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Tower

Xchange

Journal of the telecom tower industry in EMEA, CALA and Asia

Issue 16 | May 2016 | www.towerxchange.com

TowerXchange CALA:
< Is it time to invest in Argentinian towers?
< Brazil tower industry facing its toughest year yet
< TowerXchange verdicts on Bolivia and Telesites

TowerXchange Africa and the Middle East:


< Analyses of AMT Tanzania and IHS+HTN deals
< BMI study the Big Four, MottMac study Algeria
< TowerXchanges whos who in MEA towers

TowerXchange Asia:
< edotco, Indus Towers, Protelindo perspectives
< Cam Towerlinks project to connect Angkor Wat
< TowerXchanges guide to Chinese tower market

TowerXchange Europe:
< Cellnex CEO Tobias Martinez interviewed
< Transformation in Turkey, Germany, Russia & CIS
< UK, France, Poland and Greece market studies

Meet the tower industry leaders


Reports from a dozen European roundtables join us next in Florida!

Dont miss TowerXchange Meetups for CALA (16 -17 June) and Africa (19-20 October)!

Tower

Xchange

Contents
Regular and special features
5

CALA tower count, analysis and news

50 Africa tower count, analysis and news


76 Asia tower count, analysis and news
92 Europe tower count, analysis and news
105 The evolution of Telefnicas Telxius

131

CALA: Argentina opens, Brazil


slows, Bolivia studied

132 Brazil tower industry facing its toughest year yet


148 Investment opportunities in Argentinian towers
157 TowerXchange and Mott MacDonald on Bolivia
163 Is Telesites a force to be reckoned with?

168

111 Global tower market maturation

MEA: whos who, plus AMT


and IHS deals analysed

169 TowerXchanges whos who in MEA towers


182 BMIs verdict on Africas Big Four towercos
186 AMT enter Tanzania, IHS acquire HTN and Hotspot
199 Mott MacDonald Share Square: Algeria

115 Ranking the top 185 towercos worldwide


119 RANsharing: the search for an equitable deal
124 Growing pains: how to scale a towerco
129 AMT and SBA quarterly results review
203 TowerXchange market analysis: China
329 Small cells special feature

TowerXchanges whos who


349 Directory of over 170 vendor profiles
353 Abloy, Acsys, Ascot, Ausonia, Bladon Jets, EnerSys,
Invendis, IPS, Nexsysone and Tarantula

202

Asia: China, Indonesia, Laos,


Cambodia and India

220 Inside edotcos NOC, plus Sri Lanka and Myanmar


236 Indonesia: MNO perspective, XL-Protelindo deal
242 Cam Towerlink connect Angkor Wat, Laos study
248 SCM at Indus Towers; BMI on Indian tower market
2

| TowerXchange Issue 16 | www.towerxchange.com

261

65% European towerco


penetration by 2020

272 Cellnex CEO keynote interview


275 Turkey: Global Towers IPO imminent
282 German tower market restructuring
289 UK, France, Greece, Russia, CIS, Poland, Romania

TowerXchange Meetup calendar


< TowerXchange Meetup Americas, June 16-17, 2016
< TowerXchange Meetup Africa, October 19-20, 2016
< TowerXchange Meetup Asia, December 13-14, 2016
< TowerXchange Meetup Europe, April 4-5, 2017

www.towerxchange.com | TowerXchange Issue 16 |

With special thanks to the TowerXchange Inner Circle


Our informal network of advisers:

About TowerXchange
Founded in 2012, TowerXchange is your

(Chairman) Daniel Lee


Managing Director
Intrepid Advisory Partners

Chuck Green
Executive Chairman
Helios Towers Africa

Kurt Bagwell
President International
SBA Communications

Zhiyong Zhang
Chairman & President
Miteno

Suresh Sidhu
CEO
edotco

Jim Eisenstein
Chairman & CEO
Grupo TorreSur

Akhil Gupta
Chairman
Bharti Infratel

Malcolm Collins
Chief Executive
CTIL

Bimal Dayal
COO
Indus Towers

Michel Faivre
Directeur Programme Partage
dInfrastructure AMEA, Orange

Ted Zhong
CEO
Q Towers International

Inder Bajaj
CEO
HTN Towers

Nina Triantis
Managing Director, Global, Head of
Telecoms & Media
Standard Bank

Hal Hess
EVP, International Operations and
President, EMEA and Latin America
American Tower

Riana Donaldson
Manager: International Network
Operations Support
Vodacom

The TowerXchange Journal is free to

Terry Rhodes
CEO
Eaton Towers

Nobel Tanihaha
President Director
PT SOLUSI TUNAS PRATAMA (STP)

Tunde Titilayo
Vice Chairman
SWAP International

monetises this community through hosting

Marc Ganzi
President, Digital Bridge &
Mexico Tower Partners

Umang Das
Chief Mentor
Viom Networks

Jack Dessay
Managing Director
Macquarie Capital

Arun Kapur
Co-Founder
Irrawaddy Green Towers

Gilles Kuntz
CEO
TowerCo of Madagascar

Jeffrey Eldredge
Partner
Vinson & Elkins

James Maclaurin
formerly CEO
edotco

Maria Scotti
CEO
Torrecom

Enda Hardiman
Managing Partner
Hardiman Telecommunications Ltd.

and is governed with the support and advice

Areef Kassam
Director of Infrastructure
GSMA Mobile for Development

David Meganck
Founder and COO
Acsys

Adeel Bajwa
Senior GM of Legal Affairs and
Contracts, Warid Telecom

informal network of advisors

Ayman Al Adl
Director - TMT
Standard Chartered Bank

Tilak Raj Dua


Director General
TAIPA

Scott Coates
CEO
Wireless Infrastructure Group

Dagan Kasavana
CEO
Phoenix Tower International

Peter Owen Edmunds


Co-founder and Chairman
Russian Towers

Carlo Ramella
COO, EI Towers
and Chairman, Towertel

| TowerXchange Issue 16 | www.towerxchange.com

independent community for operators,


towercos, investors and suppliers interested
in EMEA, CALA and Asian towers. Were
a community of practitioners formed to
promote and accelerate infrastructure
sharing. TowerXchange dont build, operate or
invest in towers; were a neutral community
host and commentator on telecoms
infrastructure.

qualifying recipients. We also provide


webinars and regular meetups. TowerXchange
annual Meetups and the sale of advertising,
without compromising editorial integrity.
TowerXchange was founded by Kieron
Osmotherly, a TMT community host and
events organiser with 18 years experience,
of the TowerXchange Inner Circle an

2016 Site Seven Media Ltd. All rights reserved. Neither the
whole nor any substantial part of this publication may be reproduced, stored in a retrieval system, or transmitted by any
means without the prior permission of Site Seven Media Ltd.
Short extracts may be quoted if TowerXchange is cited as the
source. TowerXchange is a trading name of Site Seven Media
Ltd, registered in the UK. Company number 8293930.

www.towerxchange.com | TowerXchange Issue 16 |

YOUR
SIGNAL
STARTS
HERE.

TOWER OWNERSHIP

LEASING

SITE MANAGEMENT

FLORIDA HEADQUARTERED.
INTERNATIONALLY CONNECTED.
Our clients depend on SBA to provide the wireless infrastructure that allows them to transmit the
signal to their customers. As their first choice provider of wireless infrastructure solutions, we are
continuously setting the standard for customer satisfaction by Building Better Wireless.

800.487.SITE sbasite.com
2016 SBA Communications Corporation. All Rights Reserved.

SITE DEVELOPMENT

CONSTRUCTION

TowerXchanges analysis
of the independent tower
market in CALA

New tower count, new towercos

Estimated
number of towers owned or managed
618 by towercos in CALA
**Telesites

Since our last update, weve seen the creation of


Telxius, Telefnicas spinoff towerco which is going to
incorporate the operators assets in Spain, Germany
and Latin America into one entity. Additionally,
TowerXchange has spoken to several towercos that
we hadnt identified before such as Balesia, active in
Colombia, Peru, Guatemala, El Salvador and Puerto
Rico; MX Towers, active in the Mexican market and
likely to focus on small cell deployment across the
country; and Golden Comunicaciones, a joint venture
between Innova Capital Partners and Goldman Sachs,
focusing on Colombia and Telecommunications
Partners, operating in Peru.

TowerXchanges periodical CALA baseline data


update doesnt only feature the latest tower count
but includes several news items in terms of new
towercos, market openings and changing dynamics in
the CALA tower industry.

Estimated number of towers owned or managed by towercos in CALA


1,212

618

*American Tower
3,765
18,851
484
Estimated
number of900 towers
owned or managed
by8,852
towercos
in CALA
13,350
Telxius 1,655
Estimated number of
328 towers owned or managed by towercos in CALA
1,212
12,874

*American Tower

*American
Tower1,655
Telxius
Grupo TorreSur

**Telesites 23
SBA Communications
1400

132

20,000

25,000

30,000

35,000

15,000

10,000

20,000

25,000

30,000

35,000

20,000

25,000

30,000

35,000

15,000

193

65

901
753

480
ic
o
Pa To
rt w
ne er
rs
1203

555

208

500

450

400

100
200

100

190

193

1203

650
650

200
200

500
500

450
450

208
208 100
100

400
400

105

60

51

40

40

100
100
200
200

190
190

150
150

105
105

60
60

In terms of tower count, Amrica Mvils spin off is


proving itself as a BTS force. In fact, it has added as
Ecuador
Unknown
many as 2,009 new sites since its creation. Grupo
Spain & Germany
TorreSur has added a healthy 200 new sites to its
count, closing at 6,500. Phoenix Tower International
continues its regional (and U.S.) expansion with the
40
40
40
40
addition of 545 Viva sites in the Dominican Republic,
Dominican Republic
Dominican Republic
and the other middle market towercos continue to
Ecuador
Ecuador
grow.
Unknown
Dominican Republic

51
51

M
ex
ic
ex P o T
ic ar ow
o tn e
Pa To e r
rt w rs
Ph ner er
oe s CS
I
Ph n n
S
t i
In oenern xCTSS
te ix at ow
rTn T io e
oart ow na r
To rioen er l
rr s aUl
es
ni
da
U
ni
s
**das
B*r *Q
*a*
M
Br
zQ
C
a C ilMT
**C zilom oCw
To pa e
o
*
m
** ** w n r
** Cpoa e y
*C
nn r
on tiyn
tin en
ta
e
** nta l
** ** l
** *N
*N M
T M S
To orr S
rr ec
o
e
C co m
Ce en m
Annt ten
An d en n
de ea ni ial
a n al
* nP T
** **P*a aTrot ow
** *r*t wne er
** Inne rs
I( nr
(T nTnoo osv
or rvr at
re eastt te
se eecl l
c) )
II IIM
M
H H T T
do diog igh
h
B
B l li
To To ra rinaes ne
rr rre sil il
e
I
In nt s s A
te el An n
lli li d d
Si Sit in in
te e a as
So So s
lu lu
tio tio
ns ns
Al Al
fa fa
Si Si
te te
To T
TO T
O
rrorr
es es CSACS
A
de d
e
Pa P
naan
To T
m am
rr or
a a
es re
Ons O
linnl
e ine
Sk S
ysky
Te T
itesi
le el
coec
s tes
mom
To T
rr o
esrr
es

600
600

65
193
65
901
901 753
194
753 690
600
194 400
555
690
600
400
555

150

de
Pa
na
To
m
rr
a
es
On
lin
e
Sk
ys
Te
ite
le
co
s
m
To
rr
es

480

400

600

ite

600

194
600

TO
CS
A

690

To
rr
es

650

200

ex

10,000

71

600

15,000

Ph
CS
In oen
S
te ix
rn T
at ow
i
on er
To
rr
al
es
U
ni
da
s
**
Br *Q
M
az
C
C il T
** om ow
p e
**
*C any r
on
tin
en
ta
l
**
**
*N
M
S
To
rr
ec
om
Ce
n
An ten
ni
de
al
an
** Pa To
** rt we
** ne r
r
I
(T nno s
or v
re att
se el
c)
II
M
T
H
do ig
Br hlin
To
as e
rr
il
es
In
An
te
lli
di
Si
na
te
s
So
lu
tio
ns

400
400

Source: TowerXchange
research, quarterly filings,
site lists

599 540 573 386 221 136

5,000

480

8001531

600
600

484

71132

400

1531

484

599 540 573 386 221 136

1203

600

1000

800

10,000

12,874

5,000

600

13223

1200

1000

8,852

Al
fa
S

1400
1200

1531

3,765

618

6,500

1000

800

8,852

1,212

13,350

12,874
328 5,000

7,032
6,500

Grupo TorreSur

1400

18,851
13,350

9006,500

7,032

SBA Communications71
Grupo
1200 TorreSur

23

599 540 573 386 221 136

328

Telxius 1,655
**Telesites

3,765

18,851

SBA Communications 900 7,032

Year

Country

Seller

2014

Brazil

BR Towers

2014

Brazil

Oi

2013

Brazil

Nextel

2013

Brazil

2013

Brazil

Unknown
Buyer

Tower count

Deal value US$

Cost per tower US$

Deal structure

American Tower

4630

$978,000,000

$211,231

Company acquisition

SBA Communications

1641

$527,000,000

SLB

American Tower

1940
$349,000,000
www.towerxchange.com

$321146

Z-Sites

American Tower

236

$129,000,000

$546,610

Company acquisition

Oi

SBA Communications

2007

$645,000,000

$321,375

SLB

Spain & Germany


* American Towers Brazil count is pro rata to the closing of the second tranche of TIM Brazil towers
Ecuador
Torresec
SBA Communications
Spain
& Germany
130
2015
Portfolio acquisition
31% remains subject to regulatory
** Creation of Telesites
approval. We understand Telesites has a BTS
contract from
Claro Costa Rica
34%
Mexico
sites as
Dominican Republic
Amzak/Teletower
Phoenix Tower
190 Tower Partners added almost 200 Company
2015
acquisition
Crownand
Castle
*** QMC has a portfolio of 901 towers across Brazil, Mexico, Colombia
Puerto Rico
Brazil Dominican Republic,
T4U
Phoenix Tower
529
2015
Company acquisition
**** Continental Towers owns a portfolio of ~690 towers, which their
website claims are distributed
across Mexico,
Jamaica,
American Tower
did
IIMT
in
Mexico.
Innovattel
grew
its
regional
Brazil
T4U
Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Colombia and Peru
Phoenix Tower
529
2015
Company acquisition
***** NMS has a portfolio of 600 towers across Nicaragua, Mexico,
Colombia
and Peru
SBA
Communications
Brazil
TIM
American Tower
6480
$1,200,000,000
$185,185
2014
SLB
portfolio
from
350
to
500
sites
and
Torrecom
added
****** Innovattel/Torresec owns a portfolio of 500 towers across Puerto Rico, Colombia, Ecuador,
Argentina,
Panama
and
Peru
Panama
American Tower
Phoenix Tower
60
2014
Subsidiary acquisition
Verizon
AT&T

XX | TowerXchange Issue 16 | www.towerxchange.com


Miscellaneous
4%

$179,897
SLB |
| TowerXchange
Issue 16

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effectively
cost-efficient

energizing
communities

empowering
communication

Connectivity is at the core of everything we do. Providing rst-of-its-kind regional accessibility,


our telecoms infrastructure reach enables us to touch communities and expand communication
businesses across Southeast Asia.
Enabling connectivity for the future

www.edotcogroup.com

Newest towercos in the CALA market

close to 100 sites to its portfolio across Nicaragua,


Guatemala and Mexico.

Name

Countries

Focus

Balesia

Colombia, Peru, Guatemala, El Salvador, Ecuador

BTS

Golden Comunicaciones

Colombia

BTS

MX Towers

Mexico

Small cells/rooftops

Telecomm. Partners

Peru

BTS

Telxius

Peru, Chile, Brazil (Germany, Spain)

Carve out
Source: TowerXchange

Selected estimated CALA tower counts

Chile
8,511

Peru
9,118

Caribbean Central
10,550
America
11,489

Colombia
15,353

Argentina
16,000

Mexico
27,084

Brazil
54,425

Estimated total towers in rest of South America: 17,400 (Venezuela, Ecuador, Bolivia, Paraguay, Uruguay, Surinam, French Guiana and
Guyana)
Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

In the meantime, SBA Communications added


approximately 400 new sites to its CALA portfolio
and American Tower around 200. The U.S. publicly
listed giants may own the lions share of the existing
towers in CALA, but they are on an even playing
field when it comes to BTS, and the organic growth
is being liberally shared around, at least until the
Brazilian currency crisis settles.
Who is going to buy middle market towercos?
The CALA region is filled with middle market
towercos with portfolios ranging between 100 and
1,500 sites. In Brazil alone, TowerXchange reports
over a dozen entities purely focused on Build-toSuit activities, while in Mexico there are as many as
twenty.
As reported in a recent editorial on the status of the
Brazilian tower industry, most of these towercos are
private-equity backed and built on the assumption
that after a few years of BTS activity, theyd scale
their business enough to flip to one of the larger
towercos most likely American Tower or SBA
Communications. And not only theyd be acquired
but theyd be able to sell for multiples in the
twenties.
Amid current economic conditions, doubts
have risen as to whether these towercos can be
monetised, let alone at high multiples. The Brazilian
currency crisis alongside the saturation of the
www.towerxchange.com | TowerXchange Issue 16 |

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WITH 2,400 TOWERS AND 20,000 ROOFTOPS

REACHING
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Major tower transactions in Latin America 2011/2016

*American Tower acquisition of 4,630 BR Towers includes2,530 towers plus 2,100 exclusive rights
**Totals and average exclude the GTP / American Tower deal as it was US-centric

Year

Country

Seller

Buyer

Tower count

2016
2016
2016
2016
2015
2015
2015
2015
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2012
2012
2012
2012
2012
2012
2012
2012
2011
2011
2011
2011
2011
2011

Dominican Republic
Peru
Chile
Brazil
Ecuador
Dominican Republic
Brazil
Brazil
Brazil
Panama
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Mexico
Brazil
USA, Panama & Costa Rica
Brazil
Brazil
Brazil
Mexico
Brazil
Peru
Chile
Brazil
Brazil
Brazil
Brazil
Brazil
Chile
Mexico
Mexico
Colombia
Colombia
Brazil
Brazil

Viva
Telefnica
Telefnica
Telefnica
Torresec
Amzak/Teletower
Algar Telecom
T4U
TIM
American Tower
BR Towers*
Oi
Nextel
Z-Sites
Oi
Nextel
Nextel
Oi
GTP**
Oi
Oi
Telefnica
Axtel
Sitesharing
Telefnica
Telefnica
Telefnica
Oi
Telefnica
Telefnica
Telefnica
Telefnica
Telefnica
Telefnica
Telefnica
Millicom/Tigo
Telefnica
Sitesharing

Phoenix Tower
Telxius
Telxius
Telxius
SBA Communications
Phoenix Tower
Highline do Brasil
Phoenix Tower
American Tower
Phoenix Tower
American Tower
SBA Communications
American Tower
American Tower
SBA Communications
American Tower
American Tower
SBA Communications
American Tower
BR Towers
Grupo TorreSur
American Tower
American Tower
BR Towers
Torres Unidas
Torres Unidas
SBA Communications
Grupo TorreSur
American Tower
BR Towers
American Tower
American Tower
American Tower
American Tower
American Tower
American Tower
Grupo TorreSur
American Tower

545
900
328
1655
130
190
125
529
6480
60
4630
1641
1940
236
2007
2790
1666
2113
15700
2113
2113
93
883
100
350
400
800
1208
192
1912
1500
558
1554
584
125
2126
1358
666

Totals / average

42,822

Special thanks to Jonathan Atkin, Managing Director at RBC


Capital Markets for his contribution
XX | TowerXchange Issue 16 | www.towerxchange.com

Deal value US$

Cost per tower US$

$11,500,000
$214,000,000

$35,061
$129,305

$16,000,000

$128,000

$1,200,000,000

$185,185

$978,000,000
$527,000,000
$349,000,000
$129,000,000
$645,000,000
$413,000,000
$398,000,000
$343,000,000
$4,800,000,000
$251,000,000
$293,000,000
$18,000,000
$250,000,000

$211,231
$321146
$179,897
$546,610
$321,375
$148,029
$238,896
$162,328
$305,732
$118,788
$138,665
$193,548
$283,126

$178,000,000
$258,000,000
$33,000,000
$252,000,000
$225,000,000
$96,000,000
$323,000,000
$122,000,000
$18,000,000
$182,000,000
$206,000,000
$585,000,000

$222,500
$213,576
$171,875
$131,799
$150,000
$172,043
$207,851
$208,904
$144,000
$85,607
$151,694
$878,378

$8,288,000,000

$200,130

Deal structure
Portfolio acquisition
Portfolio acquisition
Portfolio acquisition
Portfolio acquisition
Portfolio acquisition
Company acquisition
SLB
Company acquisition
SLB
Subsidiary acquisition
Company acquisition
SLB
SLB
Company acquisition
SLB
SLB
SLB
SLB
Company acquisition
SLB
SLB
SLB
SLB
Partial acquisition
SLB
SLB
SLB
SLB
SLB
SLB
SLB
SLB
SLB
SLB
SLB
SLB
SLB
Partial acquisition

www.towerxchange.com | TowerXchange Issue 16 |

One of Africas leading


independent telecom
tower companies.
HTA acquires, builds, and manages
wireless telecom infrastructure,
leasing it to mobile network operators
to deliver network efficiency and
quality performance across Ghana,
Tanzania, Republic of Congo and the
Democratic Republic of Congo.

Find out more about our business at


www.heliostowersafrica.com

LatAm towerco breakdown by country


AMT

Andinas

Continental

Innovattel

QMC

SBA

Torrecom

Phoenix
Tower Int.

Torres
Unidas

Centennial

NMS

ATP

Balesia

Mexican market represent near-term barriers


to high valuation exits. And the Andean States namely Colombia and Peru - are getting pretty
crowded too, with lease prices being driven down
by fierce competition, which raises further concerns
with regards to the valuation of future successful
sales.
However some companies did manage to exit the
market, namely BR Towers which sold its 4,630 sites
across Brazil to American Tower for US$978mn, T4U
which was acquired by Phoenix Tower International
(PTI) in 2015 and Teletower Dominicana, again
bought by PTI in the Dominican Republic.
I believe that there are a couple of reasons why
towercos could achieve good exits. On one hand,
they might hold valuable and scalable portfolios,
with good locations, tenants and paperwork. Or
they could be hitting a sweet spot by being up for
sale at the right time, in the right country, hence
representing a good entry point for aspiring
towercos or to scale existing businesses.

Brazil

Mexico

El Salvador

Colombia

Jamaica

Chile

Honduras

Peru
Ecuador

Costa Rica

Panama

Puerto Rico

Nicaragua

Argentina

Guatemala

Dominican Republic

Towercos focusing on a single country


Brazil: GTS, Highline, CSS, Skysites, Telecom Torres, Torre Online, AlfaSite, Brazil Tower Company
Mexico: MTP, IIMT, Intelli Site Solutions, Telesites, MX Towers, Vialux, Rent-A-Tower
Panama: Torres de Panama
Uruguay: Uruguay Torres
Costa Rica: Catalina Inc., Tocsa
Peru: Telecommunications Partners
Colombia: Golden Comunicaciones
XX | TowerXchange Issue 16 | www.towerxchange.com

No matter where these towercos operate and the


scale of their portfolios, middle market entities
looking at a successful exit strategy should very
carefully follow the rules of the game in terms of
pricing, paperwork and permitting to ensure the
value of their portfolios is maximised upon exit.
Mexico
Shying away from Mexico is almost impossible.
TowerXchange is constantly drawn by its dynamics
www.towerxchange.com | TowerXchange Issue 16 |

11

Breakdown of ownership of CALAs 165,000 telecom towers, Q1 2016


33782

American Tower
Telesites
SBA Communications
Grupo TorreSur
Telxius
Other independent towercos
Operator-captive

12874
84971

9487
6500
14503

2883

Source: TowerXchange

Mexico - Estimated tower count 27,084


150
~2000
208 ~700
400
450

Telesites
American Tower
Mexico Tower Partners

1450

IIMT

12874

Centennial
Torrecom
Intelli Site Solutions
Other independent towercos including Conex

8852

(QMC), NMS Towers and MX Towers


Estimated MNO captive towers

Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

and changing scenarios, even if we consider the


tower market over populated.
The recent creation of Telesites, Amrica Mvils
spin-off, represents a new phase for the local
industry with two towercos, Telesites and American
Tower, leading the pack in the Build-to-Suit race
thanks to their alliances with respectively Amrica
Mvil and AT&T.
In spite of a relatively weak demand and a third
player - Telefnica - reluctant to commit to any
growth plan and uncertain plans from AT&T,
Telesites has managed to build as many as 2,009
new sites for its anchor tenant as of Q4 2015. And
Telesites is already expanding beyond Mexico.
Market analysts have been cautious at predicting site
needs in Mexico and have forecasted no more than
5,000 additional co-locations by 2020, a factor that
could dampen the tenancy ratio growth expectations
of Telesites, American Tower and the wide array of
middle market towercos including Mexico Tower
Partners, Torrecom, IIMT, Vialux and Intelli Site
Solutions.
The government is currently working on a US$7bn
shared 4G network - the Red Compartida - which
could be an additional factor dampening the demand
for new sites in the country. In fact, the shared
network would need around 12,000 new sites to
function but to date, the bidding process is being
delayed and local commentators remain cautious
with regards to the actual feasibility of the project.
While TowerXchange forecasts Telesites and
www.towerxchange.com | TowerXchange Issue 16 |

13

American Tower to maintain their moderated


expansion in Mexico, we also remain positive with
regards to the potential for consolidation among
towercos, especially since there are as many as
twenty middle market towercos operating in the
country.

Costa Rica - Estimated tower count 2,924


450

573

SBA
American Tower

Central America and the Caribbean


Costa Rica is the first country beyond Mexico where
Telesites is pursuing its expansion beyond Mexico.
In fact, Claro has recently assigned a 300-tower BTS
project to the Mexican towerco. Telesites will be the
sixth towerco in this 2,923 tower market, joining
market leaders SBA and American Tower, Continental
Towers, TOCSA and recent entrants PTI. Since
liberalising the market back in 2008, the Costa Rican
market has grown into a stable business environment
with relatively good growth potential and a modern
regulatory system. In a further attempt to improve the
local telecom sector, the Coordination Commission for
the Installation or Expansion of Telecommunications
Infrastructure (CCIAIT) has recently presented its first
Action Plan for Telecoms Infrastructure which aims,
among other goals, at creating a record of all telecoms
infrastructure of the country, which would be the
first of this kind in the region.
Cuba had a population of 11.3mn people and 2.6mn
mobile subscriptions at the end of 2014, giving a
mobile penetration of just 23%. Over the past twelve
months, diplomatic relations between the U.S. and
Cuba have been reinstated and there have been
an increased ability to transact between the two
countries.
XX | TowerXchange Issue 16 | www.towerxchange.com

Continental Towers
PTI

484

TOCSA

~1000

ICE
Claro

180
105 132

Source: TowerXchange

El Salvador - Estimated tower count 1,246


50

221

250

~25

SBA
Continental Towers
Tigo
Claro
Digicel

300

400

Telefnica

Source: TowerXchange

www.towerxchange.com | TowerXchange Issue 16 |

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Guatemala - Estimated tower count: 3,554


200

TowerXchange is keeping a close eye on the island


in light of its untapped market and undisputed
potential to become a target of international
towercos. In terms of towers, Cuba holds
approximately 500-700 sites which are currently
being shared by radio companies, TV stations and
ETECSA, which to date is the only operator active in
the country.

599

500

SBA

194

Torrecom

~100

Continental Towers
Tigo
Claro
Telefnica

~2000

Source: TowerXchange

Honduras - Estimated tower count: 1,200


~200

Operator captive towers


Continental Towers

~1000

Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

Innovattel/Torresec has recently participated to


Informtica 2016, the IT and telecom forum held in
Havana, Cuba. Discussing with TowerXchange on
the potential of the Cuban telecom industry to open
up to new MNOs and, as a result, to towercos, they
commented that theres still quite a way to go before
the Cuban government makes a move towards
liberalising the market. However, the change is
likely to happen sometime over the next couple of
years.
The Dominican Republic has been the target of
Phoenix Tower International which grew its local
portfolio from zero to 735 sites in just five months.
PTI has first acquired local towerco Teletower
Dominicana and its 190 towers and lately added
545 sites by closing a deal with Viva, the third
carrier of the country, at the time owned by Trilogy
International Partners. Along with the transaction,
Trilogy sold Viva to local media company Telemicro
Group, owned by businessman Juan Ramon Gomez
Diaz.
At the end of 2013, the mobile industry became a
three-way game between Claro, Orange and Viva,
since Orange and Tricom were both acquired
www.towerxchange.com | TowerXchange Issue 16 |

17

by Altice, a cable and telecoms investor from


Luxembourg.
Given the presence of four creditworthy tenants, it
is perhaps surprising that El Salvador is the least
penetrated tower market in Central America at
17%. SBA Communications and Continental Towers
appear to be the only towercos active in El Salvador,
SBA having acquired the majority of Telefnicas
sites.
Guatemala is a complex country with a very
competitive tower industry. SBA Communications,
Torrecom, Balesia and Continental all operate
in the local market which is characterised by a
fairly strong regulatory environment and the
huge influence of local communities - Consejos
Comunitarios de Desarrollo Urbano y Rural
(COCODES) - in the approval of new deployments.
Local billionaire Mario Lopez owns substantial
equity in market leaders Tigo, and also owns most
of the land under their towers, which makes the
operator reluctant to participate in widespread
infrastructure sharing.
Honduras might soon see the entrance of a second
towerco, Balesia, which would be the second one
to operate in the country in addition to Continental
Towers Corp. For now, theres been little visibility
on the local industry and its potential with around
20% towerco penetration and the two carriers - Tigo
and Claro - still holding on to their tower portfolios.
Nicaragua is a country where the perceived
operational and country risks may be higher
XX | TowerXchange Issue 16 | www.towerxchange.com

Nicaragua - Estimated tower count: 1,004


50
386
300

SBA
Torrecom
NMS
Claro
Telefnica

75
193
Source: TowerXchange

Panama - Estimated tower count: 1,561


90
150
540

SBA
Continental Towers
PTI
Torres de Panama
Cable & Wireless

550

Claro

~100
60

Telefnica

71
Source: TowerXchange
www.towerxchange.com | TowerXchange Issue 16 |

19

Bolivia: fast facts

Economy
Population

10.8mn (Q4 2015)

Fitch rating

Poverty headcount BB/Stable


ratio 39.3% (2014) (July 2015)

Inflation 4.9% (2016E)

Mobile sector

98%

SIM penetration
(Q4 2015)

Connections 106mn
(Q4 2015)

$$$$$$$
$$$$$$$
$$$$$$$
Foreign investments

US$2.1bn (2014)

Carriers
23.1%

Entel

49.6%
30%

Tigo
Viva

this highly fragmented collection of markets,


and Phoenix Tower International with its recent
acquisitions and Innovattel with its eye on Cuba
seem ahead of the competition.
Bolivia Still a virgin market in terms of towerco
penetration, Bolivia is a complex country to do
business in. However, with three active operators
all planning to make considerable investments to
upgrade their networks and enhance the quality
of their infrastructure, BTS firms could consider
making a move in the near future.
Specifically, dominant player Entel has recently
announced a US$1bn five year investment plan
which will focus mainly on enhancing the quality
of mobile infrastructure and ensuring coverage
of rural communities. Tigo invested US$130mn to
expand its infrastructure across the country and
Viva committed to US$80mn in 2015.
The Andean States

than the actual ones. Four towercos including


SBA and Torrecom operate in the country and to
date, most of their activity is focused on BTS since
the inventory of available portfolios is scarce. In
fact, Telefnica has sold most of its assets to SBA
Communications, Claro retains approximately 300
towers which could be transferred to Telesites in the
future and the third operator Xinwei hasnt started
operating yet in spite of its announcements this past
January.
Panama holds its place in the regional tower
game since the acquisition by Phoenix Tower
XX | TowerXchange Issue 16 | www.towerxchange.com

International of 60 sites from American Tower.


SBA remain market leaders with smaller portfolios
held by Continental Towers and Torres de Panama.
According to GSMA Intelligence, Panama is a
fast grower market in Central America with four
active carriers (Cable & Vision, Claro, Digicel and
Movistar), 148% penetration rate and 5.9mn mobile
connections.
The rest of the Caribbean has been very quiet in
terms of towerco activity. I believe that Cuba and
the Dominican Republic could represent interesting
starting points for towercos looking at entering

In just over a year, TowerXchange came across at


least a dozen towercos operating in Colombia, the
most recent of which is a joint venture between
Innova Capital Partners and Goldman Sachs, Golden
Comunicaciones. Of the 15,353 towers in Colombia,
67% are still in the hands of carriers with Claro
owning approximately 6,500 sites and Telefnica
2,000.
Interestingly, both companies have created spin-offs
and its yet to be seen whether their portfolios will
eventually be transferred to Telesites and Telxius,
www.towerxchange.com | TowerXchange Issue 16 |

21

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Colombia - Estimated tower count: 15,353

hence reducing the chance of any further sale and


leaseback opportunity in the country.

American Tower
Centennial

3765

Torres Andinas
Phoenix Tower International

~1000

10300

65
200
23

Other independent towercos including


Innovattel, NMS, Continental Towers,
Balesia, Andean Tower Partners, Torres
Unidas and Golden Comunicaciones
Estimated MNO captive towers
Source: TowerXchange

Peru - Estimated tower count: 9,118


Telxius

900
2342

American Tower

618
600

1358
2500

600

Torres Andinas
NMS
Innovattel
Claro
Telefnica
Bitel
Entel
Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

A National Law designed to ease permitting in


Colombia reportedly has not prevented local
government from closing sites. And Tigo, Movistar
and ETB are sharing their 4G rollout, with roaming
agreements in place, which will dampen tenancy
demand. However Avantel and DirecTV, with the
potential of AT&T investment represent significant
upside to tenancy ratio models.
Possibly the quietest of all Andean States,
Ecuador has seen the development of its tower
market considerably suppressed in light of
Claros dominant position. The recent acquisition
of Innovattel/Torresecs 130 towers by SBA
Communications hints that the latter might be
looking at developing its presence in the country
but to date, we are yet to see other towercos active
in Ecuador. In fact, Torres Andinas has so far been
focusing on Peru and Colombia while Andean
Tower Partners is planning a market entry during
Q1 2017.

Torres Unidas

100
50
50

The announced 700MHz auction is yet to take place


in spite of being announced back in Q2 2015 and to
date and local news outlets suggest that the process
should be completed before the end of 2016. And
while local carriers still perceive their towers as
a competitive differentiator, the lack of a strong
regulatory environment doesnt necessarily favour
the infrasharing model.

Peru is one of the most interesting countries in the


www.towerxchange.com | TowerXchange Issue 16 |

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Chile - Estimated tower count: 8,511

its requirements to invest in camouflage, at times


compensating local communities.

1212
American Tower

480
328

Torres Unidas

~120

6371

Telxius
Other independent towercos
Estimated MNO captive tower

Source: TowerXchange

entire CALA landscape, and is a market which is


being heavily colonised by towercos. With a total
tower count just under 10,000 sites, its also one of
the least penetrated tower markets in the region
with towercos owning 24% of sites. In Q1 2016,
Telefnica has transferred 900 sites to Telxius and
it would be interesting to see if Claro follows the
same path and opens the door to Telesites in the
country.

Perus Ministry of Transport and Communications


has called for an increase from their current 9,000
to 22,000 cell sites over the next three years, an
increase of almost 2.5x in tower stock. In order to
ease the notoriously complex permitting regime, the
Congress passed Law N. 29022 back in 2015 which
introduced, among other things, the tacit approval
of permit requests after thirty days from the initial
demand.

Local sources still suggest that the country might


be up for big changes which could considerably
reshape the dynamics of the tower industry. In
fact, Peru could be the first country to regulate
the towerco sector, hence reducing the freedom of
action of towercos in terms of prices, conditions
and overall business strategy.

Chile has seen its attractiveness to towercos


considerably reduced as a result of Law No.
20.599, also known as the Towers Law, which
has suppressed the local BTS market with its
onerous restrictions on building in saturated
or sensitive areas, its somewhat heavy handed
attempt to mandate infrastructure sharing, and

XX | TowerXchange Issue 16 | www.towerxchange.com

However, the country still presents a certain degree


of opportunity for acquisitive towercos. In fact,
of its 8,500 towers, less than 2,000 are currently
in the hands of towercos. It must be noted though
that with Telefnica and Claro both active in the
country, the possibilities for independent towercos
to acquire assets are limited to Entel. In fact,
Telefnica has already transferred its 328 sites to
Telxius during Q1 2016, although it is not clear
whether that figure represents all Telefnicas
towers in the country.
In 2015, Entel, Movistar and Claro all started using
the 700MHz frequency for their 4G LTE networks,
following the 2014 spectrum auction which
included with extra coverage obligations including
connecting 1,281 remote regions, leading BMI to
project that Chiles carriers would need three to
four times as many towers.
Brazil A deep recession combined with associated
forex crisis and a less than rosy political landscape
have dragged Brazil back into the news for
all the wrong reasons. No more talks about
BRICs, exploding GDPs, generous investment in
infrastructure for major sporting events, and a
flourishing economy any more. But we must always
keep in mind that Brazil needs thousands of towers
to bring its network up to par with other developed
markets. With close to 5,000 subscribers per site,
the potential for towercos to deploy hundreds of
greenfield projects in the country remains, but
www.towerxchange.com | TowerXchange Issue 16 |

25

Brazil - Estimated tower count: 54,425

currently there is very little new build going on in


the country, with carriers shying away from new
projects and investments.

1000
18851

American Tower

In the midst of this challenging phase, the market


might be up for some fundamental restructuring
with both TIM and Nextel reportedly being up for
sale. And while consolidation among carriers seem
more likely, the tower market is at a standstill, with
middle market towercos struggling to achieve an
exit that meets their investors ROIs expectations.

SBA Communications
Grupo TorreSur
Telxius

15000

Other independent towercos

7032
4387

Remaining big 4 operators


Other operators including Nextel, Sky Brasil,
Algar Telecom, Sercomtel and ON Telecom

6500

1655

Source: TowerXchange

Brazilian independent towercos


100
753

CSS

150 51
40
40

650

More insights into the Brazilian tower industry


and the current state of play can be found at this
analysis.

Phoenix Tower do Brasil

400

Brazil Tower Company


Centennial

Paraguay and Uruguay

Highline do Brasil

Paraguay and Uruguay are virgin markets but we


are keeping an eye on their potential to open up to
the tower industry.

AlfaSite
Torres Online

1000
1203

Skysites
Telecom Torres
Allowance for other small towercos
Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

Carveouts seem more in fashion than SLB these


days and Telxius - via its subsidiary Towerco Latam
Brasil - has already acquired 1,655 sites from
Telefnica. And the real game changer could be
Amrica Mvil in the case it decides to transfer its
8,500 towers to Telesites, hence creating the second
largest towerco in the Brazilian market.

Specifically, Paraguay is host to four operators,


namely Millicoms Tigo, Telecom Argentinas
Personal, Amrica Mvils Claro and stateowned Copaco, trading as Vox, who are currently
committing to considerable investments to upgrade
www.towerxchange.com | TowerXchange Issue 16 |

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Paraguay baseline data (Q4 2015)

Connections
7.7mn

Source: GSMA Intelligence

Population
6.7mn

116%
SIM penetration

Uruguay baseline data (Q4 2015)

Connections
5.5mn

Source: GSMA Intelligence

Population
3.4mn

159%
SIM penetration

their networks, scenario which might create the


right conditions for towercos to make a move into
the country.
Uruguay offers another enticing telecom landscape
with state-owned Antel actively competing with
Movistar and Claro and could be another interesting
target for towercos looking at new markets to
colonise.
To date, TowerXchange is tracking one active
towerco in the country - Uruguay Torres - of which
we have very little information.
Argentina Last but not least, Argentina is the
next big thing and what a few months ago was
just speculation about its potential is now turning
into action. In fact, while the new Government
XX | TowerXchange Issue 16 | www.towerxchange.com

is pushing to put Argentina back on the map of


international relations, the country does present an
ideal scenario in terms of its telecom industry and
cell site densification needs.

positive factor for entrepreneurial towercos looking


at making their way in what could become the most
attractive new tower market in CALA.
Argentinas new government is committed to
making the country an attractive destination for
international investors, and local authorities within
the telecom sector are currently engaging with
TowerXchange to present Argentina and its market
potential to the tower industry.
It must be noted that to date, BTS firm Innovattel/
Torresec is the only towerco actively operating in
the country and has begun constructing sites in
several locations and have been assigned search
rings throughout Argentina. But we are likely to see
more towercos exploring market opportunities in
the near future, especially in terms of BTS activity,
while we might need a bit more time before the first
wave of sale and leasebacks takes place. But local
experts bet that its just a matter of time!

Local experts suggests that of the (less than)


16,000 towers built in the country, as low as 12,000
are actually active and with an average of 4,500
subscribers per site, Argentina needs as many as
40,000 but at least 20,000 new sites in the near term,
entailing investments of as much as US$3bn.

Conclusions: towercos keep penetrating CALA

The country still presents many challenges for


international businesses looking at making a move.
From inflation all the way to permitting, towercos
willing to enter the market do need to juggle many
challenges and contribute to the definition of rules
and regulations from scratch. But this could be a

With the creation of Telesites, weve witnessed


the saturation of the Mexican market and are
now assessing the potential disruptive effect of
its entrance of other countries where Claro is an
active player. In the meantime, Telefnicas carve
out, Telxius, is reducing the potential for sale and

In spite of the slowdown of the Brazilian market,


the CALA tower industry is continuing its mission
to conquer the market and to date, it has reached a
respectable 48.5% penetration rate.

www.towerxchange.com | TowerXchange Issue 16 |

29

Argentina: fast facts

35%

1,500-2,000
new sites needed
per year 2016-2018

US$7+
average

Income
tax rate

ARPU

active in

Argentina
(Innovattel)

VAT
1%

the market

of the three

top MNOs

1
the new

expected combined
MNOs investments

regulator
ENACOM
resulting

from the
merge of

AFSCA

Wealth and
tax
AFTIC

140%

share of each

$$$$

21%

1:
BTS firm

32-33%:

SIM penetration

US$9bn:
in the next five years

$$$$

16,000
existing towers
in Argentina

US$2.2bn:
Raised during the 2014

4G spectrum auction

The evolution of the CALA telecom tower industry 2013-2016


Year

Est. total towers

Towers owned by
towercos

Towerco penetration

2013

140000

46011

32%

2014

148000

61729

41%

2015

156000

69850

44%

2016 to date

165000

80029

48.5%
Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

leasebacks in several CALA countries. It will be


interesting to see how quickly the two carve outs
scale up, how quickly they gear up to focus on
co-location sales, and whether third party tenants
buy in to them as genuinely independent business
partners. With a Telxius IPO to follow soon after
Telesites, well be able to gauge how investors rate
these moves also.
In the meantime, new markets generate much
excitement among the investment and tower
community. Argentina is in the spotlight and
could very well become the most attractive tower
market over the course of the next two years. And
Cuba, Paraguay and Uruguay all seem well aligned
to become future targets for towercos willing to
explore new opportunities.
TowerXchange originally estimated that the level
of towerco penetration could reach 75% by 2020, a
figure which might be challenged by current market
conditions hampering new deals and investments.
However, with both Telesites and Telxius in the mix,
we could see considerable assets being transferred
in the near future

If you want to find out more about the


evolution of the CALA telecom tower
industry, TowerXchange invites you to
join the third annual TowerXchange
Meetup Americas, which will be held
at the Boca Raton Resort & Club, 16-17
June 2016.

www.towerxchange.com | TowerXchange Issue 16 |

31

Latin America Heatmap

Meetup
Americas 2016
16-17 June, Boca Raton
Resort and Club, Boca Raton

Legend
Towercos have acquired the majority of towers from carriers
Towercos have acquired a significant proportion of towers
from carriers, but the majority remain carrier-owned.
Significant BTS towerco activity also present
Less SLB activity, but plenty of BTS towerco activity
Early stage market for BTS and/or SLB
Negligible towerco activity

A unique networking opportunity with 250 leaders


of the CALA telecom tower industry
www.towerxchange.com/meetups/meetup-americas
Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

33

CALA news
A roundup of tower news across Central and Latin America
Argentina: Innovattel signed credit deal with
Albright Capital Management
Innovattel has signed a five-year credit facility with
Albright Capital Management for US$45mn. The
funds will be utilised for the deployment of build-tosuit projects in Argentina. Manuel Aviles, CEO and
Founder of Innovattel, commented that thanks to
this funding, the towerco is well positioned to make
history in the Southern Cone region.
Argentina, Brazil: Nextel Argentina sale
completed - Brazil up for sale?

Argentina: New President of Telefnica Argentina


appointed
Back in March, Federico Rava was appointed new
President of Telefnica de Argentina, taking over
Luis Blascos role. Blasco will continue to sit on the
companys Board of Directors.
Argentina: Telecom Italia and Fintech complete
Telecom Argentinas deal

NII Holdings concluded the sale of Nextel Argentina


after transferring the remaining 51% of its interest
to Grupo Clarin. Steve Shindler, CEO of NII,
commented: This transaction is consistent with
our strategy to concentrate our resources on our
operations in Brazil and improve our liquidity
position.
Recent speculation suggest thats Nextel Brasil might
be up for sale too, for an estimated US$300mn.
However, Nextel Brasil CEO, Francisco Valim, has
denied the rumours.

and the acquisition of broadband provider GVT.


