before joining Tyco International’s security division ADT,
the largest security company in the World, where Zhu
was President of APAC for 5 years. ZNV was previously
the power and environment monitoring and surveillance
product line of ZTE, and is still partially owned by ZTE. In
April 2014 Zhu was head hunted to become Chairman and
CEO of ZNV, running day to day operations.
Keywords: Who’s Who, Monitoring & Management, Opex Reduction, Batteries, Fuel Security, Energy
Efficiency, Air Conditioning, Site Visits, Skilled Workforces, NOC, RMS, Site Management System, Job
Ticketing, Asia, Africa, China, ZTE, ZTE Netview, ZNV Technology, ZNV
< How ZNV’s solutions are proven at over 600,000 cell sites worldwide, with 40% market share in China
< The marriage of environmental monitoring and security surveillance
< Using advanced video compression technology to reduce bandwidth required by 90-95%
< How data can be integrated with maintenance workflows and job ticketing to reduce O&M costs
< The importance of the 1,000 people supporting the service of ZNV’s network
TowerXchange: Please introduce ZNV Technology
– what role does the company play in the telecom
tower industry?
Robert Zhu, Chairman and CEO, ZNV Technology:
ZNV Technology is a spin off from ZTE so its roots
are in the telecom industry. Our company’s main
activities are still to provide monitoring and
supervision equipment and software for telecom
radio base stations. We monitor and supervise
temperatures, smoke alarms, batteries, voltage,
diesel levels, humidity, flood sensors, access
control and many more. We can also have a
video surveillance system linked with them when
necessary.
ZNV has developed a platform to collect all this
data and schedule predictive maintenance across
hundreds of thousands of base stations. In China
our software platform is the only one that can
handle and process such large quantities of data.
TowerXchange: One of the first questions our
readers have is “how proven is the solution?”
Please tell us about the use cases for your
installations in China and worldwide.
Our solution is proven in China and worldwide.
Overall in China our equipment and software are
installed on over 500,000 base stations – out of a
total of over 1.3 million base stations built – we have
nearly 40% market share.
We monitor in the coldest weather in the North and
XX
ZNV is dominant in China serving all three major
carriers: China Mobile, China Telecom and China
Unicom. We also have commercial relationships
with other important operators in 60 countries
globally. In any country where ZTE have built
telecom towers, they use our monitoring systems.
In addition, we have secured deals in South Africa
from MTN, Zimbabwe from Econet and South
America from America Movil. ZNV has also done
battery monitoring for MobiNil in Egypt, for
example.
TowerXchange: TowerXchange has heard about
markets where 30% or more of diesel has
been stolen, 15% of batteries stolen. What can
towercos and MNOs do to improve security at
remote cell sites?
Our services include security monitoring, video
surveillance, control door access and alarm systems.
Video helps to identify burglars, and this triggers
an alarm to alert a control team and minimise loss.
This is a particularly big issue in Africa where the
theft of diesel is common.
“
A standard H.264 HD camera typically requires 4-6MB bandwidth to
transmit an HD image, while our new camera requires only 1.5MB. We
have also developed a new algorithm to calculate and compress the data.
When our monitoring systems show the cell site is operating within norms,
data is reduced to 100KB – only 5-10% of the original bandwidth required
Our competitive advantage is that we have over
10 years of experience. We use a unique solution
which marries environmental monitoring with
security monitoring. We have installed deterrent
devices such as chili powder dispenses, sprays and
high pitch sirens in the room at volumes that are
uncomfortable for human beings. This is a different
approach to scaring burglars away. Usage is subject
to legal liability issues which vary locally.
TowerXchange: One of the main objections
towercos and MNOs have to widespread use of
video surveillance technology is the bandwidth
and storage requirements for data from
thousands of cell sites – what can be done to
overcome this limitation?
This is absolutely a challenge; no company wants
security video to take up scarce bandwidth. In
response to this we introduced a new range of
“
Eastern provinces of China and into Russia, also in
humid tropical conditions in locations in Africa. Our
solution is also proven at high altitude like in Tibet
– installed at 5000m above sea level. Nearly all our
installations are still covered by our maintenance
crew. Many installations have been in operation
for over 12 years and they are still covered and
operating. Ours is a very reliable and proven
system.
cameras where we can compress the video data
using international standard H.265, which is
currently the most advanced video coding standard
in the world. ZNV were the first company globally
to release this kind of camera! HD images can
be transmitted using one third of the bandwidth
that the former mainstream H.264 requires.