During an analysts presentation, CEO Amos Genish
commented that nine months after the integration of
GVT, savings are aligned with expectations.
Brazil: TIM Brasil up for sale?
Vivendi is reportedly assessing the possibility to
sell its majority stake in TIM Brasil, after having
acquired it back in 2014 as part of the GVT sale to
Telefnica.
Brazil, Chile, Peru: Telefnica transfers sites to
Telxius in Chile, Peru and Brazil
Telefnica Peru announced the transfer of 900
towers to Telxius subsidiary, Towercom Latam. In
previous weeks, Movistar Chile published its plan to
transfer 328 towers valued at US$11.5mn to Telxius
and in Brazil, Telefnica Brasil (Vivo) has sold 1,655
sites to Towerco Latam Brasil, the local subsidiary of
Telxius for a reported US$212.6mn.
Brazil: Nextel leads 4G market in Rio de Janeiro
Nextel took over the 4G leadership in Rio de
Janeiro in 2015, scoring a market share of 27.4%
and surpassing rival Vivo. Nextel is planning its 4G
launch in So Paulo in 2016 and reported 2.5mn
customers in 2015 (+68.5% YOY).
Brazil: Vivos data surpasses voice

Brazil: Telefnica Brasil benefits from tower sale


Telecom Italia has finalised the sale of its stake in
Telecom Argentina to Fintech. The transaction was
valued at over US$960mn.
34 | TowerXchange Issue 16 | www.towerxchange.com

Telefnica Brasil has reported Q1 profits for


US$346mn, following the sale of its towers to Telxius

In 2015, Brazilian operator Vivo generated more


revenue with data than voice. Specifically, data
accounted for 51.4% of Vivos ARPU in Q4 2015.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Brazil: Ois bonds downgraded as TIM merger


plans fall apart
In February 2016 TIM rejected a plan to merge
with Oi, which contributed to the fall of Ois bonds
(-15.7%). The investment firm LetterOne, which
holds the rights to the tie-up until May 23, stated
that L1 Technology has been informed by TIM that
... it does not wish to enter into further discussions,
about the facilitation of a merger between Oi and
TIM in Brazil.
In the absence of the merger, Ois bonds have been
downgraded to B by Fitch. Similarly, Standard &
Poors downgraded Ois global scale credit rating
from BB+ to BB- and the domestic scale credit rating
from brAA+ to brA-.
Brazil: TIM commits to Brazilian investments
TIM Brasil published its investment plans for the
biennium 2016-2018 and announced capex for
US$4.9bn, excluding spectrum. Along with the
investments, TIM is planning savings for as much as
US$280mn by 2017.
Colombia: Goldman Sachs and Innova Capital
fund Colombian towerco
Goldman Sachs and Innova Capital Partners have
launched a joint venture to provide financing
to Golden Comunicaciones, a Colombian tower
developer. According to Patricia Rodriguez, Innovas
head of Latin American Development Colombia
presents a unique opportunity for growth in the
XX | TowerXchange Issue 16 | www.towerxchange.com

telecom sector, among other industries, and we look


forward to developing additional opportunities in
the region.

their exploitation and the use of state resources to


develop greenfield projects.

Costa Rica: Telesites enters Costa Rica


Herman Torres, CEO of Golden, added that Golden
offers our wireless customers a significant footprint
of high quality tower assets across Colombia. Today,
the investment made by Goldman Sachs and Innova
will enable us to reduce the digital divide that exists
in our country and undoubtedly will enable us to
improve our current network infrastructure.
Colombia: Colombian regulator pushes for less
limitations for new towers
Colombian regulator CRC is liaising with mayors
of Colombian cities, namely Bogot, Cajica,
Cali, Ibague, Lorica, Monteria, Planeta Rica and
Popayan, to analyse their Land Management
Plans. Municipalities are being requested to
remove limitations to the deployment of telecom
infrastructure. The regulators recommendations
are likely to extend to other municipalities including
Cartagena, Palmira and Floridablanca.
Costa Rica: Costa Rica to review infrastructure
law
The Coordination Commission for the Installation
or Expansion of Telecommunications Infrastructure
(CCIAIT) has published the Action Plan for
Telecommunications Infrastructure, which outlines
several goals to be achieved in the tower sector. One
of the key aspects of the plan is the creation of a
comprehensive record of infrastructure to maximise

Telesites has been awarded a 300 BTS project by


Claro in Costa Rica. The project is Telesites first
outside of Mexico, where the towerco had already
built 2,009 new sites by Q4 2015.
Cuba: Cuba sets ambitious telecom goals for 2016
Cuba is expected to add as many as 500,000 new
mobile lines in 2016. In a recent plan published by
State-owned operator ETECSA, the company outlines
several goals to enhance the QoS in the country and
aims at reaching 46% penetration rate by the end of
the year.
Dominican Republic: PTI adds 545 towers in the
Dominican Republic
Viva, the third carrier in the Dominican Republic,
has agreed to sell 145 towers as well as marketing
rights of over 400 sites to Phoenix Tower
International (PTI). In parallel, Viva was sold by
Trilogy International Partners to Telemicro Group, a
local media company owned by businessman Juan
Ramon Gomez Diaz.
PTI has been aggressively pursuing growth
opportunities in Central and South America and
this is the second deal the towerco has struck in the
Dominican Republic after the acquisition of 190 sites
from Teletower Dominicana in November 2015.
www.towerxchange.com | TowerXchange Issue 16 |

35

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22

Dominican Republic: Costa Rica plans new


spectrum auction
The Costa Rican Telecommunications
Superintendence (SUTEL) is planning a spectrum
auction for the assignment of 1,800 MHz and 2,100
MHz spectrum. The terms of the auction are yet to
be published but the government aims at auctioning
a total of 70MHz of spectrum in these bands which
were left over during the 2011 tender. Both Claro and
Movistar have previously requested more spectrum
to further enhance their services.
Dominican Republic: Altice commits to
investments in the Dominican Republic
Following the acquisition of Orange and Tricom,
Altice plans to invest around US$138mn in 2016 in
the Dominican Republic to upgrade its network. The
company plans to increase its 4G presence in all
major cities and expand the 3G network to 90% of the
population.
Mexico: Mexican carriers could be fined for
dropped calls
Telcel, Iusacell (now AT&T) and Movistar are facing a
potential fine of US$250mn for service failures from
2010. The ruling comes after the collective action
promoted by the Consumer Protection regulator,
PROFECO, which declared that back in 2010, dropped
calls amounted to 3.6 billion.
Mexico: Telesites subsidiaries merge
Opsimex and Promotora de Sites, two of Telesites
XX | TowerXchange Issue 16 | www.towerxchange.com

subsidiaries, have merged in March 2016. Opsimex


was created back in January 2015 as a result of the
spin off of Telcel while Promotora de Sites was set up
after the spin off of Sercotel.
Mexico: Telcel and AT&T receive AWS blocks
IFETEL confirmed the allocation of AWS spectrum
blocks to Telcel and AT&T. The two carriers have
been awarded 15-year licenses back in February and
the Mexican government will generate as much as
US$2.5bn from the auction.
Mexico: Telesites announces 2015 revenue
Telesites reported revenues for US$244mn in 2015.
The Mexican towerco highlighted that 63.3% of its
revenue is generated by tower rental. Meanwhile, the
tariff price war, and increasingly competitive towerco
landscape in Mexico are combining to put downward
pressure on lease rates, which are now below the
CALA average.
Peru: US$1.1bn invested in Peruvian telecoms in
2015
The Supervisory Agency for Private Investment in
Telecommunications (OSIPTEL) has reported that
in 2015, Peruvian carriers invested as much as
US$1.1bn in infrastructure. The Agencys Chairman,
Mr Gonzalo Ruiz Diaz added that the number of
antennas in the country went up by 24.6% (15,072)
as of Q4 2015 as a result of the increased level of
investments by the carriers. But added that the
country still needs as many as 14,000 new antennas
to reach good level of coverage. TowerXchange
estimate there are currently 9,450 towers in Peru

Please feel free to contact the TowerXchange team


Kieron Osmotherly
Founder & CEO
E: kosmotherly@towerxchange.com
Jo Jefferies
Executive Assistant to CEO
E: jjefferies@towerxchange.com
For editorial & speaking enquiries regarding Americas:
Arianna Neri
Head of Americas
E: aneri@towerxchange.com
For editorial & speaking enquiries regarding Africa or Europe:
Laura Dinnewell
Head of EMEA
E: ldinnewell@towerxchange.com
For editorial & speaking enquiries regarding Asia:
Ian Ferguson
Head of Asia
E: iferguson@towerxchange.com
For editorial & speaking enquiries regarding China &
Myanmar:
Christie Liu
Head of China and Myanmar
E: cliu@towerxchange.com
For advertising opportunities & event participation:
Annabelle Mayhew
Chief Commercial Officer
E: amayhew@towerxchange.com
M: +44 7423 512588
Emma Jones
Business Development Manager
E: ejones@towerxchange.com
Toya Smith
Senior Operations Manager
E: tsmith@towerxchange.com
For media partnerships & to request additional subscriptions:
Harpreet Sohanpal
Head of Marketing
E: hsonanpal@towerxchange.com

The TowerXchange Journal is published by Site Seven Media Ltd.


2016 Site Seven Media Ltd. All rights reserved. Neither the whole nor any
substantial part of this publication may be re-produced, stored in a retrieval
system, or transmitted by any means without the prior permission of Site
Seven Media Ltd. Short extracts may be quoted if TowerXchange is cited as the
source. TowerXchange is a trading name of Site Seven Media Ltd, registered in
the UK. Company number 8293930.

www.towerxchange.com | TowerXchange Issue 16 |

37

Thursday 16 and Friday 17 June, Boca Raton Resort and Club, Boca Raton

Meetup Americas 2016


A unique networking opportunity with 250 leaders of the CALA telecom tower industry

TowerXchange is doing a tremendous job for the tower industry in Latin America. The opportunity to get together in one
location and exchange ideas over several days with all of the tower companies in our region is truly invaluable
- Jim Eisenstein, Chairman and CEO, Grupo TorreSur

To discuss your participation, contact Annabelle on +44 7423 512588 or email amayhew@towerxchange.com
Diamond sponsor:

Silver Sponsors:

Bronze Sponsors:

TowerXchange Meetup Americas Draft Agenda


Boca Raton | 16-17 June 2016
Day One | Thursday 16 June
8:00 Registration and coffee
9:00 TowerXchanges analysis of the CALA telecom
tower industry
Speakers: Kieron Osmotherly, Founder and CEO and
Arianna Neri, Head of Americas, TowerXchange
9:45 CXO panel part I: Brazil
< Moderator: Jonathan Atkin, Managing Director,
RBC Capital Markets
< Peter Bendall, Senior Vice President, Macquarie
Group
< Eric Crabtree, Chief Investment Officer, IFC
< Jim Eisenstein, Chairman and CEO, Grupo TorreSur
< Mauricio Giusti, CEO, Phoenix Tower do Brasil
< Andre T. Laloni, Managing Director, Head of Brazil
and Southern Cone, UBS
< Roberto Piazza, General Manager - Brazil, SBA
Communications
< Douglas Silva, Head of Operations - Brazil,
American Tower
< Chahram Zolfaghari, CEO, Brazil Tower Company
11:00 Strategic partners panel: remote monitoring
solutions
11:20 Networking coffee break
11:50 Roundtable session I
12:50 Networking lunch
14:00 CXO panel part II: Central America and the
Caribbean
< Moderator TBA

40 | TowerXchange Issue 16 | www.towerxchange.com

< Kurt Bagwell, President - International, SBA


Communications
< Jos F. Escobar, Director, Catalina Site Management
< Edgar Geidans, Group CTO, Trilogy International
Partners
< Dagan Kasavana, CEO, Phoenix Tower International
< Federico Lorenzana, Country Manager - Costa Rica,
Continental Towers Corp.
< Maria Scotti, CEO, Torrecom

10:40 Networking coffee break

15:00 Strategic partners panel: energy solution providers

11:10 CXO panel part IV: Mexico


< Moderator: Marco Cordoni, Senior Partner, Analysys
Mason
< Felipe de Antuano, Co-CEO, Intelli Site Solutions
< Mariano Gomez, Vice President, NMS
< William Ritchey, Executive Vice President, IIMT
< Maria Scotti, CEO, Torrecom
< Jos Sola, CEO, Mexico Tower Partners
< Alex Wright, Managing Director, Nau Securities

15:20 Networking coffee break

12:20 Roundtable session III

15:50 Roundtable session II

13:20 Networking lunch

17:00 End of day one followed by drinks reception

14:30 Roundtable session IV

19:30 TowerXchange networking dinner

DAY 2 - Friday 17 June


8:30 Morning coffee
9:00 CXO panel part III: the Andean States
< Moderator TBA
< Manuel Aviles, President and Founder, Innovattel/
Torresec
< Eric Ensor, COO, Torres Andinas
< Fernando Garca lvarez, Construction and Network
Infrastructure Manager, Entel Peru
< Ryan Lepene, Senior Managing Director, Peppertree
Capital
< Estrella Zaharia, CEO, Andean Tower Partners
10:20 Strategic partners panel: access control and site
management platforms

15:30 Networking coffee break


16:00 The potential of Argentina (and a look at virgin
markets)
< Moderator: Arianna Neri, Head of Americas,
TowerXchange
< Miguel ngel Arrigoni, President, First Capital
Markets
< Juan Cueria, Vice President and COO, Innovattel
Torresec
< Clarisa Estol, Secretary of Investment Promotion,
Ministry of Telecommunications of Argentina
< Andre T. Laloni, Managing Director, Head of Brazil
and Southern Cone, UBS
< Guillermo Mulville, Head of TMT for Latin America,
IFC
17:00 End of Meetup

www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange Meetup Americas 2016 | Roundtable sessions


Country and regional focus:

Operational and financial focus:

< Country focus: Colombia - Mariano Gomez, Vice President, NMS

< Project management best practices: from site acquisition to licensing

< Country focus: Costa Rica - Federico Lorenzana, Country Manager - Costa
Rica, Continental Towers Corp.
< Country focus: Argentina - Guillermo Mulville, Head of TMT for Latin
America, IFC
< Country focus: Brazil I - Roberto Piazza, General Manager - Brazil, SBA
Communications
< Country focus: Brazil II - Jose Augusto Varela, VP Operations LatAm, Grupo
TorreSur
< Country focus: Peru - Eric Ensor, COO, Torres Andinas
< Country focus: Dominican Republic - Dagan Kasavana, CEO, Phoenix Towers
International
< Country focus: Guatemala and Nicaragua - Maria Scotti, CEO, Torrecom
< Country focus: Mexico - Carlos Tilac, COO, Torrecom
< Country focus: Bolivia - Edgar Geidans, Group CTO, Trilogy International
Partners
< Country focus: The role of the Ministry of Telecoms for the promotion
of the telecom and tower sectors in Argentina - Clarisa Estol, Secretary of

- Eduardo Martins Pedro, COO, AlfaSite


< How to build towers with maximum future sale value - David Porte, VP
International, SBA Communications
< Land aggregators: friend or foe? Michel Buhler, former VP Business
Development - LatAm, American Tower
< Ground lease management: maximising the value of land - Michel
Buhler, former VP Business Development - LatAm, American Tower
< How to successfully achieve scale in multiple CALA countries - Dagan
Kasavana, CEO, Phoenix Towers International
< Entering virgin markets - assessing risks and opportunities - Fernando
Rodriguez, VP M&A and Corporate Development, Innovattel/Torresec
< Investing in Brazil and beyond: opportunity or risk off? - Peter
Bendall, Senior Vice President, Macquarie Group
< What do analysts look at when they evaluate towercos and their
performance - Alex Wright, Managing Director, Nau Securities
< The investibility of Argentina - Miguel ngel Arrigoni, President, First
Capital Markets

Investment Promotion, Ministry of Telecommunications of Argentina


< Regional focus: Colombia and the rest of the Andean region - Estrella
Zaharia, CEO, Andean Tower Partners
< Regional focus: Central America - Ricardo Ruiz, International Operations
Director, SBA Communications
< North America best practices: How to evaluate U.S. towerco investments
versus CALA - Sachit Ahuja, VP, Business Development, Tillman Global
Holdings
< North America best practices: Inorganic growth: finding value in
maturing tower markets - Alex Gellman, CEO, Vertical Bridge
XX | TowerXchange Issue 16 | www.towerxchange.com

More roundtable topics and leaders to be announced shortly. If you


have a suggestion for a roundtable, please contact me at:
aneri@towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

41

Tower Industry Value Chain

Who you will meet

Investors: private equity, DFIs, debt finance, infrastructure funds


Investment management advisors

Law firms

Strategic consultancy

Independent Towercos

Due diligence
Demand modeling
Asset register audits

Sell co-locations
Generate amendment revenue
Build-to-suit
Achieve SLAs
Efficiency programmes
Optimise supplier contracts

Group level strategists


C-suite & network planners at local OpCos

Mobile Network Operators

Transfer assets to

Outsource
to

Tier 1 OEMs

Subcontract

Managed service providers


Construction services

Static assets

Turnkey infrastructure rollout


Tower design & manufacture
Import, customs & delivery
Site acq, leasing & permitting
Installation of towers
Tower strengthening
Decommissioning

Towers & masts


Shelters
Brackets
Enclosures
Lighting
Fencing

Outsource
to

Subcontract
or in-house

Monitoring &
management
RMS
Intelligence/analysis
Site management
Job ticketing
Asset lifecycle platform
Access control

0&M services
Maintenance
Staffing
Spare parts
Security
Refueling
Energy as a service

Dynamic assets

Energy equipment
Diesel genset
Solar
Wind
Fuel cell

Batteries
Rectifiers
Inverters
Line conditioning
PIUs

Fibre, microwave, satellite backhaul

Air conditioning
Lightning protection
Controller
Voltage regulator
Alternator

Microcells, small cells & DAS

42 | TowerXchange Issue 16 | www.towerxchange.com

ESCOs

Opex models
Vendor finance
Distributed generation
Community power

Active equipment

TowerXchange Meetups bring together 250+


business leaders representing the entire telecoms
and broadcast infrastructure ecosystem.
TowerXchange engages with MNOs who retain
their passive infrastructure, and with 151
independent towercos and network sharing joint
ventures which between them have acquired or
built over 2,032,800 towers worldwide.
TowerXchange also maintains relationships with
over 500 investment and advisory firms who
facilitate tower transactions.
TowerXchange explores the implications of
tower transactions for the supply chain: from
tower designers and manufacturers to tower
construction and O&M firms. The TowerXchange
community engages with every major telecom
energy equipment and service provider worldwide,
including an emerging class of credible ESCOs.
We track over 30 different RMS and ILM solution
providers, as well as leaders in access control and
H&S solutions for cell sites. And we connect the
passive infrastructure ecosystem with innovations
in microcells, small cells and DAS as well as fibre,
microwave and satellite backhaul.
The TowerXchange community is brought
together by the renowned TowerXchange
Journal, circulated to 15,000 tower industry
leaders worldwide. The tower industrys leaders
gather annually at TowerXchange Meetups we
look forward to meeting you there!

www.towerxchange.com | TowerXchange Issue 16 |

XX

What is a Meetup?
Proven over seven past events attended by over 1,000 decision makers, TowerXchange Meetups
are unique executive retreats for the most influential men and women in telecoms infrastructure.
Held annually in Africa, Asia, CALA and Europe, we use small group round table breakouts to give
participants unique access to the key stakeholders in the telecom tower industry in each country.

Every TowerXchange expo has sold out

Laser beam focus on towers


Another problem with other telecom events is that
passive infrastructure is typically hidden away as an
under-appreciated small part of a broader show. The
huge audience of middle management, device and
VAS influencers at other events dilutes access to the
few tower decision makers present. In comparison,
TowerXchange has been described as a networking
club for tower geeks everyone you meet at
TowerXchange is focused on towers, and everyone you
meet is a decision maker.

Curated expo of proven suppliers

80-90% of the leading towercos and MNOs attend

Accelerate vendor selection

At other telecom events, a maximum of around 10-15% of the CXOs who lead tower strategy for MNOs and
towercos are in attendance. At TowerXchange we regularly attract multiple senior representatives from 8090% of the towercos active in any region, as well as the majority of MNOs. And thanks to our unique structured
networking round tables, everyone has access to these decision makers.

If you want to buy telecom tower structures and


accessories, energy equipment, energy services, RMS,
ILM, access control, H&S equipment, or if you want to
contract with tower construction and O&M firms, then

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

43

Unique round table breakouts

the private expo at the TowerXchange Meetup provides


a whos who of proven passive infrastructure
equipment and service providers.

examine ownership of energy assets and the prospects


for energy service providers.

DAS being rolled out?

Unique structured networking


And opportunities for your business tomorrow

Identify opportunities for your business today


TowerXchange introduces each Meetup with our
proprietary research, defining the size of the
tower market in each country, identifying who
owns the towers today and predicting the future
tower transaction pipeline. We also track network
consolidations, extensions and densification, and
44 | TowerXchange Issue 16 | www.towerxchange.com

We use MNO and towerco CXO panel sessions to


understand the future of the tower industry. What
has been the progress of tower transactions and of
portfolio integration? What future acquisitions are
planned? How is capex being deployed? What are the
priorities of efficiency programmes? Are opex-sharing
models being explored? Are microcells, small cells and

TowerXchanges renowned round table breakouts are


led by an expert moderator, but everyones opinions
and questions are welcomed. Each round table focuses
on a specific country, financial or operational issue.
You can attend three or four round tables at each
Meetup. Register now to secure your choice of round
table and tailor your agenda to meet your networking
objectives!
www.towerxchange.com | TowerXchange Issue 16 |

XX

Our sponsors and exhibitors


DIAMOND
SPONSOR:

201

202

203

204

205

106

206
305

105
304
104
303
103
102

302

101

301

Access to Main
Meetup room
Entrance / Camino Foyer

SBA Communications
SBA Communications Corporation is a first choice provider and leading owner and
operator of wireless communications infrastructure in North, Central and South America.
By Building Better Wireless, SBA generates revenue from two primary businesses - site
leasing and site development services.
In our site leasing business, SBA leases antenna space on our multi-tenant towers to a
variety of wireless service providers under long-term lease contracts. SBA owns and
operates over 24,000 towers across North, Central and South America. We build our
towers at the request of wireless carriers, leveraging our in-house experience in site
acquisition, zoning and construction. Our ability to offer carriers a comprehensive portfolio
of communication sites is complementary to our tower ownership business. Currently,
SBA manages approximately 5,000 communication site locations on behalf of third-party
landlords.
Through our site development services, SBA offers wireless service providers assistance
in developing their own networks. Our services include site identification and acquisition
as well as obtaining zoning approvals and permitting for networks representing all
technologies. SBA also provides a broad range of cell site equipment installation,
optimization and integration services. Our extensive site development experience includes
participation in the development of more than 45,000 communication sites.

www.sbasite.com or call 800.487.SITE


XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

45

Our sponsors
SILVER SPONSOR:

SILVER SPONSOR:

SILVER SPONSOR:

Siterra, An Accruent Product


Acsys

Invendis

Acsys is a specialized towerco security and field service

Founded in 2007, Invendis Technologies India Private Ltd.

management software provider. Recognizing the telecom

is an M2M/IOT company based out of Bangalore. Invendis

industrys relentless drive to efficiency, we design

designs and delivers IOT technology-enabled business

solutions to accelerate you forward. Our software and

solutions for Telcos & Towercos to provide seamless

technically. Sixteen of the towercos and infracos that

mobile applications in combination with military-

services to their clients.

TowerXchange tracks are current Siterra customers,

Siterra, an Accruent Product, addresses the software needs


of tower companies to sell co-locations, upgrade capacity,
build-to-suit, maintain accurate asset registers, manage
maintenance, and collaborate with vendors operationally
as well as consolidate and integrate tower-related software

spanning 18 countries and five continents. The first version

grade access control hardware form a 4 tiered tool for:


Flexibility, Efficiency, Productivity, and Security.

Our core products and services include front end

equipment, sensors, transducers, business applications,

Our solutions are designed to improve your site

systems integration, product engineering, installation,

operations through the near elimination of theft, reduced

maintenance and 24X7 Global Monitoring & IT

inefficiencies, vendor and ticket auditing, and real-time

infrastructure services. Invendis also specialises in

remote control of field technicians. In the age of Big Data,

deploying complete range of Remote Monitoring &

Acsys gives you the intel you need to offer your tenants a

Energy Optimization services for the data sensitive

better experience while reducing your OPEX.

infrastructures.

of the Siterra site management platform was released in


2001. 100,000 users later, Siterra has become the industry
standard, must-have operating software for tower companies
today. Accruent works with its leading towerco customers
to jointly develop new features that are deployed regularly
through the SaaS platform to constantly improve customer
value. Accruent has developed global process standards
with local flexibility to pair with best-in-class software
functionality.

Our expert team of mechatronic security, software

Invendis pioneered customizable IOT enabled Front End

Accruents telecommunications division serves some of

development, and telecom professionals represent 14

Monitoring & Controlling equipment, which empowered

the worlds largest mobile network operators and service

nationalities and have combined their expertise to deploy

Towercos with access to real-time Monitoring & Energy

the Acsys solutions in nearly 50 countries around the

optimization solutions in shortest possible time.

globe. Acsys is ISO 9001 certified and a preferred supplier


of many of the biggest names in the telco industry.

In a span of 8 years, Invendis has set a global footprint

with over 1 lakh remote assets across Asia, Middle-East,

Acsys - solutions built to improve your bottom line.

Africa & Europe.

www.acsys.com

www.invendis.com

46 | TowerXchange Issue 16 | www.towerxchange.com

providers in addition to tower companies, helping link


employees from different organizations in the industry to
collaborate to projects. Accruent is the largest independent
provider of commercial property management software,
serving the telecom, retail, education, healthcare, and
corporate markets with over 4,400 customers in 120
countries.

www.accruent.com
www.towerxchange.com | TowerXchange Issue 16 |

XX

Our sponsors
Bronze Sponsor:

AUSONIA

Nexsysones all-encompassing software platform is used

drafting of sale and purchase, debt and equity financing,

by some of the largest technology upgrade roll-outs in the

master lease, build-to-suit, site management and service

USA, as well as some of the largest greenfield deployments

level arrangements; and have played a prominent role in

inAsia such as in Myanmar where operators and tower

complex fibre transactions.

companies use nexsysone to enable the sharing of network


AUSONIA provides specific power solutions for any typical

infrastructure.

telecom application (STANDBY GENSETS, OFF GRID BTS

POWER UNITS, HYBRID SOLUTIONS, MOBILE POWER

The nexsysones advance software module towerone

STATIONS, NO-BREAK POWER SYSTEMS, etc.), successfully

is specifically tailored to make easy the tower sharing

certified by 12 YEARS on FULL OPEX model.

process that tackles the typical technical, contractual and

www.velaw.com
Bronze Sponsor:

commercialcomplications that ultimately stop the common


Thanks to its unique technology, based on VARIABLE SPEED

objective of reducing operational costs via site sharing.

DC GENSETS with mechanical efficiency, AUSONIA offers


a wide portfolio of modular HIGH EFFICIENCY ENERGY

www.nexsysone.com

SOLUTIONS, specifically designed to power off-grid / bad-

Bronze Sponsor:

PHOENIX TOWER INTERNATIONAL and


PHOENIX TOWER DO BRASIL
Phoenix Tower International (PTI) and Phoenix Tower

grid BTS sites and totally monitored and controlled by

do Brasil (PTB) own and operate towers and other

remote through a dedicated web-based system. Such power

wireless infrastructure and related sites throughout Latin

solutions are designed to significantly reduce the OPEX and


TCO of the Telecom Operators and Tower Companies.

www.ausonia.net
Bronze Sponsor:

Vinson & Elkins RLLP

America, the Caribbean and the United States. PTI and

Vinson & Elkins is one of the oldest and largest

Costa Rica, Panama, the Dominican Republic, Colombia,

international law firms, with approximately 700 lawyers

the United States and Brazil.

PTB currently own and operate wireless infrastructure in

located in 15 offices around the world.


PTI and PTB are devoted to helping our wireless

nexsysone

Our global telecommunications team has extensive

infrastructure partnerscustomers, sellers, landlords,

experience advising on international telecoms and

and communitiesachieve their goals. Focused on the

telecoms infrastructure transactions. We have significant

principles of unwavering hard work and integrity, we

Nexsysone is your one-stop solution that harnesses the

industry experience, advising on telecoms transactions

demonstrate this mission every day through the fair and

power of its advance software modules through a single

in numerous countries. Our telecommunications advice

collaborative manner in which we deal with our business

unified interface to address the needs of operators and

includes acquisitions and disposals, debt and equity

partners and the dedicated operation of the wireless

towerowners in planning, efficiently maintaining and

financing, infrastructure development, operational

infrastructure sites we own and operate.

effectively sharing their infrastructure, thereby saving huge

arrangements, regulatory matters and dispute resolution.

operational costs and enhancing ROI on their CAPEX.

We also have significant experience in the negotiation and

XX | TowerXchange Issue 16 | www.towerxchange.com

www.phoenixintnl.com
www.towerxchange.com | TowerXchange Issue 16 |

47

Our sponsors and exhibitors


Bronze Sponsor:

Ascot International
HYBRID GENERATORS DESIGNED FOR TELECOM and TOWER
OPERATORS that want to enter into a multi-tenancy agreement
CAPEX & OPEX PACKAGES from 5 to 60 kW load. More
than 30 years of experience in the power sector and 34,000
installations in the Telecom Market worldwide make Ascot
Industrial a leader for tailor made solution to meet customer
needs. A field-proven, modular, flexible, and scalable plug &
play solution designed to guarantee cost-effectiveness and
reduce maintenance expense - maximizing customer uptime
and satisfaction.
Product Portfolio:
< High Efficiency Diesel / LPG / Natural Gas AC Generators 5
kW up to 2 MW
< Variable Speed and Scalable DC Generators 5 to 60 KW
< Full Hybrid Solution (Generator + Battery + Renewable
Energy Integration + Remote Monitoring)

www.ascotinternational.com
Exhibitor:

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 and Yuasa. AtUS$3.6Bin sales, GS Yuasa is one of the
worlds largest battery manufacturers.
GS Yuasa manufactures a full line of technologies including

48 | TowerXchange Issue 16 | www.towerxchange.com

lithium, lead acid, nickel metal hydride, 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 acceptance that can reduce the runtime of generators
and the total cost of ownership of telecom base stations.
With40affiliates in17countries, GS Yuasa has a worldwide
presence operating under the GS Yuasa, GS, and Yuasa brands

www.gs-yuasa.com
Exhibitor:

Abloy
ABLOY secures business operations on land, at sea, and in
the air in all circumstances. Abloy has a provenhistory of
telecommunication business for decades. Along with the new
technology in telecom business Abloyhas introduced new
methods and systems to create value and fast pay-back time
to telecom customers. Abloyprovides a complete solution
including project management. Combining mechanical and
electromechanicalfeatures ABLOY PROTEC2CLIQ offers
double security with wide internationally tested and approved
productrange. Remotely controlled PROTEC2CLIQ system
enables to control sub-contractors activities on sitesreducing
management costs and providing traceability. Several telecom
customers have chosen ABLOYsolutions to be leaders in fast
developing telecommunication world.

www.abloy.com
Exhibitor:

telecom cabinets. The company has state-of-the-art facilities in


the USA and Sweden, and their products are used in more than
120 countries worldwide. NorthStar premium thin plate AGM
batteries deliver long life at elevated temperatures, with faster
recharge and superior PSOC cyclic performance. NSB Blue
Batteries are today reducing 85% of diesel generator run time
in offgrid telecom applications. The newly launched NorthStar
Academy program will help customers to prolong their battery
life and save energy in their telecom network.

www.northstarbattery.com/1/2/3.php
Exhibitor:

Metalogalva
TELECOM TOWERS MANUFACTURER
Quality products at fair prices. Company with 42 years
experience. Young and flexible team. 400 employees; 30
engineers. 100 000 tons galvanizing capacity (year). 14 welding
and plasma robots. 6.6M Investment on new equipments.
Qualifications:
- QUALITY MANAGEMENT SYSTEM ISO 9001
- RDI MANAGEMENT SYSTEM CERTIFICATE NP 4457
- ENVIRONMENTAL MANAGEMENT SYSTEM ISO 14001
- MANAGEMENT SYSTEM CERTIFICATE
- OCCUPATIONAL HEALTH AND SAFETY OHSAS 18001
- SPECIAL CERTIFICATION FOR GALVANIZATION for German
- Norm DASt GUIDELINE 022
Verification:
- QUALIFICATION OFMANUFACTURES TO WELD STEEL
STRUCTURES according to DIN 18800-7 Level E <EC

NorthStar
NorthStar is an industry leader in designing and manufacturing
high performance lead-acid batteries and high efficiency

CERTIFICATE FACTORY PRODUCTION CONTROL (FPC) EN 1090


1/2 EXC3

www.metalogalva.pt/pt/
www.towerxchange.com | TowerXchange Issue 16 |

XX

Our exhibitors
Exhibitor:

Cotech Tower Services

Exhibitor:

Redflow

COTECH was incorporated in 2006. We specialize in the


provision of ROPE ACCESS Inspection Repair and Maintenance

Redflow Limited is an energy storage specialist that has

Services. Skills ideally suited to the vertical tower industry.

developed the worlds smallest flow batteries. Redflows

Our qualified, trained and highly skilled work force can

unique flow batteries are designed for stationary energy

address your next project with safety, practicality and speed

storage applications ranging from itsZCellhome battery to

to market. IRATA Industrial Rope Access * SPRAT -Rope Access

its ZBM battery range for commercial, telecommunications

Approved * Comtrain Approved.

and grid-scale deployment with installation globally. Redflow

* Rope Access- For Safety, Speed and Cost Effectiveness

is a publicly-listed company (ASX: RFX) that operates R&D

Meetup
Americas 2016
16-17 June, Boca Raton
Resort and Club, Boca Raton

facilities in Australia, as well as offices in the US and Europe.

http://www.cotechtowerservices.com

Produced in North America by Flex, one of the worlds largest

Exhibitor:

batteries are sold, installed and maintained by a global

manufacturing companies, Redflows high energy density


network of system integrators.

Mer Group

www.redflow.com

MER Group is a global leader in wireless infrastructure.


We supply cutting edge turnkey projects for cellular sites,
from the design stage, tower manufacture and supply, site
commissioning and installation. MER Groups tailor-made
solutions meet all the needs of a modern operator, and
specializes in the growing need for rural low-cost sites
supporting hybrid solar energy.
Established in 1948 Mer Group (TASE: CMER), has a
substantial global footprint with approximately 30 subsidiaries

Does your company provide


products and services to the CALA
telecom tower industry
If youd like to find out more and request a

(10 in Africa), and over 1,200 employees. The Group maintains

bespoke proposal, please contact Annabelle

a diversified portfolio focusing mainly on telecom, security

on +44 7423 512588 or email

and the CleanTech sectors.

amayhew@towerxchange.com.

A unique networking opportunity with 250 leaders


of the CALA telecom tower industry
www.towerxchange.com/meetups/meetup-americas

www.mer-group.com/solutions/wireless-infrastructure
XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

49

TowerXchanges analysis of the


independent tower market in Africa
and the Middle East
Integration in SSA, transactions in MENA
Figure 1: Estimated number of towers owned or managed by towercos in MEA
804
IHS Africa

American Tower

2435

2408

2126

1927

1393

1400

1600

2000

500***
700

70

500
Helios Towers Africa

TowerCo of
Madagascar

1793**** 787

3582

1350**

4717

300
Eaton Towers

1964

15882*

394

Unknown Country

South Africa

DRC

Rwanda

Uganda

Nigeria

Cote dIvoire

Zambia

Tanzania

Ghana

Cameroon

Congo B

Kenya

Burkina Faso

Niger

Egypt

700

Madagascar
5000

10000

* Pending closure of the HTN acquisition (expected Q2 2016);


** Pending closure of the Airtel transaction (expected Q2 2016);
*** Airtel transaction expected imminently
****inclusive of Airtel deal just announced governing 950 towers

Africas first towerco consolidation


The African market is no stranger to tower
transactions with just under thirty deals of
significant scale having been completed in the
past six years. Whilst sale and leaseback (SLB)
transactions, management with a license to lease
(MLL) arrangements and the formation of joint
50 | TowerXchange Issue 16 | www.towerxchange.com

15000

20000

25000

Source: TowerXchange

ventures between towercos and operators have


been widely carried out, 2016 saw the continents
first significant towerco consolidation with IHSs
announced acquisition of Nigerias HTN Towers.
In Nigeria inorganic growth opportunities are
limited, with only Globacom and NATCOMs towers
remaining on MNO balance sheets, and Globacom

having shown little appetite to divest. The market


does however have a number of smaller towercos
but faced with competition from IHS and American
Tower, these companies have begun to be absorbed
by their larger competitors with HTN and then
subsequently Hotspot, being acquired by IHS.
Whilst IHS possesses plenty of opportunity for
organic growth in the market, with an estimated
40,000 additional towers needed to meet growing
data requirements, the acquisition of HTN and of
Hotspots portfolio helps to bolster their position as
Nigerias leading towerco. From HTN and Hotspots
perspective the acquisitions also make a lot of
sense. With little room for inorganic growth and
two sizeable competitors in the built to suit market
in the form of IHS and American Tower, the two
companies were being increasingly squeezed out of
the Nigerian tower market.
Whilst we dont expect any major wholesale
consolidation amongst the big four towercos in
the immediate future, this landmark deal could be
the start of the rolling up of mid-market towercos
or the sale of smaller towerco portfolios. In South
Africa, speculation has been growing as to whether
American Tower will acquire Eaton Towers
portfolio of 300 sites, while IHS has already acquired
what amounts to an MLL deal with SWAP in Nigeria
as part of the HTN deal.
Next round of SLBs imminent
Progress has been made in Airtels tower disposal
with their Tanzanian towers being awarded to
American Tower (adding a fifth country to the
AMTs African footprint), their towers in the DRC
www.towerxchange.com | TowerXchange Issue 16 |

XX

being awarded to Helios and the operators Niger


transaction all but closed with Eaton Towers.
Whilst few developments have been observed with
the Middle Eastern Mobily and Zain processes, Saudi
Tower Company, with a portfolio of 16,400 sites, is
now reportedly looking into a tower sale meaning
that all three of Saudi Arabias operator portfolios
could be coming to market. Sticking with the MENA
region, it is widely thought that further towers of
the recently rebranded Orange Egypt may come
to market following the sale of 2,000 sites to Eaton
Towers late last year. Eaton again in pole position to
close that deal. Meanwhile, in Algeria VimpelCom
are yet to appoint an advisory firm to oversee a
proposed sale of Djezzys ~6,000 sites, with priority
first being given to the divestments in Russia, the CIS,
Bangladesh and Pakistan.
In sub-saharan Africa, speculation is gathering
that Mozambiques state owned operator, mCel,
will launch a sale of its ~2,000 towers in the
coming weeks. Whilst in the much earlier stages
of discussion, competitor Viettel is reportedly also
looking at a potential sale of its assets and, with no
independent towercos yet in Mozambique, 2016
could see this about to change.
There have been some developments in the MTN fine
with MTN making a good faith payment towards
the NCCs US$3.9bn and dropping their court case.
A sale of their South African towers could well be
on the cards to help raise capital toward some of the
remainder of the cost.
In other operator news, Orange continues to extend
XX | TowerXchange Issue 16 | www.towerxchange.com

its presence on the continent, closing its takeover


of Tigo in the DRC and Liberias Cellcom, whilst its
acquisitions of Airtels subsidiaries in Burkina Faso
and Sierra Leone are expected to close shortly.
Tower owners examine new energy business
models to reduce opex and operational challenges
There is a growing appetite amongst operators
and towercos to explore the ESCO model to help
alleviate a significant proportion of their operational
challenges. Finding an ESCO with the operational
experience and balance sheet such that the towercos
feel confident they can deliver the uptime required
to meet stringent SLAs (or shoulder the MNO
penalties should they not) still presents a challenge.
Conversely ESCOs, taking on the operational
challenges and risks need to create healthy margins
to make the business bankable. With energy already
representing the most significant opex cost at cell
sites, whether ESCOs can make the model work
at a return that attracts investors, and a price the
towerco or operator would be willing to pay, remains
to be seen.
In Nigeria, a similar arrangement has been put in
place between IHS and Flexenclosure. Flexenclosure
have agreed an order to supply 1,000 eSite power
systems (hybrid solutions combining battery, solar
and genset power sources) for IHSs sites in Nigerias
Abuja region. Under the terms of the agreement,
IHS will provide a portion of upfront capex for each
installation and then pay a managed services fee
for the delivery of power to the sites. It marks a
significant step for Flexenclosure in their transition
from being an equipment supplier to a quasi-ESCO.

In Jordan, Orange have explored an alternative


business model, signing an agreement with an
energy consortium to build five solar PV plants,
totally 33.7MW, which will power the companys
operations in the country. The project will make
use of a wheeling arrangement in place in Jordan,
whereby the sites will be constructed at a remote
location and then use the grid (paying transmission
fees and absorbing distribution losses) to bring
power to cell sites, with excess power being sold to
the grid. Whilst such a model may not be suitable for
sub-Saharan African countries with underdeveloped
grid infrastructure or which lack the necessary solar
irradiation, the innovative approach is indicative of
the increased emphasis that the telecoms sector is
putting on find its way to reduce its energy costs and
thus TCO.
Alternatives to the reduce TCO of mobile
networks?
Speaking to Orange recently on their solar project
they underscored the message that the transferring
of sites to towercos represents just one option in
the drive to bring down the cost of their networks;
energy efficiency and measures such as RANsharing
are equally important considerations when looking
at TCO.
In the last edition of the journal we reported that
Ooeredoo and Tunisia Telecom had launched
a RANsharing programme to reduce the cost of
network rollout and maintenance, estimating savings
of over 50% through the move and just recently it has
been reported that Etisalat and du are exploring the
formation of a JV infraco in the UAE.
www.towerxchange.com | TowerXchange Issue 16 |

51

To w e r s a n d M o n o p o l e s
w w w. s e c c i o n a l . c o m . b r
sales@seccional.com.br
Te l . + 5 5 4 1 3 3 1 8 . 2 3 11

Technology for leading edge reliability

Figure 2: MEAs biggest tower transactions to date


Year
2016
2016
2016
2016
2015
2015
2014
2014
2014
2014
2014
2014
2014
2013
2013
2013
2012
2012
2012
2012
2011
2010
2010
2010
2010
2010
2010
2010
2010
2010

Country

Seller

DRC +

Airtel
Hotspot
Airtel ******

Nigeria
Tanzania +
Nigeria
Nigeria
Egypt
Rwanda & Zambia
Nigeria
Ghana, Burkina Faso, Kenya & Uganda ****
Nigeria
Nigeria
Congo B
Rwanda & Zambia
Tanzania
Kenya ***
Cameroon & Cote dIvoire
Cote dIvoire
Cameroon
Uganda
Uganda
Uganda
Tanzania **
DRC **
Ghana
South Africa *
Nigeria
Ghana
Nigeria
Nigeria
Ghana **

Source: TowerXchange
Buyer

HTA
IHS
American Tower
HTN Towers******
IHS
Etisalat
IHS
MobiNil
Eaton
Airtel
IHS
Airtel
American Tower
Airtel
Eaton
MTN
IHS
Etisalat
IHS
Airtel
Helios
MTN
IHS
Vodacom
Helios
Telkom Kenya
Eaton
Orange
IHS
MTN
IHS
MTN
IHS
Warid
Eaton
Orange
Eaton
MTN
American Tower
Millicom/Tigo
Helios
Millicom/Tigo
Helios
MTN
American Tower
Cell C
American Tower
Starcomms
SWAP
Vodafone
Eaton
Visafone
IHS
Multilinks
HTN
Millicom/Tigo
Helios
Totals / average

Tower
count
950
160
1,350
*****1,211
555
2,000
1,113
4,800
2,500
9,151
2,136
394
1,269
1,149
1,000
2,000
931
827
400
300
1,000
1,020
729
1,876
1,400
407
750
800
400
750
42,927

Cost per
tower US$

Deal value
US$

$179,000,000

$123,593

$131,150,000
$181,000,000
$1,050,000,000

$65,575
$162,624
$218,750

$882,000,000
$485,000,000

$196,700
$227,060

$75,000,000

$87,616

$141,000,000
$143,000,000

$151,450
$172,914

$89,000,000
$80,000,000
$45,000,000
$21,850,000
$200,000,000
$81,000,000

$174,510
$130,719
$102,881
$228,375
$142,857
$199,017

$67,000,000

$83,750

$54,000,000

$120,000

$3,945,000,000

$126,450

Deal structure
SLB
Portfolio acquisition
SLB
Company acquisition
SLB
SLB
SLB
SLB
SLB
Joint venture (IHS 49%, MTN 51%)
SLB
SLB
SLB
SLB with direct investment in HTT*****

MLL (Contract since cancelled)


MLL
SLB
SLB
SLB
SLB
Joint venture (AMT 51%, MTN 49%)
Joint venture (HTA 60%, Milicom 40%)
Joint venture (HTA 60%, Milicom 40%)
Joint venture (AMT 51%, MTN 49%)
SLB with right to acquire 1800 more
SLB
MLL
SLB
MLL
Joint venture (HTA 60%, Milicom 40%)

* Cell C deal included 1,400 existing towers plus the option to acquire up to 1,800 more to be constructed. Cost of original 1,400 towers only included here ** Millicom restructured their equity in Helios operations
into a 24% stake at group level, which Millicom is now seeking to monetise *** Telkom Kenya-Eaton deal subsequently cancelled ***** Vodacom sold 100% of equity in towers but subscribed to acquire a 24.5%
interest in HTT **** Plus Niger deal expected to be announced imminently, ***** Plus HTNs managed services agreement governing 702 SWAP towers transfered to Helios, + deal announced, not yet closed

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

53

Figure 3: Forecast African towerco footprints

Helios Towers Africa


Eaton Towers

Congo Brazzaville
DRC

Kenya
Niger
Burkina Faso
Egypt

Ghana
Tanzania

South Africa
Uganda

Nigeria

American Tower

IHS

Cameroon
Cote dIvoire
Rwanda
Zambia

Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

2016 will see operators and towercos continuing to


explore new models to improve connectivity across
the continent. In South Africa, small cells and DAS
are becoming increasingly important as data usage
in urban areas continues to grow. At last months
Europe Meetup small cells was a hot topic, with
many towercos looking to diversify into the field and
whilst we dont expect this to become a significant
portion of African towerco business models just yet,
it is an interesting trend to watch.
Country overviews
Algeria: TowerXchange are tracking the possibility
of ~6,000 Djezzy towers coming to market. Algeria
is one of several countries which currently limits
foreign direct investment (FDI) to 49%. Under
such circumstances, an international investor
or towerco considering putting capital into an
Algerian tower play, whether BTS or more likely
sale and leaseback, is limited to a minority stake
and must source a local partner in a market with
no pre-existing independent tower industry. The
formula is further complicated in the case of Djezzy,
recently reorganised so that the government owns a
controlling stake.
Burkina Faso: Congratulations to Eaton Towers
on closing their deal to acquire Airtels towers in
Burkina Faso, where Telemob (Onatel) and Airtel vie
for market leadership, with Telecel (Planor Afrique)
not far behind. It hasnt been an easy period for
Burkina Faso within days of Eaton announcing the
deal to acquire Airtels towers, a coup had toppled
the government, and there is now the looming threat
of terrorist action spilling over into the State. If that
www.towerxchange.com | TowerXchange Issue 16 |

55

Your safety
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

Figure 4: Estimated tower counts


for selected countries in SSA
Nigeria 30,996

South Africa 25,000

Tanzania 8,800
Kenya 6,600
Ghana 5,983

Mozambique
5,000
DRC 4,350
Uganda 3,485

Senegal 3,350

Zimbabwe
1,400
Source: TowerXchange
XX | TowerXchange Issue 16 | www.towerxchange.com

werent enough to contend with, Airtel recently


agreed to sell their opco in Burkina Faso to Orange.
3G was launched in 2013 but mobile broadband
penetration remains just 4%*. SIM penetration is just
79%* in Burkina Faso, a country of some 18.4mn.
Cameroon: New entrants Viettels Nexxtel launched
in September 2014 and claimed to have 2mn
subscribers by Q2 2015, although their window of
3G exclusivety expired at the end of 2014. MTN has
launched 4G in four cities and committed to hang 3G
and 4G equipment on 700 sites during 2016. Stateowned CamTel has commenced rollout of their GSM
network, completing Cameroons transition from
a two to a four MNO market. YooMee are one of
several non-traditional MNO tenants on Cameroons
towers. Prior to Nexxtel and CamTels rollouts, IHS
owned and operated 90% of Cameroons towers,
having acquired 1,000 towers from MTN and secured
an MLL (Manage with License to Lease) deal with
Orange for a further 900 towers. IHS eventually
persuaded Nexxtel to co-locate on a limited basis,
but Viettel have also built hundreds if not thousands
of their increasingly familiar guyed-mast towers.
CamTel may leverage co-location more substantially,
and have engaged Huawei to deploy their GSM
network.
The GSMA Green Power for Mobile Best Practices
for Energy Provision in Telecoms: Francophone
Africa report, released in April 2014, suggested
there were 2,090 towers in Cameroon at that time,
of which 533 were off-grid, 34% of which were using
solar power (plus two on-grid grid-DG-solar hybrids).
According to Orange, fuel represents 52% and the
grid 48% of the total energy cost in Cameroon. IHS

provides a full service tower+power service in


Cameroon, and thus is the principle buyer of telecom
energy equipment and services.
SIM penetration stood at 93%* and mobile
broadband penetration at 5%* in Cameroon in
Q4 2015, up from 72% and 1% respectively a year
earlier.
Chad: Airtel cancelled their sale of passive
infrastructure in Chad to Helios Towers Africa,
who had until that points seemed poised to become
the first towerco in a country with less than 2,000
towers. One of the reasons for the collapse of the
HTA transaction was subsequently revealed as Chad
was identified as one of four countries for which
Airtel had entered exclusive negotiations to sell their
opco to Orange, but the deadline for that transaction
has since lapsed. SOTEL is Chads third MNO, with
YooMee heading a list of prospective non-traditional
tower tenants.
Although it is a relatively small market,
TowerXchange dont think weve heard the last of
potential tower deals in Chad whoever owns the
opco, Airtel or Orange may be motivated to re-open
dialogue (presumably with Helios Towers Africa) and
resume the process of transferring assets.
At the 2015 TowerXchange Meetup Africa, Millicom
hinted at having an appetite to partner with an ESCO
in Chad.
Congo Brazzaville: Helios Towers Africa is the sole
towerco in Congo Brazzaville, having closed a deal to
acquire Airtels 394 towers, representing around 44%
www.towerxchange.com | TowerXchange Issue 16 |

57

Figure 5: Adoption of the independent towerco model in SSA

huge impact in terms of shortcutting our to time to


market. Whereas previously we needed to negotiate
with landlords, secure permits and engineer power
solutions in order to get new sites up and running,
leveraging the independent towercos sites reduced
our lead time significantly.