Compression technology also saves a lot of data
storage requirements and cost. A standard H.264
HD camera typically requires 4-6MB bandwidth
to transmit an HD image, while our new camera
requires only 1.5MB. We have also developed a new
algorithm to calculate and compress the data.
When our monitoring systems show the cell site is
operating within norms, data is reduced to 100KB
– only 5-10% of the original H.264 bandwidth
required to transmit HD information!
TowerXchange: How can data from site
monitoring and access control systems be
“
In total there are 1,000 people
who support the service of
our network. We don’t just sell
equipment, we also continue to
support the systems
“
integrated with maintenance workflows and job
ticketing to reduce O&M costs?
Data is sent to monitoring and control centres in
China where all the data is collected and presented
on a video wall. Images and alarms are displayed.
This allows operators to identify what is important
and urgent. Platforms classify alarms and suggest
remedial actions. For example a power failure can
trigger seven or eight alarms. The operator would
not want to see all alarms. They just want to see
that site X has a power loss, but the battery is on. Or
in another example, perhaps the air conditioning
is not working properly in hot weather. Fuel level
sensors can also be used to provide refueling alerts.
Requirements differ between Africa and China, for
example power is more reliable in China and as a
result batteries are rarely used. We offer a Battery
Management System. When a battery has not been
used for a long time, it can discharge. Based on our
good data we can prolong the battery life by two to
three times the original lifetime. This has been used
successfully by China Telecom for several months.
TowerXchange: What data is needed for MNOs
and towercos to optimise energy efficiency?
We have done a lot of work on air conditioning.
Operators have recognised that the level of heat
generated by telecom devices can require that
the air conditioning be on all the time. But the
temperature drops in evening, night and early
morning, and devices may run with low traffic.
This provides the opportunity to switch off air
conditioning and save energy. We are able to use
free cooling and ventilation. However, we have
found that free cooling only works in a clean
environment (messy cell sites scan can lead to a
blocked filters requiring frequent service).
TowerXchange: Tell us about ZNV’s service
capabilities.
ZNV have a large team of experts. Our service team
consists of 300-400 of our own well trained service
engineers, supported by over 600 subcontractors. In
total there are 1,000 people who support the service
of our network. We don’t just sell equipment, we
also continue to support the systems. Service is
currently 20% of our business but growing fast. Our
service provides three benefits:
< Optimised response time targets, including a full
operational uptime promise on all our monitoring
systems
< Technical support to help move from ad hoc
maintenance to predictive and preventative
maintenance
< Value added services such as battery discharge
monitoring. This new software was developed based
on customer requirements gathered from service
teams working closely with our customers
TowerXchange: Finally, please sum up how you
would differentiate ZNV from competitive site
security and monitoring solutions.
The key to our success is a large installed base.
We have volume, experience and a well proven
solution. Our company also has a good combination
of power and environmental monitoring with
advanced video surveillance and access control.
As a result, ZNV is one of China’s leading security
companies.
Our low cost equipment manufacturing makes us
very competitive in the market. We developed an
intelligent power meter, able to tell you how your
power consumption can be reduced. In instances
where two or three operators share a site they need
to know who consumes how much power. Our
services offer very accurate information
XX
Tarantula’s successful move
to Southeast Asia
Leading site portfolio management software company’s expansion into the
region and the drivers of its success
Tarantula, the leading telecom site portfolio management
software company, relocated its global head office to
Singapore a year ago and is expanding its product
offering in Southern and Southeast Asia. Thanks to its
highly focused telecom infrastructure management
products, Tarantula already provides its solutions to
manage information relating to portfolios covering more
than 400,000 telecom towers worldwide. This includes
tower businesses of Indus Towers, Viom Networks and
American Tower in Southern Asia. In this interview,
Udhay Mathialagan, CEO of the company, tells us about
Tarantula’s successful first twelve months in the region.
Udhay Mathialagan, Chairman and CEO, Tarantula
Keywords: Tarantula, South Asia, Southeast Asia,
India, Myanmar, Indonesia, Viom Networks, Indus
Towers, American Tower, C-Level Perspective,
Irrawaddy Green Towers, Komet Infra Nusantara,
Malaysia, Thailand, Cambodia, Bangladesh, Sri
Lanka, Site Management System
< Tarantula’s expansion into Southeast Asia
< Which countries are driving Tarantula’s Asian operations
< Why towercos need to properly manage their data
< Tarantula’s business in Africa versus Asia
TowerXchange: Udhay, could you give us a brief
history of the company? Which countries are
driving Tarantula’s business in Asia? Who are
your main clients?
Udhay Mathialagan, CEO, Tarantula: We commenced
business in the UK in the late nineties by solving
problems relating to site sharing and by creating
an industry-wide data sharing platform. In 2004,
we established our software development centre in
Hyderabad, India. As India’s local tower industry
began to expand in 2007, we worked hard to became
the go-to software platform for a number of Indiabased tower companies including Viom Networks
and American Tower. In the following years we
continued to grow our business in Europe.
Last year, we decided to establish our new head
office in Singapore to get closer to the opportunities
emerging across the Asia Pacific region and to bring
together an international team of tower industry
and software product experts. We currently
have staff available in multiple locations in the
region and have expanded our customer presence
across multiple countries in the region, including
Irrawaddy Green Towers in Myanmar and Komet
Infra Nusantara in Indonesia. We have also
commenced work for major Southeast Asian telcos
across a number of their regional assets.
TowerXchange: Which countries do you feel are
driving business for Tarantula?
Udhay Mathialagan, CEO, Tarantula: Myanmar
is going through a rapid expansion phase with
multiple tower companies active and greenfield
projects being developed. India, in contrast, has
a well evolved tower market and represents
opportunities for us to expand our offering as our
customers focus on improving asset utilisation
and management. Our offering is suited to both
newly forming as well as mature markets and this
is the interesting side of Asia for us as the region is
host to very advanced as well as very young tower
industries.
Although primarily working with towercos in Asia,
we are now starting to bring to a new group of telcos
the offerings we have in other regions into Asia
where mobile operators are seeking to have a better
understanding of their wireless assets. As Asian
telcos seek to create options to spin-off their towers
or to enter into new forms of sharing arrangements,
they need to have a more comprehensive and
detailed understanding of their towers. Tarantula
has extensive experience in this process.
TowerXchange: What is the percentage of
business that comes from MNOs compared to
tower companies in the region?
Udhay Mathialagan, CEO, Tarantula: Internationally
our business is split evenly between MNOs and
tower companies. In Asia, it is more skewed towards
tower companies rather than MNOs. However, as
previously mentioned, this could change as MNOs
are becoming an increasingly relevant client for us.
One of the underlying issues in the industry that
drives our business is that the cost of wireless
infrastructure keeps increasing – particularly the
costs relating to passive infrastructure. It is very
important for MNOs - and they are well aware of
it now - that they find smarter models to manage
the lifecycle costs of their passive and the property
aspects of their wireless infrastructure.
MNOs with the intention to divest their portfolios
can significantly improve their value by having
high quality and well organised information on
their portfolio of site assets. It is not unusual to see
companies that have invested billions of dollars
in their wireless infrastructure not having basic
information around the property and physical
utilisation aspect of these assets.
TowerXchange: Which specific challenges does
Tarantula help address?
Udhay Mathialagan, CEO, Tarantula: We help asset
owners improve the long-term economics of their
business by automating business processes and
“
realisation. In fact, Tarantula tracks revenue
streams and growth potential while also helping
companies to make better investment decisions.
Some companies do try to manage their information without a single
source of core data for example, by relying on department level data
and consolidating them into spreadsheets. They sometimes even use this
method for time-bound activities such as asset deployment projects but
spreadsheets don’t offer any meaningful capability to make connections
and comparisons across projects or asset types
TowerXchange: A lot of tower companies struggle
to manage their data. Do you believe that there
are circumstances when a data hub is not
necessary for telecom tower companies?
Udhay Mathialagan, CEO, Tarantula: Some
“
by concentrating asset data in a “single version
of the truth”. We offer a data-hub for towercos to
operate their end to end business in a seamless
way. This “single version of asset data” connects
with a number of other sub-systems covering
downstream activities like remote sensors or
energy management systems or higher-level
business functions such as financial management.
Importantly, our product helps tower operators
track and implement the various aspects of
customer and ground lease contracts ensuring
revenue integrity.
companies do try to manage their information
without a single source of core data for example, by
relying on department level data and consolidating
them into spreadsheets. They sometimes even use
this method for time-bound activities such as asset
deployment projects but spreadsheets don’t offer
any meaningful capability to make connections
and comparisons across projects or asset types.
The business misses out on a common core set of
data that could have eliminated re-work. A strong
argument for Tarantula’s business proposition is
that we enable them to consolidate all their asset
data in our hub and help tower companies to reduce
costs and revenue leakage.