150,000
120,000
90,000
60,000
30,000

10,932
(11%)

200 8,700
(<1%) (9%)

23,060
(27%)

16,661
(16%)

69,849
(54%)

49,149
(40%)

46,765
(39%)

Independent
towerco owned
towers
MNO-captive
towers

)
(f

15
Q

20

16

20
4
Q

14
20
Q

20
4
Q

13

12
20
4
Q

11
20
4
Q

10
20
4
Q

20

09

of the countrys towers. Negotiations to sell Airtels


Congolese opco to Orange recently lapsed, but MNO
consolidation is not a new phenomenon in Congo,
Airtel having acquired Warids operation in the
country in 2014 vaulting them over MTN to become
market leaders. BinTels Azur are ranked a distant
third.

Source: TowerXchange

more than two in three of the towers in Cote dIvoire,


androvides a full tower+power service. According to
Orange, fuel represents 36% and the grid 64% of the
total energy cost in Cote dIvoire.

SIM penetration climbed just 2% to 102%* and mobile


broadband penetration grew by the same percentage
to 9%* in Congo between Q4 2014 and Q4 2015.

Number three MNO Moov was part of a package of


assets transferred from Etisalat to Maroc Telecom.
The regulator has revoked the licenses of MNOs
Comium and GreenN and is now considering offers
from Monaco Telecom, LPTIC and Viettel for a fourth
license - Viettel is thought to be the front runner.

Cote dIvoire: While SWAP operates a handful of


towers in the country, IHS holds a dominant position
in the Cote dIvoire tower market having acquired
a total of ~2,000 towers from market leaders MTN
(under SLB) and Orange (MLL) in 2014. IHS owns

YooMee launched a TD-LTE network in Cote


dIvoire in 2014, prompting CEO Dov Bar-Gera to
tell TowerXchange We entered Cote dIvoire after
IHS had secured the rights to market MTN and
Oranges towers for co-location, and that has had a

58 | TowerXchange Issue 16 | www.towerxchange.com

There are 26.1mn* SIM cards among Cote dIvoires


23mn* citizens, with mobile broadband penetration
at 35%*.
DRC: The sale of Airtels 950 towers to Helios has
just been announced, further strengthening Helios
position in the market. Helios is the sole towerco
and has been delivering reliable service and strong
tenancy ratio growth in the DRC since entering the
market on the back of a US$45mn deal to acquire 729
towers from Millicom Tigo back in 2010 (Millicom
originally retained 40% equity in Helios Towers
DRC which they then restructuredinto a 24% stake
at group level - which Millicom is now seeking to
monetise). Helios Towers DRC provides full service
tower+power. Grid power is reasonably reliable in
Kinshasa, but less reliable in Lubumbashi and Goma.
Almost all sites outside these three cities are off-grid
and fuel costs can be 2.5x more expensive in rural
areas.
Infratel claims to have built over 800 rural sites for
Vodacom DRC.
With around 4,250 towers serving 48.75mn
connections, DRC has one of the highest number of
SIMs per tower in the world at 11,470, illustrating the
DRCs huge growth potential.

www.towerxchange.com | TowerXchange Issue 16 |

XX

Figure 6: Estimated number of towers in MENA

Tunisia
Kuwait 7,000
Yemen
Lebanon 3,900 5,100
2,000
UAE
Qatar
8,500
1,100
Bahrain Oman
Libya
1,700
3,200
5,000 Jordan
5,900

UAE
8,500

Iraq
12,300

Morocco
17,000

Algeria
17,500

Egypt
20,000

Saudi Arabia
30,600

Source: Delta Partners data, TowerXchange presentation

There are three leading MNOs in the market; Airtel,


Orange and Vodacom (following Oranges recent
acquisition of Tigo), while aggressive cut-price
operator Africell claimed to have 7mn subscribers
in DRC by the end of 2014. Africell leveraged colocations on over 200 Helios Towers DRC sites
to accelerate time to market, and the operator is
launching 3G. Smile plans to launch LTE in DRC in
2016. Raga Sat has launched broadband services
leveraging O3bs fibre from the sky MEO satellite
service.
SIM penetration was just 62%* and although 3G was
launched in 2012, mobile broadband penetration
remained at 11%* in DRC in Q4 2015.
Egypt: Eaton announced a US$131mn deal to acquire
100% of the equity in 2,000 towers from Mobinil
(recently rebranded Orange following Oranges
XX | TowerXchange Issue 16 | www.towerxchange.com

99% buyout) in April 2015, representing a third of


the MNOs towers and 10% of the ~20,000 towers
in the country. The towers Eaton will acquire are
concentrated in the Delta, Upper Egypt and Red Sea
regions, but notably do not include assets in the
rooftop-centric Cairo market. It is however expected
that further divestments could be on the cards from
the operator.
A raft of mega-projects, including the construction
of a new capital East of Cairo, the discovery of
offshore gas, and the enlargement of the Suez canal,
could drive economic prosperity and demand for
towers.
With SIM penetration of 102%* and mobile
broadband penetration of 42%*, plus an established
culture of infrastructure sharing in the country, the
potential for towerco profitability is good in Egypt.

While 3G coverage is currently fairly extensive, with


most operators focusing on capacity upgrades ahead
of a potential 4G auction once the political situation
is more stable, Egypt still has more SIMs per tower
than any other country in MENA (4,690 versus
the regional average of around 2,500), illustrating
potential for new tower builds.
Vodafone Egypt leads the market followed Orange
with Etisalat Nisr, the third operator, making three
credit worthy prospective tenants, each of which
could potentially divest further towers in Egypt.
Telkom Egypts long mooted mobile launch may
finally happen in 2016.
Grid connections for Egyptian tower sites are slow
and expensive, so DGs are widely used the business
case for renewables may be boosted if fuel subsidies,
which currently mean diesel is around a fifth the
cost of other African markets, are reduced.
Local tower manufacturer / service provider HOIMEA also operates a network of around 40 towers
in Egypt, with a vision to scale to 300 by 2018. HOIMEAs tenancy ratio is already approaching 1.5.
Gabon: The future of Airtels towers in Gabon is
uncertain. The operator had originally set out to
divest towers in all 17 African countries, but Gabon
seldom seemed to mentioned on the grapevine. For
now, we assume the towers will remain on Airtel /
Africa Towers balance sheets, meaning there will be
no independent towercos in Gabon.
Airtel is deploying LTE, but mobile broadband
penetration was still negligible in Gabon at the
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59

end of 2014. Etisalats Moov subsidiary in Gabon


was acquired by Maroc Telecom. Libertis (Gabon
Telecom) and Azur (BinTel) make up the rest of the
MNO market.

Every industry was affected, and towercos struggled


to achieve SLAs, while EBITDA margins suffered.
However, Ghanas towercos have developed dynamic
processes able to get ahead of fuel shortages.

Oil and Gas wealth partly accounts for Gabons


soaring 164%* SIM penetration rate.

SIM penetration rose from at 113% to 121%* and


mobile broadband penetration from 24% to 30%* in
Ghana between Q4 2014 and Q4 2015.

Ghana: Eaton are adding Airtels Ghanaian towers


to the 750 Vodafone towers they are managing with
license to lease. There are three major towercos
active in Ghana, which have been snapping up
tenancies for over three years. Back in 2010, Helios
Towers Africa setup a joint venture towerco with
Millicom Tigo as minority partners, to which 750
towers were transferred. Shortly afterward Eaton
Towers closed their deal with Vodafone Ghana,
then American Tower set up another joint venture
with MTN to which 1,876 towers were transferred
(ATC Ghana now markets 2,052 Ghanaian towers,
representing around a third of the countrys tower
stock). All of Ghanas towercos now provide a full
service tower+power. With strict permitting and
environmental policies in Ghana, its tough to get
new towers built and towercos expect less than
100 new structures to go up in 2016. However, this
amplifies appetites for co-location: tenancy ratios in
Ghana are already around two.
MTN leads a crowded market for operators, followed
by Vodafone, Tigo, Airtel and Glo, with Expresso
struggling to establish a foothold.
The devaluation of the Ghanaian Cedi, compounded
by deregulation of fuel prices, led to spiralling
opex costs and crippling fuel shortages in 2015.
60 | TowerXchange Issue 16 | www.towerxchange.com

Kenya: Eaton Towers are integrating several hundred


towers recently acquired from Airtel Kenya into their
portfolio. Eaton is the sole towerco in Kenya and has
long coveted the market, having secured an MLL deal
with Orange that was soon cancelled after a change in
strategic direction by the operator, which culminated
in the announcement of the sale of Oranges 70%
stake in Telkom Kenya to Helios Investment Partners.
Eatons number one issue: how to engage with
Safaricom as a tenant and as a de facto competitor
Safaricom selectively leases their own towers to other
MNOs at attractive rates. Safaricom has a dominant
position in Kenya with 66.3% market share. Airtel has
19.1%, Telkom Kenya 11.8% and new entrant Equitel
2.9%, according to CAK statistics for Q3 2015.
Kenya has ~6,600 towers, grossly insufficient for
a country of 46mn people and with a land area of
570,000 sq km. SIM penetration is just 80%* with
plenty of room for mobile broadband growth, at 18%*
penetration at Q4 2015. Safaricom launched LTE at
the end of 2014.
Kingdom of Saudi Arabia: Zain is divesting ~5,700
towers, while Etisalat (Mobily) is divesting ~9,600
towers in KSA. American Tower, Digital Bridge,IHS,
Providence Equity, Quippo, TASC Towers, Towershare

and a number of local investors have allbeen linked


with the opportunity. Following the movements
of its competitors, Saudi Tower Company are
also reportedly looking at a sale of their ~16,400
towers.The KSA tower market offers a good volume
of potential BTS opportunities, and a surprisingly
large amount of off-grid towers for a country with a
reliable grid.
KSAs 3G network is mature and the rollout of LTE is
well under way. SIM penetration was at 181%* with
mobile broadband penetration at 71%* in Q4 2015.
Kuwait: Market leaders Zain are divesting 1,600
towers in Kuwait, representing around a third of
the countrys ~5,100 towers. Ooredoo and STCs Viva
are Zains competitors. With population coverage
at 100%, any organic growth for towercos entering
Kuwait must be driven by network densification
rather than extension. SIM penetration was at 192%*
with mobile broadband penetration at 81%* in Q4
2015.
Madagascar: TowerCo of Madagascar (ToM), initially
spun out of TELMA but now an independent towerco
in its own right, operates around 700 towers on the
island of Madagascar. The operational challenge of
operating a distributed tower network, particularly
during rainy season, is not for the feint hearted,
while the success of ToM has deterred other towercos
from bidding for Airtels Madagascan towers, which
seem set to be returned to the local Africa Towers
subsidiary. Orange is also active in Madagascar.
SIM penetration was just 31%* and mobile
broadband penetration 19%* in Q4 2015.
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XX

Estimated tower ownership in Nigeria


550

IHS own and BTS towers


IHS towers acquired from MTN

2,970

6,000

IHS towers acquired from Etisalat


IHS towers to be acquired from HTN
SWAP Telecoms & Technology (management and

200

marketing agreement to be transferred to IHS)

500
700

8,850

IHS towers acquired from Hotspot Network


American Tower Assets acquired from Airtel
BCTek
Communication Towers Nigeria

4,716

160 702

Other small Nigerian towercos

1,211

2,691

Malawi: Eatons deal to acquire Airtels towers in


Malawi was cancelled in late 2015, but the assets
may be brought back to market. Mobile services
are among the most expensive in Africa in Malawi,
contributing to SIM penetration of just 38%*, and
mobile broadband penetration of 15%*. Airtel lead
a dupoloy with TNM. Efforts to inaugurate a third
operator have floundered with Expresso and Celcom
failing to launch the regulators latest pony to back
is Lacell, who were licensed in October 2015. Xinwei
has announced plans to rollout a low cost rural
network. Athonet is deploying an LTE service. There
are around 800 towers in Malawi.
Mozambique: State owned operator, mCel is
expected to launch a sale of its c. 2000 towers
in the coming weeks, targeting over US$300mn.
XX | TowerXchange Issue 16 | www.towerxchange.com

Globacom
NATCOM
Source: TowerXchange

With no towercos currently in the Mozambique


market, the move has piqued the interest of Africas
resident towercos. A potential driver may be the
governments drafting of a bill mandating the
sharing of telecoms infrastructure. We understand
there are around 5,000 towers in Mozambique,
including 1,500-1,800 guyed mast towers erected
by low cost new market entrant operator Viettel.
Indeed it is the turbulence caused by Viettels entry
that may have precipitated passive infrastructure
monetisation, both on the part of incumbent mCel,
which has seen market share eroded by both Viettel
and Vodacom, and indeed potentially by Viettel
themselves. Viettels Mozambique subsidiary Movitel
is co-owned by Viettel and a holding company run
by FRELIMO (Frente de Libertao de Moambique
the main political party in the country).

Niger: When Eaton Towers opens up the first


towerco in Niger when their deal with Airtel finally
closes, theyll need to be ready to engage with a
challenging energy logistics scenario, low population
density, and sub US$5 ARPU. Airtel has recently
secured a 3G license in Niger where it competes
with Orange, SahelCom and Moov (recently sold by
Etisalat to Maroc Telecom). SIM penetration is just
34%* in Niger, and mobile broadband penetration
2%*.
Nigeria: Nigeria is a benchmark tower market for
many reasons. Its the largest towers and largest
mobile market in SSA, with 154.3mn* connections
among a population of 184.6mn*. Its the oldest
growth independent towerco market in Africa;
towercos have been building towers in Nigeria since
2006. Almost half (24,746) of SSAs towerco-owned
towers (49,149) are in Nigeria, and over US$2.5bn has
been spent by towercos to acquire 79% of Nigerias
towers. Towercos have proved their ability to deliver
99.9% uptime in challenging grid conditions in
Nigeria. Nigeria is not just a benchmark for African
towers, its proof of the efficacy of the independent
towerco model in any emerging market.
Competition for BTS opportunities is increasing
among Nigerias three major and many middle
market towercos. While most commentators agree
Nigeria needs to double the countrys current stock
of towers, uncertainty created by the NCCs US$3.9bn
fine on market leader MTN (the legal challenge of
which has been adjourned until mid-March) makes
predicting capex budgets a fools errand.
Nigerian cell site energy efficiency programmes
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61

are also becoming a benchmark for the rest of


Africa, with battery hybrids widely deployed and
solar being added, particularly in the north of the
country. In early 2016 Nigeria also saw the first
towerco consolidation in the African market, when
IHS acquired HTN Towers portfolio in the country.
IHS have subsequently acquired Hotspot Networks
portfolio of 160 sites.

by Millicom-Tigo on 22.8% and Expresso on 21.3%


(according to statistics from ARTP for September
2015). Expresso are seeking a towerco partner in
Senegal (and beyond) they are seeking to add
250-350 towers to their existing network of 450.
It remains to be seen whether Tigo, with around
1,100 towers in Senegal, might also be interested in
partnering with a towerco.

Rwanda: IHS has closed the acquisition of


Airtels 184 Rwandan towers, to be added to their
acquisition of 550 towers from MTN Rwanda in
2013. IHS Rwandas managing director Kunle
Iluyemi was quoted in The New Times as saying
IHS erected 34 towers across the country in 2014,
with plans to build further 50 towers in 2015.
TowerXchange estimate there are around 1,300
towers in Rwanda, of which IHS own 804.

There are around 3,350 towers in Senegal serving a


population of just over 15mn with SIM penetration
of 96%* and mobile broadband penetration having
increased 63% YOY to 14%*.

Rwanda is home to three tier one MNOs, so has no


shortage of credit worthy tenants. MTN leads the
market, followed by Tigo and Airtel. Korea Telecom
secured a joint venture with the Rwandan Ministry
of Youth and ICT to build a nationwide LTE network.
SIM penetration in Rwanda rose from 61% to 75%*
with mobile broadband rising from 28% to 35%*
between Q4 2014 and Q4 2015.
Senegal: Sonatel, in which Orange is a controlling
stakeholder, had been investigating the potential
sale and leaseback of their 1,800 structures in
Senegal, but the challenges aligning all stakeholders,
including powerful unions and government
shareholders, now suggest Sonatel will instead
seek a managed services provider. Sonatel is the
market leader with 55.7% market share, followed
62 | TowerXchange Issue 16 | www.towerxchange.com

South Africa: Amidst financial pressures by NCCs


US$3.9bn fine on MTN, most commentators expect
the MNO to divest their most valuable remaining
tower assets to raise capital and MTNs South
African towers would be top of many towercos
shopping lists! The South African tower market is
up for grabs: only 8.7% of South Africas estimated
25,000 towers are currently in towerco hands.
American Towers landmark acquisition of 1,400
towers from Cell C back in 2011 has since been
supplemented with BTS activity, giving ATC South
Africa 1,927 towers in their portfolio by Q4 2015.
Eaton Towers has built around 300 towers in
South Africa. American Towers tenancy ratio is
South Africa is 1.9, while Eatons has passed two.
Atlas Towers have build 120 towers, quadrupling
their portfolio in 12 months in South Africa and
positioning themselves to compete for any sale and
leaseback opportunities. Infratel, Eagle Towers and
Pro High Site Communications complete the map of
South African towercos. A major sale and leaseback
in South Africa could precipitate the rollup of one or

more of South Africas middle market towercos.


Recent reports in Bloomberg suggest that MTN has
19,000 sites to sell in South Africa; that total may be
inflated by counting sites instead of towers with
a prevailing tenancy ratio as high as 1.8 in South
Africa, and reducing the total to exclude rooftops,
TowerXchange reckon MTNs South African tower
count is nearer 10,000. Should MTN bring their
South African Towers to market, TowerXchange
counts at least five prospective strategic buyers,
supplemented by the usual array of infrastructure
fund bidders.
Most commentators rate IHS as the favourite to
secure MTNs South African towers. Africas largest
towerco has a track record of acquiring MTN towers,
are amenable to flexing deal structures to meet MTN
requirements, and the two parties hold each other in
high esteem. While IHS would benefit from adding
some lower risk ballast to their West Africa-centric
portfolio, it remains to be seen whether they would
have the appetite to acquire assets in KSA and SA,
should they emerge successful in bidding for Mobily
and Zains towers in Saudi.
Meanwhile, Telkoms stop-start tower monetisation
programme has stopped again. Telkom asked for
expressions of interest in a portfolio of around
6,000 shareable structures in South Africa, but that
process was discontinued. Whether MTNs towers
coming to market could restart that process remains
to be seen.
Vodacom South Africa, which operates their ~10,000
tower network as an internal towerco, and leases
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XX

space to third parties, would seem less inclined to


monetise their towers.
Tanzania: Helios Towers Tanzania (HTT) owns
around 3,450 of Tanzanias ~8,800 towers, acquired
in a US$75mn deal with Vodacom in 2013 and a
US$80mn deal with Millicom-Tigo in 2010 for 1,149
and 1,020 towers respectively. Millicom recently
restructured their equity stakes in HTAs local
towercos to acquire a 24% stake in HTAs parent
company. Millicom are now looking to exit that
investment. In order to fund further infrastructure
expansion in the country, Helios Towers Tanzania
has just secured a US$95mn loan facility with
Standard Bank.
American Tower have now entered the Tanzanian
market following the acquisition of Airtels 1,350
sites, raising competition in the country for resident
towerco Helios Towers Tanzania
Vodacom and Tigo are supplementing their network
in anticipation of aggressive competition from new
market entrants Viettel, which launched on October
15 2015 under the Halotel brand. Viettel has 3,000
new towers in the air or under construction, and
has begun co-locating. Zantel (acquired by Millicom
from Etisalat), Smart, Smile and TTCL complete the
MNO landscape in Tanzania, which lends itself to
co-location as each of Tanzanias four main MNOs
is dominant in a different region of the country,
providing a strong incentive for co-location to
accelerate nationwide coverage. The sheer scale of
Tanzania amplifies maintenance costs, which can be
as high as US$7,000 per annum ten times the cost
in the US.
XX | TowerXchange Issue 16 | www.towerxchange.com

Uganda: Eaton Towers has added Airtels Ugandan


towers to the 700 towers they acquired from Orange
and Warid back in 2012. Airtel since acquired
Warid, while Orange sold out to Africell. Uganda
remains ripe for further in-market consolidation,
with seven licensed MNOs. American Tower is also
active in Uganda, where they have a joint venture
with MTN and currently market 1,388 towers.
TowerXchange estimate there are a little over 4,000
tenancies on 3,485 towers in Uganda, suggesting an
average tenancy ratio just under 1.2. Expect this
number to rise driven by the enthusiasm of new
entrant MNO Africell, which operates an asset-light
model and prefers to co-locate rather than build
thus accelerating time to market.
Organised crime compounds the effect of
administrative fuel theft in Uganda, making site
hardening a priority for towercos.
SIM penetration is just 72%* in Uganda, with multiSIMing meaning actual penetration is under 50%,
with mobile broadband penetration at 16%*.
Zambia: IHS have acquired the towers of market
leaders Airtel Zambia to supplement their 2014
acquisition of MTNs Zambian 719 towers, which
supplemented by new build gives them 1,964 towers
in this this ~2,300 tower market. Capital constrained
Zamtel is the third of three MNOs, although the
government is a fourth player in Zambias tower
market through towers built by the Universal
Service Fund. Whilst the announcement is yet to be
confirmed, it is rumoured that Vodafone has been
awarded the fourth operator license by the Zambia
Information and Communications Technology

Authority. The government issued an ultimatum


to the countrys three operators MTN, Airtel and
Zamtel in October 2015 to improve their service
or face the introduction of a new operator in the
market. A six month period was given to improve
their service and with the deadline imminent it is
reported that Vodafone have already appointed a
CEO for their Zambian operations.
SIM penetration is 72%* in Zambia, and mobile
broadband penetration 16%. ARPU is low: in the
US$2-3 range.
Zimbabwe:There are around 1,400 towers in
Zimbabwe of which clear market leader Econet
owns around 500. Grid availability is typically
around 12 hours per day, so effectively almost all
cell sites in Zimbabwe are on unreliable grids,
requiring line conditioning and CDC battery backup
- the market is therefore a key target for renewable
energy plays. Operational risk is compounded by
significant country risk, but currency risk has been
significantly reduced since dollarisation
*Statistics courtesy of GSMA Intelligence, Q4 2015.
TowerXchange are looking forward to once
again hosting the top 250 decision makers
in African towers at the 2016 TowerXchange
Meetup Africa, hosted in the prestigious
ballroom at the Sandton Convention Centre on
October 19 and 20 2016! Visit:
www.towerxchange.com/meetup/meetup-africa/

www.towerxchange.com | TowerXchange Issue 16 |

63

Africa and Middle East News

DRC: Airtel agree tower sale to Helios Towers


Africa

A roundup of tower news across SSA and MENA

Airtel have agreed the sale of 950 towers in the


Democratic Republic of Congo (DRC) to Helios Towers
Africa. The divestment also includes towers that
are currently under construction. The agreement
was announced on 5th May and is still subject to
statutory and regulatory approval from the relevant
authorities.

Technology Company (LPTIC) have been received,


with Viettel thought to be the front runner following
its successful entry into several African markets
including Mozambique, Burundi and Tanzania.
DRC, Ghana and Tanzania: Millicom to sell 24%
stake in Helios Towers Africa

Cote dIvoire: ARTCI strips Comium and GreenN


of GSM licenses and reviews offers for a new
concession
The Regulatory Authority for Telecommunications
in Cote dIvoire (Autorite de Regulation des
Telecommunications de CI, ARTCI) has revoked
the licenses of operators GreenN and Comium
after months of speculation. With three MNOs
remaining Orange, MTN and Moov, ARTCI is now
considering offers for a fourth operator. Offers from
Monaco Telecom, Vietnams Viettel Group and the
Libyan Post Telecommunications and Information
64 | TowerXchange Issue 16 | www.towerxchange.com

It has been reported that Millicom plans to sell its


24% stake in Helios Towers Africa. In 2010, Helios
Tower Africa acquired a portfolio of 2,450 Millicomowned towers in Ghana, DRC and Tanzania. At
that time, Millicom retained equity stakes in the
individual tower companies and in Q3 2015 those
interests were reorganised into a 24% stake in the
parent company to simplify the investment. The
value of the transaction will provide an interesting
benchmark valuation for African towers with it
being highly likely that the details of the transaction
will be disclosed.
DRC: Millicom closes the sale of its DRC
operations to Orange
Millicom has announced that it has closed the sale
of Tigo in the DRC to Orange. The proceeds of the
transaction will be used to invest into Millicoms
Latin American operations and other markets in
Africa. The move further strengthens Oranges
position in the DRC, which is the largest mobile
market in Central and Western Africa after Nigeria.

Ghana: MTN Ghana to invest US$96mn in network


upgrade plans
MTN Ghana, the countrys largest mobile network
operator by subscribers and winner of one lot
of 800MHz spectrum in the recent auctions, has
announced it will be investing US$96mn to upgrade
its network. It is reported that US$62mn million will
be spent on improving the operators traditional
network, US$16mn million on enhancing its IT
network, while US$18mn will be invested in the
rollout of 4G LTE services. MTN Ghanas 2,113 site
tower network is owned, operated and marketed for
co-location by a joint venture towerco owned 51% by
American Tower, 49% by MTN.
Jordan: Orange to build five solar PV plants
totaling 33.7MW to power its Jordanian operations
Orange has signed an agreement with a consortium
comprising Paris-based Neoen, Jordans Millennium
Energy Industries (MEI) and Catalyst Private Equity
to construct five solar PV plants which will power
the companys entire operations in the country. The
project will use a wheeling agreement whereby the
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XX

PV sites - built at remote locations, will make use


of Jordans grid, with Orange paying transmission
fees. Construction of the solar facilities is expected to
commence in late 2016 and, when complete should
generate almost 61GWh a year and save 40,000
tonnes of CO2 emissions annually.

Liberia: Orange acquires largest operator for an


undisclosed sum
Orange has acquired Cellcom, Liberias operator
which held a 45% market share in the country
ahead of MTN subsidiary, Lonestar. With mobile
penetration sitting at 66% in the country, Orange
views Liberia as a high growth potential market and
a valuable addition to its growing footprint in the
market
Mozambique: mCel tower sale imminent; Viettel
to follow suit?
State owned operator, mCel is expected to launch
a sale of its c. 2,000 towers in the coming weeks,
seeking to raise over US$300mn. With no towercos
currently in the Mozambique market, the move has
piqued the interest of Africas resident towercos.
Competitor Viettel is reported to be considering a
monetisation of its assets although discussions are
believed to be in the very early stages. There are a
little over 5,000 towers in Mozambique.
Nigeria: MTN pays a proportion of US$3.9bn fine
and NCC reinstates regulatory services
The Nigerian Communications Commission has
XX | TowerXchange Issue 16 | www.towerxchange.com

reinstated regulatory services to MTN Nigeria after


they made a good faith payment towards a fine
for failing to meet a deadline to disconnect over five
million unregistered SIMs in the country. The initial
fine of US$5.2bn had been reduced to US$3.9bn
with MTN subsequently withdrawing its lawsuit
and the two parties hoping to reach a settlement out
of court. The reinstatement of regulatory services
will allow MTN to pursue the necessary approvals,
in accordance with the NCC regulatory process, for
new tariff plans and promotions as well as other
regulatory matters.
Nigeria: IHS acquires HTN Towers in Africas first
towerco consolidation
IHS has announced the acquisition of HTN Towers
portfolio of 1,211 sites in Nigeria in a landmark
deal signifying the first in-market consolidation
in the African towerco segment. When closed,
the transaction would take IHSs tower count in
Nigeria to 15,722 towers, 53.9% of the countrys
29,190 total. The deal also involved the transfer
of HTNs managed services and co-location
marketing agreement concerning SWAP Telecoms &
Technologies 702 towers to IHS. For further details,
check out TowerXchanges analysis of the deal later
in this Journal.
Nigeria: IHS acquires Hotspot Networks 160+ sites
and lease agreements with third parties
IHS have reached an agreement with Hotspot
Network Limited to acquire Hotspots 160+ towers
and additional lease agreements the company has
on third party sites (primarily billboard monopoles)

for just under a billion Naira (c. US$5mn). The deal


has been approved by the Nigerian Communications
Commission and the two companies are in the
process of integrating Hotspots sites into IHS
portfolio, including the addition of power as a service
to each site.Hotspot Network Limiteds focus will
now shift to rural broadband rollout and data centre
management.
Nigeria: NCC to issue remaining five InfraCo
licenses this year
Following the award of the first two concessions
to IHS and MainOne Cable (for the North Central
Zone and Lagos state respectively), the Nigerian
Communications Commission has announced that
it plans to auction off the remaining five regional
InfraCo licenses this year. IHS and MainOne Cable
have faced issues in the rollout of new infrastructure
but the commission is reportedly working with them
to alleviate their concerns.
Nigeria: Flexenclosure secures order to power
1,000 IHS sites
IHS have signed an order with Flexenclosure for
1,000 of its eSite systems to power IHS towers in
Nigerias Abuja region. The deal is the largest sale
of eSite systems that Flexenclosure has closed to
date and with the systems using solar energy, the
agreement will increase the sustainability of IHSs
footprint in the country significantly.
South Africa: Tata seeks new buyer for Neotel
after Vodacom calls off its planned takeover
www.towerxchange.com | TowerXchange Issue 16 |

65

Vodacom has called off its plans to takeover domestic


rival, Neotel after the High Court in Pretoria ruled
against Vodacoms acquisition of Neotels spectrum
and licenses. The original deal between Vodacom
and Tata was signed nearly two years ago amidst
strong protestations from other operators in the
market: MTN, Telkom and Cell C. Following the
collapse of the deal, Tata Communications are
reported to be seeking an alternative buyer.
Tanzania: Helios Towers Tanzania secures
US$95mn loan facility from Standard Bank
Helios Towers Tanzania (HTT) has arranged a
US$95mn syndicated loan facility, coordinated
through Standard Bank with Stanbic Bank Tanzania,
FMO, Investec Bank, National Micro Finance Bank
and the Emerging Africa Infrastructure Fund as
mandated lead arrangers. The funds will be used to
expand the Helios Towers operations in the country,
which is the companys largest market where they
possess a portfolio of 3,582 towers. Since HTTs
launch in 2011, approximately 5,500 base stations
have been added to Tanzanian networks, but only
2,900 new towers added thanks to sharing.
Tanzania: Halotel to install infrastructure in 1,800
villages by October 2016
Halotel, Viettels Tanzanian operation has announced
plans to install towers in 1,800 villages by October
of this year. The company launched in Tanzania in
October 2014 and has since covered 1,500 towns
and villages and reached 90% population coverage.
The planned additional infrastructure rollout
66 | TowerXchange Issue 16 | www.towerxchange.com

should take this figure to 95% by the end of the year.


TowerXchange understands Viettel has built ~3,000
towers, and co-located on 1,000 more since launch.
Tanzania: American Tower acquires 1,350 Airtel
sites
Bharti Airtel has reached a deal with American
Tower Corporation to sell their 1,350 Tanzanian
towers. The deal, which is expected to close in
H1 FY16, had a purchase price of US$179mn,
representing an average cost per tower of US$132.6k.
Under the terms of the agreement, Airtel will be the
anchor tenant on the towers with an initial ten-year
lease, with the deal potentially to be expanded to
include an additional 100 sites that are currently
under development. The move is the latest in Airtels
strategy to divest their assets across the continent
and helps to bolster American Towers African
portfolio, adding a fifth country to their footprint. For
further details, checkout TowerXchanges analysis of
the deal later in this Journal.

Uganda: MTN plans to spend US$65mn to upgrade


and expand its network
With strong data growth forecasted in the market,
MTN plans to invest US$65mn in upgrading and
expanding its Ugandan networks. Of the companys
5.4 million data customers only 9% are currently
covered by its 3G and 4G broadband networks; the
company aims to increase this figure to 15% and 20%
in 2016. The US$65mn will reportedly be spent on
the deployment of 200 additional 3G sites, a further
100 4G LTE base stations as well as 400km of fibre.

MTN Ugandas 1,393 site tower network is owned,


operated and marketed for co-location by a joint
venture towerco owned 51% by American Tower, 49%
by MTN.
Zambia: Vodafone rumoured to have been awarded
fourth operator license
Whilst the announcement is yet to be confirmed, it
is rumoured that Vodafone has been awarded the
fourth operator license by the Zambia Information
and Communications Technology Authority. The
government issued an ultimatum to the countrys
three operators MTN, Airtel and Zamtel in October
2015 to improve their service or face the introduction
of a new operator in the market. A six month period
was given to improve their service and with the
deadline imminent it is reported that Vodafone
have already appointed a CEO for their Zambian
operations. IHS owns and leases out 1,964 towers in
Zambia, representing 80-90% of the total inventory of
towers in the country, so co-location could accelerate
any prospective rollout by Vodafone.

Zambia: Airtel to invest US$48mn in infrastructure


upgrades and a further US$30mn in diesel
generators
Airtel Zambia has announced that it will be investing
US$48mn on infrastructure upgrades in the country
including the installation of a fibre network. With
the power situation in the country having impacted
on service provision, the company plans to spend a
further US$30mn on the procurement and installation
of generators to improve power supply. Airtel Zambia
recently sold their towers to IHS
www.towerxchange.com | TowerXchange Issue 16 |

XX

MENA news
Egypt: MobiNil rebrands as Orange Egypt and
plans US$318mn network expansion and service
improvements
Following the completion of Oranges 99% buyout of
the Egyptian MNO, MobiNil has rebranded to Orange
Egypt. The company has announced plans to invest
US$318mn on improving its network and service
delivery in the country, with a heavy focus on mobile
broadband. The company has also announced plans
to bid for a 4G license. These investments could
be partly funded by the sale of additional towers;
Orange sold 2,000 Egyptian towers to Eaton in 2015,
raising US$131mn.
Algeria: VimpelCom tower monetisation could see
Algerian towers sold
VimpelComs global tower monetisation process
could soon expand to Algeria. VimpelComs Global
Telecom Holding owns 45.57% of market leader
Djezzy, with 51% owned by the government and
3.43% by Cevital. Meanwhile, Algeria Telecom are
seeking to upgrade 70% of infrastructure in 2016,
and considering an IPO to raise capital. There are an
estimated 17,500 towers in Algeria, serving 248.3mn
subscribers.
Algeria: ARPT names three operators for the
first phase of the Universal Telecommunications
Service programme
Algerie Telecom (AT), Algeria Telecom Mobile
(Mobilis) and Optimum Telecom Algerie (OTA,
XX | TowerXchange Issue 16 | www.towerxchange.com

Djezzy) have been awarded authorisations by


Algerias telecoms watchdog the Regulatory
Authority for Post and Telecommunications (Autorite
de Regulation de la Poste et des Telecoms, ARPT) for
the provision of basic telecoms services (wireless
or fixed) and internet access at affordable prices to
underserved areas. The move is part of the countrys
Universal Telecommunications Service (UTS)
programme aimed at bringing coverage to a total of
97 communities in 28 wilayas (regions) in Southern
Algeria.
Saudi Arabia: Mobily reviewing offers for towers;
Saudi Telecom Company joins Mobily and Zain in
exploring a tower sale
Saudi Arabias Mobily is currently reviewing a
number of offers for its ~9,600 telecom towers
having announced its intention to sell, viewing
them as a non-core asset which are complicated
to manage. After competitor, Zain had expressed a
similar interest, rival Saudi Telecom Company is now
reportedly looking into a potential monetisation of its
assets in the country. IHS, Digital Bridge (reportedly
with the backed of Abraaj Group and Saudi Aramco)
and Providence Equity are believed to be leading
contenders for Saudi towers.
UAE: Etisalat and du explore JV infraco in UAE
Clear market leaders in the UAE Etisalat and du are
exploring the opportunity to create a joint venture
infrastructure company. Delta Partners estimates
there are around 8,500 towers in the UAE, while
GSMA Intelligence reports there are 8.5mn SIMs
(92% SIM penetration)

Please feel free to contact the TowerXchange team


Kieron Osmotherly
Founder & CEO
E: kosmotherly@towerxchange.com
Jo Jefferies
Executive Assistant to CEO
E: jjefferies@towerxchange.com
For editorial & speaking enquiries regarding Americas:
Arianna Neri
Head of Americas
E: aneri@towerxchange.com
For editorial & speaking enquiries regarding Africa or Europe:
Laura Dinnewell
Head of EMEA
E: ldinnewell@towerxchange.com
For editorial & speaking enquiries regarding Asia:
Ian Ferguson
Head of Asia
E: iferguson@towerxchange.com
For advertising opportunities & event participation:
Annabelle Mayhew
Chief Commercial Officer
E: amayhew@towerxchange.com
M: +44 7423 512588
Emma Jones
Business Development Manager
E: ejones@towerxchange.com
Toya Smith
Senior Operations Manager
E: tsmith@towerxchange.com
For media partnerships & to request additional subscriptions:
Harpreet Sohanpal
Head of Marketing
E: hsonanpal@towerxchange.com
For the designers of the TowerXchange Journal & brand:
Jon Whitty
Senior Designer & Brand Development
E: jon@blacklightdesign.co.uk

The TowerXchange Journal is published by Site Seven Media Ltd.


2016 Site Seven Media Ltd. All rights reserved. Neither the whole nor any
substantial part of this publication may be re-produced, stored in a retrieval
system, or transmitted by any means without the prior permission of Site
Seven Media Ltd. Short extracts may be quoted if TowerXchange is cited as the
source. TowerXchange is a trading name of Site Seven Media Ltd, registered in
the UK. Company number 8293930.

www.towerxchange.com | TowerXchange Issue 16 |

67

Who are the runners and riders in the


Saudi and Kuwaiti tower transactions?

By Laura Dinnewell, Head of EMEA,


TowerXchange

The first potential tower sale and leaseback in the Middle East
was mooted over a year ago, with Zain appointing Citigroup to
advise on a potential tower transaction in two Gulf countries
in early 2015. Mobily, Etisalats operation in Saudi Arabia was
next to come to follow suit, appointing TAP advisors to look
into a potential sale of their towers. Fast forward 12 months
and Saudi Telecom Company are now joining the party
potentially putting all operator owned towers in Saudi on the
market at the same time. TowerXchange take a look at the
portfolios potentially for sale, examine the latest developments
in the processes and explore who the likely bidders will be.

Keywords: Abraaj Group, Acquisition, Africa & ME, Africa & ME News, Al Rajhi Group, Al Zamil
Group, American Tower, ARPU, Carve Out, Co-locations, Country Risk, Cyan Capital, Digital Bridge,
Etisalat, First Mover Advantage, IHS, Infrastructure Sharing, Investment, Investors, Jordan, Kuwait,
Lawyers & Advisors, Masts & Towers, Middle East, MNOs, Mobily, Off-Grid, Ooredoo, Operator-Led JV,
Procurement, Providence Equity, Quippo International, Risk, Sale & Leaseback, Saudi Arabia, Saudi
Aramco, Saudi Telecom Company, TAP Advisors, TASC Towers, Tenancy Ratios, Tower Count, Towercos,
Towershare, Valuation, Viva, Zain

Read this article to learn:


<
<
<
<

What portfolios are coming to market in Saudi Arabia and Kuwait


The latest progress on each of the transactions
Potential proposed deal structures
Who the potential bidders are likely to be

68 | TowerXchange Issue 16 | www.towerxchange.com

The Saudi and Kuwait mobile markets


Both Saudi Arabia and Kuwait have developed mobile
markets with three mobile network operators and
almost complete population coverage. LTE
rollout is well underway, limiting the potential for
capacity enhancements, but with little bi-lateral
infrastructure sharing underway there exists
potential for increasing tenancy ratios on many
towers. Whilst there are only three operators in each
market, all are credit worthy; whats more Saudi
Arabia represents the biggest mobile market in the
Arab world whilst Kuwait has the highest ARPU in the
Middle East. In summary, both the Saudi and Kuwait
markets should be viewed as low risk, low growth
markets more akin to Europe than their African
counterparts.

Spotlight on the sellers


Zain
3
1
Market position:
Towers for sale: 5,000 in Saudi Arabia, 1,600 in
Kuwait
Zain has a footprint in eight countries in the Middle
East (Bahrain, Jordan, Kuwait, Lebanon, Iraq, Saudi
Arabia, Sudan and South Sudan). In Kuwait, Zain is
the market leader with 44% market share, whereas
in Saudi Arabia the company is the number three
operator and has long-term debts of US$2.95 billion
and is battling to compete against STC and Mobily.
Following an initial appointment of Citigroup to
examine a potential sale in two Gulf countries in
early 2015, Zain CEO Scott Gegenheimer confirmed
www.towerxchange.com | TowerXchange Issue 16 |

XX

Source: TowerXchange

Saudi Arabia

Kuwait

Population

31.8mn

3.9mn

GDP/ Capita

US$54.6k

US$72.2k

Connections

57.2mn

7.7mn

SIM penetration

180%

195%

Population coverage

98%

100%

30,600

5,100

30,600 (100-%)

1,600 (29%)

3 (+ multiple MVNOs)

Est. tower count


Towers coming to market
MNOs

Market share

20%
34%

the company was opening a process for a sale of both


their Saudi and Kuwait towers later in the year. In
March 2016 year it was announced that they were
in the process of narrowing down potential bidders
although no public announcements have yet been
made.
In Kuwait, 1,600 towers are up for grabs; in Saudi
Arabia some reports suggest the company to be
selling 5,000 towers, whilst others put the number at
7,000. Zain had originally looked at including South
XX | TowerXchange Issue 16 | www.towerxchange.com

Mobily saw its shares fall by more than 50%


following the discovery of accounting irregularities
over a year ago,. Following the news, Mobily
appointed Ahmad Farroukh (former CEO of MTN
South Africa) as its new CEO and Kais Ben Hamida
(former CFO of Egypts MobiNil, who recently sold
2,000 of their towers to Eaton Towers) as its CFO.
TAP Advisors, with a long standing history of running
tower transactions, are reportedly leading the Mobily
process which is thought to encompass 9,600 towers

Market share
STC

45%

Middle East. Etisalat has monetised their towers in


Nigeria, selling a total of 2,691 towers in two tranches
to IHS in 2014.

18%
44%

Mobily
Zain

Zain

38%

Ooredoo
Viva

Sudan towers in the process but given the political


instability in the country it seemed unlikely they
would attract a bidder and the process appears to
have been dropped.
Mobily
2
Market position:
Towers for sale: 9,600 in Saudi Arabia
Mobily is 27% owned by the UAEs Etisalat which
has a footprint in 15 countries across Africa and the

Saudi Tower Company


1
Market position:
Towers for sale: 16,400 in Saudi Arabia
Saudi Tower Company (STC) is the leading operator
within the Kingdom of Saudi Arabia, and has a
footprint in Kuwait, Lebanon, Jordan, Bahrain and
South Africa as well interests in India, Malaysia
and Turkey. As well as boasting 45% of the market
share in Saudi, STC owns over half of the countrys
estimated 30,600 towers.
In June 2011, STC entered into discussions with
number two operator, Mobily regarding the creation
of a captive tower company, but an agreement was
not reached. More recently a new round of rumors
circulated suggesting STC was advocating a joint
venture towerco between the KSA MNOs. It is now
rumoured that STC is once again considering the
monetisation of its ~16,400 towers.
www.towerxchange.com | TowerXchange Issue 16 |

69

What will be the potential deal structure?


Most observers feel that a sale and leaseback
structure will be the favoured model although to
what extent the operators would look to retain
equity is unknown. A further structure has been
thrown into the mix recently, with Saudi financial
news reporting in mid-March that Mobily and
STC have entered into talks to examine the option
of establishing a joint venture through which to
manage their towers. When questioned on the
matter, Zain, who are believed to be further along
in the sale process also revealed that they were
keeping their options open, with CEO Hassan
Kabbani stating that the company was also assessing
both strategies.

Spotlight on the potential buyers


The upcoming transactions are likely to have no
shortage of suitors. We take a run though who the
mooted leading contenders for the portfolios are.
Digital Bridge
Formed in 2013 through a partnership between
serial tower entrepreneurs Ben Jenkins and Mark
Ganzi, who sold Global Tower Partners to American
Tower. Digital Bridge have investments in towercos
Vertical Bridge, Andean Tower Partners and Mexico
Tower Partners as well as small cell player ExteNet
systems. The company has recently appointed Phil
Cooper as head of EMEA and are rumoured to be
one of the leading players in both the Zain and
Mobily processes. Their bid reportedly has the
backing of state owned Saudi Aramco and emerging
markets focused buy out firm Abraaj Group.
70 | TowerXchange Issue 16 | www.towerxchange.com

Providence Equity Partners


Providence Equity are a global private equity firm
specialising in media, communication, education and
information industries. They already have money
at work in towercos Indus Towers (India), Grupo
Torresur (Brazil) and KIN (Indonesia). Their bid
for the Mobily and Zain assets is believed to have
the backing of an as yet, unnamed Middle Eastern
investor.
IHS
IHS is Africas leading towerco with a portfolio
of over 23,000 sites across Nigeria, Cote dIvoire,
Cameroon and Zambia and have completed nine
transactions of scale across the continent. Their
portfolio is heavily biased towards West Africa,
and more specifically Nigeria which is where two
thirds of their towers are located. With the company
thought to be gearing up for an IPO, the acquisition
of assets in Saudi Arabia and/or Kuwait will provide
a more balanced portfolio which is likely to increase
its attractiveness to investors in a prospective IPO.
American Tower
As the worlds second largest tower company (behind
China Tower Company) and with a truly global
footprint, it is highly likely that American Tower
would be considering an acquisition in a new region
where there are no major towercos in the market.
Whilst the company likes to keep its cards close to
its chest, and has very clear investment criteria we
envisage they would have looked at the portfolios
closely.
Towershare
Towershare run Pakistans largest towerco with

a portfolio of 800 sites. Having re-located their


headquarters to Dubai, their focus now turns to the
Middle East, with an appetite to enter the market
rapidly. Raising US$100mn in private equity from
Cyan Capital and other regional private equity
investors, they are putting the capital in place to
participate in current processes.
TASC Towers
As one of the few towercos currently operating
in the MENA region, TASC Towers with their
Jordanian portfolio look a likely candidate to
participate in the Saudi and Kuwait processes
with Zain also having a presence in the Jordanian
market.
Quippo International
The ownership team behind Viom Networks
in India are now seeking new international
opportunities following their successful exit and
sale to American Tower. They are believed to have
an appetite for opportunities in Russia, although
are not believed to be among the shortlisted
bidders for the VimpelCom transaction, and are
also highly likely to have an appetite for the towers
in Saudi and Kuwait.
Local investors
Whilst lacking the expertise of the international
towercos, local family funds are known to have
expressed an interest in the upcoming transactions,
with Al Rajhi Group and Al Zamil Group amongst
the names reported. With both Digital Bridge and
Providence Equity known to have the backing of
local investors further investors may look at a
partnership
www.towerxchange.com | TowerXchange Issue 16 |

XX

Helios Towers Africas plans


for the 950 towers to be acquired
from Airtel DRC
An interview with HTAs Group Director of Sales and Marketing, Alex Leigh
On 5th May, Airtel announced the sale of 950 towers in the DRC
to Helios Towers Africa, signifying the operators eleventh tower
transaction and second with Helios. The deal further strengthens
Helios Towers Africas position in the DRC, where they are the sole
towerco in what is known to be a very operationally challenging
market. TowerXchange speak to Helios Towers Africas Group Director
of Sales and Marketing, Alex Leigh to discuss the transaction and why
the DRC is such an exciting market.

Alex Leigh, Group Director of Sales


and Marketing, Helios Towers Africa

Keywords: Acquisition, Africa, Africa & ME News, Airtel, Buildto-Suit, Change Management, Co-locations, Country Risk, DRC,
Energy, Energy Efficiency, Greenfield, Helios Towers Africa, HTA,
Infrastructure Sharing, Market Forecasts, Masts & Towers, MNOs,
Monitoring & Management, Network Rollout, News, Off-Grid,
Operational Excellence, Opex Reduction, Sale & Leaseback, Skilled
Workforces, SLA, Tower Count, Towercos, Unreliable Grid, Uptime

Read this article to learn:


< Why the transaction and the DRC are of such importance to Helios Towers Africa
< Factors behind the the companys strong operational performance in such a challenging market
< What plans HTA has for the upgrade of the Airtel sites
< What strengths HTA brings to the market

XX | TowerXchange Issue 16 | www.towerxchange.com

On 5th May 2016, Bharti Airtel International agreed


the sale of 950 towers in the DRC (including sites
under construction) to Helios Towers Africa. The
deal marks the eleventh country in which Airtel has
divested their towers with transactions closed in
Nigeria (with American Tower), Rwanda and Zambia
(with IHS), Ghana, Burkina Faso and Kenya (with
Eaton Towers) and Congo Brazzaville (with Helios
Towers Africa) and deals announced in Niger (with
Eaton Towers) and Tanzania (with American Tower).
Helios Towers Africa, with a portfolio of over 6,500
towers (pro rata for the closure of the Airtel DRC
transaction) has a presence in four countries;
Tanzania (where American Tower have recently
entered as competitors), Ghana (with both American
Tower and Eaton Towers present) and Congo
Brazzaville and the DRC (where they are the sole
tower company operating). The transaction is
Helios second major acquisition in the DRC, having
acquired 729 towers from Tigo/Millicom back in
2010 and is the companys second deal with Airtel,
having previously acquired 390 towers in Congo
Brazzaville.
TowerXchange: Congratulations on the
announcement of the deal with Airtel in the DRC,
why is the transaction of such great importance
to the company?
Alex Leigh, Group Director of Sales and Marketing,
Helios Towers Africa: We already have a strong
presence in the market with the towers that we
have bought, reactivated or built and we see huge
potential for growth in the DRC. There is a lot of
www.towerxchange.com | TowerXchange Issue 16 |

71

foreign investment going into the country, including


the construction of a new multi-lane highway and a
new airport terminal in Kinshasa. As the city grows,
the requirements for mobile and data coverage are
going to grow. Dependent on which sources you
read, somewhere between 15 and 20 million new
mobile users will be coming online in the next five
years, and there is already an infrastructure gap in
the country.
We see our key customers having a strong
willingness to invest in the DRC to meet this demand.
As well as co-locating equipment on existing towers
we have also built new greenfield towers for most
operators in the country. Plus, with spectrum being
scarce in the market, there is a requirement for
lots of repeating infrastructure to meet demand. In
summary, it is a very exciting time to be in the DRC.
TowerXchange: The DRC is known to be a
particularly challenging market to work in from
an operational point of view, however Helios
subsidiary in the country has been performing
highly. What can you tell us about the companys
success on this front?
Alex Leigh, Group Director of Sales and Marketing,
Helios Towers Africa: We have had strong
performance across the board in all our markets and
have implemented some key changes which have
driven this. We are working to define processes and
continuously improve them, in Africa we will always
encounter challenges but it is how we learn from
such occurrences and put in place systems to avoid
future failures.
72 | TowerXchange Issue 16 | www.towerxchange.com

We have a new management team in place, many


of whom are six sigma black belts hailing from the
power industry. These black belts are training local
talent to become green belts, developing skills and
competencies on the ground. Management and
training of partners as well as staff is also critical
in ensuring effective operations. Many companies
adopt a practice of putting in place service level
agreements and then penalising partners when
they under deliver - rather than helping them to
better deliver. Weve brought our maintenance
contractors in a lot closer to the business and
embedded them with the zonal managers in each
country.
A big focus has been on improving emergency
power; how should you put in generators, how can
you minimise failures and what lessons can you
take from failures? We have seen a reduction in
fuel outages at many sites from tens to zeros; even
at our worst performing sites we have managed to
get fuel outages down to zero - using monitoring
and data analytics to make informed decisions and
drive continuous improvement.
TowerXchange: What plans does Helios have in
place to upgrade the 950 towers acquired from
Airtel?
Alex Leigh, Group Director of Sales and Marketing,
Helios Towers Africa: We very much adopted
a front loaded sales and operational planning
approach in the acquisition of towers and have
already identified key projects that need to be
completed to improve the sites.

Whilst the first important step of the transaction


is the release of capital to Airtel, the second step
is to be quickly delivering quality of service
improvement through operational improvements
to the towers. We aim to have all the upgrade work
completed within a 12-month timeframe and work
will commence immediately.
In parallel to the upgrade work that has been done
to deliver operational improvements to Airtel, our
focus is on getting additional tenants on the towers,
with a subsequent focus being on the rationalisation
of duplicate networks.
TowerXchange: Why is Helios Towers ideally
positioned to better manage Airtels network of
towers?
Alex Leigh, Group Director of Sales and Marketing,
Helios Towers Africa: As well as having a strong
presence in the DRC already, with good relationships
in place with local suppliers and contractors we also
bring with us six years of working in the African
continent. In this time, we have obtained the battle
scars which enable us to put in place processes to
avoid downtime on sites. Added to this, our new
CEO, Kash Pandya as well as other members of our
management team, bring a wealth of experience
from the power industry which is hugely important
in a market such as the DRC where there is limited
grid connectivity. In addition to our operational
strengths, we also bring with us a strong balance
sheet which underpins the company and gives
operators the level of confidence they need in
trusting their networks to us
www.towerxchange.com | TowerXchange Issue 16 |

XX

19-20 October, Sandton Convention Centre, Johannesburg

Meetup Africa 2016


The 4th annual retreat for250 leaders of the African telecom tower community

To discuss your participation, contact Annabelle on +44 7423 512588 or email amayhew@towerxchange.com
Diamond
sponsors:

Silver Sponsors:

Bronze Sponsors:

TowerXchange Meetup Africa draft agenda


Sandton Convention Centre, Johannesburg | 19-20 October 2016
Day One | Wednesday 19 October

Day Two | Thursday 20 October

08:00 Coffee and registration

08:30 Morning coffee

09:00 TowerXchanges analysis of the African &


Middle Eastern tower industry

09:00 Keynote panel: Reducing network TCO - what


are the other pieces of the puzzle?

10:00 Keynote panel: Consolidation of Sub-Saharan


Africas towers

10:00 Strategic partners panel


10:20 Networking refreshment break

10:40 Strategic partners panel

10:50 Finance and risk management

11:00 Networking refreshment break

11:30 Roundtable session III

11:30 Roundtable session I


12:30 Networking lunch break
13:50 An emerging market in the MENA region

12:30 Networking lunch


13:40 Roundtable session IV
14:40 Networking refreshment break
15:10 Strategic partners panel: Energy

14:30 Roundtable session II


15:30 Networking refreshment break
16:00 Achieving operational excellence
17:00 Strategic partners panel
17:20 End of day one followed by drinks reception
19:00 TowerXchange Meetup Africa party and
dinner

74 | TowerXchange Issue 16 | www.towerxchange.com

Event at a glance

15:30 Solving the energy equation: new business


models and solutions
16:30 End of Meetup

< 4 years of welcoming the whos who of the African


tower industry
< SOLD OUT every year!
< New expanded exhibition with 60+ stands
< Increased operational focus and delegation
To enquire about panel opportunities or hosting a
roundtable please contact Laura Dinnewell, Head of
TowerXchange Africa: ldinnewell@towerxchange.com

Does your company provide products and


services to the African tower industry?
Now in its fourth year, the TowerXchange Meetup
Africa will gather an audience of 300+ tower
industry leaders. Leading turnkey infrastructure
service providers, tower manufacturers, RMS and
site management platform developers and energy
equipment providers have selected the TowerXchange
Meetup Africa as their preferred platform to showcase
their solutions and expertise. and expertise. If youd
like to find out more and request a bespoke proposal,
please contact Annabelle on +44 7423 512588 or email
amayhew@towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange Meetup Africa 2016 | Roundtable sessions


Regional focus roundtables:

Operational best practice roundtables:

< DRC

< Egypt

< Burkina Faso & Niger

< Optimising maintenance capex

< Mozambique

< Cameroon

< Saudi Arabia

< Operational best practices for the achievement of SLAs

< Algeria

< Cote dIvoire

< Kuwait

< Accelerating construction and build-to-suit rollout

< Nigeria

< Rwanda & Zambia

< North Africa

< Best practices from Asia

< Tanzania

< Uganda

< Angola

< Streamlining site acquisition, upgrading and integration

< Ghana

< Kenya

< Subcontractor performance management

< Congo Brazzaville

< South Africa

< Negotiation and management of lease agreements


< Managing and improving community relations

Strategic and financial roundtables:

< Excellence in procurement


< What is the low hanging fruit to improve TCO of power systems?

< What resources and capabilities can be centralised and shared by


multinational towercos?
< Can the ESCO business model work?
< How to manage active infrastructure sharing when towercos own a
significant proportion of passive infrastructure
< Microcells, DAS and IBS in Africa
< Reducing opex by leveraging synergies between passive and active network
management
< Integrating independent network providers (towercos and fibrecos)
< Refinancing debt
< Middle market towercos: Survival, growth and exit strategies
< Optimising solutions for urban areas
< How to build towers with maximum future sale value
< How to mitigate forex exposure
XX | TowerXchange Issue 16 | www.towerxchange.com

More roundtable topics and leaders to be announced shortly. If you


have a suggestion for a roundtable, please contact me at:
ldinnewell@towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

75

TowerXchanges analysis of the


independent tower market in Asia

(now Axicom) and its 1,772 towers is finalising the


restructuring and integration of the business. This
was the first major tower transaction to take place
in Australia for some time, but TowerXchange is
actively tracking more than one towerco with an
appetite to enter this market. Broadcast Australia
also operates a portfolio of 620 towers, some of
which are leased out to MNOs. There are a number
of smaller towercos in Australia which could
become acquisition targets in a rollup play.

Selected Asian tower market size comparisons, Q1 2016

New
Zealand
4,000

Afghanistan Myanmar Cambodia


Nepal 5,897
9,000
7,620
6,000

Malaysia
22,000

South
Korea
30,000

Laos Sri Lanka Australia


7,374 7,000
Philippines Bangladesh
9,000
Pakistan
21,000
27,700
28,000

Vietnam
55,000

Indonesia
76,739

Japan
220,000

India
453,500

China
1,180,000

Thailand
52,483

Bangladesh: edotco operates a network of 6,000


towers transferred from Axiatas Bangladeshi opco
Robi. The edotco portfolio is maturing fast with 11
different customers including six MNOs.
Bangalinks ~6,000 towers are believed to be
coming to market as part of VimpelComs passive
infrastructure monetisation process.

Source: TowerXchange

TowerXchange estimate that there are 1,966,663


towers in Asia and Oceania, making the region by
far the largest and fastest growing tower market
in the world. Towercos own 1,582,348, or 80.5%, of
Asias towers, but that statistic masks considerable
regional variation between virgin tower markets
with no towerco activity, such as Japan and the
Philippines, and mature tower markets like India
where towercos own 308,855 of 453,500 towers
(68%, which will rise to ~82% when BSNLs
towerco is formally carved out).
Afghanistan: There are five licensed 3G MNOs in
Afghanistan; Etisalat, MTN, Roshan, Aftel and AWCC.
76 | TowerXchange Issue 16 | www.towerxchange.com

Security obviously remains a key issue for local


towerco Frontier Tower Solutions, who have built or
manage around 1,200 towers for AWCC, while there
were rumors that MTN and Etisalat approached IHS
about operating a shared towerco in Afghanistan,
but the deal fell outside IHSs investors remit. There
are over 20mn subscribers and over 90% population
coverage in Afghanistan. The local MCIT shares
annual tower count data as seen in figure two.

Australia: TowerXchange understands there are
around 9,000 telecom towers in Australia, 74% of
which remain operator-captive. The Macquarie-led
consortium that acquired Crown Castle Australia

There are around 27,700 towers in Bangladesh,


with around 1,000 new towers going up each year.
Bharti Airtel and the Axiata Group have signed an
agreement to merge their respective operations
in BangladeshAirtel Bangladesh Ltd and Robi
Axiata Ltdto create the second largest telco.
The proposed transaction is subject to conditions
precedent including receiving applicable
approvals from relevant authorities and is
expected to complete in the first half of 2016. The
merger is likely to see Airtels Bangladesh towers
managed by edotco in the near future.
While the BTRC advocates infrastructure sharing,
www.towerxchange.com | TowerXchange Issue 16 |

XX

a proposed change of law that would prohibit


licensed MNOs from operating tower sharing
companies would restrict options for Axiataowned edotco.

Afghanistan tower counts, 2002-15

Source: MCIT, Afghanistan

Afghan calendar year

Western calendar year

Tower count

1393

2014-15

5897

Cambodia: With a crowded operator market of


seven operators serving a population of 15.5mn,
and a regulator that supports infrastructure
sharing, there is continued potential for the 9,000
site tower market in Cambodia to grow.

1392

2013-14

5383

1391

2012-13

5005

1390

2011-12

4350

1389

2010-11

3977

1388

2009-10

3184

There has been an influx of Chinese operators and


vendors prepared to invest heavily in this market.
Challenges still remain including 20% of sites
being off-grid and the risk of landmines in the
more remote areas.

1387

2008-9

2736

1386

2007-8

2091

1385

2006-7

1067

1384

2005-6

567

1383

2004-5

311

1382

2003-4

89

1381

2002-3

edotco operates a portfolio of 1,700 towers in


Cambodia. Local tower builder Cam Towerlink is
also in the process of setting up operations as a
towerco, and has secured its first contract to build
towers around the Angkor Wat temple UNESCO
World Heritage complex. Some operators in this
market, such as Mfone, have fallen victim to the
intense competition and price wars leaving some
infrastructure assets abandoned.
China: China Tower Company (CTC) is completing
the ingest of over 1mn towers from China Mobile,
China Unicom and China Telecom. Equity is
divided between Chinas three MNOs with China
Mobile holding 38%, China Unicom holding 28.1%,
China Telecom holding 27.9%, with 6% acquired
by China Reform Corporation, a State fund with
a particular focus on reforming state-owned
XX | TowerXchange Issue 16 | www.towerxchange.com

Estimated tower count for Bangladesh


4,100
7,800

Grameenphone
Banglalink

3,800

Axiata / edotco
Airtel
Teletalk, CityCell and non-traditional MNOS

6,000

6,000

Sources: TowerXchange research, edotco, Hardiman


Telecommunications

www.towerxchange.com | TowerXchange Issue 16 |

77

Tower deals in Asia 2008-2016 (excluding carve-outs)

Source: TowerXchange

Year

Country

Seller

Buyer

Tower count

Deal value US$

Cost per tower US$

Deal structure

2016

Indonesia

XL Axiata

Protelindo

2,500

$250,000,000

$100,000

SLB

2016

India

Viom Networks

American Tower

42,200

$1,180,000,000

$76,540

Acquiring 51% controlling stake

2015

Myanmar

Digicel MTC

edotco

1,250

$221,000,000

$176,800

Acquiring 75% controlling stake

2015

India

KEC International

American Tower

381

$13,000,000

$34,121

Company acquisition

2014

Indonesia

PT Telkom

Tower Bersama

4000

$904,000,000

$226,000

Equity swap

2014

Malaysia

KJS

YTL Power Intl

309

$15,000,000

$48,544

Company acquisition

2014

Indonesia

XL Axiata

STP

3500

$460,000,000

$131,429

SLB

2013

Indonesia

Hutchison

STP

300

$68,000,000

$226,667

SLB

2012

Indonesia

Hutchison

Protelindo

503

SLB

2012

Indonesia

PT Central Investindo

Protelindo

152

Company acquisition

2012

Indonesia

Indosat

Tower Bersama

2500

2011

Indonesia

Infratel

Tower Bersama

595

2010

India

Essar Telecom Infrastructure

American Tower

4450

$432,000,000

$97,079

SLB

2010

Indonesia

Hutchison

Protelindo

1482

$165,900,000

$111,943

SLB

2010

India

Aircel

GTL Infrastructure

17500

$1,800,000,000

$102,857

SLB

2009

India

Viom Networks

QTIL

18000

$2,407,000,000

$133,722

Company acquisition

2009

India

Transcend Infrastructure

American Tower

327

$23,000,000

$70,336

Company acquisition

2009

India

XCEL Telecom

American Tower

1730

$170,000,000

$98,266

Company acquisition

2008

Indonesia

Bakrie

STP

543

$34,000,000

$62,615

SLB

2008

Indonesia

Hutchison

Protelindo

3692

$500,000,000

$135,428

SLB

Totals / average

101,914

$8,257,900,000

$102,399

78 | TowerXchange Issue 16 | www.towerxchange.com

$519,000,000

$207,600

SLB
Company acquisition

www.towerxchange.com | TowerXchange Issue 16 |

XX

Estimated breakdown of towers owned by Indian towercos


Indus Towers

119,881

Bharti Infratel

38,458

43,379

Reliance Infratel
GTL Infrastructure

Ascend

50,350 42% equity stake in Indus Towers


57,561

American Tower

Tower Vision

associated rollout of 4G. Tower transaction deal


flow continues to pick up as towers worth an
estimated US$7bn are either under discussion for
sale, or moving between announcement and close.

29,432
8,400
4,843
20,000

40,000

60,000

80,000

100,000

120,000

State owned MNOs Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam retain 70,000 towers

enterprises. The MNOs have now confirmed the


value of the transferred assets, allowing them to
finalise the remaining elements of the transaction.
The consideration amount for the assets were
CNY102.74 billion for China Mobile, CNY54.66
billion for China Unicom and China Telecom,
CNY30.13 billion.
Whilst CTC gets up to capacity, a fragmented
but fast growing segment of independent tower
companies are bidding for and securing build
contracts scooping around 10% of the ~150,000
new towers constructed in 2015. TowerXchange
forecast that Chinas independent towercos could
own as many as 100,000 Chinese towers by the end
of 2017.
Reports have emerged from China that CTC has
XX | TowerXchange Issue 16 | www.towerxchange.com

discounted their lease rates by 10-20% under


pressure from their parent MNOs. Meanwhile
China Unicom and China Telecom may be nearing
an active infrastructure sharing agreement which
could lower the glass ceiling on tenancy ratios in
China to two.
For more insights into the Chinese market, see the
China tower market FAQ later this issue.
India: 68% of Indias 453,350 towers are owned
and operated by towercos, making the Indian
tower market second only to the U.S. in terms of
longevity, and second only to China in terms of
scale. The Indian tower market was adversely
affected by the restructuring of MNO licenses
in 2012, but has recovered and been boosted
by ongoing waves of spectrum auctions and the

American Tower completed its acquisition of


a 51% controlling ownership interest in Viom
Networks in April 2016. The remaining 49%
ownership stake will be controlled by the Tata
Group and several private equity firms. American
Tower paid INR 76 billion (approximately US$1.14
bn) in cash and assumed around INR 51 billion
of INR-denominated debt. Viom Networks
operates 42,200 towers, supporting nearly 100,000
tenancies, while American Tower already owned
15,361 towers in the country, with a tenancy ratio
approaching two, prior to the acquisition of Vioms
towers.
The planned sale of Indian Reliance
Communications (RCOMs) tower assets has
reportedly been delayed by a disagreement
over the valuation of the sites. TPG Capital and
Tillman Global Holdings (TGH) submitted a nonbinding offer for the towers in December last year,
reportedly offering INR215 billion (US$3.2 billion)
for the sites, which are currently held through
RCOM subsidiary Reliance Infratel. Apparently
many of the sites lack structural capacity for
additional tenants, leading to TPG being reluctant
to underwrite the initial offer, forcing TGH to
begin looking for another partner with which to
purchase the towers.
Bharti Airtel has been rumoured to be considering
www.towerxchange.com | TowerXchange Issue 16 |

79

Estimated tower count for Indonesia


14,737

11,389

7,770
2,185

5,500

8,500

1,000
1,000
450
208
1,000

18,000
4,000

selling 5% of their 71.7% equity stake in Bharti


Infratel to raise capital for spectrum and to pay
down debts. Bharti Infratel reported an increase
in tower count of almost 3,000 towers over Q1
2016, including their stake in Indus Towers,
together with an uptick in tenancy ratios from 2.12
to 2.20. Bharti Infratels market cap was then Rs
724bn, down from Rs 729bn the previous quarter.
EBITDA for FY15-16 stood at Rs 5,403 Crore, an 8%
YOY increase.
BSNL has received in-principle approval to carve
out its estimated 65,000 towers into a separate
towerco which could be valued up to US$3bn. A
government working group has been formed to
develop a capital and organisational structure
for the new entity. Analysts are excited by the
potential of these towers coming to market as
80 | TowerXchange Issue 16 | www.towerxchange.com

Towerco-owned

Source: TowerXchange

Mitratel
Tower Bersama
Protelindo
STP
IBS Tower
KIN
Persada Sokka Tama
Retower Asia
Balitowers
Others
Operator-captive
Telkom + Telkomsel
XL
Indosat
many are in prime locations with considerable
tenancy rate growth potential, having not been
proactively marketed before. BSNL has leased
out 6,505 of its towers to other telecom operators,
suggesting a tenancy ratio around 1.1. Out of
the 6,505 spaces that it has rented out, Bharti
Airtel accounted for 2,251 slots. It was followed
by Reliance Jio with 1,440 slots and Idea and
Vodafone with just above 900 towers each.
GTL Infrastructure, with just under 30,000 towers,
Tower Vision with 8,400 and Ascend Telecom with
4,843 complete the Indian towerco market. GTL
Infrastructure losses narrowed to Rs 92.75 crore
in their Q1 2016 update. Ascend Telecom investor
New Silk Road has announced that it will return
US$500mn to shareholders during 2016, leading to
speculation that it plans to exit the Indian towerco.

Indonesia: Indonesia remains one of the most


mature tower markets in the world, with solid
tenancy ratios, excellent organic growth, and
strong market caps boasted by three major
towercos; Protelindo (14,737 towers), Tower
Bersama (11,389) and STP (7,770). IBS Tower, KIN,
Retower, Persada Sokka Tama and Balitowers
all also have some scale in Indonesia. There
have been rumours that IBS Towers, which has
some ownership links with its number one
tenant Smartfren, could be coming to market.
TowerXchange has upwardly revised our
estimate of the total number of towers owned by
Indonesias 30 smaller towercos to 1,000.
The Indonesian market is seeing some large
investments in telecoms infrastructure in
the pipeline. Protelindos parent company
Sarana Menara Nusantara (SMN) is looking to
raise IDR4.18 trillion (US$316mn) through a
rights shares offering to fund expansion and
to strengthen capital structure. Protelindo will
use the funds to build new towers and invest in
supporting services companies; a small portion
will be used to repay Protelindos debts. At the
same time, Tower Bersama Infrastructure Group
(TBIG) is preparing up to Rp 2 trillion (US$145.72
mn) of capex this year to build between 1,500 and
2,000 new towers before year-end.
XL Axiata has agreed to sell 2,500
telecommunication towers to Protelindo for 3.56
trillion rupiah (US$250mn) in cash. XL has signed
a deal to leaseback most of the towers for ten
years.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Estimated tower count for Laos

(au). DOCOMO has already started rolling out LTE-A.


Japans three leading MNOs are believed to have
each added up to 30,000 microcells and small cells
as infill sites. TowerXchange understand several
tower companies are trying to establish themselves
in the Japanese market, but that their penetration
remains negligible.

423
1,950

1,100

LTC
Unitel
ETL
Beeline (VimpelCom)

4,000
Source: TowerXchange

The future of Telkom-owned Mitratel and


their 5,500 towers remains uncertain with
the cancellation of the proposed share-swap
acquisition of Mitratel by Tower Bersama at the
behest of the commissioner. Telkom still has a
further 18,000 towers on their balance sheet,
of which 13,000 could potentially be sold at an
unspecified point in the future.
Protelindo and Tower Bersama are holding firm
against downward pressure on lease rates, which
are believed to average around US$1,150 in
Indonesia.
Meanwhile, the new battleground for competition
between Indonesias towercos seems to be
microcells and fibre, as illustrated by Protelindos
acquisition of iForte. STP also has substantial
fibre and microcell portfolios after its acquisition
XX | TowerXchange Issue 16 | www.towerxchange.com

of fibre company Bit, while Balitowers have also


added substantial stock of smaller sites to their
portfolio.
Japan: Japan is one of the most sophisticated
mobile markets in the world. Yet towers are still
seen as a source of competitive differentiation,
which perhaps explains why initial interest in
carving out a towerco a few years ago seems to have
tailed off, and why tower count data is so hard to
find readers should consider our estimate a very
rough guide. Japan is famous for having the fewest
number of subscribers per tower in the world
reportedly around 500 suggesting a staggering
tower count of around 220,000 for a nation of
127mn people and a landmass of just 378,000 sq km.
LTE was launched as long ago as 2011 by former
State owned monopoly NTT DOCOMO and in 2012
by the nations other MNOs, SoftBank and KDDI

Laos: The 7,473 towers in Laos all remain


operator-captive, but there are possible
opportunities to acquire towers from all but the
market leading MNO: Unitel has 4,000 towers,
and is a 51-49% joint venture between the State
and Viettel. The State also owns 51% of number
two operator LTC, whose co-investor Shenington
Investments may seek an exit. 100% State owned
MNO ETL is heavily indebted and needs cash for
4G rollout, while VimpelCom has long sought to
exit Beeline Laos, whose towers could potentially
be monetised by an acquirer.
Malaysia: Towercos own 31% of Malaysias towers,
led by edotcos 3,600 towers carved out of Celcom
/ Axiata. A further 3,200 towers are owned by 14
different State-backed and other independent
towercos.
There are around 22,000 towers now in Malaysia,
representing almost exactly 2,000 mobile
subscribers per tower. edotco aims to increase
their Malaysian tower count by around 1,000 in
2016, although many new sites will be special
structures such as lamp posts. A new ground
based tower in Malaysia costs around RM300,000
(US$69,000).
www.towerxchange.com | TowerXchange Issue 16 |

81

Estimated tower count for Malaysia


edotco

3,600

DiGi

3,400

Maxis

3,800

Telekom Malaysia

1,000
3,200

State backed towercos

5,000

YTL
2,000

Unaccounted for

1,000

2,000

3,000

4,000

5,000

Source: TowerXchange

Estimated state of Myanmar rollout, Q4 2015


3,000
0

As many as 8,000 new towers could be required


by the rollout of LTE, of which around 1,000 new
towers went up in 2015, with Celcom building
through edotco and Maxis and DiGi building
their own although DiGi has since signed a
collaboration agreement with edotco which
includes co-location and new BTS sites. The
State-backed towercos also continued to expand,
including through over 2,000 rural sites supported
by Malaysias Universal Service Provision Fund.
It has been estimated that an additional 8,000
structures may be needed in Malaysia for 4G,
although much of that demand will be met by
microcells, lamp-poles, DAS and IBS.
Myanmar: The Myanmar tower count had reached
7,470 by Q4 2015, approaching the halfway point
in the 17,300 tower rollout which is the total the
GSMA forecast the country would require to meet
Telenor and Ooredoos license obligations.

Built
2,500

Contracted, not yet built


2,900

2,000

1,500

1,827
2,400

1,000

1,650
1,100

1,500

1,250

1,220
900

KPT / KDDI
Summit

IGT for Telenor


and Oordeoo

Apollo
for Telenor

PAMEL for
Ooredoo

MTC for Ooredoo


now edotco

OCK for
Telenor

700

503

EFT for Telenor

MIG for
Ooredoo

Source: TowerXchange
82 | TowerXchange Issue 16 | www.towerxchange.com

Vietnamese military-backed MNO Viettel has


been granted the right to negotiate with a
local consortium. If the tie-up is approved, the
company will join a local group of 11 public
Myanmar firms and a subsidiary of militaryrun Myanmar Economic Corporation, Star High
Public Company, to form a joint venture that
should receive the markets fourth licence for
nationwide services. Star High Public Company
offers access to 1,000 towers and more than 13,000
kilometres of fibre, among other telecoms assets,
making the business case for the fourth operator
viable. If negotiations are successful, Viettel will
pay 49% of a US$300mn licence fee, equivalent to
www.towerxchange.com | TowerXchange Issue 16 |

XX

Estimated tower ownership in Thailand


5,000

800

its prospective holding in the company, and the


operator has promised to invest US$1.5bn into the
country.

1,500
Proposed DTAC-CAT towerco

11,000

DTAC towers built outside concession


AIS disputed towers built under CAT concession

12,000

AIS disputed towers built under TOT concession


AIS towers built outside concession

12,183

DIF (formerly TRUEIF)


True disputed towers built under CAT concession

10,000
Source: AEC Advisory and TowerXchange

Towerco penetration in Asia now and forecast for Q117


100

Current penetration
Forecast, Q1 2017

80
76%

85%

68%
63%

60
100%

40
34%

34%
20%

20%
26%

20%

19%

24%

18%

2%

n
ta

1%

is

si

a
Pa
k

Ru
s

et

na

a
Vi

di
bo

Ca

de

sh

ng
la

ai

la
n
Ba

ia

XX | TowerXchange Issue 16 | www.towerxchange.com

Th

al
tr

Au
s

an

ka

a
iL

Sr

es
on

al
ay
si

ia

a
di
In
d

In

m
ya
n

Ch

in

ar

6%

30%

an

31%

al

31%

20

Ze

34%
61%

CI

68%

79%

58%

49%

N
ew

69%

edotco has closed a deal to acquire a 75%


controlling stake in Digicel Myanmar Tower
Company (MTC). Yoma Strategic Holdings, part
of Burmese finance and real estate tycoon Serge
Puns empire, retained their minority stake. The
transaction values MTC at an enterprise value of
US$221mn. edotcos acquisition sets a benchmark
price per tower of US$176,800 in Myanmar, which
may be difficult to maintain given the high quality
of locations in MTCs portfolio and the lease up
rate approaching two. edotco has since stated its
intent to invest US$200mn into Myanmar over the
next five years, and is planning to construct 5,000
towers in the country in the next three years.
Phase three of the Myanmar tower rollout has
seen a re-alignment of towerco-MNO partnerships,
with IGT now building for Ooredoo when
we last checked in they had lit 1,500 of 2,900
contracted towers, making IGT Myanmars leading
towerco. IGT recently secured a syndicated loan
of US$122mn, forming part of the companys
US$230mn investment plan to deploy more than
2,000 towers in Myanmar. Apollo will be number
two, with around 1,100 of 1,827 contracted towers
for Telenor built by Q3 2015.
Malaysian managed service provider OCK has
secured a contract to build 920 towers for Telenor,
marking the companys debut as an independent
towerco. TowerXchange sources suggest OCK
www.towerxchange.com | TowerXchange Issue 16 |

83

Estimated tower count for Vietnam

US$1.365bn. There have been no tower deals in


Nepal to date, but this move by the Axiata Group
will likely pave the way for Axiatas towerco edotco
to enter the market in the near future.

10,000
20,250
4,750

Viettel
MobiFone
VinaPhone
Vietnamobile + GTEL Mobile

11,000

Towercos

9,000
Source: TowerXchange Research

are offering a disruptively discounted lease rate


of US$900pcm, inclusive of power, compared to
prevailing rates in the US$1,200-1,800 range.
The Asian Development Bank (ADB) and the
International Finance Corporation-IFC, a member
of the World Bank Group-are providing a loan
of $150 million each to Ooredoo Myanmar for
the rollout of a mobile telecommunication
network across Myanmar, which will help extend
affordable telecom services across the country,
boosting economic growth and job creation.
The restructuring of the Myanmar tower market
may continue with further towerco consolidation
at least one existing towerco is believed to be
seeking an exit.
84 | TowerXchange Issue 16 | www.towerxchange.com

All the towercos in phase three of the Myanmar


tower rollout are required to provide full service
tower+power, a departure from phases one and
two in which Ooredoo retained ownership of
power assets.
Tenancy ratio growth has been considerably
healthier at Myanmars urban sites than at rural
sites. Ooredoos increasing focus on urban 3G
may exacerbate that situation, although in other
markets Viettel has been strongly predisposed to
connecting rural communities, so their entry may
bring some much needed balance.
Nepal: Axiata Group has closed the acquisition of
a majority stake in Nepalese market leader Ncell
from TeliaSonera, in a deal believed to be worth

New Zealand: Weve heard two credible reports


of prospective towerco activity in New Zealand,
so dont expect this ~4,000 tower, 6mn subscriber
market to be dormant for long. 2degrees (Trilogy)
has around 1,000 of those towers, Vodafone
New Zealand and Spark about half each of the
remainder. LTE is offered by all three MNOs. New
Zealands US$175mn Rural Broadband Initiative
(RBI) has accelerated investment in towers,
targeting coverage in all communities with greater
than 300 inhabitants. Under the RBI Vodafone had
added 104 new towers and upgraded 305 others by
Q2 2015.
Pakistan: An agreement was reached between
VimpelCom (Mobilink), Global Telecom Holdings,
Warid Telecom Pakistan and Bank Alfalah to
merge their Pakistan telecom businesses and
creating a new combined entity with 15,000 towers
serving 45 million customers.
Telenor Pakistan reportedly has raised concerns
over the proposed Mobilink-Warid merger with
the countys Competition Commission, which
is reviewing the deal for regulatory approval.
Mobilink, and Warid Telecom filed a notification
of proposed change in substantial ownership
interest of Warid on 15 December 2015, and
made the request for permission of merger
between Mobilink and Warid before the Pakistan
www.towerxchange.com | TowerXchange Issue 16 |

XX

Telecommunication Authority (PTA). The closure


of the transaction may be contingent upon one or
both parties selling their towers to reduce debt.
With upwards of 50% overlap between Mobilink
and Warids networks (Mobilink has around
10,000 towers, Warid 5,000), the necessity of
decommissioning suggests the same towerco may
have to acquire both portfolios.
Etisalats Ufone are also believed to have
commenced a process to monetise their Pakistani
towers.
We have been unable to confirm speculation that
#2 MNO Telenor may bring their Pakistani towers
to market too, but they have recently reached an
agreement with China Mobile Pakistan (Zong) to
share their fibre-optic network assets.
There is some growth potential in a Pakistani tower
market with 3G only launched in late 2014, with
138mn subscribers and five competitive MNOs, but
there may also be some need for decommissioning
of parallel infrastructure.
Philippines: While the scale of The Philippines
100mn subscribers makes it an interesting market,
the current status of the mobile market as a virtual
duopoly between Globe and Smart (with a rough
estimate of a total of ~21,000 towers) would seem
to preclude the participation of an independent
towerco. Hope was offered by the prospective entry
of SMC as a third MNO, but their proposed joint
venture with Telstra recently collapsed (SMC has
reportedly commenced dialogue with Telenor as
XX | TowerXchange Issue 16 | www.towerxchange.com

an alternate partner). However, Philippine MNOs


seem increasingly inclined to outsourcing towers
to rid themselves of the challenge of securing the
consent of would-be tower neighbors (a NIMBY
mentality still prevails), while taxation of cell sites
is reportedly high and permitting complex.
South Korea: According to GSMA Intelligence,
SIM penetration was at 113% among a population
of 50.4mn in Q4 2015. South Korea boasts one
of the most sophisticated telecommunications
infrastructures in the world, cultivating an
insatiable demand for high speed mobile
broadband among its citizens. Mobile broadband
penetration in South Korea is above 99% and fibre
has been widely deployed. South Korea is a three
operator market featuring SK Telecom, KT and
LG Uplus, while the Ministry of Science, ICT and
Future Planning (MSIP) has announced intention
to license a fourth MNO. South Korea was the first
market in the world to migrate the majority of
users to LTE, with LTE-A rollout now well under
way. TowerXchange are starting to pick up the first
faint signals that towerco activity may be emerging
in South Korea.
Sri Lanka: Dialog has transferred 2,150 towers to
edotco, and Bharti Infratel are 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 is driving need for cell site
densification. There are around 7,000 towers in Sri
Lanka.
Deal activity in the Sri Lankan tower market

may be picking up with Bharti Airtel reportedly


looking into selling its 2,500 towers. Bharti Airtel
has not confirmed the deal, but it would be in line
with their strategy of eliminating less profitable
operations.
Thailand: Thailand has a tower market unlike
any other in the world! Joint venture towercos are
being established as vehicles for the resolution
of long standing BTO (Build-Transfer-Operate)
disputes. Thailands three commercial MNOs were
due to transfer 2G infrastructure back to SOEs
CAT and TOT. The 2G equipment has little value,
but of course the towers do. CAT, which ran the
concessions for the 850 and 1,800 MHz bands, is
reportedly in the final stages of forming a 49-51%
JV towerco with majority stakeholder DTAC, into
which 11,000 disputed towers would be injected.
Negotiations to create a prospective 12,000 tower
JV towerco between AIS and TOT, which ran the
900 MHZ concession, were called off late in 2015.
We reckon there are 47,483 towers in Thailand,
of which 12,183 sit on the balance sheet of DIF,
formerly TRUEGIF, a towerco created by True
Corp and SCB Asset Management and successfully
listed on the Thai stock exchange. DIF has little
debt, a high leverage ceiling, and an appetite
to consolidate more Thai towers - especially if
True reduces their shareholding to increase the
perceived independence of the entity.
A further 10,000 towers were built by AIS and
800 by DTAC outside the concession for 3G usage.
Trues non-concession towers sit on DIFs balance
www.towerxchange.com | TowerXchange Issue 16 |

85

Asia heatmap

sheet It all gets very confusing! Read AEC


Advisorys excellent A guide to the Thai telecom
tower market in TowerXchange for a detailed
understanding.
The important question is: are Thailands telecom
towers investible? The steady leaseup of DIFs
towers is a good sign, as is the recent 2,000 site
infrastructure sharing deal announced between
AIS and DTAC - a culture of infrastructure sharing
is slowly emerging in Thailand. With 4G auctions
imminent, we are cautiously optimistic about the
investibility of Thai towers, as long as investors
have the stomach for politics and dont mind a 49%
FDI limit.

Legend
TowerXchange research has not revealed any infracos or
towercos to date
Towercos or infracos active in the market. No recent
transactions have taken place and none rumoured to take
place soon
Towercos or infracos active in the market. No current
transactions taking place but an attempted tower sale has
taken place in the last 3 years or there are unconfirmed
rumours of a deal in this market.
Towercos or infracos active in the market. Rumours of deals
confirmed in the market.
Towercos or infracos active in the market. Deals of significant
size have taken place in the last 5 years.
Towercos or infracos active in the market. Deals have taken
place in the last year and more imminent deals rumoured

Note: Russia is covered under Europe; we estimate it to have a 5% towerco penetration and we expect it to be a growth market
86 | TowerXchange Issue 16 | www.towerxchange.com

Vietnam: Towers are being built and co-locations


added more quickly in the 55,000 Vietnamese tower
market than in Myanmar! But its a complicated
ecosystem. A fragmented group of around 30 local
towercos own ~10,000 towers. Alcazar Capital and
ASEAN Towers Vietnamese subsidiary Golden
Towers is in the process of rolling up 5,800 towers
by consolidating existing independently owned
towers in Vietnam. Meanwhile the restructuring of
Vietnams Ministry owned #2 and #3 ranked MNOs
MobiFone and VNPT could unlock a decent sized
sale and leaseback opportunity in the mid-term at
the very least, VNPT will be even more incentivised
to co-locate as they had historically relied on
MobiFones network. Even market leaders Viettel
appear to have warmed to the idea of co-location.
4G spectrum in the 2.3 and 2.6 GHz bands, together
with refarmed 900MHz spectrum, is expected to be
auctioned in 2016
www.towerxchange.com | TowerXchange Issue 16 |

XX

Asia News
A roundup of tower news across Asia
China: Towers, cash and equity changes hands

Bangladesh: Airtel and Axiata merge


Bharti Airtel Ltd and Malaysia-based Axiata Group
Berhad have signed an agreement to merge their
respective operations in BangladeshAirtel
Bangladesh Ltd and Robi Axiata Ltdto create the
second largest telco in that country. Post-merger,
the combined entity operating as Robi will serve
approximately 40mn customers. The proposed
transaction is subject to conditions precedent
including receiving applicable approvals from
relevant authorities and is expected to complete in
the first half of 2016.
Axiata will hold a 68.3% controlling stake in
the combined entity, Bharti Airtel 25% and the
remaining 6.7% will be held by Japan-based NTT
DoCoMo, an existing shareholder.
XX | TowerXchange Issue 16 | www.towerxchange.com

China Mobile, China Unicom and China Telecom


have given an update on the transfer of their
tower assets to China Tower Company. The three
companies agreed in October 2015 to hand over
their entire tower portfolios to China Tower in
exchange for shares in the new company and, in
the case of China Unicom and China Mobile, a cash
consideration. The exact number of shares was to
be decided at a later date, but it was agreed that
the shareholding structure after the completion
would be as follows: China Mobile 38.0%, China
Unicom 28.1%, China Telecom 27.9% and China
Reform Corporation 6.0%. The companies have
now confirmed the value of the transferred assets,
allowing them to finalise the remaining elements
of the transaction. The consideration amount for
the assets were CNY102.74 billion for China Mobile,
CNY54.66 billion for China Unicom and China
Telecom, CNY30.13 billion.