In addition, some towercos aim to build scale by
using distributed spreadsheets which won’t support
their growth beyond a certain point. Our platform
offers significant payback in terms of revenue
TowerXchange: How do you compare the Asian
market for Tarantula with Africa and other
regions where you operate?
Udhay Mathialagan, CEO, Tarantula: We see some
similarities between Africa and Asia such as patchy
energy infrastructure and challenges in securing the
required human talent and skills.
Asia is host to a very diverse array of countries,
including some of the world’s most and least
developed nations. We have learned not to
generalise and to focus on solving a specific market
or customer problem using our products that have
been tested in real-life conditions in more than
thirteen countries.
TowerXchange: How would you judge the last 12
months of Tarantula, have they been successful?
Udhay Mathialagan, CEO, Tarantula: Over the
past year, Tarantula has secured customer deals
that cover seven new markets in the region so I’d
definitely say establishing our base in Singapore
and deploying resources in this region has been a
good move.
I expect our business to continue growing as
wireless penetration increases and new business
models and ideas are deployed to manage the
expected subscriber and data volume growth
The synergy between tamper
proofing, energy efficiency and cloud
services solutions
Addressing towercos’ most pressing challenges, all-in-one solution
The demands for running towerco operations today go
beyond the services provided by conventional RMS vendors.
True to its name, AIO is addressing the growing need
for innovation under its All-In-One umbrella. Presently,
towercos need to focus their attention on reducing energy
costs, excelling in managing site operations while avoiding
white collar fraud and system tampering. AIO’s solution
relies on a simple and yet efficient synergy: increase energy
efficiency, circumvent complicated white collar tampering
and safeguard data, simultaneously providing towercos
much needed operational flexibility.
Asher Avissar, Co-founder and CEO, AIO Systems
Keywords: AIO Systems, C-Level Perspective, RMS, Interview,
Southern Asia, Southeast Asia, Security, Opex Reduction,
Energy Management, Diesel Consumption, Batteries, KPI,
Operational Excellence, Towercos, Site Management Systems,
Opex Reduction
< AIO’s proposition for the Asian towerco industry
< How towercos can significantly reduce energy consumption and optimise site management
< How to prevent white collar tampering
< AIO’s latest innovation and how it will serve the tower industry
TowerXchange: What kind of monitoring
services and solutions are required at cell sites
in Asia? And how does AIO’s proposition differ in
Asia from other markets?
Asher Avissar, Co-founder and CEO, AIO Systems:
With the enormous amount of towers changing
hands to independent towercos in Asia, the sheer
volume and diversity of these towers is a daunting
challenge in itself.
AIO’s power lies in the knowledge and experience
we have worldwide. Our site solutions and services
are developed based on day to day site operations,
through trial and error. The Asian market is slightly
more complicated than other markets. We have
to ensure towercos address complicated issues
such as implementing and controlling alternative
energy resources, countering sophisticated
tampering, floods, humidity, multi-tenant disputes,
et cetera. The absolute synergy between AIO’s site
hardware control elements, management systems,
and cloud service solutions gives towercos the
competitive edge.
TowerXchange: How does AIO ensure its clients
operational and energy efficiency?
With the complexity around energy at Asian
towers, AIO’s site components together with
our software and hybrid solution automatically
selects the optimal energy resource in real-time.
A sophisticated algorithm calculates the status of
batteries, rectifiers and system variables based on
voltage, current, environment, temperature and
humidity. Automated free-cooling units eliminate
unnecessary use of air conditioning during stable
temperatures… I could give you many other
examples of how we ensure energy efficiency.
This all occurs to secure the harmony of the site’s
operation in real-time. From a managerial point
of view, you can easily assess data for any country
for any site, establish whether or not energy
consumption was optimised, how sites perform,
what equipment operates the best under which
conditions, and where to take specific pre-emptive
actions. Furthermore, AIO’s data validation
structure is based on duplicated measurements,
site behaviour profiles, data input verification
systems and algorithms, which assures the absolute
accuracy of the data.
“
Reducing the energy bill is usually
on the highest list of priorities
for towercos in Asia. In India for
instances, the sheer volume and
type of users sharing the same
power line may greatly impact the
stability of the power on site
“
AIO Systems’ NOC
TowerXchange: What are clients demanding
when it comes to reducing energy opex? And
how is AIO addressing these demands?
Reducing the energy bill is usually on the highest
list of priorities for towercos in Asia. In India
for instance, the sheer volume and type of users
sharing the same power line may greatly impact
the stability of power on site. Matters are further
complicated with tapping into the power lines,
operating the generators simultaneously whilst
refuelling in order to inflate the bill, water or
other liquids mixed with diesel and other forms of
theft. This is in stark contrast to Myanmar where
towercos are simply interested in optimising energy
usage and such practices are practically unheard of.