American Tower completed its acquisition of a 51%


controlling ownership interest in Viom Networks in
April 2016. The remaining 49% ownership stake will
be controlled by the Tata Group and several private
equity firms. American Tower paid INR 76 billion
(approximately US$1.14 bn) in cash and assumed
around INR 51 billion of INR-denominated debt.
Viom Networks operates 42,200 towers, supporting
nearly 100,000 tenancies, while American Tower
already owned 15,361 towers in the country, with
a tenancy ratio approaching two, prior to the
acquisition of Vioms towers.
India: Viom Networks CEO to depart
Syed Safawi, chief executive officer of Viom
Networks, announced in a letter to the Board and
employees that he will be resigning by the end of
June. The move follows the recent completion of the
acquisition of Viom Networks by American Tower
Corporation. Safawi, an industry veteran with
close to three decades of industry experience with
leadership stints at Reliance Communication Ltd.,
Bharti Airtel Ltd. and Coca-Cola, and was brought in
as CEO of Viom Networks in 2012.
India: SREI raises capital

India: American Tower to invest a further


US$2bn into India
American Tower announced that it will invest
US$2bn in India, in addition to the US$879mn
being spent to acquire a controlling stake in Viom
Networks.

SREI Infrastructure Finance announced that its


board will consider a proposal to raise Rs 17,500
crore through issuances of securities, including
bonds and commercial papers, next financial
year. The company has proposed to raise money
through public issue of secured redeemable nonwww.towerxchange.com | TowerXchange Issue 16 |

87

convertible debentures (NCDs) aggregating up


to Rs 2,500 crore in one or more tranches during
2016-17. SREI also proposed to issue secured and/or
unsecured redeemable non-convertible debentures
(including Bonds) aggregating up to Rs 10,000 crores
outstanding at any point of time during 2016-17 on
private placement basis.

Hemant Kumar Ruia has been named CFO of Indus


Towers. Ruia joins Indus Towers from Reliance
Retail Ltd, where he was also CFO and played the
role of business partner across various brands
with Reliance Retail. Ruia has extensive experience
in business partnering, funds management,
information systems, legal and secretarial and other
aspects of the finance function.

India: Indus Towers connects Tamil Nadu


Indus Towers announced that it will provide
telephony network across Tamil Nadu by
connecting over 79.3 million wireless subscribers
across Indus Towers second largest telecom circle.
With more than 13,100 towers and over 28,700
tenancies in Tamil Nadu, comprising 2,800 towers
and 6,500 tenancies in Chennai, Indus now offers its
users continuous and uninterrupted connectivity
across the state. Through the new measure, the
company enables communication for more than
97% of the total addressable population of the state,
and employs 4,000 people (directly and indirectly)
in the state.
India: New CEO and CFO for Indus Towers
Bimal Dayal has taken on the role of CEO of Indus
Towers, Indias largest telecom tower company,
succeeding B.S. Shantharaju who retired on March
31. Dayal has been associated with Indus Towers
since 2010 as the COO, and will now take up the full
responsibilities of CEO. Bimal is a member of the
TowerXchange Inner Circle advisory board.

88 | TowerXchange Issue 16 | www.towerxchange.com

India: Dispute over permitting of Delhi towers


comes to a head
The Municipal Corporation of Delhi (MCD) is no
longer permitting operators to set up telecom
towers in the capital following a notification from
the Ministry of Urban Development banning
the installation of such sites in residential areas,
according to the Economic Time of India. Rajan
Matthews, the director general of industry group
the Cellular Operator Association of India (COAI)
was quoted as saying that: We have learnt that the
authorities are in the process of issuing notices
for pulling down the sites in residential areas.
These plans, if implemented, are expected to lead
to service outages in the capital, as an estimated
80%-90% of the citys 18,000 sites could be affected
by the order. Telecom Secretary JS Deepak wrote
to the Ministry of Urban Development to request
an amendment, and pointed out that the issue
falls under the jurisdiction of the Department of
Telecommunications (DoT). Municipal bodies in
several cities have reportedly been sealing mobile
towers, claiming that some had been installed
illegally.

India: Active infrastructure sharing permitted


The department of telecommunications of India
has allowed mobile operators to engage in active
infrastructure sharing, a move that will help
mobile operators reduce their capital expenditure
by 30-35%. Operators will also be able to reduce
their operating expenditure by around 5%.
Active infrastructure sharing also operationalises
spectrum sharing, which was allowed by the
government in September last year. The move could
also benefit towercos in India by opening another
revenue stream for them.
India: Reliance Jio closes in on roaming deal with
BSNL
Reliance Jio Infocomm (RJIL) is in advanced stage
of talks with state-run telecom company Bharat
Sanchar Nigam Limited (BSNL) to use latters
network and infrastructure largely for voice
operations across all 22 telecom circles under an
intra-circle roaming arrangement. BSNL confirmed
that while talks are on, the deal has not been
finalised as yet. Apart from fixed charges at 25
paise per minute for voice, BSNL has fixed 25 paise
per megabyte for data and 5 paise per SMS for any
telecom operator to share its network.
India: BSNL has leased up ~10% of its towers
BSNL has leased out 6,505 of its towers to other
telecom operators and leased in space on 15,113
third party towers. Out of the 6,505 spaces that it
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XX

has rented out, Bharti Airtel accounted for 2,251


slots. It was followed by Reliance Jio with 1,440 slots
and Idea and Vodafone with just above 900 towers
each. The state-owned company had, for over a
decade, refused to allow private companies to put
up their antennas on its towers, fearing that doing
so would make them lose their competitive edge,
but now they are willing to do so for a fee. Many of
BSNLs towers are on its own property, including
telephone exchanges, often in locations where others
do not have any presence.
India: Bharti Airtel considers selling 5% stake in
Bharti Infratel
The Indian press was awash with rumour in April
2016 that leading MNO Bharti Airtel was considering
selling 5% of their 71.7% equity stake in Bharti
Infratel to raise capital for spectrum and to pay
down debts. Bharti Infratel reported an increase in
tower count of almost 3,000 towers over Q1 2016,
including their stake in Indus Towers, together with
an uptick in tenancy ratios from 2.12 to 2.20. Bharti
Infratels market cap was then Rs 724bn, down from
Rs 729bn the previous quarter. EBITDA for FY15-16
stood at Rs 5,403 Crore, an 8% YOY increase.
India: Alternate energy requirements under
negotiation
The Telecom Department of India (DoT) is urging
the sector regulator to review the rules relating
to running mobile towers on hybrid power amid
financial and technical challenges faced by carriers.
XX | TowerXchange Issue 16 | www.towerxchange.com

The green telecom policy was created four years ago


and requires mobile carriers to migrate 50% and
20% of their cell towers in rural and urban areas to
hybrid power respectively by December 2015, and as
much as 75% and 33% by December 2020. Telecoms
operators are citing difficulties that they are having
in generating the large sums of capital required
to generate alternate energy sources to meet the
targets. With the Telecom Regulatory Authority of
India (TRAI) re-examining the policy, indications are
that these targets could be recalibrated significantly.
The TRAI has so far declined to announce when the
amended recommendations would be submitted.

reportedly been delayed by a disagreement


over the valuation of the sites. TPG Capital and
Tillman Global Holdings (TGH) submitted a nonbinding offer for the towers in December last year,
reportedly offering INR215 billion (US$3.2 billion)
for the sites, which are currently held through
RCOM subsidiary Reliance Infratel. Apparently
many of the sites lack structural capacity for
additional tenants, leading to TPG being reluctant
to underwrite the initial offer, forcing TGH to begin
looking for another partner with which to purchase
the towers.
India: GTL Infrastructure net losses narrow 7%

India: New Silk Route seeks to exit Ascend


Telecom
Livemint reports that New Silk Route (NSR) are
seeking to return US$500mn to investors during 2016
as they gear up to create a second fund. The e-paper
speculates that this could mean the investor plans
to exit Indian towerco Ascend Telecom, which owns
just under 5,000 towers We have returned $200
million to our investors this year. We are knocking
on the door of 2016 and clearly we would like to
liquefy these investments and realize them and that
is certainly the biggest activity at NSR right now, the
paper quotes Parag Saxena, CEO of NSR as saying.
NSR is also a minority investor in Reliance Infratel.
India: Reliance Infratel sale hits valuation snag
The planned sale of Indian Reliance
Communications (RCOMs) tower assets has

GTL Infrastructure losses narrowed to Rs 92.75


crore in their Q1 2016 update. The company cited
improving trading conditions since the MNO market
was restructured, and claims to have secured a fair
share of incremental tenancies following the 2015
spectrum auction. Unfortunately the news did not
prompt a recovery in share price: GTLINFRA was
trading at 2.00 INR at time of press, down from a
high of 3.35 in January 2016, with the price of 34.8
INR prior to the MNO market restructuring now a
distant memory.
Indonesia: XL Axiata slashes debt with sale of
2,500 towers to Protelindo
Telecommunications provider XL Axiata is set
to halve its total loans this year through a share
offering and a tower sale, a move expected to push
the company back into profitability. XL is to hold a
www.towerxchange.com | TowerXchange Issue 16 |

89

rights issue to repay shareholder loans amounting


to US$500 million maturing in 2017, and has
agreed to sell 2,500 telecommunication towers to
local tower operator Profesional Telekomunikasi
Indonesia, or Protelindo, for 3.56 trillion rupiah
(US$250mn) in cash. XL has signed a deal to
leaseback most of the towers for ten years. The
move followed a sale of 3,500 towers to STP in
late 2014.. Both of the transactions, as previously
reported, are expected to conclude by the end of the
first half this year.
Protelindos tower count is now 14,737.
Indonesia: Protelindo parent raises capital
Protelindos parent company Sarana Menara
Nusantara (SMN) is looking to raise IDR4.18 trillion
(US$316mn) through a rights shares offering to fund
expansion and to strengthen capital structure. SMN
intends to release 1.02 billion shares at a price of
IDR4.105 per share and the company is expecting
to get shareholder approval for the offering by 20
May. The proceeds from the sale will be invested in
the groups subsidiary Profesional Telekomunikasi
Indonesia (Protelindo), which will use the funds to
build new towers and invest in supporting services
companies; a small portion will be used to repay
Protelindos debts.
Indonesia: TBIG to build 1,500-2,000 towers in
2016
Tower Bersama Infrastructure Group (TBIG) is
90 | TowerXchange Issue 16 | www.towerxchange.com

preparing up to Rp 2 trillion (US$145.72 mn) of


capex this year to build between 1,500 and 2,000
new towers before year-end. With telco operators
actively expanding into 4G networks, the company
expects to add 2,000 new tenants by year end.
As of Sept. 30 2015, TBI had 19,643 tenants and
12,292 telecommunication sites comprising 11,291
telecommunication towers, according to the
companys records.

next 12-18 months. Currently, edotco manages


and owns 16,450 towers across South-East Asia
and ASEAN, which generated an annual revenue
of over US$2.97mn last year. Axiata is adding new
units into the edotco group so the revenue figure
is not comparable on a year-on-year basis, with
edotcos recent expansion into Myanmar.
Malaysia: U Mobile to use Sacofa infrastructure
in Sarawak

Malaysia: edotco to build sites for DiGi


DiGi Telecommunications, Malaysias second
largest operator by subscribers, has signed a
collaboration agreement with infrastructure
provider edotco Malaysia. DiGi will gain access to
edotcos more than 3,600 sites, as well as new builtto-suit sites, to accelerate its network expansion
programme. The five-year agreement will also
allow the pair maximise the deployment of shared
sites, helping lower opex and lower their carbon
footprint. edotco and DiGi have been collaborating
since 2013, and they are both committed to
achieving optimised network efficiencies through
their partnership.

U Mobile Sdn Bhd, has reached an agreement


with Sacofa Sdn Bhd to assist with its network
expansion in Sarawak. The partnership will enable
U Mobile to leverage Sacofas telecommunication
infrastructure footprint of over 700 sites across
the state, and its fibre network to facilitate
network expansion and increase QoS. Sacofa has
exclusive rights to construct, own and manage
communication infrastructure in Sarawak, and will
deliver build-to-suit-sites and provide bandwidth
leasing services to U Mobile over a period of 10
years as part of the agreement.
Myanmar: Viettel wins right to negotiate fourth
operator consortium

Malaysia: edotco could IPO


Axiata Group Bhd is considering a plan to list its
telecommunication tower unit edotco Group Sdn
Bhd on the local bourse. The Axiata Groups head
of investor relations, Clare Chin Kit Ching said the
plan for an initial public offering (IPO) was subject
to a final decision, which could happen over the

Hanoi-based telecoms operator Viettel has


been granted the right to negotiate with a local
consortium. If the tie-up is approved, the company
will join a local group of 11 public Myanmar
firms and a subsidiary of military-run Myanmar
Economic Corporation, Star High Public Company,
to form a joint venture that should receive the
www.towerxchange.com | TowerXchange Issue 16 |

XX

markets fourth licence for nationwide services.


Star High Public Company offers access to 1,000
towers and more than 13,000 kilometres of
fibre, among other telecoms assets, making the
business case for the fourth operator viable.
If negotiations are successful, Viettel will pay
49% of a US$300mn licence fee, equivalent to
its prospective holding in the company, and the
operator has promised to invest US$1.5bn into the
country.

Myanmar: OCK enters towerco market, more


consolidation imminent
Malaysian managed service provider OCK has
secured a contract to build 920 towers for Telenor,
marking the companys debut as an independent
towerco. TowerXchange sources suggest OCK
are offering a disruptively discounted lease rate
of US$900pcm, inclusive of power, compared to
prevailing rates in the US$1,200-1,800 range.
The restructuring of the Myanmar tower market
may continue with further towerco consolidation
at least one existing towercos is believed to be
seeking an exit.
Myanmar: ADB and IFC loan US$300mn to
Ooredoo
The Asian Development Bank (ADB) and the
International Finance Corporation-IFC, a member
of the World Bank Group-are providing a loan
of $150 million each to Ooredoo Myanmar
XX | TowerXchange Issue 16 | www.towerxchange.com

for the rollout of a mobile telecommunication


network across Myanmar, which will help extend
affordable telecom services across the country,
boosting economic growth and job creation.
Nepal: Axiata closes acquisition of Ncell from
TeliaSonera
Axiata Group has closed the acquisition of a
majority stake in Nepalese market leader Ncell
from TeliaSonera, in a deal believed to be worth
US$1.365bn. Simon Perkins will be installed as
Ncells new Managing Director. Axiatas towerco
edotco could follow its parent company into the
country.
Pakistan: Telenor challenges Mobilink-Warid
merger
Telenor Pakistan reportedly has raised concerns
over the proposed Mobilink-Warid merger with
the countys Competition Commission, which
is reviewing the deal for regulatory approval.
Mobilink, and Warid Telecom filed a notification
of proposed change in substantial ownership
interest of Warid on 15 December 2015, and
made the request for permission of merger
between Mobilink and Warid before the Pakistan
Telecommunication Authority (PTA). The closure
of the transaction may be contingent upon one or
both parties selling their towers to reduce debt.
With upwards of 50% overlap between Mobilink
and Warids networks (Mobilink has around
10,000 towers, Warid 5,000), the necessity of

decommissioning suggests the same towerco may


have to acquire both portfolios.
Etisalat are also rumoured to be interested in
monetising their towers in Pakistan.
The Philippines: SMC and Telstra discontinue
their partnership
Local conglomerate SMC still plans to shake up the
Philippine market by launching a third MNO, but
it wont be in partnership with Australian MNO
Telstra after talks about a prospective joint venture
were discontinued in March 2016. Telenor have
been mooted as alternate joint venture partners
with SMC. Globe and Smart continue to split the
Philippine mobile market, with infrastructure
seldom shared and no tower companies active in
the market.
Vietnam: IFC considers investment in Golden
Towers
The IFC, which has around US$500mn invested
in eight towercos worldwide, is considering an
opportunity to invest US$20mn Alcazar Capital
and ASEAN Towers Vietnamese subsidiary Golden
Towers US$210mn project to roll up 5,800 towers
by consolidating existing independently owned
towers in Vietnam. There are around 55,000 towers
in Vietnam, around 10,000 of which are in the
hands of a fragmented ecosystem of local towercos,
including Golden Towers itself, which owns around
340 towers
www.towerxchange.com | TowerXchange Issue 16 |

91

TowerXchanges analysis of the


independent tower market in Europe
Germany

27,000

Deutsche Funkturm

Spain
Germany
Italy
Spain
UK
Source: TowerXchange
Italy
Turkey
UK
Germany
Ukraine
Turkey
FranceSpain
Ukraine
Czech Republic
Italy
France
IrelandUK
Czech Republic
Russia Turkey
Ireland
Netherlands
Ukraine
Russia
PolandFrance
Netherlands
Denmark
Czech Republic
Poland
Slovakia
Ireland
Denmark
Finland
Russia
Slovakia
Kazakhstan

Figure 1(a): Europes


18 towercos
with >1,000 assets
16,000
RTRS
Deutsche Funkturm
Cellnex

7,709 27,000

7,410

16,000
14,000

RTRS
First Tower Company

7,410
11,000

Cellnex
Telxius
First Tower Company
INWIT

7,709
2,350

2,804

14,000
11,519

Deutsche Funkturm
Telxius
Arqiva

11,000
10,550

RTRS
GlobalINWIT
Tower

11,519
7,500

Arqiva
TDF
Cellnex

2,350

7,410
10,550
6,966

GlobalCompany
Tower
CETIN
First Tower

EI Rai
Towers
Way

7,709
1,181
14,000

7,500
4,800

TDF
EI Towers
Telxius
3,2006,966
CETIN
FPS Towers
4,800
INWIT 2,618

27,000
2,804

16,000
1,181

11,000

2,804

2,350

11,519

2,300

Arqiva 3,200
10,550
2,028
Global Tower 2,618
7,500
Wireless Infrastructure
RaiGroup
Way 2,300
TDF 1,900 50 506,966
Russian Towers
American
Tower 2,028
CETIN 1,800 4,800
Wireless InfrastructureVertical
Group 1,900
1,600 50 50
EI Towers
3,200
Russian Towers 1,800
5000
FPS Towers
2,618
Vertical 1,600
Rai Way 2,300
5000
American Tower
FPS Towers
American
Tower

2,028

1,181

10000

15000

20000

25000

30000

35000

10000

15000

20000

25000

30000

35000

Netherlands
Finland
Serbia
Poland
Kazakhstan
Austria
SerbiaDenmark
Greece
AustriaSlovakia
CALA

Wireless Infrastructure Group

1,900 50 50
Figure 1(b):
Europes
telecom and broadcast towercos with <1,000
Russian Towers
towers
Vertical
1,800

GreeceFinland

1,600

1000

5000

10000

15000

20000

25000

30000

35000

CALA Kazakhstan

Serbia

800
1000

Austria

460

Greece

600
800

460

800

79

700

Ra

500

586

377 420 400

377

377

120 113 100 100

ita

800

400

200

260 200
187 180 156 150 140
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260 200
92 | TowerXchange Issue 16 | www.towerxchange.com
187 180 156 150 140
120 113 100 100
0

47

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The biggest news of 2016 so far comes from Spanish


giant, Telefnica. After months of speculation
surrounding a potential divestment of towers,
February saw the carve out of their 11,000 Spanish
sites (along with 2,883 towers in Latin America and
subsea cabling) into a newly formed infrastructure
business Telxius. In April, this was then followed
by the sale of their 2,350 German towers to
the entity for 587mn. It is not thought that
Telefnica Deutschlands ~12,000 remaining sites
(predominantly rooftops) will be transfered to the
subsidiary. The move comes as part of a strategy to
reduce the companys debt burden whilst optimising
the return on capital deployed in such infrastructure
- including increasing co-locations on sites. The
company has also indicated that they will potentially
look at the acquisition of towers from third parties

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800

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79

Br

200
400

500

800

Br

1000

800

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400
600

The past few of months have seen big news in


the European market indicating a major shift is
underway in attitudes toward tower ownership. Of
Europes 600,000 towers (including Russia and the
CIS), 78,211 (or 13%) sit in the hands of independent
towercos; 43,684 of which are owned by companies
who have a significant footprint in the broadcast
sector. A further 74,920 towers (12%) are owned
by operator captive towercos and 67,125 towers
(11%) are managed by JV infracos - putting a total
of 35% in the hands of infrastructure companies.
TowerXchange forecasts that by the end of 2016
this number will increase to 40% with 18% being
owned by independent towercos, 11% by operatorled towercos and 11% by JV infracos. By 2020, 65%
of Europes towers are expected to sit in the hands of
infracos (see figure two).

40

33

www.towerxchange.com | TowerXchange Issue 16 |

XX

Following a similar restructuring ahead of a


proposed monetisation of assets, Turkcells
Ukrainian business, Lifecell transferred 811
towers to its wholly owned subsidiary UkrTower
for EUR47.8mn. UkrTower is part of Turkcells
infrastructure business Global Tower which owns
an estimated 8000 towers in Turkey, in addition
to its Ukrainian portfolio. Turkcell have recently
confirmed that they have initiated the process for an
IPO of a certain amount of shares in Global Tower,
although an IPO of the unit is somewhat complicated
by the Build-Operate-Transfer agreement in place
with the Turkish government onan estimated 60%
of their Turkish towers.
Negotiations continue around the sale of a stake
in INWIT, where decision is expected imminently.
Two shortlisted offers remain, one from EI Towers
and a second from Cellnex in conjunction with
infrastructure fund F2i. Mediaset-owned EI Towers
are thought to have bid to acquire a lower stake of
25% in the company, with the deal also including a
transfer of 1000 towers to INWIT. Cellnex and F2i
are known to be bidding for a 45-49% stake in INWIT
(which then would be followed with a takeover bid
XX | TowerXchange Issue 16 | www.towerxchange.com

Figure 2: Forecasted breakdown of ownership of Europes ~600,000


telecom tower and rooftop structures 2016-2020
600,000

Number of towers

thus creating a sizeable towerco positioned to


compete in major tower transactions in Europe.
Whilst the company has not released an official
statement, it has been reported thatTelefnica plan
for an IPO of Telxius on the Madrid Stock Exchange
in early July.Goldman Sachs and JP Morgan have
been reportedly appointed to join UBS in running
the process although it has not yet been revealed
what level of equity Telefnica plans to retain.

500,000

MNO Captive

400,000
300,000
200,000
100,000

307,726
379,744
67,125
72,570
74,920

Q116

275,226

49,125

49,125
30,968

67,125

51,968

244,681

65,968

191,181

357,726

237,226
59,125

212,226
69,125

30,968

30,968

272,681

287,681

JV infraco
Operator-led
infraco
Independent
towerco

109,181

Q416

Q417

Q418

Q419

Q420
Source: TowerXchange

for the rest of the capital). As to who the likely winner


will be decision is split. Some observers believe that
the Cellnex takeover will afford higher synergies
due to their stronger presence in the telecoms sector,
whilst others have suggested that the recent alliance
of INWIT and EI Towers shareholders, Vivendi and
Mediaset - could favour the Italian companys bid.
In Russia, the sale of VimpelComs 10,400 towers
is well underway, with three shortlisted bidders
Russian Towers, Vertical and the Russian Direct
Investment Fund in the running for the portfolio.
The deal is expected to close in Q2 2016, marking
Russias first major tower transaction. Following the

completion of the sale it is widely expected that


VimpelCom will then turn their attention to potential
divestitures across their CIS markets, in a bid to
further reduce their current debt.
Keeping our focus on the east, Russias Tele2 and
Megafon are also rumoured to be re-evaluating
their tower strategies with Megafon looking into
a potential sale of its infrastructure business, First
Tower Company.
In Germany Deutsche Telekom have reportedly
brought in advisors to look at an IPO of their
infrastructure assets while American Tower
www.towerxchange.com | TowerXchange Issue 16 |

93

European tower deals since 2008


Year

Country

Seller

Buyer

Tower count

Deal value

Cost per
tower

Deal structure

2016

Germany

Telefonica

Telxius

2350

587,000,000

249,787

SLB

2016

Ukraine

Lifecell

UkrTower

811

47,820,000

58,964

SLB

2016

Spain

Telefonica

Telxius

11000

SLB

2015

Ireland

Coillte

Cignal

113

Portfolio acquisition

2015

Germany

Telefonica

Deutsche Telecom/ Omega Towers

7700

Asset Transfer

2015

Italy

Tecnorad

EI Towers

134

17,000,000

126,866

Portfolio acquisition

2015

Italy

Wind (VimpelCom)

Cellnex

7377

693,000,000

93,941

SLB with 10% equity

2015

Italy

TowerCo

Cellnex

212

94,600,000

446,226

Company acquisition

2014

Spain

Telefonica/Yoigo

Cellnex

4277

385,000,000

90,016

SLB

2012

France

Bougyes Telecom

FPS Towers

2166

185,000,000

100,400

SLB with 15% equity

2012

Germany

KPN

American Tower

2031

393,000,000

193,501

SLB

2012

Netherlands

KPN

Protelindo

261

75,000,000

287,356

SLB

2012

Netherlands

KPN

Shere Group

460

115,000,000

250,000

SLB

2012

Spain

Telefonica

Cellnex

500

45,000,000

90,000

SLB

2010

Netherlands

KPN

Open Tower Company

500

SLB

2008

Netherlands

KPN

Open Tower Company

101

SLB

Totals / average

39,993

Germany may be seeking third party investors, and


in Poland, Orange are also rumoured to be looking
into a tower sale.
TowerXchange are currently tracking 68 towercos,
broadcast companies and JV infracos with tower
portfolios in Europe. With the exception of Cellnex
94 | TowerXchange Issue 16 | www.towerxchange.com

2,637,420,000

(active in Spain and Italy), Wireless Infrastructure


Group (with assets in the UK, Ireland and the
Netherlands), Shere Group (with towers in the UK
and Netherlands) and Shared Access and Britannia/
Hibernian (both with assets in both the UK and
Ireland), all other companies have a presence in just
one country.

128,161

Source: TowerXchange

Major tower transactions on the cards represent


an opportunity for Europes towercos to expand
into new geographies and also represent an
opportunity for major international players to gain
a footprint in Europe: #3 and #4 US towercos SBA
Communications and Digital Bridge both have an
appetite for European towers, for example. Whats
www.towerxchange.com | TowerXchange Issue 16 |

XX

Figure three: Estimated tower and rooftop counts for selected markets
in Europe

Kazakhstan Czech Republic

7,000

10,200

Germany Russia
Greece Nether- Poland France Spain Italy UK
45,052
22,000
117,100
45,000
47,517 53,000 69,635
12,000 lands
15,204

Ireland
4,000
Denmark
4,500

Finland
10,000

Ukraine
12,000

Further focus for Europes towercos resides


in decommissioning as the impact of MNO
consolidation (such as that of 3s acquisition of
O2 in Ireland and the proposed merger of 3 and
Wind in Italy) starts to filter through to their
infrastructure

Source: TowerXchange

more, such transactions are leading to the creation


of new domestic towercos. In such a fragmented
market, with independent tower ownership in
the hands of a number of mid-sized companies
and with investors having a growing appetite to
invest in European tower infrastructure, it often
seems that there is more capital seeking tower
opportunities than there are opportunities. A
domestic player with local expertise together
with the backing of a financial investor and the
presence of a strong management team could be
XX | TowerXchange Issue 16 | www.towerxchange.com

opportunities in the small cell and DAS markets.


With European MNOs accustomed to infrastructure
sharing, and urban infill to meet growing data
demand sitting as a top priority, there exists
significant potential for a third party infrastructure
provider to deliver more cost effective, neutral host
heterogeneous networks. The uptake of venue-DAS
is growing significantly and a number of city-wide
outdoor small cell projects are being rolled out. The
Small Cell Forum forecasts that by 2020 only 20%
of small cell infrastructure will be solely managed
by a single operator, the other 80% will be multioperator small cells with a third party involved,
whether thats other operators or a towerco.

well placed to make a significant play in upcoming


transactions. TowerXchange are tracking a lot of
towercos, infrastructure funds and PE firms with an
appetite for smaller portfolios, from BTS startups
to 100-2,000 towers. But the question remains: does
anyone have the appetite and digestive capacity to
compete with Cellnex for Europes largest sale and
leasebacks? Telxius could be one such company.
Moving away from macro-structures, an increasing
number of European towercos are tapping

TowerXchange Meetup calendar


< TowerXchange Meetup Americas, June 16-17, 2016
< TowerXchange Meetup Africa, October 19-20, 2016
< TowerXchange Meetup Asia, December 13-14, 2016
< TowerXchange Meetup Europe, April 4-5, 2017

www.towerxchange.com
www.towerxchange.com | TowerXchange Issue 16 |

95

European tower activity - the headlines


Azerbaijan: Infraco Azerconnect active in the country.

from TDF in 2014.

CIS:Logycom forms first independent towerco in


Kazakhstan, with an order to build just under 100
towers. Meanwhile, VimpelComs towers could come to
market across several CIS states.

Ireland:Towercom, ESB Telecoms, WIG,


Hibernian, Shared Access, Cellcom and Highpoint
active. Together with three state-owned entities,
they own 40% of Irelands 4,000 towers. 3s
acquisition of O2 disrupted network sharing
agreements and is leading to consolidation. Coillte
sold 298 sites including 113 towers to InfraVia
Capital Partners creating new towerco Cignal.

Czech Republic:CETIN, infrastructure business


carved out of O2 has 4,800 towers and 750 micro sites.
Also in infrasharing venture with T-Mobile.
Denmark:Infrasharing mandated by the state
TT-Network formed by Telia and Telenor. MNO
divestments expected in 2-4 years.
Finland:Digita sold by TDF to First State Investments
in 2012.
France:Towerco FPS active after acquiring towers
from Bougyes Telecom and 20,000 rooftop sites from
Loxel. TDF lead the market, ITAS TIM and Towercast
also active. Free Mobiles entry disrupting the market,
SFR-Numericable forced into merger; Bouygues
Telecom looking to exit? Could more towers become
available for sale and leaseback?
Germany:Towercos Deutsche Funkturm and
American Tower active in the market, ATCs towers
bought from KPN. Deutsche Telekom rumoured to
be looking at an IPO of their assets. ATC Germany
rumoured to be seeking investors. 2,350 Telefonica
sites sold to infraco Telxius for 587mn.
Greece:Infraco VICTUS Networks run by Vodafone
Greece and Wind Hellas. Initial rumors of potential
sale and leasebacks emerging. Broadcast towerco
Digea owns 156 towers.
Hungary:Antenna Hungaria acquired by the state

96 | TowerXchange Issue 16 | www.towerxchange.com

Italy:Cellnex/F2i and EI towers still battling out


for a stake in INWIT. EI Towers acquisition of
fellow broadcast towerco Rai Way initially halted
but discussions re-opened. EI Towers continue to
roll-up smaller towercos. Cellnex closed landmark
sale and leaseback with Wind in 2015.
Latvia:Bite Group brought towers to market in
2013 but no agreement reached.
Netherlands:Protelindo, Shere Group and Open
Tower Company acquired a total of 1,322 towers
from KPN. Rumours that T-Mobile may be looking
to sell its business.
Poland:Emitel (towerco) and NetWorkS! (infraco)
active in the market. Infraco NetWorkS! may
dissolve, may force tower sale by Orange or
T-Mobile.
Portugal:Portugal Telecom sold to Altice tower
sale rumour has gone quiet.
Romania:Orange and Vodafone sharing networks
through JV infraco Netgrid Telecom.
Russia:VimpelCom creates National Tower

Company with 10,400 towers, sale expected in


Q2 2016. MegaFon creates First Tower Company
with 14,000 towers, and expresses intent to sell the
towerco. MTS carves out 5,500 towers into MTS
Towers no apparent plans to monetise. Tele2
hints at potential SLB. Active towercos include
Russian Towers, Vertical, Link Development and
Service Telecom..
Serbia:Managed service provider Konsing Group
owns a portfolio of 47 sites.
Slovakia: Towercom, towerco acquired by
Macquarie in 2013 with a portfolio of 700 sites.
Spain:Telefonica carved out 11,000 towers into
new infrastructure business, Telxius. Towerco
Cellnex active after acquiring towers from
Telefonica/Yoigo. Axion towers rumoured to be on
the market.
Sweden:Several infracos including Net4Mobility,
3GiS and SUNAB
Turkey:Turkcells Global Tower manages over
16,000 sites including 7,870 macro towers. Turkcell
have initiated the process for an IPO of the unit.
UK:Towercos active in the market include Arqiva,
WIG, Shere Group and Shared Access, MBNL and
CTIL sizable infracos. Sale of O2 to Hutchison to be
blocked by the European Commission.
Ukraine:Towerco UKRTower active in the market,
recent acquisition of 811 towers from parent
company Lifecell. UkrTower to be included in the
upcoming IPO of Global Tower.

www.towerxchange.com | TowerXchange Issue 16 |

XX

European heatmap

Legend
TowerXchange research has not revealed any infracos or
towercos to date
Towercos or infracos active in the market. No recent
transactions have taken place and none rumoured to take
place soon
Towercos or infracos active in the market. No current
transactions taking place but an attempted tower sale has
taken place in the last 3 years or there are unconfirmed
rumours of a deal in this market.
Towercos or infracos active in the market. Rumours of deals
confirmed in the market.
Towercos or infracos active in the market. Deals of significant
size have taken place in the last 5 years.
Towercos or infracos active in the market. Deals have taken
place in the last year and more imminent deals rumoured

Source: TowerXchange

Note: For the purposes of our European coverage, Towerco describes an independent company which owns and operates passive infrastructure for commercial profit. Infraco incorporates MNO joint venture
organisations and carve outs which serve more than one entity or market their towers commercially

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

97

The unique characteristics and


projected future of the European
tower industry

Kieron Osmotherly, CEO, TowerXchange and Laura Dinnewell,

Head of TowerXchange EMEA

At the TowerXchange Meetup Europe, TowerXchange


opened proceedings with a run down of the key
characteristics, trends and transactions in the
European tower industry, examining key motivators
and forecasting how the shape of the market is set to
change. We summarise some of the main take home
messages and revisit key charts and figures presented
to provide a 101 on this rapidly evolving marketplace.

Keywords: Acquisition, American Tower, Arqiva, Broadcast, Capacity Enhancements, Carve Out, Cashflow
Finance, Cellnex, CETIN, Core Network, Backhaul & FTTT, DAS, Deal Structure, Decommissioning,
Densification, Deutsche Funkturm, EBITDA, EI Towers, Europe, Europe Insights, Europe News, First Tower
Company, FPS Towers, Global Tower, IBS, Infrastructure Sharing, Investment, INWIT, LTE, Market Overview,
MNOs, Operator-Led JV, Rai Way, Rooftop, RTRS, Russia & CIS, Russian Towers, Sale & Leaseback, Small Cells,
TDF, Telxius, Tower Count, Towercos, TowerXchange Research, UkrTower, Urban versus Rural, Valuation,
Vertical, Whos Who, WIG

Read this article to learn:


< The different roles of JV infracos and operator-led, broadcast and independent towercos in the
European tower industry
< Who Europes key infracos and towercos are
< The mix of ground based towers and rooftop towers in the European market
< Key transactions and deal structures to date
< Motivators behind recent transactions
< How tower ownership is forecasted to change hands in the next five years

98 | TowerXchange Issue 16 | www.towerxchange.com

The current state and forecast future growth of


the European tower industry through 2020
In Europe (inclusive of Russia and the CIS), there
are a total of 600,000 cell sites. These sites are
comprised of towers, streetpoles, rooftops and inbuilding solutions by TowerXchanges definition,
we count any site that is potentially shareable. As a
mature tower market, that total of around 600,000
is staying fairly constant with new build being
more or less cancelled out by the decommissioning
of parallel infrastructure.
The structure of the European tower market is
quite unique, with joint venture infrastructure
sharing companies such as CTIL and MBNL in
the UK, VICTUS Networks in Greece, NetGrid in
Romania, Mosaic in Ireland and a host of others in
Scandinavia operating (if not always owning) 11.1%
of the continents towers (figure one). Theyre
a different breed from a commercial towerco
because they are typically created to serve solely
the needs of their parent MNOs, may price leases
solely at a chargeback level, and may not lease sites
to third parties.
A second unique characteristic of the European
market is the prevalence and scale of broadcasttelecom hybrid towercos. Broadcast infrastructure
is generally a different but parallel asset class
characterised by less growth than the telecom
towerco asset class. Hybrid broadcast and telecom
towercos represent around 9% of the 13% of
Europes towers owned by independent towercos;
www.towerxchange.com | TowerXchange Issue 16 |

XX

just 4% are pureplay telecom towercos for now!


Operator-led carve out towercos, where the
parent MNO retains >51% of the equity in the
towerco, account for 12.1% of Europes towers,
a segment supplemented by the addition of
Telefnicas Telxius, but from which INWIT may
be exiting upon completion of their sale: carve
out and monetise is becoming as popular as the
pure sale and leaseback model.
There is no European tower market per se, there
are 50 local tower markets, the size of some of
which are shown in TowerXchanges analysis of
the independent tower market in Europe. There
are also no pan-European towercos, in fact of the
61 European towercos and infracos identified
by TowerXchange, only six have a presence
in multiple countries, and most of those are
neighboring countries. However, we expect to see
the rise of multi-country towercos of scale in the
coming five years, led by Cellnex.
Towers versus rooftops and streetpoles
It is something of a misnomer to talk about a
600,000 tower European tower market, since in
several markets, rooftop structures significantly
outnumber traditional ground based towers
(GBTs), exemplified by Russia where only 36% of
telecom structures are GBTs, and Germany where
its only 23% (figure two)
Rooftop structures may be as investible or less
XX | TowerXchange Issue 16 | www.towerxchange.com

Figure one: Current ownership of Europes ~600,000 towers


13%
MNO captive

12.1%

JV infraco
63.7%

11.1%

Operator-led infracos
Independent towerco

Source: TowerXchange

Figure two: Towers versus rooftops and streetpoles


Russian example
42,100

75,000

GBTs

German example

16,381

53,604

Rooftops and streetpoles

Source: TowerXchange

www.towerxchange.com | TowerXchange Issue 16 |

99

investible than full GBTs as a function of their


structural capacity, rights of access and the
contractual relationship with the landlord.
A lot of the new build were seeing in Europe
consists of streetpoles and infill microcell sites,
rather than full scale GBTs.

5. Telxius, Telefnicas infraco manages a portfolio


of 13,350 sites in Europe 2,350 ground based
towers in Germany and an estimated 11,000 ground
based towers and rooftop sites in Spain. Telefnica
is considering an IPO of the unit on the Madrid
Stock Exchange in early July.

An introduction to Europes towercos

6. INWIT, Telecom Italias infraco with 11,519 sites


was listed on the Milan Stock Exchange last year
and a further stake in the company is being fought
over by Cellnex/F2i and EI Towers.

There are 17 towercos in Europe which possess


portfolios of over 1000 towers, rooftops and
streetpoles (see figure 1a in TowerXchanges
analysis of the independent tower market in
Europe).
1. Deutsche Funkturm is Deutsche Telekoms
captive towerco, and owns just under 40% of the
towers and rooftops in Germany.
2. RTRS is the Russian broadcast towerco with
16,000 towers.
3. Cellnex is the fastest growing towerco in Europe,
with 15,120 towers across Spain and Italy and an
appetite for further opportunities in their existing
markets plus Portugal, France, Germany, Austria,
Switzerland, Belgium, the Netherlands, the UK and
Ireland.
4. First Tower Company is Russian operator
MegaFons infraco and manages a portfolio of
14,000 towers. MegaFon has been open about its
intention to sell to a strategic investor in the next
12-24 months.
100 | TowerXchange Issue 16 | www.towerxchange.com

7. Arqiva, the UKs broadcast telecom hybrid with


10,550 towers, are currently restructuring their
balance sheet.
8. Global Tower, Turkcells infrastructure
subsidiary with ~8,000 towers in Turkey and a
further 1,181 in the Ukraine (managed under
UkrTower) is at the beginning of an IPO process.
9. TDF, the French broadcast/telecom hybrid
towerco has 6,966 towers, was recently refinanced
and is now owned by a consortium including
Brookfield and Arcus.
10. CETIN is a 4,800 tower infraco carved out
of O2 Czech Republic, which owns and operates
transmission, passive and active infrastructure.
11. EI Towers, the Italian broadcast towerco with
2,300 sites, also incorporates TowerTel with over
900 telecom towers. The company is one of the
shortlisted bidders for the INWIT equity stake

and is in talks regarding a takeover of rival Italian


broadcast towerco, Rai Way.
12. FPS Towers has 2,618 towers plus rights to
over 20,000 rooftops in France. It is rumoured
that the company may be sold by investors Antin
Infrastructure Partners.
13. Rai Way is an Italian broadcast towerco, less
aggressively seeking opportunities in the telecoms
sector than its rival EI Towers. There exists the
possibility that Rai Way and EI Towers may merge.
14. American Tower, the worlds largest
independent towerco American Tower has just a
2,028 tower portfolio in Germany. The company
is reportedly seeking a new minority investor,
potentially to fund expansion in Europe.
15. Wireless Infrastructure Group is the largest
pureplay independent towerco in the UK with over
2,000 sites, a few of which are in Ireland and the
Netherlands.
16. Russian Towers has built a portfolio of 1,800
sites in their home country Russia. As one of the
finalists to acquire VimpelComs 10,400 towers
in Russia and with an appetite for transactions
across the CIS, their portfolio may be set to increase
substantially.
17. Vertical, with a portfolio of 1,600 sites are
competing with Russian Towers in the ongoing
VimpelCom process in Russia and similarly have an
www.towerxchange.com | TowerXchange Issue 16 |

XX

appetite for further tower sales in the region.


Beyond this, TowerXchange track 27 telecom
towercos and smaller broadcast towercos with
less than 1,000 towers and 12 JV infracos, the
largest of which are the UKs CTIL and MBNL,
each managing portfolios of ~18,000 sites. Further
information on these players can be found in
TowerXchanges whos who in European towers
in the 15th edition of the TowerXchange journal.
European tower deals since 2008
Weve seen over 2bn deployed since 2012 to
transfer 25,000 towers from MNO-captive to
independent towercos (see the deal table in
TowerXchanges analysis of the independent
tower market in Europe). However, we think this
is the tip of the iceberg of an investment of more
than 10x that magnitude over the coming five
years.
The trend to monetise European towers was
initiated in the Netherlands where KPN sold 1,300
towers to three different towercos, then again
by KPN in Germany to American Tower, before
Bouygues Telecoms sale of over 2,000 towers to
Antins FPS Towers in France.
What really kick started the European tower
industry were large transactions by Cellnex in
Spain (with Telefnica and Yoigo) and 14 months
ago with Wind in Italy, bringing us up to the
current day with the VimpelCom process to sell
10,400 towers well under way in Russia.
XX | TowerXchange Issue 16 | www.towerxchange.com

A second trend is starting to emerge in the


monetisation of European passive infrastructure,
initiated by Telecom Italias strategy for their
infraco, INWIT. With a partial listing of INWIT on
the Madrid Stock Exchange now being followed
by a strategic sale of a further tranche of equity
in the infraco, other operators are considering
both options for their newly created captive
towercos. Turkcell have initiated the IPO process
for Global Tower, Deutsche Telekom have hinted
at a potential listing of Deutsche Funkturm,
Telefnica are rumoured to be planning an early
July IPO of Telxius, and MegaFon are looking for a
strategic buyer for First Tower Company.
Drivers of change
Why wasnt there a substantial pipeline of
European tower transactions and monetisations
when there is now?
Firstly, many European MNOs didnt need
the cash as urgently as did their counterparts
in Africa for example. But the efficiency
benefits of transferring assets to infrastructure
specialists, whilst focusing on selling minutes
and megabytes, remains common to MNOs
worldwide.
European towers is a sellers market, and with
relative valuation arbitrage so significant,
whether theyre considering selling and leasing
back or carving out and keeping their towers,
the monetisation of towers is creeping up the

boardroom agenda within MNOs across Europe.


Where is activity expected?
Looking at the heatmap presented in the article
TowerXchanges analysis of the independent tower
market in Europe in this journal, you can see that
the continent is awash with opportunities.
In this edition of the journal we take a detailed look
at the tower industry in Russia, Germany, Turkey,
Italy, Spain, UK and the CIS where known activity
is underway. We also examine emerging markets
including Romania, Poland and Greece and discuss
the potential for the creation of independent tower
markets in each country.
As stated earlier, of Europes 600,000 towers
(including Russia and the CIS) 36% are owned by
infracos and a third of which (13%) are owned
by independent tower companies. Examining the
transactions which TowerXchange are tracking
and the trends we are observing, we forecast the
percentage of towers to be owned by infracos
(independent towercos + operator-led towercos +
JV infracos) to increase to 40% by the end of this
year and 65% by 2020. In terms of ownership by
independent towercos, we forecast this to increase
to 18% by the end of 2016 and 48% by 2020.
Again, refer to the infographic in TowerXchanges
analysis of the independent tower market in
Europe to see how we anticipate that forecast
being realised
www.towerxchange.com | TowerXchange Issue 16 | 101

Europe News

fund acquisitions and extend their footprint of 2,028


towers in the continent.

The latest spate of tower carve outs, consolidation and transactions


has collapsed with parties failing to reach an
agreement regarding the consolidation. Bouygues
Telecoms revenues had been hit by the entrance of
FREE mobile into the French market which led to
a price war. The entrance of FREE had previously
also ben a factor in the takeover of Vivendis SFR by
Altices Numericable.
France: ARCEP proposes curtailment of network
sharing agreements
Eurasia: Turkcell submits a binding offer for
TeliaSoneras stake in FINTUR
TeliaSonera intends to divest its stake in FINTUR,
the mobile business it owns with Turkcell in
Kazakhstan, Azerbaijan, Georgia and Moldova.
With Turkcell already owning a 41.45% stake in
the company, it has submitted a binding offer
to acquire TeliaSoneras stake. In an interview
with TowerXchange, Turkcells CSO suggested the
company felt it could create more value for their
shareholders and customers if they took a bigger
role in the management of their subsidiaries in the
region.
France: Orange takeover of Bouygues Telecom
collapses
After entering into official negotiations in
January, Oranges takeover of Bouygues Telecom
102 | TowerXchange Issue 16 | www.towerxchange.com

French telecoms regulator, the Regulatory


Authority for Electronic Communications and
Posts (ARCEP) has proposed the curtailment of
network sharing agreements between Orange
and FREE mobile and between SFR-Numericable
and Bouygues Telecom. The move is designed
to stimulate what the regulator calls crucial
investments into telecoms infrastructure in the
country.
Germany: American Tower seeks minority
investor
Investors including Blackrock have been
approached regarding acquiring a potential 1020% stake in American Tower Germany. With
the European tower industry starting to open
up and sizeable portfolios potentially coming to
market, such investment could well be used to

Germany: Telefnica Deutschland sells towers to


Telxius
Following the restructuring of its Spanish and
Latin American assets into infrastructure business
Telxius, Telefnica has announced the sale of its
2,350 German towers to the subsidiary for a cash
price of 587mn (249,787 per tower). The are no
plans for a sale of the remainder of their estimated
12,000 sites the majority of which believed to be
rooftops to the entity.
Germany: Deutsche Telekom brings in advisors
to look at a spinoff or IPO of infrastructure
Deutsche Telekom has reportedly appointed
advisors to look into a potential IPO or spinoff of
their infrastructure assets. Deutsche Telekoms
27,000 towers (of which 8,000 are ground based
towers) are managed by their infraco Deutsche
Funkturm. Talks regarding a potential sale or IPO
are said to be in the very early stages and it has yet
to be clarified which assets may be included in such
a transaction.
Italy: EI Towers and Cellnex/ F2i still in the
running for INWIT
The sale of a stake in Telecom Italias INWIT is still
ongoing with Italian broadcast towerco EI Towers
and Spanish towerco Cellnex (in conjunction with
F2i) the two shortlisted bidders. EI Towers favour a
www.towerxchange.com | TowerXchange Issue 16 |

XX

smaller 25% stake with the deal thought to include


the transfer of 1,000 EI sites to INWIT, whereas
Cellnex prefers a larger stake - seeking the initial
45% of equity on offer and following this with a
takeover of the entire share capital. In addition to
the complexities of the bids, the deal process has
been further slowed by the resignation of Telecom
Italia CEO, Marco Patuano. Announcements are
expected in mid May. Both the Cellnex and INWIT
CEOs have intimated that a Cellnex takeover would
afford greater synergies; whilst other reports
suggest that the recent alliance of INWIT and EI
Towers shareholders, Vivendi and Mediaset - could
favour the Italian companys bid.

have voiced their concerns that it could lead to


higher prices, less choice and reduced innovation
for mobile customers in Italy.
Italy: INWIT finalises the acquisition of 76 towers
in Lombardy
INWIT has finalised the purchase of 76 telecom
towers in Lombardy, mainly located in the province
of Brescia. The transaction, was achieved through
the acquisition of three companies Gestione Due
S.r.l., Gestione Immobili S.r.l. and Revi Immobili
S.r.l. for a total amount of 7.9mn.

Orange and Telkom Romania have signed two


separate agreements governing fixed and 4G
networks in the country. Orange, which currently
does not have fixed internet infrastructure in
Romania, will gain access to Telkoms network, whilst
Telkom will be able to use Oranges 4G network
which is the most extensive in the country. The
deal is seen as win-win for both parties, as Orange
would have to invest massively to create its own
fixed broadband network while Telekom has a lot of
catching up to do on 4G data coverage.
Russia: VimpelCom and MegaFon sign RANsharing
agreement

Kazakhstan: Tele2 and Altel form joint venture


Italy: Rai Way and EI Towers merger talks to
reopen?
After the Italian government blocked EI Towers
attempted takeover of rival broadcaster Rai Way
amidst competition concerns, EI Towers have told
media that they have not given up on the possibility
of an acquisition. EI Towers continue to build their
infrastructure portfolio in Italy through the rolling
up of smaller.
Italy: EC competition authorities study Wind 3
Italia merger
Competition authorities at the European
Commission have launched a full investigation into
the proposed merger between VimpelComs Wind
and Hutchisons 3 in Italy. Such a merger would
likely put the new entity in poll position in the
Italian operator market but competition authorities
XX | TowerXchange Issue 16 | www.towerxchange.com

Swedens Tele2 and Kazakhtelecoms Altel have


announced that they will be joining forces in the
Kazakh market. The move is part of a strategy to
close the gap on number one and number two
operators Kcell and KaR-Tel (Beeline), although the
merger will still leave the new entity some 14-17%
short of its rivals market shares.

VimpelCom and MegaFon have announced a


partnership to construct, operate and share RAN
infrastructure across ten regions in Russia in a bid
to more cost effectively rollout their 4G networks.
The agreement will be the largest network sharing
partnership in the country and will involve the
deployment of over 1,300 additional base stations.
Russia: MTS creates their own towerco

Poland: Emitel seeks refinancing


Polish broadcast towerco Emitel, with a portfolio
of 370 sites, is reportedly seeking refinancing. The
company has recently invested capital to add fibre
to its towers, a strategy which other players in the
market are likely to follow.
Romania: Orange and Telkom sign agreements
for infrastructure sharing on fixed and 4G
networks

MTS has made 5,500 towers, approximately half their


portfolio, available for commercial lease through
MTS Towers. There is no indication that this is the
first step toward the monetisation of the assets. In
contrast, VimpelCom has consolidated their 10,400
towers into National Tower Company, in advance of a
sale and leaseback, the process for which is drawing
to a close. MegaFon has also carved out their 14,000
towers into First Tower Company, explicitly stating
their intent to sell to a strategic acquirer.
www.towerxchange.com | TowerXchange Issue 16 | 103

Russia: Russian Towers, RDIF and Vertical emerge


as frontrunners to secure VimpelCom towers
As the process to sell VimpelComs Russian
towers draws toward a close, two local towercos
and Government fund RDIF have emerged as
frontrunners. Russian Towers are backed by the
EBRD, UFG Private Equity, Macquarie (specifically
MRIF), ADM Capital, Sumitomo Corporation and the
IFC and have built over 1,800 towers plus hundreds
of lamp-post solutions in the country. Privatelyowned startup Vertical have raced to a portfolio of
1,600 towers and lamp-posts. It seems increasingly
unlikely acquiring investors will have an appetite
for VimpelComs rooftop sites, which may have been
included to boost the deal valuation VimpelCom
are thought to be holding out for a valuation north of
$600mn.
Spain: Zegona fail to secure funding for Yoigo
acquisition; MASMOVIL offer back on the table
UK based Zegona Communications has reportedly
failed to secure the funding required for a reported
630mn takeover of TeliaSoneras Yoigo. After
having been outbid by Zegona previously, Grupo
MASMOVILs 550mn offer is now reportedly being
reconsidered by TeliaSonera, although it is yet
unknown whether TeliaSonera will grant Zegona
additional time to secure the necessary funding to
support their higher offer.
Spain: Reports suggest Telxius could IPO in July
TMTfinance report that Telefnica will IPO Telxius in
104 | TowerXchange Issue 16 | www.towerxchange.com

July 2016, seeking a 4-6bn valuation. Over 16,000


towers have been injected into Telxius, which
makes 40% of revenue from the tower business and
60% from submarine cable. For more information,
see our detailed analysis of Texius later in this
Journal.
Turkey: Turkcell announces IPO of Global Tower
business
Turkcell has announced their intent to IPO its
infrastructure unit, Global Tower. Turkcell has a
portfolio of 23,000 sites including ~8,000 macro
towers in Turkey. An IPO of the unit is somewhat
complicated by the Build-Operate-Transfer
agreement in place with the Turkish government
on the original towers. See TowerXchanges Turkish
market analysis and Turkcell interview later in this
edition for further details.
UK: Hutchison takeover of Telefnicas O2 on the
brink of collapse
The European Commission is reportedly on the
verge of blocking Hutchisons planned takeover of
O2 amidst concerns about loss of competition in
the market. In spite of the numerous concessions
proposed by Hutch it is thought that they have
been unable to alleviate the concerns of the
competition authorities. With Telefnicas net debt
sitting at 50.2bn as of Q1 2016, they are thought
to be looking for new buyers, with cable company
Liberty Global and a number of private equity firms
thought to be interested parties.

UK: WIG secures investment from 3i


The UKs Wireless Infrastructure Group has secured
75mn in investment from 3i Infrastructure. 3i joins
Wood Creek Management as shareholders in the
company and takes WIGs total capital raised up to
1bn. The funds will be used to not only scale up
WIGs infrastructure footprint in the UK but also to
expand their present into other Western European
markets.
UK: Arqiva restructuring could re-open the door
to US strategics
The ongoing strategic review of Arqiva could reopen the door to previous owners Crown Castle, or
their competitors American Tower, to enter the UK
market. Arqiva has around 10,550 active towers and
a tenancy ratio of 2.5, but the consortium of current
owners, led by CPP and Macquarie, could use the
current balance sheet restructuring exercise as an
opportunity to exit. An IPO has also been rumoured,
with a valuation north of 2bn mooted.
Ukraine: lifecell sells 811 towers to infraco
subsidiary UkrTower
lifecell, Turkcells Ukrainian subsidiary, has
announced a sale and leaseback transaction of
811 towers to UkrTower, their wholly owned
subsidiary in the Ukraine for a reported US$52mn.
Whilst the transfer was made in part to improve
the management of their towers, it will also be
part of Turkcells broader strategy to monetise
infrastructure assets
www.towerxchange.com | TowerXchange Issue 16 |

XX

The evolution of Telefnicas


Telxius
With the O2-Three merger less likely, Telefnica considers tower IPO

By Laura Dinnewell, Head of


TowerXchange EMEA

The past 12 months have been an eventful period for Spanish


operator, Telefnica. After reaching an agreement with Hutchison
in March last year to sell their UK O2 business to help alleviate
debt, it now looks increasingly likely that the merger will be
blocked by the European Commission. Their plan B of raising
capital from the monetisation of their towers and subsea cabling
has sprung into action. Following the formation of Telefnicas
infrastructure business, Telxius, in February 2016 originally
incorporating the operators ~11,000 Spanish towers and 31,000km
of subsea cabling, further towers from the Chilean, Peruvian,
Brazilian and now German businesses have been sold to the unit.
On 28 April 2016 it was reported that Telefnica had appointed
banks to prepare Telxius for an IPO.

Keywords: Americas, Americas News, Argentina, Brazil, CETIN, CTIL, Carve Out, Central America,
Chile, Colombia, Decommissioning, Europe News, Exit Strategy, Germany, Investment, MNOs, Mexico,
Multi-Region News, New Market Entrant, News, Peru, Spain, Telefnica, Telesites, Telxius, Tower Count,
Towercos, UK, Valuation, Venezuela

Read this article to learn:


< Key dates and milestones in the formation of Telxius
< The composition of Telxius portfolio of infrastructure assets
< The potential value of Telxius portfolio
< What may be next for the infraco including a potential listing on the Madrid Stock Exchange

XX | TowerXchange Issue 16 | www.towerxchange.com

Increasing financial pressures on Telefnica


Telefnica have been coming under increasing
financial pressure with weak Latin American
currencies and the performance of their opcos in
the region hitting the companys revenues hard. The
operator has amassed a significant amount of debt
following a number of acquisitions across Europe
and Latin America, including an 8.6bn takeover of
German rival E-Plus and the acquisition of Brazilian
broadband provider GVT for $9bn (7.9bn), resulting
in almost doubling of the companys debt over a
ten-year period. Telefnicas most recent financial
results show debts of 50.2bn.
The rise and fall of Hutchisons takeover of
Telefnicas O2 UK business
In March 2015, Telefnica reached an agreement
with Hong Kongs Hutchison Whampoa for the sale
of Telefnicas O2 for an initial 9.25bn with an
additional payment of 1bn once the cumulative
cash flow of the combined company in the UK
reached an agreed threshold. The deal was hoped
to go some of the way towards reducing Telefnicas
debt burden. However, in the face of concerns about
reduced competition in the UK mobile market, a
full scale review was launched by the European
Commission Competition Commission, with UK
regulator Ofcom, urging them to block the takeover.
Whilst a final decision has not been announced, the
April deadline set by the commission has passed and
reports that Hutchisons lawyers have been called in
to mount a challenge suggests that a negative verdict
has all but been reached.
www.towerxchange.com | TowerXchange Issue 16 | 105

With the collapse of the takeover so goes the


opportunity to knock 10.25bn (13.1bn) off
Telefnicas 50.2bn debt. In February, the company
announced a 2.9bn early retirement plan to help
cut its employment costs but further measures are
required to bring the debt back under control. Ever
since CFO Angel Vila hinted at a potential tower
sale during his Q3 2015 investor presentation,
monetisation of Telefnicas passive infrastructure
has been viewed as one of the key steps that the
operator would inevitably take - it just seemed a
question of when.

Figure one: Telxius portfolio of 16,154 towers


Spain 11,000

The towerco business model is becoming


increasingly popular as operators observe the
>12-18x EBITDA multiples publically listed
towercos currently trade at (versus the typical 3-4x
EBITDA of MNOs). Turkeys Turkcell has been the
latest operator to follow suit, announcing on 28
April that it has initiated the IPO process for its
infrastructure business Global Tower. In Germany,
Deutsche Telekom has also expressed an interest
in investigating a potential IPO of their infraco,
106 | TowerXchange Issue 16 | www.towerxchange.com

Germany 2,350

Brazil 1,655

Peru 849

Tower monetisations show their worth


With the carve out and IPO of a 40% stake in
Telecom Italias INWIT raising 875.3mn for the
business, and on the other side of the Atlantic, the
carve out and IPO of America Movils Telesites
raising north of 2bn for the the Mexican operator,
a precedent has been set. Telecom Italia have since
moved to monetise their tower business further with
an additional stake in the business being fought
over by Italian broadcaster EI Towers and towerco
Cellnex in conjunction with infrastructure fund F2i.

Source: TowerXchange

Deutsche Funkturm.
What do we know about Telxius assets and
Telefnicas plans for the unit?
The first infrastructure assets to be carved into the
business were ~11,000 Spanish towers and 31,000km
of subsea cabling. On 24 March Movistar Chile
(Telefnicas opco in the country) agreed the sale of
328 towers to Telxius for CLP7.85bn (10.4mn). This
was followed a week later by Telefnica Perus sale
of 849 towers to the unit and Telefnica Brasils sale
of 1,655 towers for BRL760mn (192.6mn). On 21
April, Telefnica Deutschland announced the sale
of 2,350 towers to the infraco for 587mn (the rest
of the German opcos sites, an estimated ~12,000
rooftops have not been transferred to Telxius). These
transactions bring Telxius total tower count to
16,154 (figure one) with the company also managing

Chile
328

a network of over 65,000km of submarine fibre optic


cables, of which ~31,000km are owned.
Telxius reports pro forma FY15 revenues of 600mn,
with 60% attributed to the submarine cabling
components of their business and 40% to towers. Of
that 40% from towers, 15% comes from their Latin
American towers and 85% from their European
towers (figure two). Calculating the average revenue
per tower we arrive at the figure of just under 17k
per site - in line with the revenues reported by
leading European independent towerco, Cellnex.
Alberto Horcajo, former CFO of Telefnica Brasil,
has been announced as Telxius new CEO. In a press
release it was stated that the formation of Telxius
was part of a strategy to optimise Telefnicas
asset portfolio, taking a more specialised and
focused approach. The group plans to increase the
number of services they provide to other operators,
www.towerxchange.com | TowerXchange Issue 16 |

XX

infrastructure Co.
improving their return on capital invested and
is looking at taking advantage of further growth
opportunities in the sector, including the possibility
of incorporating third party assets.

Table one: Telefnica asset sales to Telxius

formed by fiber-optic submarine cables and


mobile towers
Country

Whilst an IPO of the unit has not formally been


Spain
announced, TMTfinance report that Telefnica
International
network:
>65,000km
submarine
fiberhave hired Goldman Sachs and JP Morgan to join
opticthe
cables
(~31,000km
arelisting
owned)
Germany
UBS in running
process.
An early July
on
the Madrid Stock Exchange has been mooted and,
Brazil
given how quickly the process has moved to date, we
expect such time lines to be feasible.

~16,000 telecom towers in Spain, Germany and Peru


selected
What could
Telxius countries
be worth? in LatAm
Chile

Number of towers
sold

Deal Value ()

Price per tower


()

2,350

587,000,000

249,787

1,655

192,600,000

116,727

10,400,000

31,707

11,000

849
328

The valuations ascribed to injected assets are seldom


a good guide to the future value of the combined
entity - on the MNOs balance sheet towers are a

Sources: Press releases, Company reports

Balanced portfolio & exposed to mature and


depreciating asset with opex - theyre a cost centre,
emerging
markets
whereas the proposition Telxius represents to
Figure two: breakdown of Telxius
prospective investors is a set of robust long term
contracts deriving revenue from the leasing of
towers and subsea cable capacity to Telefnica and
to third parties.

revenue

Operations breakdown (2015PF)


Submarine Cables

Towers

Tower Revenues

~60%

Latam
~15%

~40%
Total Revenue

Europe
~85%

Source: Telefnica quarterly results


XX | TowerXchange Issue 16 | www.towerxchange.com

Only the values from the sale of towers in


Telefnicas subsidiaries in Germany, Brazil
and Chile have been disclosed and with widely
differing average tower prices it makes it difficult to
extrapolate values for their Spanish and Peruvian
transactions. Comparing Spain and Germany, the
German transaction is thought to be exclusively
composed of ground-based towers, whereas the
Spain number is thought to include rooftop sites.
As such, one would expect the average value of the
Spanish sites to be lower.

Perhaps the nearest equivalent with which


to benchmark might be CETIN in the Czech
Republic, which also carved out towers and other
infrastructure from O2 Czech Republic - although
availability of meaningful data is limited as O2 Czech
Republic had been sold to local investor PPF, who
drove the carve out and swiftly re-privatised it after
a brief listing on the Prague Stock Exchange.
In regards to what valuation Telxius could achieve
at IPO, initial press speculation has suggested that
they are targeting a range of 4-6bn, which seems
aggressive when compared to Cellnex; a more
mature towerco of similar scale valued at 3.34bn
(at the time of writing).
The listing of a 66% stake in Cellnex, Abertis
Telecoms infrastructure business, saw shares
www.towerxchange.com | TowerXchange Issue 16 | 107

Figure three: Timeline of the creation of Telxius


Pre March 2015

Telefnicas net debt


more than doubles

March 2015

Sept 2015

Telefnica reaches

CFO Angel Vila

an agreement with hints at a potential


Hutchison to sell

over the course of


a decade following

monetisation of

UK O2 business for Telefnicas towers

numerous acquisitions

10.25bn to help

in his Q3 investor

across Europe and

tackle escalating

presentation

Latin America

debt

Oct 2015

Dec 2015

Jan 2016

Jan 2016

The European

Bloomberg reports

Ofcoms Sharon White

News circulates that

Commission launches

Telefnica to be

meets EU Competition

Telefnica is carving out

an investigation

considering a carve

Commissioner

its ~11,000 Spanish towers

Hutchisons takeover

out of 60,000 towers

Margrethe Vestager to

into new infrastructure

of O2

into an infrastructure

urge her to block the

unit, Wireless Towers

unit

O2 takeover

Feb 2016

March 2016

March 2016

April 2016

April 2016

April 2016

April 2016

April 2016

Telefnica announces the creation of

Movistar Chile

Telefnica Peru

Telefnica Brasil

Telxius saying it will initially consist

announces

announces

announces the

Speculation

Telefnica

Telefnica Q1 2016

Reports circulate

mounting that

Deutschland

results presented

that Telefnica

of about 15,000 phone towers and

the sale of

the sale of

sale of 1,655

the EC will block

announces the

with net financial

plans to list

an international submarine-cable

328 towers

849 towers to

towers to Telxius

Hutchisons

sale of 2,350

debt sitting at

Telxius on the

network covering 31,000 kilometers

to Telxius for

Telxius

for BRL760mn

takeover of O2

towers to Telxius

50.2bn

Madrid Stock

with more assets being included

CLP7.85bn

(192.6mn)

as the deadline

for 587mn

gradually over coming months.

(10.4mn)

Telefnicas ~11,000 Spanish towers

Exchange in
early July

for their review


approaches

are known to be included. Alberto


Horcajo is announced as CEO

surge 12% on the first day of trading, valuing it at


3.5bn (US$3.8mn). The IPO of a 40% stake in INWIT
(Telecom Italias infrastructure unit) the following
month, saw shares rise more than 9% on its trading
debut on the Milan stock exchange, giving the
company a market cap of around 2.4bn, and raising
a gross 875.3mn (US$956.7mn) for Telecom Italia in
the process. INWIT has 11,519 towers on the balance
sheet, whilst Cellnex have 15,140, yet differences
108 | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

in their market cap at their trading debuts can


largely be attributed to (amongst other factors)
Cellnex proven track record in the acquisition and
management of third party towers. Similar to INWIT,
the newly created Telxius does not come with this
experience and whilst multiple tenants do exist on
Telefnicas towers, we have generally seen that
it can take a full year for a new carve-out towerco
to genuinely start thinking and behaving like an

independent towerco.
Looking across the Atlantic to Mexico, the recent
carve out of America Movils 12,555 towers into
new infrastructure business Telesites may serve
as a cautionary tale considering the fall of its stock
(from Mex$13.38 to approximately Mex$11.00
during the third week of January) since its listing on
21 December. Its target price and overall financial
www.towerxchange.com | TowerXchange Issue 16 |

XX

Table two: A history ofTelefnica transactions up to the creation of Telxius


Year

Country

Buyer

Tower
count

Deal
value US$

Cost per
tower US$

Deal
structure

2015

Germany

Deutsche Funkturm

7700

Not disclosed

Not disclosed

Asset transfer

2014

Spain

Cellnex

4277*

419,650,000

98,118

SLB

2013

Brazil

American Tower

93

18,000,000

193,548

SLB

2012

Chile

Torres Unidas

400

Not disclosed

Not disclosed

SLB

2012

Brazil

SBA Communications

800

178,000,000

222,500

SLB

2012

Brazil

American Tower

192

33,000,000

171,875

SLB

2012

Brazil

BR Towers

1912

252,000,000

131,799

SLB

2012

Brazil

American Tower

1500

225,000,000

150,000

SLB

2012

Chile

American Tower

558

96,000,000

172,043

SLB

2012

Spain

Cellnex

500

49,050,000

98,100

SLB

2011

Mexico

American Tower

1554

323,000,000

207,851

SLB

2011

Mexico

American Tower

584

122,000,000

208,904

SLB

2011

Colombia

American Tower

125

18,000,000

144,000

SLB

2011

Brazil

Grupo TorreSur

1358

206,000,000

151,694

SLB

Total

21,553

1,939,700,000

162,536

*Includes an undisclosed quantity of Yoigo towers

goals for 2016-2020 have been considered bold


by analysts, especially if compared with its listed
competitors such as SBA Communications and
American Tower. TowerXchange would be inclined
to reserve judgement on Telesites; co-location
growth may not reach the aggressive targets set out
in Telesites IPO, but the towercos close relationship
with Telcel has enabled them to build over 2,000
XX | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

new towers in their first year.


At present it is also unknown what sort of equity
Telefnica would look to retain in Telxius, should
they list the company on the Madrid stock exchange.
Considering the fierce competition for INWITs
assets between EI Towers and Cellnex (with
American Tower having reportedly been involved in

early bidding stages), leaving the door ajar to sell a


future stake in Telxius to a strategic investor could
certainly be attractive and so an IPO followed by a
later strategic sale may be an option that Telefnica
would consider.
Within the European market (where 85% of Telxius
revenues from towers are generated), Cellnex
represents the only sizeable independent towerco
with a presence in multiple markets. A portfolio
such as that of Telxius would offer an attractive
opportunity for not only Cellnex to extend its strong
hold but it would also present an opportunity for
a well capitalised European towerco to reach scale
or an international player to mark their entry into
the European market. Given the presence of a
number of major international players at the recent
TowerXchange Meetup Europe, we feel there would
be no shortage of interested parties!
What other towers could be incorporated into
Telxius?
Prior to the Telxius transactions,Telefnica had sold
21,553 towers to date, raisingjust under US$2bn
at an average of US$162,536per tower (table two).
TowerXchange estimate there are approximately
32,200 sites left on Telefnicas balance sheet,
excluding those already transferred to Telxius.
Telefnica retains around 12,000 rooftop sites in
Germany, but landlords make it difficult to co-locate
rooftop sites in Germany, so these assets are unlikely
to be transferred to Telxius.
Telefnica O2s UK towers now sit on the CTIL
www.towerxchange.com | TowerXchange Issue 16 | 109

balance sheet, a joint venture infraco with


Vodafone. Managed as an integrated portfolio,
with significant decommissioning continuing and
RANsharing being overlaid, extraction of the O2
towers would be a complex task, and would be
rendered moot if Telefnica persevered with their
plans to divest O2; if not to Hutch then perhaps
to a new entrant regulators would find less
objectionable, such as Liberty Global.
So if UK and further German assets are unlikely
to be included in Telxius, what else could be?
Telefnica has ~5,000 towers in Argentina, where
an independent tower market is just starting to
emerge. However, even though Argentinas new
government is making significant progress in
opening the market to international investment, it
may be too soon to test the resolve of the European
and U.S. pension funds who will ultimately buy
Telxius stock; Argentina remains a bit too frontiersy
to fit with the narrative of de-risked, long term
recurring telecom infra revenues.
However, we dont think Telefnica has injected
all their Peruvian and Chilean towers into Telxius,
nor any of their towers in Colombia, Venezuela,
Ecuador and Central America, nor the few
Telefnica has left in Mexico. The Telxius balance
sheet could be swelled by ~10,000 additional CALA
towers prior to IPO. Its not going to be the 60,000
tower giant speculated earlier this year, but Telxius
could be big, it could be valuable, and Telefnica
clearly think the time is right to monetise their
assets on the public markets. TowerXchange are
inclined to agree!
110 | TowerXchange Issue 16 | www.towerxchange.com

Thursday 16 and Friday 17 June, Boca Raton Resort and Club, Boca Raton

Meetup Americas 2016


A unique networking opportunity with 250 leaders of the CALA telecom tower industry

To discuss your participation, contact Annabelle on +44 7423 512588 or


email amayhew@towerxchange.com
DIAMOND
SPONSOR:

Silver Sponsors:

Bronze Sponsors:

www.towerxchange.com | TowerXchange Issue 16 |

XX

Global tower market maturation


Towercos and infracos now own 61.9% of the worlds 3.4mn towers
During Q1 2016 the proportion of the worlds
telecom and broadcast towers owned and operated
by towercos or specialist infracos rose from
60.3% to 61.9%. A new, parallel industry to retail
telecommunications, the tower industry is building
the vast majority of the worlds new towers. This 20
year old, US$192bn infrastructure asset class currently
owns 2,092,865 of the worlds 3,379,806 towers. In this
quarters global tower market overview, Id like to take
the opportunity to contrast the maturity of different
tower markets worldwide.
Keywords: Africa & ME, Africa & ME Research,
Americas, Americas Research, Asia, Asia Research,
Business Model, Carve Out, Deal Structure, Europe,
Europe Research, Infrastructure Sharing, Market
Overview, Multi-Region, Operator-Led JV, Research,
Russia & CIS, Sale & Leaseback, Tower Count,
By Kieron Osmotherly, CEO, TowerXchange

TowerXchange Research, Towercos

Read this article to learn:


< The scale of the tower industry worldwide and by region
< When will the MENA tower market achieve launch velocity?
< Why and where tower transaction deal flow is accelerating in Europe
< Why Asia is currently the fastest growing tower market in the world
< How the increasing maturity of the SSA and CALA tower industries affects market dynamics

XX | TowerXchange Issue 16 | www.towerxchange.com

There remains a pronounced difference in MNOs


attitude toward passive infrastructure ownership,
ranging from North and Northeast Asia, where
operators cling to their towers as a primary source
of differentiation, to the US tower market, where
a significant majority of towers were long since
transferred from MNOs to independent towercos, a
critical evolution in vaulting the US mobile market
from laggard to leadership status.
Outside of Northern and Northeast Asia, MENA
is the least mature tower market, but a landmark
first transaction has already been closed (in Egypt
by Eaton Towers, who are closing in on a second
deal with counterparts Orange Egypt). A further
five decent scale MENA tower transactions are in
the pipeline: all three MNOs in KSA are at various
stages of bringing their towers to market, while
Zain are selling towers in Kuwait and VimpelCom
may soon turn their attentions to monetising
their Algerian towers. Weve even heard talk of
potential joint venture, operator captive towercos in
Bahrain and the UAE. Predicting when, or even if, a
MENA tower deal will close is a risky business, but
TowerXchange will stick our necks out and say we
anticipate towerco penetration in MENA reaching
around 14% by the end of 2016, exceeding 20% by
the end of 2017, by which time the region will have
matured to launch velocity status.
Our rating of Europes maturity as a launch
velocity tower market indicates both the high
quantity of prospective deals in the transaction
pipeline, and the relatively low penetration of
independent towercos to date, representing just
www.towerxchange.com | TowerXchange Issue 16 | 111

13% penetration. Penetration in Europe is topped


up to 37% by several large scale joint venture
infracos, and a growing trend favoring MNO-captive
carve out towercos and infracos, most recently
exemplified by Telefnicas Telxius. The other
concentration of carve outs is in Russia, where each
of the three leading MNOs has created their own
towerco, each with a different purpose: VimpelCom
with intent to sell and leaseback National Tower
Company as soon as their valuation is met,
MegaFon with intent to professionalise asset
management in First Tower Company before sale
to a strategic investor, while 5,500 towers have been
transferred to MTS Towers with the apparent
intention of retaining the value created by colocation.
The status of Europe as a launch velocity market
masks a variety of hot and cold regions of activity.

Region

Estimated tower count

Towerco penetration

Tower market maturity

North America

140,000

82%

Mature

India

453,500

68%

Mature

SSA

122,739

42%

Maturing

CALA

162,000

48%

Maturing

S & SE Asia (exc India)

318,263

29%

High growth

China

1,180,000

100%

High growth

Europe

600,000

36%

Launch velocity

MENA

139,800

1%

First movers

NE & E Asia (exc China*)

247,600

0%

Dormant
Source: TowerXchange

TowerXchange market maturity classifications


Dormant: negligible towerco activity, almost all
towers remain on the balance sheets of MNOs,
who still see the network as a primary source of
competitive differentiation.
First movers: early adopter MNOs are
considering the first transactions in the region,
but less than 10% towers have been transferred
from MNOs to towercos. First mover markets are
generally treated with caution by investors, but
on the other hand much of the low hanging fruit
assets may yet to have been picked.

112 | TowerXchange Issue 16 | www.towerxchange.com

Launch velocity: MNOs are seriously considering


monetising their towers, and the first four landmark
transactions have taken place, with over 10% of
towers in towerco hands. While towercos still dont
own a high proportion of towers, the pipeline of
future transactions is starting to fill up.
High growth: MNOs have bought in to the
principle of partnering with towercos, and there
are immediate drivers to monetise assets. Multiple
concurrent divestiture processes mean towercos are
equally busy raising and deploying capital.

Maturing: deal flow is starting to plateau an


increasing proportion of the investible towers
have been absorbed by towercos, whose attention
increasingly turns to the integration and leaseup
of acquired assets, and the drive to maximise
efficiency and profitability.
Mature: most of the MNO towers have been
acquired, towercos are able to focus their
attention on the last improvements to site level
profitability and tenancy ratio. Much of the M&A
in mature tower markets consists of consolidation
between towercos, while those who achieve scale
may consider an IPO
www.towerxchange.com | TowerXchange Issue 16 |

XX

Comparing towerco penetration worldwide


100%

China 1,180,000 /
1,180,000
towers

36%

Europe
216,538 /
600,000
towers

68%

India
308,855 /
453,500
towers

29%

0%

1.4%
48%

82%

USA
CALA
S & SE Asia N & East Asia
77,362 / 114,139 /
exc China
exc India
162,000 140,000
0 / 247,600
90,801 /
towers
towers
towers
318,263
towers

42%

18%

Oceania
SSA 2,692 /
MENA
51,332 / 14,900
2,040
/ 139,800 122,739 towers
towers
towers

* Europe includes JV infracos, broadcast towercos and operator-captive towercos as towercos. Independent towercos own 13%
Sources: TowerXchange, RBC, Delta Partners, Mott MacDonald

The aforementioned Russian activity creates a


hotspot to the east, which is warming neighboring
CIS countries, where tower transactions are forecast
from 2017. Another hotspot is in Southern Europe,
where Cellnex and EI Towers are battling for
control of TIMs INWIT in Italy, and in Spain where
Cellnex now has a peer in Telxius. Considered in
isolation, Spain and Italy are certainly maturing
markets. Other European tower markets to watch
in Q2 2016: Turkey, where Turkcell has stated
intent to list their carve-out towerco Global Tower
on the local stock exchange; and Germany, where
Telefnicas Telxius has recently taken ownership of
XX | TowerXchange Issue 16 | www.towerxchange.com

the MNOs 2,350 towers, where Deutsche Telekom


is considering monetising the 27,000 towers
in subsidiary Deutsche Funkturm, and where
American Tower Germany is raising third party
investment.
The rest of Northern Europe is a more static
market, perhaps because the MNOs of the UK and
Scandinavia have organised infrastructure sharing
through several joint venture infracos which
themselves have delivered some of the prospective
efficiency gains of partnering with independent
towercos.

It is strange to see a market 100% penetrated by


towercos classified only as high growth rather
than mature, but the transformation of China
to a co-construction and infrastructure sharing
model has happened almost overnight, with China
Tower Company (CTC) still building toward capacity.
Although over a million legacy towers have
been transferred from Chinas MNOs to CTC, our
categorisation of China as high growth stems from
the fervent new build market (currently 150,000+
new towers per annum), which is being fought
for by CTC and a growing band of independent
towercos. To learn more about the structure of the
www.towerxchange.com | TowerXchange Issue 16 | 113

61.9%

2,092,865 of the worlds


3,379,806 telecom and
broadcast towers are
now owned by towercos

towercos rather than MNOs led a rollout from the


outset, has been a bumpy ride for towercos and
MNOs alike, with towerco consolidation coming
earlier than some might have anticipated; those
who have built quality assets with a disciplined
approach to contractual terms will likely prosper.

The Indian tower market is almost re-maturing


after investors seemed to accept that valuations had
been recalibrated after four years of restructuring
in the wake of the cancellation of 122 MNO licenses.
With towers now changing hands for a more
palatable ~US$60,000-80,000 each, deal flow has
returned to India, again characterised by towerco
consolidation rather than sale and leasebacks. The
most eagerly anticipated tower deal in India would
be the inauguration of a BSNL tower company.

Brazil and Mexicos status as maturing markets,


with little left to acquire from MNOs, brings the
CALA region to an overall maturing level, yet
there is high growth to be found in the Andean
States (some would say too high growth, with
over 20 towercos putting sticks in the ground in
Colombia alone!) In this edition of TowerXchange
we take a closer look at the long-dormant
Argentinian tower market: has the blue touch
paper been lit? Could CALAs second largest
telecom market achieve launch velocity in the
next 12-18 months?

This variation of tower market maturity, and


variations in operator requirements, has created
a parallel set of variant towerco business models;
from steel and grass to full power as a service,
from huge operator-led infracos capturing value
for parents, to lean, fast build to flip independent
developers. Whether you have an appetite for high
growth, high return, high risk opportunities in
early stage or fast growth markets, or prefer a more
conservative exposure to risk and therefore growth
in a more mature market, there is something in this
asset class for everyone

Source: TowerXchange

Chinese tower market, check out the special feature


later in this edition.
The tower markets of Southern and Southeast Asia
are currently the most dynamic and fast growing
in the world. Within the region we still have
considerable variance of local market maturity,
from the old growth, mature tower market of
Indonesia, where most operator towers that can be
sold have been sold, and where three or four larger
towercos continue to rollup assets from as many
as 35 small independent developers. Then we have
high growth markets like Bangladesh and Pakistan;
in the latter country towercos own <1,000 towers
now, but rumors suggest almost every MNO tower is
coming to market (CM Pak notwithstanding).
Myanmar is increasingly a category of one; the
great towerco experiment whereby independent
114 | TowerXchange Issue 16 | www.towerxchange.com

The tower market in SSA is showing the classic


symptoms of maturing. Again, most of the investible
towers have been acquired, and this quarter weve
seen the first towerco consolidation in Nigeria with
IHS acquiring HTN Towers and Hotpsot Networks
Limited. For the three privately owned members of
Africas Big Four attention turns to the path toward
monetisation; integrating their last acquisitions,
driving tenancy ratio growth, and instigating
operational improvements to enhance site level
profitability.

www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange now tracks 185 towerocs and infracos who own


2,092,685 of the worlds 3.4mn telecom and boadcast towers
Rank

Towerco

Count

Countries

Rank

Towerco

Count

Countries

China Tower Company

1,160,000

China

15

Protelindo

14,737

Indonesia, Netherlands

American Tower

143,534

USA , Brazil, Chile, Colombia,

16

First Tower Company

14,000

Russia

17

NetWorkS!

13,000

Poland

Africa, Uganda, Nigeria

18

Telesites

12,874

Mexico

Peru, Mexico, Costa Rica,


Germany, India, Ghana, South

Indus Towers

119,881

India

19

DIF (formerly TRUEGIF)

12,138

Thailand

Reliance Infratel

43,379

India

20

CTIL

12,000

UK

Crown Castle

40,085

USA

21

MBNL

12,000

UK

Bharti Infratel

38,458

India

22

Tower Bersama

11,389

Spain

GTL Infrastructure

29,432

USA

23

INWIT

11,200

Italy

Deutsche Funkturm

27,000

Germany

24

Arqiva

10,550

UK

SBA Communications

26,522

USA, Canada, Brazil, Panama,

25

Global Tower / UkrTower

8,681

Turkey, Ukraine

Guatemala, El Salvador,

26

Tower Vision

8,400

India

Ecuador, Colombia

27

STP

7,770

Indonesia

Nigeria, Cameroon, Ivory

28

Eaton Towers

7,070

Ghana, Kenya, Uganda, South


Africa, Niger, Burkina Faso,
Egypt

29

Victus Networks

7,000

Greece

30

TDF

6,966

France

10

Costa Rica, Nicaragua,

IHS Towers

23,493

Coast, Rwanda, Zambia


11

edotco

16,450

Malaysia, Sri Lanka,


Bangladesh, Cambodia,
Pakistan, Myanmar

12

Telxius

16,233

Spain, Germany, Brazil, Peru, Chile

31

Helios Towers Africa

6,556

Tanzania, DRC, Congo B, Ghana

13

RTRS

16,000

Russia

32

Grupo TorreSur

6,500

Brazil

14

Cellnex

15,120

Spain, Italy

33

MTS Towers

5,500

Russia

*Bharti Infratel owns 42% of Indus Towers, making their total tower count effectively 88,808. Only fully owned towers shown here to avoid double counting

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 | 115

Rank

Towerco

Count

Countries

Rank

Towerco

Count

Countries

34

Mitratel

5,500

Indonesia

61

Torres Unidas

1,080

Chile, Peru

AT&T Towers

5,059

USA

62

Miteno

1,000

China

Ascend Telecom

4,843

India

63

Komet Infra Nusantara (KIN)

1,000

Indonesia

CETIN

4,800

Czech Republic

64

Persada Sokka Tama

1,000

Indonesia

38

US Cellular Towers

4,281

USA

65

Shere Group

960

UK, Netherlands

39

Vertical Bridge

3,700

USA

66

Central States Tower

921

USA

40

EI Towers

3,200

Italy

67

QMC Telecom

901

Brazil, Mexico, Colombia & Puerto Rico

41

FPS

2,618

France

68

TowerCo

900

USA

TT-Network

2,500

69

Tower Ventures

894

USA

Rai Way

2,300

70

Towershare

800

Pakistan

44

IBS Tower

2,185

Indonesia

71

esk Radiokomunikace

800

Czech Republic

45

T-Mobile Towers

2,157

USA

72

Open Tower Company

800

Netherlands

46

Phoenix Tower International

2,127

Brazil, Dominican Republic, Costa


Rica, Panama, USA, Colombia

73

Sacofa

765

Malaysia

74

Brazil Tower Company

753

Brazil

SWAP Telecoms and Technologies

702

Nigeria

BCTek

700

Nigeria

TowerCo of Madagascar

700

Madagascar

Towercom (Slovakia)

700

Slovakia

79

Continental Towers

690

Colombia, Costa Rica, Panama,


Nicaragua, Guatemala, Peru, El
Salvador, Jamaica and Honduras

80

Diamond Communications

636

USA

Industrial Communications

635

USA

Broadcast Australia

620

Australia

NMS

600

Nicaragua, Mexico, Colombia & Peru

Axion

586

Spain

Centennial

565

Brazil, Mexico, Colombia

Andean Tower Partners

555

Peru, Colombia
Peru, Ecuador, Colombia, Puerto Rico, Argentina

Malaysia

35
36
37

42
43

47
48
49
50
51
52
53
54
55
56
57
58
59

Italy

Wireless Infrastructure Group

2,000

ASEAN Towers (IGT + Golden Towers)

1,972

SEATH (VinaCapital / VNI)

1,930

Russian Towers

1,800

Axicom

1,772

Australia

Vertical

1,600

Russia

Mexico Tower Partners

1,531

Mexico

Frontier Tower Solutions

1,500

Varsity Wireless

1,288

Pan Asia Majestic Eagle

1,250

Cell Site Solutions

1,203

InSite Wireless Group

1,200

Message Centre Management /

1,131

Torrecom
60

Denmark

Apollo Towers

1,100

116 | TowerXchange Issue 16 | www.towerxchange.com

UK, Ireland, Netherlands


Myanmar, Vietnam
Vietnam

Russia

Afghanistan
USA
Myanmar
Brazil
USA
USA, Mexico, Guatemala,

75
76
77
78

81
82
83
84
85
86

Nicaragua

87

Innovattel (Torresec)

500

Myanmar

88

Touch Matrix

460

www.towerxchange.com | TowerXchange Issue 16 |

XX

Rank

Towerco

Count

Countries

Rank

Towerco

Count

Countries

89

CTI Towers

457

USA

119

2RN

150

Ireland

90

Shared Access

456

Ireland, UK

120

Hibernian / Brittannia Towers

140

UK, Ireland
Malaysia

91

Retower

450

Indonesia

121

Asia Space

137

92

IIMT

450

Mexico

122

Tocsa

130

Costa Rica
USA

93

Sprint Sites USA

435

USA

123

Communication Enhancement

124

94

ITAS TIM

420

France

124

Q Towers

120

China

95

Towercom

400

Ireland

125

Service Telecom

120

Russia

96

Highline do Brasil

400

Brazil

Desabina

118

Malaysia

97

ESB Telecom

377

Ireland

Cignal

113

Ireland

98

Emitel

377

Poland

Logycom Group

100

Kazakhstan

99

Dharmoni

346

CIE

100

Ireland

100

KJS

309

Melaka ICT Holdings

95

Malaysia

101

Subcarrier Communications

300

Falck

75

Denmark

102

Link Development

300

Saurava Towers

55

India

103

Torres Andinas

300

Torre Online

51

Brazil

104

Common Tower

260

HIGHPOINT (Obelisk)

50

Ireland

105

Skyway Towers

250

Sanyuan Tec

50

China

106

Branch Communication

226

USA

HOI-MEA

50

Egypt

107

Balitowers

208

USA

Konsing Group

47

Serbia

108

Infra Quest

201

Eagle Towers

45

South Africa

Yikedbina

200

Cellcom

40

Ireland

Senno Telcom

200

Skysites

40

Brazil

Intelli Site Solutions

190

Telecom Torres

40

Brazil

Grain Management

188

Stout & Company

38

USA

Digita

187

Alticom

33

Netherlands

Pegasus Tower

173

Fanasia

27

Iran

Atlas Towers

162

USA, South Africa

Pro High Site Communication

11

South Africa

Digea

156

Greece

Perak Integrated Networks

150

Malaysia

Alfa Site

150

Brazil

109
110
111
112
113
114
115
116
117
118

XX | TowerXchange Issue 16 | www.towerxchange.com

Malaysia
Malaysia
USA
Russia
Colombia, Peru
Malaysia
USA

Malaysia
Malaysia
China
Mexico
USA
Finland
USA

126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145

www.towerxchange.com | TowerXchange Issue 16 | 117

Meet the towerco CXOs, their investors and their


partners at your next TowerXchange Meetup!