Management requirements are further challenged
by new legislation aimed at protecting the
environment and reducing site carbon footprints. www.towerxchange.com | TowerXchange Issue 11 | 281
“
Managing a wide variety of
sites spanning across complex
infrastructures and dispersed
geographical locations is a
challenge in itself for towercos. An
optimal solution for both active
and passive site management is
urgently required
“
AIO can tell you what the realistic cost of your
energy bill should be, but our measures will
also ensure that you can drastically reduce
this bill. You will definitely know if someone is
tapping into your line. Our intelligent solutions
will automatically switch to alternative energy
sources during inconsistent power supply, shut
off generators during refuelling, or close fuel
tanks if fuel quality is impaired. AIO is also at the
forefront of resolving towercos’ concerns regarding
environmental protection. With our energy,
hybrid and environmental solutions we protect the
environment simultaneously ensuring that towercos
minimise opex.
TowerXchange: What do you mean by
operational flexibility?
282 | TowerXchange Asia Dossier 2014 | www.towerxchange.com
It has become clear to us that in the race to
acquire more towers, companies are looking for
a more flexible approach to run their operations.
AIO takes operational flexibility a step further.
We offer a whole range of services, geared for
almost any business or operation. The first group
of services are our cloud and NOC services.
Towercos can simply choose to access the data or
let AIO handle the full range of their operations:
rollout, monitoring, alert response, performance,
maintenance and more.
SMART-Tampering components, advanced hardware
controllers and accessories that are equipped
with wireless communication. In many instances
in Asia site data itself has been tampered with.
The backup software has control systems in place
that pre-emptively manage user levels and will
automatically detect inconsistent data entries. AIO
also protects wireless communication with effective
firewalls that will protect site data. As I mentioned
previously, data is further secured with our data
verification systems.
TowerXchange: What are the next challenges
towercos will face in the near future and how is
AIO addressing them?
The second service is our Business Intelligence
(BI) module. This module is centred on expanding
the towercos’ operational intelligence across their
entire network structure. Data is accessed over any
web portal from any location, providing an overall
global perspective of site operations that can be
drilled down to the minutest KPI. We have also recently developed a “pay-as-you-go”
module structured in a way to facilitate businesses
at any stage of their operations. These modules will
provide towercos with full flexibility, today and for
future operations.
TowerXchange: How does AIO circumvent
white collar tampering, whilst at the same time
protecting site data?
It’s not easy to circumvent white collar tampering
and you always need to stay a step ahead. Sites are
usually setup with inconspicuous camouflaged
Managing a wide variety of sites spanning across
complex infrastructures and dispersed geographical
locations is a challenge in itself for towercos. An
optimal solution for both active and passive site
management is urgently required.
A minimum prerequisite from most carriers today
dictates that sites are managed uniformly by
towercos. From AIO’s perspective this needs to be
changed. AIO is in the finishing stages of developing
a smart hardware controller that will correlate
data via the SNMP communication protocol. The
idea is to correlate both active and passive site
data, which is combined within AIO’s BI module.
This means AIO will provide towercos with the
business intelligence on how to manage different
infrastructure, both active and passive, from a
global perspective
www.towerxchange.com | TowerXchange Asia Dossier 2014 | 282
Accelerate your sales cycle
and close your next major deal in emerging market towers
Advertise in the TowerXchange Journal, circulated to a highly targeted community of the 10,000
most influential tower decision makers
1.4%
4.4%
2.5%
5%
Towerco
5.7%
Energy equipment & ESCO
33.7%
6%
14.8%
turnkey infrastructure
Strategic or legal advisor
Active equipment or IBS
39.8%
19.7%
Investor
7.2%
11.7%
9.1%
RMS, ILM & access control
C-level
VP, SVP or Dept Head
Director-level
Senior manager
Middle management
23.1%
SSA
CALA
60
40
MENA
North America
76%
59%
20
Regulator or government
Other
In which region are
readers interested?
80
Managed service/
Static asset manufacturer
6.9%
8.8%
100
Operator
Asia
48%
40%
32%
Europe
22%
0
To book your advertisement, contact: Annabelle Mayhew | [email protected] | M. +44 (0) 7423 512588
Tower
© 2015 Site Seven Media Ltd
Xchange
Design by BLACKLIGHT Design Agency

TowerXchange 11, 02/15

Transcription

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