Undisclosed counts

TowerXchange MeetupAmericas 2016


June 16-17, Boca Raton, FL

3GIS, Sweden

Norkring, Norway

Antenna Hungaria, Hungary

Norkring, Belgium

AWAL Telecom, Pakistan

OCK, Myanmar

Azerconnect, Azerbaijan

OIV, Croatia

Balesia, Colombia, Peru,

Radiocom, Romania

Guatemala, El Salvador, Ecuador

RTP, Portugal

Catalina Inc, Costa Rica

Secured Towers, Nigeria

Cam Towerlink, Cambodia

Shared Networks Tanzania,

Communication Towers

Tanzania

Nigeria, Nigeria

Square1 Infrastructure, Chile,

Eco-Friendly Towers, Myanmar

Nigeria, South Africa, Myanmar

ETB, Serbia

Staghorn Infrastructure, USA

EuroTower, European remit

Summit LatAm, tbc CALA

Golden Comunicaciones,

SUNAB, Sweden

Colombia

Swisscom, Switzerland

TowerXchange's famous global towerco league table provides a simple comparison of

Infratel, South Africa

Tarpon Towers, USA

the scale of towercos by tower count. We have derived tower counts for the category's

Levira, Estonia

TASC Towers, Jordan, UAE, Lebanon

Media Broadcast, Germany

Teracom, Sweden, Denmark

frequently, while we have offer no guarantee that the counts they provide are accurate:

Mosaic, Ireland

Telecommunications Partners,

we ask for a count of complete macro towers, but inevitably some towercos inflate

MXTowers, Mexico

Peru

Myanmar Infrastructure

Towercast, France

estimates. As the product of proprietary market research, TowerXchange asserts

Group, Myanmar

Uruguay Torres, Uruguay

copyright over this table and the data listed herein. If you want to use data in your own

Net4Mobility, Sweden

Vialux, Americas

Netgrid Telecom, Romania

TowerXchange MeetupAfrica 2016


October 19-20, Johannesburg
TowerXchange MeetupAsia 2016
December 13-14, Singapore
TowerXchange Meetup Europe 2017
April 4-5, London
For agenda information and to register, visit:
www.towerxchange.com/meetups/

TowerXchange tower count research methodology

13 listed entities from quarterly statements, where available, while the other counts are
drawn from qualitative market research. Smaller towerco's count may be updated less

their tower count by including works in progress, neutral host DAS, lamp-posts and
other special structures. As such, TowerXchange's tower count should be considered

analysis, you need to request our permission.


If you wish to suggest a correction, please email Kieron Osmotherly at
kosmotherly@towerxchange.com.

118 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

RANsharing: the search for an


equitable deal for MNOs and towercos
Heated debate helps MNOs and towercos appreciate one anothers perspective

Heated debate at the RANsharing roundtable

RANsharing is always a controversial


topic at TowerXchange Meetups.
The RANsharing roundtable at the
TowerXchange Meetup Europe 2016
was tremendously useful because MNOs
and towercos both put their cards on
the table, the discussion got a little
tense, but ultimately all parties left
better understanding a little more about
what was at stake for one another. We
summarise the debate here

Keywords: Active Equipment, Active Infrasharing, Asia, Bankability, Best of TowerXchange, C-Level
Perspective, CTIL, Deal Structure, EBITDA, Europe, Europe Research, Greece, Infrastructure Sharing,
Lease Rates, MBNL, MLA, Project Finance, RANsharing, ROI, Research, Single RAN, Tenancy Ratios,
TowerXchange Research, UK, Valuation, Victus Networks

Read this article to learn:


The different permutations of RANsharing which must be anticipated in MLAs
Three example RANsharing case studies: the UK, Greece and an Asian example
Understanding MNO and towerco perspectives on this contentious issue
The search for the magic number: what is a fair price, and fair contractual terms, to ensure a
win-win outcome from RANsharing?
< How the potential for future RANsharing affects tower valuations and divestitures
<
<
<
<

XX | TowerXchange Issue 16 | www.towerxchange.com

Introduction
If RANsharing is an exciting potential source of
efficiencies for MNOs, its an equally daunting
potential dampener of revenue for towercos. With
so much at stake, it is perhaps unsurprising that
negotiations between MNOs and towercos can get
a little heated where RANsharing is concerned.
Provision for the treatment of RANsharing must be
negotiated into towercos Master Lease Agreements,
so what is the magic number how should
RANsharing be priced, if at all?
RANsharing 101
There are already several permutations of
RANsharing, with the potential for still more to
evolve in the future. The foremost of these are:
< MORAN (Multi Operator RAN where antennae are
shared but not spectrum)
< MOCN (Multi Operator Core Network, in which
both antennae and spectrum are shared)
< GWCN (Gateway Core Network, where both RAN
and core network are shared)
These are illustrated in figure one, taken from
Analysys Masons excellent essay in a issue nine
of the TowerXchange Journal: RANsharing:
opportunity or threat?
With so many brands of RANsharing, it is difficult
for a towerco to know what it is seeking to protect
itself against.
RANsharing joint ventures in Europe
www.towerxchange.com | TowerXchange Issue 16 | 119

Europe has one of the worlds least mature tower


industries in part because instead of selling passive
infrastructure, in many instances Europes MNOs
dived straight into active infrastructure sharing joint
ventures. The continent is home to the worlds most
mature RANsharing ecosystems, with several deep
RANsharing partnerships in prominent markets.
These RANsharing partnerships have generally been
successful for MNOs, driven by a principle that if
youre an MNO with your own estate into which
you invest 100mn you get 100mn back, whereas if
sharing the same network costs two parties 50mn
each (or you still put in 100mn each and rollout
faster). The benefits are obvious before one even
considers the savings from sharing opex.
In order for independent towercos to take root in
markets where RANsharing is taking place, or may
take place in the future, towercos must adapt their
contracts, business models and expectations. When
the independent towerco business model took root
in the U.S., India and even more recently in SSA,
RANsharing was not prevalent. The balance of
power is different in Europe, and the contractual
provisions concerning RANsharing can be critical
to ensuring a win-win outcome for MNOs and
towercos.
Lets compare three examples; from a market where
RANsharing is widespread and where towercos
are active; another market with a RANsharing
joint venture (JV) where towercos may enter in
the medium term; and a market where there is
currently little or no RANsharing but where several
MNOs are seeking to monetise their towers.
120 | TowerXchange Issue 16 | www.towerxchange.com

Figure one: RANsharing models as identified by Analysys Mason


MORAN
MORAN

Service Service
Service Service
platforms
platforms
platforms
platforms
HLR

HLR HLR

HLR

MOCN
MOCN

GWCN
GWCN

Service Service
Service Service
platforms
platforms
platforms
platforms
HLR

HLR HLR

Service Service
Service Service
platforms
platforms
platforms
platforms
HLR

HLR

HLR HLR

HLR

MSC/ MSC/
MSC/ MSC/
SGSN SGSN
SGSN SGSN

MSC/ MSC/
MSC/ MSC/
SGSN SGSN
SGSN SGSN

M
MS
SC
C// M
MS
SC
C//
S
SG
GS
SN
NS
SG
GS
SN
N

B
BS
SC
C // B
R
RS
N
NC
C
C // R
B
S
C
RN
NC
C

B
BS
SC
C // B
R
RS
N
NC
C
C // R
B
S
C
RN
NC
C

B
BS
SC
C // B
R
RS
N
NC
C
C // R
B
S
C
RN
NC
C

B
BT
TS
S// N
NB
ee// B
BN
BooT
TddS
S
Nooddee B
B

B
BT
TS
S// N
NB
ee// B
BN
BooT
TddS
S
Nooddee B
B

B
BT
TS
S// N
NB
ee// B
BN
BooT
TddS
S
Nooddee B
B

Backhaul
Backhaul

Backhaul
Backhaul

Backhaul
Backhaul

First stage
active
stage ofstage
active
Firstofstage
ofRAN
active RAN SecondSecond
of active
sharingsharing
where spectrum
where where
where spectrum RAN sharing
RAN sharing
is not shared
spectrum
is
also
shared
is not shared
spectrum is also shared

Legend
Legend

O p e r a tO
o rpA
erator A

Third stage
active
Thirdofstage
of active
RAN sharing
where CS
RAN sharing
where CS
and PSand
corePS
elements
core elements
are alsoare
shared
also shared

O p e r a tO
o rpB
e r a t o r B S h a r e dSehl ae rmeednetl e m e n t

Source: Analysys Mason

RANsharing and towercos co-existing: the UK


example

Beacon, Vodafone and O2s joint 4G rollout,


underpinned by RANsharing.

The management and operation of UK telecom


networks is unlike anywhere else in the world,
largely thanks to two deep infrastructure sharing
joint ventures, CTIL (Vodafone+O2) and MBNL (EE +
Three) which between them operate over half of the
countrys ~50,000 towers.

Another JV, MBNL is one of the deepest integrated


RANshares in the world, wherein EE and Three
share sites, power and security under a mixed
MORAN business model sharing everything except
spectrum. MBNL manages RAN for EEs 2G and
4G network, and for Threes 4G, and also runs a
MORAN equivalent model for transmission. The JV
was envisaged in 2007 when the strength of market
leaders Vodafone and Cellnet (now O2) forced
Three and T-Mobile (now EE, and being acquired

CTIL owns and operates the networks of Vodafone


and O2 (Telefonica) in the UK. Structured along an
East-West divide, CTIL is programme managing

www.towerxchange.com | TowerXchange Issue 16 |

XX

around 7,000 of the countrys towers.

RANsharing looks scary, but the worst thing a towerco can do is fight
its customers. Weve got to get in front of these changes and consider
how to create value for our customers in ways which also creates value
for your towerco

by BT) to consolidate assets, decommission parallel


infrastructure, and reinvest savings and rollout to
achieve 99%+ coverage. An estimated ~1bn has
been saved over each of the initial seven years of the
joint venture.
RANsharing looks scary, said one UK towerco,
but the worst thing a towerco can do is fight its
customers. Weve got to get in front of these changes
and consider how to create value for our customers
in ways which also creates value for your towerco.
For example, look at some of the non-core assets
in shared networks; perhaps the RANsharing joint
venture identifies parallel infrastructure they no
longer need but on which there are still third party
tenants perhaps a towerco can acquire or manage
such sites?
We restructured relationships with the UKs JV
RANsharing companies, and were able to protect
our business, continued the towerco. Remember
that network sharing isnt about reducing footprint,
XX | TowerXchange Issue 16 | www.towerxchange.com

its ultimately about increasing points of presence


(PoPs). Through the creation of MBNL, for example,
EE would have increased from around 8,000 to 1819,000 PoPs.
RANsharing in a market towercos may enter
soon: the Greek example
Economic turbulence has created a scenario where
at least one Greek MNO may monetise their towers
in the next 12-24 months. Towercos interested in
this 12,000 tower market will have to decode the
implications of the current RANsharing agreement
in the country between Vodafone Greece and Wind
Hellas, operated Victus Networks, which manages

Victus Networks is a 50/50 JV formed in 2014 by


Vodafone and Wind to help them challenge the
dominant market share and larger spectrum
holdings of Cosmote, 100% owned by OTE, itself
now majority owned by Deutsche Telekom.
Victus Networks manages the Radio Access and
Transmission Networks of its parent companies
and, in parallel, is implementing a partial active
radio network sharing (MORAN) for 2G and 3G
technologies in rural and selected urban areas of
Greece. Victus networks claims to have delivered
~100mn in savings across capex and opex.
If the network is a factory, our objective is to reduce
unit production cost and enable reinvestment, said
one of the stakeholders in the Greek RANsharing
venture.
When inaugurating a RANsharing JV, MNOs need to
consider a checklist of soft issues, continued the
same Greek stakeholder. The corporate matchup
(people and management) is important in this
instance it was easier for two challengers to agree
terms. It requires a lot of management effort to
make these partnerships happen, and the first year
is tough you need commitment, focus and drive,

How do MNOs compete when RANsharing?


Competition is through a raft of factors beyond the network: brand, handsets, price, channels, distribution
and the customer experience all create a brand halo, and those are todays competitive differentators.
However RANsharing doesnt prevent competition at the network level: if one MNO has more spectrum
they still have more capacity. Sharing partner MNOs can still deploy at totally different rates

www.towerxchange.com | TowerXchange Issue 16 | 121

but weve ultimately found it to be a fruitful


journey.
Preparing for RANsharing in a market where
none exists, and where MNOs are seeking to
monetise their towers: an Asian example
There is currently little or no RANsharing between
the MNOs in this next example country, but
negotiations are ongoing for the sale of towers by
multiple MNOs.
The MNOs proposed terms and conditions
leave the door wide open for RANsharing, while
the interested towercos would prefer to see
RANsharing prohibited, or at least priced in the
MLA. The issue has become contentious as it
is potentially highly value destructive for the
towerco at a time when the MNO is seeking to
realise a valuation equivalent of 8-12x EBITDA
when selling their towers.
I need to achieve a tenancy ratio of 1.7 to build
an investible business case to acquire the towers.
Given that if two parties engage in RANsharing
it could eliminate 60% of potential tenancy
ratio growth, I need to negotiate some form of
contractual protection against RANsharing, said
one of the towercos bidding for the assets.

Mitigating the risk of RANsharing by extending the towerco business model


If you cannot fight against RANsharing you have to lead it, suggested one towerco. Vendors
forecast network densification may require 10x as many base stations as we have today, so perhaps
it is incumbent upon towercos to build sites designed for RANsharing, and to build value for MNOs.
Were building 1,000 light poles per year, on which we own the base stations. Outdoor DAS is a similar
opportunity.
Another towerco suggested: were talking about telecom infrastructure sharing at a country level rather
than speaking to MNOs. When smaller countries prove the model of sharing networks from the outset,
that will change the model.
Theres only one power distribution network, and one rail network, in many countries, suggested an
MNO. Deep network sharing is a natural extension of the dynamics of infrastructure consolidation.
A UK towerco disagreed: The UK regulator clearly wants to see infrastructure competition. I feel were
decades away from a single network. We still need differentiation on quality of network to incentivise
innovation and investment were a long way away from telecoms networks becoming a utility.
RANsharing already exists, towercos have to live
with it. If RANsharing doesnt exist, MNOs need to
be mindful of the potential of RANsharing to lower
the glass ceiling on tenancy ratios, so they need to
manage their valuation expectations accordingly
or afford the towerco some degree of contractual
protection against the potential future impact of
RANsharing.
Contractual protection: what price RANsharing?

The balance of power depends largely on how


embedded active infrastructure sharing is
within the network at the time a towerco enters

Its a simple question with an important answer:


how many tenancies does a towerco lose when their
clients agree to share RAN?

These three examples illustrate a simple truth: if

If a towerco is well protected by their contracts,

122 | TowerXchange Issue 16 | www.towerxchange.com

they may lose very few tenancies. When two of our


clients agreed to 2G, 3G and 4G RANsharing in rural
areas only, representing around 60% of territory, we
were barely affected, said one towerco. However,
another towerco in the same country lost almost
10% of their tenancies.
Theres virtually no active infrastructure sharing
in Africa, said another towerco. But the biggest
argument we have with our clients today still
concerns RANsharing because we sign 10-15 year
agreements. All our agreements have active sharing
provisions, and we generally agree an extra fee
to share RAN, but its difficult to come up with
one economic model to cover all the different
RANsharing models.
www.towerxchange.com | TowerXchange Issue 16 |

XX

MNO perspective

Towerco perspective

RANsharing must be permitted to maximise


the efficiency of my business

RANsharing must be controlled to protect the


investibility of my business

RANsharing protects me against lease price


increases and protects long term EBITDA

Charging for RANsharing protects the


investibility of the towerco business model

I dont even know what the network will look


like in the future I need to be protected

I dont even know what RANsharing will look


like in the future I need to be protected

If I sell my towers, I want to protect the right


to share RAN while maximising valuation

If I buy towers, RANsharing could lower


the glass ceiling on lease up growth, which
suppresses valuation

Theyre my antennae!

Theyre my towers!

We can unlock new efficiencies through


RANsharing we just need to get our fair
share

We can unlock new efficiencies through


RANsharing we just need to get our fair share

I just want to ensure we have a strong


position at the negotiating table in future

I just want to ensure we have a strong position


at the negotiating table in future
Source: TowerXchange

An MNO countered: but it is better to share our


networks there are efficiency gains through
sharing costs this is the main argument you use to
make us partner with towercos: the more you share,
the more you gain. There are economics if you can
share passive infrastructure, even more if you can
share active equipment or MORAN.
XX | TowerXchange Issue 16 | www.towerxchange.com

MNOs are generating economics from RANsharing,


the towerco needs to have some too they are our
sites after all! Said another towerco. We might
charge 10,000 per year without RANsharing, or
16,000 with RANsharing. Alternatively RANsharing
might simply be forbidden to force a discussion it if
and when it appears.

Another towerco took a different stance: It cant


always be just about the tenant paying more money
the tariff might be defined by additional capacity,
additional radio units, additional ground space,
more activity on site. Its not like nothings changing
onsite; there is more infrastructure on site for
RANsharing.
It seems some towercos are seeking a mutually
beneficial, long term partnership, while others
are talking about protecting their business in the
short term by forbidding RANsharing or charging
incremental fees, said one MNO representative.
You cant stand in the way of efficiencies; you need

All our agreements have active


sharing provisions, and we
generally agree an extra fee to
share RAN, but its difficult to
come up with one economic
model to cover all the different
RANsharing models

Contrasting perspectives on RANsharing

www.towerxchange.com | TowerXchange Issue 16 | 123

Growing pains:
how to scale a towerco

Every deal has to make sense

The Growing and scaling a towerco roundtable

As the participants in the Growing and scaling


a towerco roundtable gathered at the recent
TowerXchange Meetup Europe, it was soon evident we
were in for a treat. The experience and international
mix of participants was remarkable: moderator Peter
Egbertsen shared experience as a Director at Protelindo
(with a footprint in Indonesia, Myanmar, and the
Netherlands), we had contributions from Towershare in
Pakistan, Towercom in Ireland, Brittannia / Hibernian
Towers / Ulstercom in the UK and Ireland, Eaton Towers
in SSA, NOVEC in the Netherlands, Digital Bridge in
the Americas and China, and American Tower in 13
countries and counting! These views were supplemented
by several debt, private and public equity investors with
experience in the asset class. Heres what we learned

Keywords: Africa & ME, Americas, Asia, Bankability, Best of TowerXchange, Build-to-Suit, Business Model,
C-Level Perspective, Cashflow Finance, Deal Structure, Debt Finance, Decommissioning, ESCOs, Europe,
Exit Strategy, Fixed Price, Investment, Lease Rates,MLA, Multi-Region, Pass-Through, Private Equity,
Research, Site Level Profitability, Small Cells, TowerXchange Research, Towercos, Valuation

Read this article to learn:


<
<
<
<
<

The discipline required to scale towercos organically and inorganically


The importance of negotiating and defending a good MLA
The risks of deep discounts on lease rates and cutting corners on permitting and quality
The different appetites of different sources of capital
Is there a minimum tower count to realise economies of scale?

124 | TowerXchange Issue 16 | www.towerxchange.com

Discipline: every tower has to make sense


Discipline is critical when scaling a towerco; every
investment every individual tower has to make
sense. With growing competition in this sector, you
have to be very wary of making stupid deals. Its
important to remember the cautionary tales; even
in the U.S. lots of towercos went bankrupt when the
bubble burst in the early noughties; even American
Tower and SBA Communications lost huge market
cap youve got to manage your leverage so you can
survive tough times.
Dont grow for the sake of growth. You can retire
on the cash flow from five towers, or you can buy
towers, but every deal has to make sense, said
one towerco. For example, we made an 80mn
acquisition in a European country, funded half from
cashflow, half with bank debt. That deal looks good
now, and weve recovered the acquisition cost, but
if the debt was twice the price the deal would look
pretty average. If you dont have access to low cost
capital you have to be even more disciplined. Your
deals have got to be futureproofed.
The temptation for less disciplined inorganic growth
is substantial as there arent many businesses you
can scale as quickly as a towerco. Hypothetically
you can achieve scale in a tower company from a
standing start with your first deal; given sufficient
upfront capital, and assuming you can find an MNO
who will trust a prospective partner with little or no
operational track record, a towerco can scale quickly
and put capital to work under a business model with
which investors are increasingly comfortable. But
www.towerxchange.com | TowerXchange Issue 16 |

XX

One simple piece of guidance: put enough of your


own money at stake that you walk away from
deals you dont like. Investors will always be more
inclined to back a management team with skin in
the game. Ive personally said no on occasions
when the board says yes, said one towerco CEO.
It pays to be boringly rational every deal has to
make sense, tower by tower, country by country.
If thats a good guiding principle for inorganic
growth, theres a parallel principle for organic
growth: dont issue stupid MLAs!
Towercos have got to get the contractual terms
right, and that means theyve got to get the
relationship with the MNO right. It might be
tempting to slash lease rates to secure a big BTS
contract, but if you need almost two tenants
per tower and 5,000 sites to achieve scale, your
investors may run out of patience and you may
run out of cash before you get to scale and whats
your exit strategy? No-ones going to want to buy
a portfolio with a deeply discounted lease rate. Its
also not in MNOs interests to work with towercos
who may be here today, gone tomorrow. Disciplined
towercos negotiate and defend a good MLA. In the
words of one towerco: the capital value is in the
contract, not in the steel.
Dont assume the scale and co-location revenue will
come just because your leases are cheaper than
the other guys and dont cut corners on permits
XX | TowerXchange Issue 16 | www.towerxchange.com

and quality again, no-one going to want to buy


a portfolio in which they need to invest tens of
thousands of dollars or euros retreading permitting
processes or upgrading structures.
Again the lesson is simple: only do deals where you
see the returns. Dont give away too much value in
the pursuit of scale. There is a time to sit back and
not do anything. Another business clich tower
entrepreneurs hold dear: you dont need to be the
biggest, just be the best.
Todays low interest rates can be an anathema to
discipline. If you trim the margin too thin on a
tower acquisition or tower build, todays interest
rates can only go up. You need to have a really good
M&A team and access to smart capital which makes
sense in the future as well as today.
Sources of capital
With Europe a zero interest rate environment,
towers are increasingly interesting as an
investment opportunity in long term contracts
with proven cash flow streams. Putting money in
towers makes more sense than putting money in
the bank. Whether its pension funds gravitating
toward infrastructure investments, or strategic
investors such as American Tower with access to
low cost capital from their own cash flow, there is
no shortage of prospective sources of funding for
European towers, although still not the same depth
of investor pool as in the U.S. when it comes to
institutional capital, private equity growth funds,
and pension funds with account mandates.

It pays to be boringly
rational every deal has to
make sense, tower by tower,
country by country

just because you can grow quickly, doesnt mean to


say you should.

Theres a natural tendency to look at the towercos


listed in the U.S., plus the likes of Cellnex as
examples of what liquidity looks like in this asset
class, said one investor, but dont lose sight of the
cost of capital to scale a business. Towercos need
discipline in terms of their cost of capital. For firms
like us with a remit to invest across multiple sectors
its about comparative valuations. Im nervous that
everyone is so excited about the tower business.
Even high teens valuations in the U.S. still seem
high to me, so were looking for low double digit
multiples, and seeking an exit through sale to a
strategic or aggregator. Given the vintage of 4G in
Europe, and the development of a market in which a
significant proportion of MNOs retain towers, clearly
some stakeholders think theres more value to be
found in the future than now.
As ever, different breeds of capital have different
appetites. Many private equity investors dont
www.towerxchange.com | TowerXchange Issue 16 | 125

see the same magnitude of growth opportunity in


Europe to deliver their targeted 20%+ annualised
returns, and thus have a preference for emerging
market towers where the ongoing 3G and subsequent
4G rollout and the associated growth in data demand
mean tower networks are still being extended as
well as densified, thus organic growth can be more
substantial. The relatively high operational, country
and currency risk associated with emerging market
towers has meant the pension funds have been less
keen on such opportunities to date.
Is there a minimum tower count to realise
economies of scale?
In a mature tower market like Indonesia, where the
majority of acquirable operator towers have been
sold, the principle remaining path to scale is through
organic growth and lease up a towerco might need
at least 2,000 Indonesian towers to achieve scale.
Europe is a different story; one towerco cited an
example where they have just 260 towers under
management, which they run with just two fulltime
employees, plus backup from their corporate HQ.
Another towerco in the same European country has
20 staff managing 800 towers. A third towerco has
30 staff managing 2,000, whereas a fourth towerco
reported a significantly higher headcount managing
2,000 towers, but in a context where the company
was deploying more aggressively.

minimum scale for entry into a market has dropped.


Its all about how you structure and manage the
business. We can be profitable more quickly when
focusing on organic growth. But African towerco
operations arent as lean as European towercos; we
need more people for logistics half our time and
money spent on power.
We buy few portfolios with less than 1,000
sites unless we already have a footprint in the
country, said a representative of a large, listed
towerco. What adds value for us is any steps
the seller has taken which compresses the time
it takes to integrate a new portfolio. A seller will
attract a premium valuation if they have all their
documentation in order.
Value drivers
Value drivers vary across different tower
markets. For example, while consolidation and
decommissioning of towers is a big issue in Europe,
most delegates at the U.S.-centric tower summit
at the CTIA were unfamiliar with the concept of
decommissioning. However, the U.S. market is
host to a thriving ecosystem of independent tower
developers building and selling towers half a dozen
or a dozen at a time thats not a phenomenon we
see in Europe yet.
Rollup

We used to think we needed 1,000-2,000 towers per


country to have scale, said the CEO of an African
towerco. But then we built a portfolio of 300 towers
in South Africa and its been very profitable, so our
126 | TowerXchange Issue 16 | www.towerxchange.com

Build to flip tower entrepreneurs also feed another


tier of the towerco ecosystem; rollup plays. The
most renowned of these was Global Tower Partners

(GTP), backed by Blackstone and built by Marc Ganzi


and his team, largely on the back of over 300 small
acquisitions, most with independent developers
and Mom and Pop operations. GTP scaled to over
15,000 towers, and was sold to American Tower for
US$4.8bn. That roadmap is being played out again
by Ganzi and former Blackstone Partner Ben Jenkins
in their latest venture, Digital Bridge, albeit this time
with a more global and diverse footprint, extending
beyond macro towers into data centres and small
cells Digital Bridges biggest acquisition to date
being the acquisition of ExteNet Systems from SBA
Communications for US$1.4bn.
Expansion across borders
Opinion differed as to the opportunity for multicountry tower plays in Europe. One investor
made the comparison that it was easier to cross
jurisdictions in the U.S. tower market where
one remained under common rule of law with
leasing frameworks and tax structures largely
institutionalised, whereas in Europe has disparate
tax regimes, disparate landlord freehold/leasehold
relationships, and differing MNO requirements. The
investor concerned felt European towercos needed
to walk before they run to scale across multiple
countries.
In contrast, a towerco contended that scaling any
business was about hiring and backing the right
management team, and towercos are no different.
If you have people that can execute a towerco
business plan in one market, you can you spread
that overhead across adjacent countries. Another
www.towerxchange.com | TowerXchange Issue 16 |

XX

towerco concurred: while each country needed local


management, there are many functions a towerco
can centralise rather than replicate in every country.
How to persuade operators to sell their towers
Its a push and pull process, said one towerco. We
have to educate MNOs but there needs to be a need.
One investor recalled the then CEO of American
Tower Steve Dodge touring European MNOs in the
late nineties, advocating the monetisation of towers
or the creation of joint ventures. As we know, few
European towers changed hands outside of Crown
Castles foray into the United Kingdom, but with
subscriber and revenue growth plateauing, debt
rising and pressure to maintain dividends to prop
up stock, European MNOs have greater incentive
to monetise towers than ever, particularly given
the relative valuation benchmarks established by
Cellnex and INWITs IPOs.

Top ten tips for scaling a towerco


1.
2.
3.
4.
5.
6.
7.
8.

Have the discipline to walk away from deals that dont make sense
Manage your leverage so you can survive tough times interest rates can only go up!
Be prepared to take the time to rollup smaller tower portfolios
The capital value is in the contract not in the steel
Dont discount leases excessively no-one will want to buy your portfolio!
Dont cut corners on permitting and structures youll harm valuation
You may not need 1,000+ towers to achieve scale build smart, build organically
Investors are more interested in the people they invest in than the assets the credibility of your
management team is critical
9. If MNOs try to retain too much value, they risk making their towerco partners uninvestible
10. Be wary that a towerco providing power as a service is a fundamentally different animal to a
pureplay steel and grass towerco pick a business model and stick to it
giving them? Suggestions ranged from improving
cycle times for co-location to easing tower
transactions: the transition of a portfolio from MNO
to towerco is always a painful process.

The independent towerco business model is


increasingly proven outside the U.S.; there are
towercos building trust by creating efficiencies
on every continent now, and those towercos are
increasingly prepared to offer more flexibility on
deal structures.

Towercos cant survive if we give MNOs everything


they want, contended another towerco. Valuations
are high, opex is high in the markets were targeting.
Its a challenge to convince MNOs in the Middle East
that they need to leave something on the table if
MNOs retain too much of the value, the towerco may
not have the opportunity to create sufficient value to
raise capital.

How can we accelerate Europes transition from


a market where 87% of towers remain operatorcaptive, or on the balance sheet of operator-led
towercos and JVs? Towercos need to start giving
the MNOs more of what they want, proposed one
towerco CEO. More pertinently, what arent we

We were recently negotiating with an MNO who


also have their own towerco, said another towerco.
We found ourselves negotiating about pockets of
value we sometimes hadnt realised existed yet! But
MNOs who have run their own towerco appreciate
that independent towercos work the assets harder

XX | TowerXchange Issue 16 | www.towerxchange.com

than MNOs. Weve worked with some demanding


customers and sellers over the last ten years,
but weve found that there is enough value from
co-location growth to make it worthwhile for all
parties.
The operational challenges of building and
scaling a towerco
The operational challenges for towercos are
amplified when the business model calls for
provision of power as a service, as opposed to
markets like the US and Indonesia where power is a
pass through.
Theres no one thing the supply side that makes a
transformational difference to opex and thus the
bottom line performance of a full service towerco
its a hundred little things, which therefore requires
huge attention to detail, said the CEO of an African
www.towerxchange.com | TowerXchange Issue 16 | 127

towerco whose lease prices are inclusive of power.


The structure of your outsourcing partnerships
becomes critical, as does the management of people
and the power supply chain. I dont want to be in
the power generation industry but at the moment
theres no one stop shop solution each vendor
provides incremental benefits, but I dont see a clear
structure for provision of power as a service across
all emerging markets, and its still not clear which
model will prevail.
The operational challenges of power management
are magnified in Myanmar, where there was no
endemic no tower industry, and no distributed power
generation industry either. We didnt encounter any
partner we could trust to take whole power problem
away, said another towerco representative. Wed
be interested to buy power as a service, or buy power
by the kWh, but we remain unconvinced that the
ESCOs have access to the necessary capital, nor have
the proven execution capability from delivery to
installation and running the sites.
MNOs are inclined to wash their hands of their
principle operational challenges and risks, said
another towerco. Towercos must stay disciplined
and focus on the core model.
Another towerco agreed: in one country the MNO
was trying to make us take responsibility for power
provision but still tell us what DG to put on a site.
They cant have it both ways, but unfortunately
this creates just another opportunity for cowboy
towercos to sign bad deals to the detriment of all
concerned.
128 | TowerXchange Issue 16 | www.towerxchange.com

See you at our future events!

Meetup
Americas 2016

Meetup Africa
2016

16-17 June,
Boca Raton

19-20 October,
Johannesburg

Meetup Asia
2016

Meetup
Europe 2017

13-14 December,
Singapore

4-5 April,
London

www.towerxchange.com
www.towerxchange.com | TowerXchange Issue 16 |

XX

International highlights from American


Towers Q1 2016 earnings call
On April 29, American Tower (AMT) released its Q1
2016 results and hosted an earnings call with James
Taiclet, Chairman, President & CEO, Thomas Bartlett,
CFO & EVP and Leah Stearns, SVP, Treasurer and IR.

portfolio will be merged with AMTs existing legacy


business over the next year to eighteen months. With
regards to future steps, the company plans to take
the ownership interest of Viom up from the current
51% to somewhere in the mid 60s.

Commenting on the companys strong growth rate,


the executives highlighted that over the last year,
AMT built, leased or acquired more than 25,000 sites
across various markets, including Verizons, Airtels
Nigerian and TIMs Brazilian portfolio, plus 3,700
sites worldwide that the towerco built by itself.

AMTs goal remains to eventually own 100% of


Viom, cooperating with partners such as TATA and
Macquarie, but the process could take up to four
years. In the meantime, merging the two businesses
is the top priority.

With regards to AMTs overseas operations, Bartlett


commented that Our international markets
generated organic growth over 600 basis points
higher than the U.S. and over 350 basis points higher
than it generated in Q1 of 2015 at over 13% on a
consolidated basis, the highest rate in the last two
years.

AMT is currently integrating multiple MLAs across


the two portfolios. A process that might take up
to eighteen months to consolidate. In terms of
its lease ability, Taiclet added that most of the
documentation and systems are already there, since
Viom was already operating as an independent
towerco.

Specifically, here are some of the highlights of each


of AMTs international markets as discussed during
the earnings call.

For 2016, American Tower anticipates core growth


around 14% in India.
Mexico and Brazil

India
Organic core growth in India reached 12% thanks
to local operators being particularly involved in the
deployment of new technologies and networks.
In 2016, the company forecasts revenues up to
US$555mn from Viom, whose recently acquired
XX | TowerXchange Issue 16 | www.towerxchange.com

American Tower scored organic core growth over


13% in Central and Latin America, with Mexico
around 10% and Brazil at 13%. AMT commented
that in spite of some macro-economic challenges,
network rollouts in the region are still strong.
While Mexico is undergoing what AMT defined

aggressive 4G rollouts, Brazil is still in the process


of augmenting its 3G network.
Taiclet discussed the Mexican dynamics by adding
that the country is undergoing a shift that has
already happened in the U.S. with the adoption of
4G and the resulting changing dynamics in service
pricing and handset pricing.
In-building
With regards to in-building, Bartlett commented that
American Tower is a technology pioneer especially in
CALA and is looking at transferring this knowledge
into new markets such as Africa.
Mexico and Brazil are very strong in-building
markets and in India, thanks to the acquisition of
Viom, American Tower added around 200 in-building
sites, which is more than ATC India previously
owned.
EMEA
EMEA is the fasted growing region in AMTs portfolio
with organic core growth over 14%, which goes up to
18% by excluding Germany which is a more mature
hence a less performing market.
M&A
Asked about potential new deals, Taiclet concluded
that if the asset prices are too high you are not
going to see us active, if asset prices are within our
investment criteria you will see us move very quickly
to move forward.
www.towerxchange.com | TowerXchange Issue 16 | 129

International highlights from


SBA Communications Q1 2016
earnings call
On May 2, SBA Communications hosted its Q1

61 were in international markets where SBA

2016 earnings call. Representing the towerco

reports cash revenue growth around 13% and solid

were Jeffrey Stoops, President, CEO and Director,

leasing activities.

Mark DeRussy, CFA, VP of Finance and Brendan


Cavanagh, CFO and EVP.

Brazil

SBA reported net organic international cash

Brazil still delivers results with SBA reporting

leasing revenue growth of 12.1%, inclusive of 0.9%

its best same tower gross organic growth YoY, at

of churn, and organic growth in Brazil at 13.5%.

approximately 14%. And Stoops added that they


expect solid long-term growth for our business

Brazil accounted for 6.6% of cash site leasing

in Brazil. Carrier networks in Brazil significantly

revenue, excluding pass-through revenues, and

lagged those here in the U.S. 4G deployments are in

9.6% of the total leasing revenue for Q1 2016. The

the early stages. The deployment of 700MHz is still

actual tower cash flow for SBAs international

largely to come in Brazil, and the demographics of

portfolios decreased 6.1% YoY (US$37mn). But

the population heavily support expanding wireless

the figure represents a 14.8% increase without

consumption.

taking into account the impact of foreign currency


exchange rates. SBA reported a small decrease in

SBAs new builds dropped by sixty towers and the

international tower cash flow margins (68% vs

reduction is mostly in Brazil although SBA is still

69.1%) in the year-earlier period.

confident that some of these projects might slip


into 2017.

During the first quarter of 2016, the company


added 188 new sites to its portfolio, of which 117

When asked about the market situation in Brazil,

were acquired and 71 built. Out of the new builds,

Stoops added that in spite of new builds slowing

130 | TowerXchange Issue 16 | www.towerxchange.com

down, the leasing activity is still positive and that


should the economy improve, the market could be
much better and that SBA is performing in spite of
a very tough economy.
With regards to Oi and its potential debt
restructuring, the CEO noted that the carrier is
currently looking at an extra-judicial form of
restructuring, which would have no effect on
existing contracts and is the preferred option SBA
hopes for. Alternatively, Brazil offers two different
types of judicial bankruptcy which, Stoops added,
are very similar to U.S. Chapter 7 and Chapter 11.
Stoops continued with regards to the judicial
solutions by adding that a restructuring process
in court would still leave the contracts untouched
whereas the equivalent of a Chapter 7 liquidation
would cause the loss of all leases, but SBA doesnt
foresee that happening.
M&A
SBA highlighted its commitment to investing
in high quality assets in and out of the U.S. and
added that there are still a number of interesting
opportunities in several markets which are being
evaluated.
Stoops concluded that if we do not believe those
opportunities are at the right price or terms, were
quite comfortable using our leverage capacity to
buy back our own stock when we believe the share
price is below intrinsic value.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Regional coverage:

CALA features
In this issue of the TowerXchange Journal we update our research on Brazil
in light of the economic challenges the market is currently facing. Interviews
with UBS, AlfaSite and Abrintel as well as an updated Share Square from Mott
MacDonald will offer some clarity on what is happening in the Brazilian telecom
tower industry.
TowerXchange continues to analyse the evolution of new markets and their
likelihood to open to the tower industry. In this issue, we interviewed First
Corporate Finance Advisors and spoke with Guillermo Mulville from the IFC for
insights on Argentina. Additionally, weve discussed with Innovattel/Torresec
to find out how the first towerco in the country are progressing in Argentina, as
well as hearing some details about their recent trip to Cuba.
Finally, we analyse the performance of Telesites against its announced goals and
offer an overview of Bolivia, a virgin market yet to be penetrated by towercos.

Dont miss:
132 An updated analysis of the Brazilian telecom tower industry
148 Argentina: First Corporate Finance and IFC
152 Entrepreneurial towercos: Innovattel on Argentina and Cuba
157 Virgin markets: Bolivia
163 Is Telesites a force to be reckon with?

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 | 131

Brazilian tower industry is


facing its toughest year yet
Why organic and inorganic growth has slowed, and what it means for investors
in Brazilian towers
Back in 2013, TowerXchange estimated that independent
towercos owned around 32% of the 140,000 towers in CALA.
By 2014, those figures rose to 41% of 148,000 towers. Although
estimated, these figures showed an impressive growth both in
terms of towerco penetration and portfolio growth across the
region. In 2015, the percentage went up just 1% to 44% (over
156,000 total sites) and to date, almost at the end of Q1 2016, we
think that towercos own approximately 45% of CALAs 165,000
sites. In 2013-14, inorganic growth of the tower industry in
CALA was driven by Brazil. In 2015, organic growth in CALA was
driven by Brazil. Both have slowed. Why?
Keywords: American Tower, Americas, Bankability, Brazil,
Build-to-Suit, Editorial, Exit Strategy, Market Overview,
Nextel, Oi, Private Equity, Phoenix Tower International,
By Arianna Neri, Head of Americas,
TowerXchange

SBA Communications, Sale & Leaseback, South America,


Telefnica, Towercos

Read this article to learn:


< The slowdown of the Brazilian tower industry in context
< 2011-2016: what changed in the Brazilian industry and why
< Is it possible to find an exit strategy during the crisis?
< What are BTS firms doing when there are no towers to build?

132 | TowerXchange Issue 16 | www.towerxchange.com

Brazil was crowned queen of the CALA tower


market thanks to its balanced carrier market, high
site densification and rollout requirements, and
sheer size. Towercos rushed to start operating in
the country, invested in local teams and know-how
in spite of Brazils tough tax regime and uncertain
political situation. Investors bet high on its
potential returns and everyone enjoyed a few years
of tremendous successes.
However Brazil is currently facing the deepest
recession since the 1930s and its effects are
spreading across all industries including the tower
sector.
Did Brazilian towercos underestimate the risks?
2011-2013 were phenomenal years for the CALA
tower industry, especially thanks to Telefnica, Oi
and Nextel which all divested several thousands
towers in Brazil, Colombia, Mexico and Chile. We
all knew that at one point the pace of sales and
leaseback (SLB) transactions would slow down as
the inventory of acquirable portfolios was reduced.
But that didnt stop - and if anything it helped
promote - the proliferation of towercos especially
thanks to the potential of the Build-to-Suit (BTS)
market in the region.
This trend contributed to the creation of a new
layer of middle market towercos, with less
acquisitional buying power but specific knowhow, regional connections and capabilities which
made them the perfect partner for carriers with
aggressive densification plans and reduced budget.
www.towerxchange.com | TowerXchange Issue 16 |

XX

To date, there are at least a dozen BTS-focused


towercos in Brazil, as many as twenty in Mexico
alone, around ten in Peru, and a mid-teen count in
Colombia.
Most of these towercos are private-equity backed
and built on the assumption that after a few years
of BTS activity, theyd scale their business enough
to flip to one of the larger towercos most likely
American Tower or SBA Communications. And not
only theyd be acquired but theyd be able to sell for
multiples in the twenties.
The first glimpse of consolidation among towercos
happened back in 2014, when American Tower
bought BR Towers and its 4,630 sites across Brazil
for US$978mn. A transaction many saw as the first
of many, but which to date has few sequels.
The trend of towercos entering the region, reaching
a certain scale and succeeding at their exit strategy
with high multiples seemed achievable until not
long ago. Amidst this rush to scale, a growing swell
of complaints could be heard that a complete set
of paper and structural quality wasnt always a
priority in Brazil, with projects being awarded
to the cheapest bidder regardless of the overall
engineering standards.

The evolution of the CALA telecom tower industry 2013-2016


Year

Est. total towers

Towers owned by
towercos

Towerco
penetration

2013

140000

46011

32%

2014

148000

61729

41%

2015

156000

69850

44%

2016 to date

165000

73975

45%
Source: TowerXchange

growth was the year when finally the word crisis


started to creep into the news.
Theres no need to revisit the recent story of
troubled Brazil, whose economic stagnation,
recession, inflation and political corruption
allegations have all been widely discussed in
recent news. However, 2015 was still a relatively
good year for the Brazilian tower industry with an
estimated 2,000 new sites being built in the country,
the majority by the BTS-centric middle market
towercos.

Is 2016 going to be the quietest year ever?


Until 2013, Brazil made the headlines as one
of the poster children of economic growth and
industrialisation - the BRICS - but its GDP was
already in decline. But 2015, with its -3.5% in GDPs
XX | TowerXchange Issue 16 | www.towerxchange.com

However, 2016 has started under a cloudier sky and


is likely to become the toughest year to date for the
local telecom and tower industry. There are very
few BTS projects being developed in Brazil and
most of those that remain are just backlogs from

2015. And although scenarios can vary depending


on the towercos and their position in the market,
not many can enjoy American Towers predictions
of 11% organic growth in 2016.
If its true that towercos can invest some of their
free time in cleansing their paperwork, reviewing
underlying contracts, amending their revenues
and marketing their towers to new tenants,
this proposition isnt as valid for towercos with
relatively small portfolios hence unable to leverage
their scale. And Id doubt that their investors would
be satisfied with a quiet year of paperwork.
On the other hand, whereas middle market
towercos could still long for a high valued exit in
the future, its unlikely that their potential buyers
will want to cultivate a narrative to their investors
www.towerxchange.com | TowerXchange Issue 16 | 133

The recent nomination of Mr da Silva, former


President, as Chief of Staff to current President
Ms Rousseff to protect him from the investigation
related to the Petrobras scandal has just
contributed to throwing the country into a black
hole. Not even the upcoming Olympics are looking
good with tickets on sale for as low as US$18 and
commentators noticing how the sales campaign is
falling considerably behind.
Under these conditions, I doubt anyone feels bold
enough to buy in Brazil, but even if Who would
commit to a multiple higher than the multiple at
which their own stock currently trades?
Although I am no expert in finance, I am left
wondering whether the cheeky plan - which many
seem to have adopted - of building towers in Brazil
at whatever price, under whatever conditions
to one day flip at high multiples is now shaking
under the reality of these less than prosperous
times.
Todays conditions dont help any towerco
to function, whether theyve been diligently
following market rules or cutting some corners
and working below market prices. But whereas
134 | TowerXchange Issue 16 | www.towerxchange.com

whereas some towercos can afford to keep their Brazilian capital in


the country, reinvest it or simply wait for better days to come, privateequity backed towercos - no matter how high quality their work is are often under the pressure of a stringent investment lifecycle which
rarely exceeds eight-nine years

some towercos can afford to keep their Brazilian


capital in the country, reinvest it or simply wait for
better days to come, private-equity backed towercos
- no matter how high quality their work is - are
often under the pressure of a stringent investment
lifecycle which rarely exceeds eight-nine years.
Long are gone the times when a tower with one
tenant was already worth a premium!
I think everyone still interested in doing long term
business in the country is likely to welcome this
tough but much needed wave of rationalisation.
And I do hope well see more towercos diligently
following the rules, compiling a complete set of
permitting paperwork, working at market rates
and spending time leasing up their towers.
If some towercos are just taking the foot off the gas
and waiting for better times to come while focusing

of expansion and acquisition in Brazil under the


current circumstances. The combination of the
Brazilian foreign exchange crisis, its internal
political and economic situation alongside the less
than rosy outlook of the U.S. - and international
- stock exchange dont really call for bullish
investments in Brazil or elsewhere.

their attention on their existing portfolios, some


others really dont have this luxury and werent
created on the premise that the local industry
would at any point get to such a deadlock.
The only option is to wait and see, if investors can
be persuaded to have patience. For better times,
more favourable conditions and an upswing able to
instil a sense of confidence firstly into carriers. In
fact, only a renewed wave of investments from the
mobile network operators could revamp the BTS
market in the country.
Will there be rationalisation and consolidation
in the Brazilian tower industry? Probably not at
the prices many investors had hoped for. There
is a wildcard in the pack: could Phoenix Tower
International rollup to scale whilst American Tower
and SBA Communications are reluctant to re-invest
in Brazil?
www.towerxchange.com | TowerXchange Issue 16 |

XX

Mobile market overview

Share Square: Brazil

248.3 million mobile subscriptions by the end of 2015, giving a


penetration rate of 119%

Brazil

The 4G market in Brazil is expanding rapidly and is expected to


reach 50mn subscribers by the end of 2016

Passive

The Brazilian tower market has been a lucrative market for


investors since the early 2000s which has led to multinational
towercos establishing a large presence. American Towers,
Grupo Torresur and SBA Communications own over 50% of
Brazils estimated 60,000 towers
Brazils major operators, aside from Claro, have sold sizable
pieces of their tower portfolios to towercos in the last five years
in an effort to reduce debt and free-up capital for network
investment
The market is advanced and competitive; towerco opportunities
likely to be mainly from the increasing demand for 4G
consolidation and a relatively low mobile penetration. Risks
lower due to established, multinational operators that service
the market

None

Current Sharing

Active

7 MNOs: Vivo, TIM, Claro, Oi, Nextel, Algar Telecom and


Sercomtel

3G

4G

Opportunity for Outsourcing


by MNO to towercos

Limited opportunity for new


entrant towercos

Mobile subscriptions- market share

24.82%

26.17%

18.91%

27.8%

1.75%
0.52%
0.03%

Vivo (Telefnica)

Nextel (NII)

TIM (Telecom Italia)

Algar Telecom

Claro (America Movil)

Sercomtel

Oi

XX | TowerXchange Issue 16 | www.towerxchange.com

There are seven mobile network operators (MNOs)


serving the Brazilian market, with four large
operators serving more than 45mn subscribers
each and three smaller operators with a combined
subscriber base of less than 6mn. Vivo (Telefnica)
currently holds the largest market share with 69.0mn
subscribers closely followed by TIM (Telecom Italia)
65.0mn, Claro (Amrica Mvil) 61.6mn and Oi with
47.0mn subscribers. The smallest operator Sercomtel,
had fewer than 65,000 subscribers at the end of 2015.
Key mobile developments

Technology Deployment
Opportunity for towercos entry with
focus on high Lease Up Rate (LUR)

Brazil had an estimated population of 208.7mn


people and 248.3mn mobile subscriptions at the end
of 20151, giving a mobile penetration of 119% - the
fifth highest level of penetration in South America.
Around 74% of subscribers have a pre-paid account,
which ranks 7th amongst the South American
countries. Peru ranks the lowest with 65% pre-paid
subscribers.

Brazil has an average mobile penetration for the


South American region, surpassed by Suriname
(175%), Uruguay (159%), Chile (146%) and Argentina
(144%). Brazils national subscriber base has grown
rapidly in recent years, doubling since 2008 to reach
a record high of 275.5mn in Q1 2015. However,
subscriber numbers reversed as the year developed
and an estimated 10% reduction in subscribers
was observed across the Brazilian market, with the
reduction felt relatively evenly across the four large
operators in relation to their market share. The fall
in subscribers is reportedly a result of the operators
www.towerxchange.com | TowerXchange Issue 16 | 135

efforts to disconnect inactive or non-paying users,


as well as a tightening of the credit policies available
to customers. The subscriber numbers of the three
smaller operators were reportedly unaffected in
2015. Subscriber numbers are expected to remain
stagnant through 2016 before increasing in 2017.
3G services were first rolled out in Brazil in Q4 2007
when Vivo and Claro introduced the technology
into a small number of key states. Following the
official 3G auction in December 2007 for the rights
to offer UMTS services in the 2100MHz band, TIM,
Algar, Sercomtel and Oi rolled-out a 3G service
offering within a year of purchasing the licenses.
The remaining operator, Nextel waited until 2010 to
purchase the required licences and began offering
a 3G service in the second half of 2012. Vivo, Claro
and TIM expanded aggressively into the 3G market
and the three operators held 95.6% of the 3G market
share after 4 years (Q4 2011). This figure has fallen to
82.8% following the growth of Oi in this area.
Rollout of 4G
The announcement of plans to auction licences for
4G frequencies in the 450MHz and 2.5GHz bands in
June 2012 was met with significant resistance from
the incumbent operators who believed the auction
was premature. The auction went ahead nonetheless
and Vivo, TIM, Claro and Oi all successfully
purchased licenses at the auction, however desire
for the 450MHz band was significantly less than
anticipated by the regulator. In response to this, the
regulator stated that the winners of the lucrative
2.5GHz bands were also required to take the 450MHz
bands for deployment in rural areas.
136 | TowerXchange Issue 16 | www.towerxchange.com

The four operators faced new competition in the 4G


market in the major cities of So Paulo and Rio de
Janeiro from pay-TV and Video-on-Demand service
providers Sunrise Telecomunicaes and Sky Brasil
Servios who also successfully acquired 4G licences,
as well as from Nextel who rolled-out their service
offering in Q2 2014. As of the end of 2015, GSMA
estimates that there were 25.4mn 4G subscribers in
Brazil, with Vivo and TIM leading the way in terms of
subscribers with 9.5mn and 7.1mn respectively.
Operator activity
Vivo (Telefnica) launched its mobile service offering
in Brazil in 2003 as a 50-50 joint venture between
Portugal Telecom (PT) and Telefnica Mviles and
was the largest mobile operator in the country at the
time with a subscriber base of 17mn. Vivo was the
first operator to reach 1mn 4G subscribers and has
continued to maintain the largest subscriber base in
the 4G market (Q4 2015).
TIM (Telecom Italia) is Brazils second largest mobile
operator by subscriber number and has featured
in the mobile market since 2002. TIM has struggled
to withstand intense market competition in recent
years, and since 2013 increasing reports of merger
and acquisition activities involving TIM have been
recorded.
Claro (Amrica Mvil) entered the Brazilian market
through the joining of five companies owned by
parent company America Movil in 2003. Claro
currently services the highest number of 3G
subscribers in Brazil at 49.7mn (Q4 2015) and the
third largest number of 4G subscribers - 4.5mn.

Oi entered Brazils mobile market in June 2002 as the


countrys first GSM operator. Oi has grown mainly
through acquisition, most noticeably acquiring rival
telecoms group Brasil Telecom (BrT) in 2008, to
achieve the fourth largest market share by mobile
subscribers.
Nextel, Algar Telecom and Sercomtel service
the remaining 2.1% of mobile subscribers in the
Brazilian market. Algar Telecom and Sercomtel have
diversified their service offering by also supplying
pay-TV services whereas Nextel, the largest of the
three operators, is reportedly up for sale following its
parent company NII Holdings experiencing financial
difficulties in 2014 and 2015.
Regulation
Following Constitutional Amendment 8/1995, which
removed exclusivity in the operation of public
services to state managed companies, and General
Telecommunications Law 1997, Agncia Nacional de
Telecomunicaes (Anatel) was formed to regulate
the Brazilian telecoms market in 1997. Anatel is
entirely independent from the Brazilian government,
both financially and administratively. Anatel
regulates the entire telecommunications industry,
including radio spectrum, merger and acquisition
activity, conflict resolution amongst operators,
violation prosecution and product certification.
The Agencys aim is to support the development
of Brazilian telecommunications and bridge the
regional inequalities.
Brazils telecommunications infrastructure fell
behind the U.S. and Europe in the 1990s due to a
www.towerxchange.com | TowerXchange Issue 16 |

XX

lack of investment, however investment has steadily


improved and the main cities now boast comparable,
modern technologies. This vacuum of investment
towards the larger cities has left regional imbalances
across the country with the north and north-west
regions lacking even basic telecommunications
systems in some areas. Anatel has attempted to combat
these inequalities through a number of initiatives
including packaging together the purchase of 450MHz
spectrum with sought after 2.5GHz spectrum to help
drive rural coverage.
The tower sharing market
The Brazilian tower market has been a lucrative
market for investors since the early 2000s which has
led to multinational towercos establishing a large
presence. Approximately 35,000 of the estimated
60,000 towers in Brazil are owned by towercos, with
the vast majority of these towers owned by three
towercos: American Tower, Grupo TorreSur and SBA
Communications.
American Tower first entered the Brazilian towerco
market in 2000 and has grown largely through
acquisition, including the purchase of 6,400 towers
from mobile operator TIM in 2014, to reach its current
total of just under 19,000 towers. SBA Communications
entered the market in 2012 after an acquisition of 800
towers from Vivo. SBA has since rapidly developed
a significant presence in Brazil and today own 7,000
towers. Grupo TorreSur is the third largest towerco
in Brazil by number of towers (6,500) which includes
1,641 towers acquired from Oi in 2014.
The remainder of the towerco owned infrastructure
XX | TowerXchange Issue 16 | www.towerxchange.com

in Brazil is shared between towercos of varying


size and global presence. Telxius, a global company
created by Telefnica in Q1 2016 to manage selected
infrastructure assets, owns 2,500 towers. Highline
do Brasil owns just under 200 towers after initially
starting out as a build-to-suit company in 2013 and
an estimated 3,387 towers are owned by a number of
small independent towercos.
The prominence of towercos within the Brazilian
market has been assisted in recent years by a shift
from operators who no longer see the ownership
of their tower portfolio as a core element of their
business. Brazils major operators, aside from Claro,
have sold seizable pieces of their tower portfolios to
towercos in the last five years in an effort to reduce
debt and free-up capital for network investment.

failed to bridge the regional imbalances across the


country leaving certain regions lacking even basic
telecommunications systems. Increasing reports
suggest that the market structure may change as the
fourth and fifth largest operators, TIM and Nextel, are
reportedly up for sale.
After a period of concentrated tower transactions
which has seen many of the large MNOs significantly
reduce their tower portfolio and a number of
towercos establish a significant presence in the
market, both the MNOs and towercos are now
expected to consolidate their positions leading to a
reduction in the number of tower transactions
1. GSMA

Guest columnist Marcus Dowdeswell

Conclusions
With the largest population in South America
(208.7mn people) and the fifth highest mobile
penetration (119%), there is considerable room for
subscriber growth in the Brazilian mobile market. 4G
services have been launched and consumer appetite
is growing rapidly with 4G subscribers expected to
reach 50mn by the end of 2016.
The presence of four multinational MNOs within the
market has encouraged competition and innovation
and subsequently ensured that the Brazilian market
has matched the roll-out of speeds and technologies
seen in equivalent developed countries. There are
also three smaller operators that concentrate their
services mainly within the larger cities of Brazil.
Nonetheless, the current market structure has

Marcus Dowdeswell is a Consultant in Mott


MacDonalds Digital Infrastructure practice,
working with telecommunications operators,
vendors and investors across the Middle East and
Africa. Marcus has analysed tower markets across
three continents and has recently been working as
a Market Analyst on multi-million dollar mobile
tower transactions in Africa and the Middle East,
covering tens of thousands of tower assets. Marcus
graduated with a BA in Business Finance and is an
Associate Member of the Institute of Consulting

www.towerxchange.com | TowerXchange Issue 16 | 137

Guest columnist Ed Siegle

Ed Siegle is a Principal Consultant in Mott


MacDonalds Technology & Communications
Division. He has 20 years of experience
as a consultant, primarily focused on the
telecommunications industry, working for
operators, vendors, investors, regulators and
public sector organisations. His particular
expertise lies in market analysis, commercial
due diligence, product and market strategy
development, demand forecasting and business
case production.

In the course of his career he has worked for


clients in the UK, Europe, the USA, Africa and
Latin America. He has spent over 2 years living
and working in Latin America, including 18
months in Brazil where he helped establish
new offices for two consultancies. Over the past
3 years he has been part of a Mott MacDonald
team commissioned to execute a series of
advisory projects for towercos looking to invest in
developing markets

138 | TowerXchange Issue 16 | www.towerxchange.com

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 its published in the TowerXchange
Journal, accessible 24/7 from desktop, tablet or mobile

< A comprehensive archive of TowerXchanges


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
TowerXchanges Meetups.

Tower

Xchange

www.towerxchange.com | TowerXchange Issue 16 |

XX

Being small and local could


be a plus in Brazil
Insights into the BTS market, and the realities of site acquisition and permitting in Brazil
AlfaSite might be a small entity in the Brazilian tower
landscape but is able to leverage its ownership by a larger
local holding, Grupo Alfa, which incorporates a managed
service provider, an energy equipment company, a tower
manufacturer and a tower company. Thanks to its local
expertise and easy access to materials and manpower,
AlfaSite has been able to win build-to-suit (BTS) projects
in 2015 and has bold goals for 2016, in spite of the current
challenging conditions the market is facing.

Eduardo Martins Pedro, COO, AlfaSite

In this interview, TowerXchange discuss with the


companys COO, Eduardo Martins Pedro, what it means
to do business in Brazil today; technical and operational
challenges as well as opportunities.

Keywords: Alfa ERB, Alfa Energa, AlfaSite, Americas, Americas Insights, Brazil, Build-to-Suit, C-level
Perspective, Grupo Alfa, Insights, Leasing & Permitting, Private Equity, Regulation, Site Acquisition,
Skilled Workforces, South America, Tower People

Read this article to learn:

TowerXchange: Eduardo, please tell us about


yourself and your professional background.
Eduardo Martins Pedro, COO, AlfaSite: I am
a civil engineer and I started working in the
telecom infrastructure sector back in 1996, at the
very beginning of the digital era here in Brazil.
Specifically, I worked as a site hunter, as a field
engineer in various telecom plants and as site
acquisition coordinator until 2009, when I joined
Alfa ERB. In 2012, I founded AlfaSite along with
other partners.
TowerXchange: Can you share some details about
AlfaSite, its activities and footprint in Brazil?
Eduardo Martins Pedro, COO, AlfaSite: AlfaSite is
part of Grupo Alfa which includes Metal Alfa, which
is a tower manufacturer, Alfa ERB, a managed
service provider and Alfa Energa, a power
generator rental and electrical panels designer.
AlfaSite owns and operates 150 sites in major cities
and we focus on build-to-suit activities as well
as offering co-location services. AlfaSite is 100%
Brazilian and is owned and funded privately by us.
TowerXchange: What is the status of the buildto-suit market in Brazil? How many towers did
AlfaSite build in 2015 and how many are being
planned for 2016?

< AlfaSite, its footprint and activities in the Brazilian build-to-suit market
< A late start for 2016 BTS projects in Brazil
< How the Lei das Antenas is being implemented at a local level
< The challenges of site acquisition in Brazil

XX | TowerXchange Issue 16 | www.towerxchange.com

Eduardo Martins Pedro, COO, AlfaSite: The Brazilian


build-to-suit market is indeed affected by the
current economic instability but weve seen some
opportunities coming up at the beginning of March.
www.towerxchange.com | TowerXchange Issue 16 | 139

I am talking about a very small number of projects


that have come to market relatively late, at the end
of Q1.
In 2015, AlfaSite built fifty-eight new sites and we
are hoping to build more than one hundred during
2016. Being a local, privately funded company is
definitely a challenge, especially when competing
against large companies with foreign investments.
This year is being extremely tough and BTS
opportunities were only assigned to towercos
that presented some sort of financial or technical
innovation to their customers.
TowerXchange: From a technical perspective, is
it hard to build towers in Brazil, and to source
partners and materials?
Eduardo Martins Pedro, COO, AlfaSite: Being part
of Grupo Alfa is actually one of our strengths as
this allows us to utilise products manufactured
by companies within our group. Specifically, from
towers to electrical panels, skids for installation or
even construction manpower, we are able to source
everything in-house. Therefore, sourcing isnt an
issue for us. The licensing process is the tricky part
for us!
TowerXchange: What has been the impact of the
Lei das Antenas for towercos seeking permits?
Eduardo Martins Pedro, COO, AlfaSite: When
applied correctly, the Lei das Antenas does
accelerate the process of obtaining licenses.
However, the analysis on the viability of a license
140 | TowerXchange Issue 16 | www.towerxchange.com

within each municipality isnt always done by


specialised technical teams which often results in
dubious interpretations of the Law and a lack of
understanding of the project itself. This is where
the process becomes lengthy and licenses hard to
accomplish.
TowerXchange: Which characteristics should
the perfect tower portfolio have?
Eduardo Martins Pedro, COO, AlfaSite: I think that
an ideal portfolio consists of sites structurally
able to host at least three tenants. Having all the
licenses and permits in place is another key point
as well as having constant availability of power
and a good level of security to protect equipment.
TowerXchange: How challenging is site
acquisition in Brazil?
Eduardo Martins Pedro, COO, AlfaSite: Site
acquisition is definitely a challenging activity
in Brazil. Training capable professionals is
a key component of this process as we need
experts who are able to select good sites,
negotiate competitive deals and analyse property
documentation.
Planning an optimised deployment project is
critical as well, especially since it affects the speed
of the licensing process. Being able to present all
necessary documents does increase the chances of
a fast response from the municipality and in any
case, a professional team does need to constantly
keep monitoring the status of the application.

One of AlfaSite towers

The underlying relationship with landlords


is another key aspect. We need to deal with
transparent landlords and most of all, ensure
that sites are leased or sold with all the property
documentation otherwise obtaining licenses is
virtually impossible
www.towerxchange.com | TowerXchange Issue 16 |

XX

How ABRINTEL, the Brazilian


towerco association, is working to
ease the permitting of new cell sites
In spite of the new Lei das Antenas, easing the regulatory framework is still key
for local towercos

Z/Ed>

^^K/KZ^/>/Z/E&Z^dZhdhZWZd>KDhE/O^

The Associao Brasileira de Infraestrutura para as


Telecomunicaes (ABRINTEL) was created back in 2013 with the
goal to gather and represent tower companies across the country.
Its members include top executives from Brazilian towercos
with the common goal to give a strong voice to the industry and
strengthen its position in the country.
I have recently spoken with Loureno Pinto Coelho, the President
of the Board of the association, who shared with TowerXchange
insights into ABRINTELs role in Brazil, commented on the Lei das
Antenas and on the overall status of the Brazilian tower industry.

Keywords: ABRINTEL, American Tower, Americas Insights, Brazil, Cell Site Solutions, Greenfield, Grupo
TorreSur, Insights, Lei das Antenas, Lei de Uso e Ocupao do Solo, Market Overview, Phoenix Tower
International, QMC Telecom, QoS, Regulation, SBA Communications, South America, So Paulo

Read this article to learn:


< The organisation and role of ABRINTEL in the Brazilian tower industry
< The Lei das Antenas: its status and implementation challenges
< Financial crisis vs regulatory hurdles: which one do investors fear the most?
< ABRINTEL and its technical advisory role: limitations at a local level

XX | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Please tell us about ABRINTEL,


its mission and current organisation
Loureno Pinto Coelho, President, ABRINTEL:
ABRINTEL has the mission to educate regulatory
bodies, the government as well as the civil society
on the importance of a stable and transparent
regulatory environment. Our goal is to create
strong foundations for international and local
investors able to contribute to the expansion of
the telecom infrastructure sector, which is vital
in order to boost mobile penetration across the
country.
ABRINTEL is organised with an Administrative
Council as well as a Board of Directors of
which I am currently President. To date, the
association includes members from top towercos
active in Brazil including American Tower, SBA
Communications, Grupo TorreSur, Phoenix Tower
International, Cell Site Solutions and QMC Telecom.
TowerXchange: What is the status of the Lei das
Antenas? And is it proving useful?
Loureno Pinto Coelho, President, ABRINTEL: The
law is approved and it is helping towercos seek
permits to a certain extent. In fact, the problem is
that municipalities still hold their own autonomy
when it comes to regulating the use and occupation
of the ground. We still face the opposition of
certain cities to the launch of greenfield projects
and the installation of sites.
We are promoting the alignment of municipalities
www.towerxchange.com | TowerXchange Issue 16 | 141

TowerXchange: Is ABRINTEL working as


technical advisor to municipalities or other
local entities? Is it useful and why?

local regulatory hurdles concern investors more than a temporary


phase of economic turmoil

and their local regulations to the federal law


(Lei das Antenas) in order to smoothen and
expedite the authorisation process as well as
the installation of new towers. Additionally, by
complying with the Lei das Antenas, pending
authorisations for already installed sites should be
resolved rapidly.

investment in the country, hence guaranteeing a


deeper level of penetration and an overall positive
impact on the speed of data, capacity, coverage and
quality of service.

TowerXchange: How many towers are being


built in Brazil each month/year?

Loureno Pinto Coelho, President, ABRINTEL:


Much depends on the elimination of barriers to
construction and installation in municipalities
such as So Paulo, among others.

Loureno Pinto Coelho, President, ABRINTEL:


There are approximately 2,000 new sites being
built each year and weve calculated an estimated
70,000 sites already in place, between towers,
monopoles and rooftops.
This number isnt low and represents quite a
substantial growth achieved in a few years.
However, a friendlier regulatory environment
would still contribute to enhance the level of
142 | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: How do you foresee the tower


industry shaping up in the next 12-18 months?

We believe that the key problem is the excessive


time required for licensing and the lack of a clear
regulatory framework for greenfield projects. The
telecom industry is one of the main catalysts for
the creation of digital cities and digital nations and
its a top priority to ensure that local authorities
enable this process by providing clear and
straightforward rules and regulations.

Loureno Pinto Coelho, President, ABRINTEL:


Since its creation, ABRINTEL has been supporting
different regulatory bodies and key stakeholders
in the understanding of the tower industry and
its challenges. For example, over the past few
years, weve been working with the So Paulo
administration and City Council to present and
discuss the Lei de Uso e Ocupao do Solo (Law for
the Use and Occupancy of Soil).
Unfortunately, our technical recommendations
arent always translated into specific actions and
sometimes the rationale behind a certain decision
is political rather than technical. In any case,
we are working together with local and federal
authorities to improve the national and local
telecom regulatory framework. This process isnt
only useful, its necessary!
TowerXchange: How is the Brazilian economy
affecting the tower industry?
Loureno Pinto Coelho, President, ABRINTEL:
I believe that local regulatory hurdles concern
investors more than a temporary phase of
economic turmoil. And this is one of the key
reasons why we are so involved in working with
and advising local and national authorities.
Anyone interested in finding out more about
ABRINTEL can visit www.abrintel.org.br
www.towerxchange.com | TowerXchange Issue 16 |

XX

How investible is the CALA


telecom tower industry?
An analysis of the current conditions of the regional market and its potential for growth

Andr Laloni, Managing Director, Head of Brazil


and Southern Cone Investment Banking, UBS

Investment banker Andr Laloni is now Head of Brazil


and Southern Cone Investment Banking for UBS. He has
been covering the telecom sector for almost seventeen
years and has been a key contributor to shape the tower
industry in the country, advising most of the transactions
in the sector. In this interview, Andr shares with
TowerXchange his views on Brazil, the likelihood of
new markets including Cuba, Argentina and Paraguay
opening up and key factors that determine the decision
for carriers to sell or carve out their tower portfolios.

Keywords: American Tower, Americas Insights, Amrica Mvil, Antel, Argentina, Brazil, Build-to-Suit, Capex,
Chile, Claro, Co-locations, Copaco, Crown Castle, Cuba, Debt Finance, ETECSA, Exit Strategy, Grupo TorreSur,
IDT Telecom, Infrastructure Funds, Insights, Investment, Investors, MLA, Millicom, Movistar, Network
Rollout, Nextel, Oi, Paraguay, Personal, Peru, Phoenix Tower International, Regulation, SBA Communications,
South America, T4U, TIM, Telecom Argentina, Telecom Italia, Telefnica, Telesites, Tenancy Ratios, Tigo, UBS,
Uruguay, Valuation, Verizon, Vox

Read this article to learn:


< The rationale behind divesting or carving out passive infrastructure
< Perspectives on Telesites, its performance and site demand in Mexico
< The status of the Brazilian telecom tower industry: troubles ahead for middle market towercos?
< Which countries could drive future sale and leaseback transactions
< New markets: Argentina, Paraguay, Uruguay and Cuba
< Key components of the perfect towerco

XX | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Andr please tell us about


yourself and your experience in the telecom
investment arena.
Andr Laloni, Managing Director, Head of Brazil
and Southern Cone Investment Banking, UBS: I have
been an investment banker for almost seventeen
years, specifically since 2000 when I started
working with UBS in New York in their global
industrial group. In 2003, I moved back to Brazil
where I joined Telecom Italia for a few months to
then go back to investment banking with Unibanco,
Goldman Sachs, Barclays and then again with UBS,
where I now run their investment banking division
for Brazil and Southern Cone.
Telecoms is one of the sectors I have always been
covering throughout my career. Its one segment
where I have always been involved. I have
participated in the majority of the transactions
that shaped the tower industry in Brazil, more
frequently advising carriers in divestiture
processes, negotiating with towercos.
TowerXchange: Why are certain MNOs
increasingly inclined to carve out and keep their
towers rather than sell and leaseback? What are
the relative merits of each model?
Andr Laloni, Managing Director, Head of Brazil
and Southern Cone Investment Banking, UBS: This
is a very relevant and hot topic at the moment and
I see that most carriers take one direction or the
other as a function of three key underlying motives.
Capital needs: if and when a carrier does need
www.towerxchange.com | TowerXchange Issue 16 | 143

financial support as a result of its capex outlook and/


or indebtedness, it will compare the cost of a sale
and leaseback operation with the cost of other funds
available in the market for them. Not every carrier
can easily access capital, so the decision behind
selling towers will depend on the cost of alternative
funding.
Regulatory environment: weve seen this
happening in Mexico last year, contributing with
the creation of Telesites. In this instance, theres
no need for upfront cash hence a spin-off is a good
alternative. On the pro side, the carrier will still
retain a certain degree of control on its portfolio and
there is an upside in terms of value as towercos tend
to trade around 15-18x while carriers trade within
5-8x. On the downside though, theres always the risk
of being perceived as not completely independent
from the parent carrier company which could
hinder the attractiveness of the portfolio to potential
tenants. This could result in a lower degree of growth
than originally expected.
Unlocking value: as I mentioned, towercos trade at
higher multiples than operators so creating a spin-off
gives an opportunity to generate considerable value.
Whether the spin-off is a result of regulatory demand
or elected to create value, the new entity will face
the same challenges and will need to prove itself as
truly independent and focused on maximising the
potential of the tower portfolio.
TowerXchange: Why do you think Telesites made
an underwhelming debut on the stock exchange?
Andr Laloni, Managing Director, Head of Brazil and
144 | TowerXchange Issue 16 | www.towerxchange.com

Southern Cone Investment Banking, UBS: Telesites


is a young company and I wouldnt necessarily call
its debut underwhelming. I believe the company has
great potential and its the beginning of a new story
with very strong DNA.
Telesites did have some price drop after its IPO
during the first few weeks of operations and I believe
its now trading at about 10-15% discount to the likes
of AMT, CCI and SBA. But again, this is the normal
evolution of a young organization.
However, Id say there are a couple of factors to be
taken into consideration with regards to Telesites
future outlook. First, their forecasted demand
from the carriers might not be as high as originally
expected.
IFT did estimate that Mexico would need 70,000 sites
on top of the existing 25,000 to densify the network
and bring it to mature market standards. However,
there are various factors that might reduce this
forecast. Specifically, according to research analysts,
AT&T originally planned to add around 3,000 new
sites by 2018 but theyve now found that the sites
acquired from Nextel have greater potential of
utilisation than originally thought. So they might
actually be up for less co-locations and less new
builds than predicted.
Telefnica doesnt have a great narrative of
investments in Mexico and wont necessarily become
a major tenant on Telesites sites. And lastly, the
Government is currently working on the 4G shared
network and for now, theyve estimated that 12,000

new sites will be built in Mexico by 2023. If thats


the case, this could further reduce and dampen the
demand for Telesites portfolio.
Some of the global investment funds have
restrictions to invest in emerging markets and
sometimes their investment mandate comprises
ETFs, index, overall broad equity-linked instruments
instead of a single ticker only. Since Telesites didnt
issue ADRs, some of these funds, former investors
of AMX, wouldnt be allowed to be a shareholder of
Telesites. (At the time of the spin-off, Amrica Mvil
shareholders received one Telesites share for every
twenty Amrica Mvil shares held, consequently
AMX investors became also investors of Telesites)
TowerXchange: And with regards to the company
itself, do you think it will expand its operation
beyond Mexico and into Brazil and other LatAm
states?
Andr Laloni, Managing Director, Head of Brazil and
Southern Cone Investment Banking, UBS: Telesites
did announce theyd expand into other LatAm
countries and they have recently announced new
towers to be built in Costa Rica through their buildto-suit contract with Claro Costa Rica.
With regards to Brazil, the situation is a bit different
in light of the presence of large and very established
independent towercos - American Tower, SBA
Communications and Grupo TorreSur - and due to
the competitiveness of the local market. That said,
theres definitely room for growth and Telesites could
leverage Claros portfolio by putting it up for share.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Claro has about 8,000 sites in Brazil which could


serve the market and Telesites could definitely
look into that. Current market conditions dont
necessarily help the move though.
In Brazil, the number of subscribers per tower is still
much higher than in developed markets such as the
U.S. - 4,500 vs 1,000 - and the average tenancy ratio
is around 1.2/1.3 while it reaches 2.5 in the U.S. so
theres definitely still a lot to be done.
TowerXchange: What is your perception of the
status of the Brazilian telecom tower industry
in light of the countrys economy? Are towercos
progressing towards consolidation?
Andr Laloni, Managing Director, Head of Brazil and
Southern Cone Investment Banking, UBS: Brazil is
going through very tough times both economically
and politically but I hope that the situation can be
defined once and for all and finally improves. The
international and local investment community
definitely needs more clarity on the direction of the
country.
With regards to towercos, high interest rates
combined with inflation pressure and difficult access
to credit do have a direct impact on the industry,
especially on smaller companies that see their
margins and ROIC compressed.
In the past M&A activity has been intense in Brazil
with Telefnica, Oi and TIM all divesting most of
their assets as a solution to fund their capital needs.
XX | TowerXchange Issue 16 | www.towerxchange.com

To date, the only intact portfolio is Claros which has


no intention to sell so Id say that on the carrier side,
most transactions have already taken place beside
some residual assets which could get sold in the
future.
On the other hand, weve also seen some degree
of consolidation happening among towercos with
BR Towers being acquired by American Tower and
T4U which was recently bought by Phoenix Tower
International. So yes, Id say there is the potential for
consolidation among towercos.
However, the mismatch in terms of currency is
affecting international players and their capital
returns. Investments made in Brazil in U.S. dollars
return cash in Reais and the exchange is obviously
hurting companies so this is a very delicate financial
phase for everyone. In spite of the current situation,
Id still say that Brazil is up for a lot of growth with
stronger companies well positioned to ride through
these volatile times.
Id also add that smaller towercos such as family
businesses and privately funded entities could
do relatively well in spite of the crisis. In fact,
they can still generate significant profits for their
shareholders no matter how small their portfolio is.
The hard place to be right now is in the middle I
am referring to those towercos purely focused on
build-to-suit that havent reached enough scale to
be relevant targets to larger towercos but whose
investors do have certain expectations in terms
of growth rates to be achieved exclusively via BTS

rather than with acquisitions.


These companies hardly have any competitive
advantage to win BTS projects over larger, more
structured organisations. So I am not sure what
kind of multiples they can expect if they were to
be acquired today. I think some of these towercos
could potentially be acquired but for the value of
their portfolios rather than their value as ongoing
businesses hence taking into consideration their
specific know-how. Or they could get sold and
become platforms for new entrants but considering
there isnt much else to acquire in Brazil, I am not
sure theyd serve as a good entry card to significantly
grow a new portfolio.
TowerXchange: Is Argentina the next big thing
for the tower industry? We know of one BTS firm
(Torresec) that got into the country in 2015, do
you think we are likely to see any other towercos
entering Argentina?
Andr Laloni, Managing Director, Head of Brazil and
Southern Cone Investment Banking, UBS: Argentina
is definitely an interesting place which is now
presenting some positive conditions for towercos and
in general, for the investment community.
On the telecom side, the market is quite big, seizable
and with lots of competition. Claro, Telefnica and
Telecom Argentina all share similar proportions of
the market ranging between 30% and 35%, rising
and falling year to year. Nextel (Cablevision) is the
fourth largest player with over 3% of market.
The country has so far lacked significant investments
www.towerxchange.com | TowerXchange Issue 16 | 145

so theres lots of room for growth in virtually every


industrial segment. To date, Torresec is the only
firm operating in Argentina and there isnt any large
towerco yet.

Brazil - Estimated tower count: 54,425

The industry is lacking education Theres no


pattern, no rule, no precedent. Everything has to be
created from scratch just like in Brazil eight years
ago. I participated in shaping up the industry here
in Brazil and I can see the same history repeating
in Argentina. Theres an increased appetite for its
assets not only in terms of towers but as a potential
investment destination across multiple industries
since the change in government.

18851

On the financial side, there are extremely high


interest rates and lending is very expensive which
represent a positive factor for potential M&A as
carriers will find it more convenient to sell their
towers rather than to source alternative ways
of funding their businesses. However, there are
crucial issues related to land agreements, leases
and permitting as the country lacks any kind of
regulation over it.
The other challenging factor is that contracts cannot
be indexed with inflation which is really high. In
Brazil, MLAs do factor in inflation but the same
cannot be done in Argentina for now. As a solution,
contracts could potentially be dollarised but, even
when contracts are stipulated in U.S. dollars, this has
proven really hard to enforce.
So Id say that there is a legal framework that needs
to prove itself but this has to be done during an
146 | TowerXchange Issue 16 | www.towerxchange.com

1000
American Tower
SBA Communications
Grupo TorreSur
Telxius

15000

Other independent towercos

7032
4387

Remaining big 4 operators


Other operators including Nextel, Sky Brasil,

6500

1655
actual negotiation rather than theoretically. Once the
opportunity presents itself, players will look into it
and sit down to negotiate terms that are beneficial
for the telecom tower industry as a whole.
In terms of timeline, I think that although the
industry is showing an interest in Argentina, no
one is ready to act just yet. There are some ongoing
conversations and well need to wait to see how they
go over the next few months.
TowerXchange: The sale and leaseback scenario
has been extremely quiet Where do you foresee
the next deals to happen (we are keeping a close
eye on the Andean States)?

Algar Telecom, Sercomtel and ON Telecom


Source: TowerXchange

Andr Laloni, Managing Director, Head of Brazil and


Southern Cone Investment Banking, UBS: Theres
the potential for transactions in a number of Andean
countries and it all depends on their economic and
political stability really Carriers across all countries
need to invest in their networks and the cost of debt
is high in most countries beside Chile.
The attractiveness of any local market depends on
various factors including the competitive landscape
among carriers, prospects for network investments
and the cost of lending. As said, where lending is
expensive, sale and leaseback is usually a more
economically viable option. Legally speaking, having
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XX

Four must-haves of a tower portfolio

Assets

Client base

whether contracts stipulated in Cuba can really be


enforced before making any move.

MLA

Management

a strong framework for contracts and some degree


of protection against inflation do help towercos to
invest more comfortably.

country definitely helps capital investments and


the development of a strong tele-com sector so I do
foresee some towerco activity there in the future.

Id say that Peru, Paraguay, Uruguay and Argentina


all present interesting conditions but are at very
different stages of market development.

In Uruguay, Antel is the state-owned incumbent


which does have a monopoly of landline telephony
and broadband but it does compete with Movistar
and Claro in the mobile market. Thanks to the
countrys competitive landscape, Uruguay could also
be a target for towercos.

TowerXchange: How about Paraguay and


Uruguay? Are they likely to experience any
towerco activity in the near future? Although out
of your geographical coverage, we are looking at
Cuba as well, any opinion about that?
Andr Laloni, Managing Director, Head of Brazil
and Southern Cone Investment Banking, UBS:
In Paraguay, there are four operators - namely
Millicoms Tigo, Telecom Argentinas Personal,
Amrica Mvils Claro and state-owned Copaco,
trading as Vox.
Tigo has recently announced its plans to invest
as much as US$2.5bn over the next few years
and usually once a carrier announces this kind
of investment plans, the others follow The
stable economic and political environment of the
XX | TowerXchange Issue 16 | www.towerxchange.com

Cuba is a completely different ballgame. With


just over 20% mobile penetration rate, the
telecom industry is massively behind any other
state in Central America. There are some signs
of development but the entire legal, political and
industrial framework has to be designed from
scratch.
Back in February 2015, IDT Telecom and ETECSA
closed a deal to provide long distance calls and in
September 2015, Verizon won the contract to offer
roaming services. So its clear that there are quite a
few movements and much to be done in the country
but the challenges remain when it comes to its
legal system, local financing and we all need to see

TowerXchange: If you were to pick a towerco


to invest in and could draw its top four
characteristics, what would they be (geo-spread,
tower count, management, clients, tenancy ratio,
liquidity, debt et cetera)?
Andr Laloni, Managing Director, Head of Brazil and
Southern Cone Investment Banking, UBS: I would say
there are four key components that determine the
success of a towerco.
Portfolio: the companys portfolio needs to have a
good size, strategic locations, solid tenancies and
infrastructure available for co-location
Client base: a growing, credit-worthy clientele is key
to drive the profitability of the portfolio
MLAs: the quality of contracts, their duration,
structure and guarantees are absolutely
fundamental. An MLA needs to secure cash-flow to
the towerco and the same portfolio could give very
different returns depending on the structure of the
underlying contract
Management: as an overarching element, towercos
need to have very strong and competent expertise,
especially local one. In fact, although there are
common denominators to the industry, the specifics
of the business differ region by region and local
expertise and management is a very relevant factor

www.towerxchange.com | TowerXchange Issue 16 | 147

Investment opportunities
in Argentinian towers
Chairman and CEO of Argentinas first investment bank on the countrys
investibility and financial outlook
Financial advisors, bankers, securitisation experts and strategic
consultants, First Corporate Finance is riding the wave of Argentinas
newly found openness to international investors. Miguel Arrigoni, its
Chairman and CEO, has a long standing experience in the financial sector
and is now ready to launch the very first investment bank in Argentina.

Miguel Arrigoni, Chairman & CEO,


First Corporate Finance

Just over twelve months ago, Arrigoni flew to Boston to meet with
investors who asked him about the tower industry in Argentina, about
which there was then very little to say. After a year of in-depth analysis
and studies, he spoke to TowerXchange about trading conditions in the
country, its readiness to open doors to international investors and the
prospects for international investment in Argentinian towers.

Keywords: Americas Insights, Argentina, Best of TowerXchange, Build-to-Suit, Business Model, Carve
Out, Country Risk, Debt Finance, Deloitte & Touche, EY, First Capital Markets, First Corporate Finance,
Insights, Investment, Investors, Market Overview, Network Rollout, Private Equity, Regulation, Sale &
Leaseback, South America

Read this article to learn:


< First Corporate Finance and its role in the Argentinian financial landscape
< Key data about the Argentinian telecom tower industry
< The carrier landscape: poor QoS in spite of high demand
< What should investors expect from the Argentinian financial market
< A look at Argentinas investibility, legal threats and currency mismatch

148 | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Miguel, please introduce yourself


and your professional background.
Miguel Arrigoni, Chairman & CEO, First Corporate
Finance: I started working in finance forty years
ago, when I was just seventeen. I worked within
BDO, one of the largest audit firms in the world
and then created Arrigoni y Asociados whose
team became part of Ernst & Young in 1997 and
subsequently Deloitte & Touche. I ran the corporate
finance division for Latin America for EY and then
Deloitte until 2013, when we decided to separate
our entity and create First Corporate Finance.
The core team of First has been together for over
twenty-five years and to date we number ninety
experts, making up the largest corporate finance
office in Argentina.
Back in 2013, we decided to create our separate firm
because we were expecting certain economic and
political changes to happen and wanted to be able
to serve the market independently. To date, these
changes are indeed happening under the Macri
presidency and we are able to serve our clients in a
variety of financial fields.
First Corporate Finance is specialised in
investments, M&A, raising debt through the capital
markets in securitisation we own 80% market
share in Argentina. In fact, weve performed around
1,400 transactions without one single default which
is quite impressive by Argentinian standards!
Recently, weve created First Capital Markets, which
www.towerxchange.com | TowerXchange Issue 16 |

XX

person in the country. We are talking about 144%


SIM penetration rate and 62.7mn connections for
about 43.6mn inhabitants.
Last year, we visited some investors in Boston
and were asked questions about the passive
infrastructure business. At the time, we really had
no idea that the lack of investment in the telecom
sector was so deep.
Our studies show that to reach decent quality
of service (QoS) in Argentina, wed need about
30-40,000 towers and to date, we can count on
approximately 15,000 sites. We are talking about
20,000 new towers and an investment in the short
term of US$2bn, if not US$3bn.

Buenos Aires

is specialised in brokerage and trading, putting


us on the way to become one of the first local
investment banks in Argentina.
Our goal is to serve local and foreign investors. You
see, back in the nineties, the international financial
community was very involved in Argentina whereas
now 80% of all financial activities are performed at
a local level. We all know the history of Argentina
and its closed economy but right now, things are
changing and the market is definitely opening up to
foreign companies.
XX | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: When did you first start looking


at towercos and their business model?
Miguel Arrigoni, Chairman & CEO, First Corporate
Finance: We are very active in the infrastructure
sector as a whole. Argentina is an underdeveloped
country with plenty to do in all fields including
energy, mining, highways et cetera. And this
definitely includes telecoms and telecoms
infrastructure.
To date, there are about 1.5 mobile phones per

With 4,000 subscribers per site, we are miles away


from the U.S. standards and although we know that
many countries in the region have similar averages,
I dont think the QoS is as bad as in Argentina.
Especially if we consider that certain areas arent
underserved but literally disconnected, such as
many villages in Patagonia with 1-2,000 inhabitants.
TowerXchange: How do you foresee the
Argentinian tower market shaping up? And
when?
Miguel Arrigoni, Chairman & CEO, First Corporate
Finance: I think the biggest change that needs to
happen is in the way operators do business. So
far, weve been used to the traditional model of
each operator owning their towers but the sharing
concept does need to be adopted not only to
www.towerxchange.com | TowerXchange Issue 16 | 149

improve efficiency but also to, hopefully, respond to


new regulatory requirements.
In fact, the government is definitely pushing
for a new telecom regulation to come into play
and we hope this will mandate infrastructure
sharing. Argentina has a long way to go to become
competitive - I foresee at least ten years from now
- and only a strong push from the government can
speed things up.
From its side, the government is now assessing ways
to use state-owned real estate for telecoms. In fact,
finding locations for telecom sites has historically
been a problem for the telecom industry and the
government is now experimenting alternative ways
to find suitable spots, also by utilising public land.
TowerXchange: Do you think that Argentinian
carriers are inclined to sell their towers?
Miguel Arrigoni, Chairman & CEO, First Corporate
Finance: Maybe they arent inclined yet but its
the logical move they should aim for. The level of
investment by operators has been quite low over
the past few years, with the exception of perhaps
Claro.
When the new telecom regulation will come into
force, it will push for network enhancement,
improved QoS and cell site densification so carriers
will have to invest. Selling towers is a logical
solution to finance network rollout.
The QoS in Argentina is so poor that if you travel
150 | TowerXchange Issue 16 | www.towerxchange.com

from downtown to any centric neighbourhood in


Buenos Aires - I am talking about a five mile ride
- your call will drop at least four times. Even in
Buenos Aires, call drop rates are very high. Black
holes in the city are everywhere!

Finance: The legacy from the past governments


isnt all negative. In fact, Argentina enjoys very
low level of debts. Specifically, we are talking
about less than 15% foreign debt compared to the
national GDP.

With regards to towers, the recent spin-offs of


Telefnica and Claro might not call for pure sale
and leaseback operations but my point is that
one way or the other, operators have to improve
their service and invest in the country. The tower
business is clearly not the core activity of operators
but they do have options. They can sell, spin off or
start sharing Whatever works!

On the downside, this has corresponded to very


little or zero investment but right now, we have
the ability to easily increase the level of debt.
The question is how do we use that money. If
used wisely and spent on infrastructure projects,
Argentina has all the potential to become a leading
force in the CALA and global economic landscape.

TowerXchange: And how many towers are we


talking about? Who owns what in Argentina?
Miguel Arrigoni, Chairman & CEO, First Corporate
Finance: Operators say that there are as many as
15,000 towers in Argentina but weve analysed the
status of the market and believe that there are no
more than 12,000 active sites in the country. I am
referring to sites that actually work!
Interestingly enough, the top three operators have
very similar market shares (around 30-33%) and
each of them owns one third of all existing towers.
And in spite of its really bad service, charges have
been quite high from all three operators.
TowerXchange: How investible is the Argentinian
telecom industry? What are its threats?
Miguel Arrigoni, Chairman & CEO, First Corporate

As we all know, the past government restrained


the freedom to move capital out of the country and
this has contributed to the countrys crisis. In fact,
weve lost two third of capital resources as a result
of this imposition.
Now we just need to become normal. Technically
speaking, investors are already free to take their
money out of the country but obviously the
market is cautious. The image of Argentina has
been poisoned by nationalisations that took place
between 2008 and 2013 but many facts were
misinterpreted.
In fact, the Argentinian government did pay Repsol
US$5bn to compensate for the expropriation and,
talking about our national airline, Aerolineas was a
disaster under the management of Grupo Marsans,
with as many as 80% of flights being cancelled on
a daily basis. So the government takeover wasnt a
negative move, if you ask me.
www.towerxchange.com | TowerXchange Issue 16 |

XX

I think it will take the whole year for international


companies to reassess the status of things here in
Argentina, before making any more investments.
Investments are more likely in 2017. But with
regards to towercos, it could be that some players
- also in light of the entrance of Innovattel - look
at the industry and decide to go for some smaller
investments. This could also be pushed by a very
good local offer in terms of labour and suppliers.
TowerXchange: From a legal standpoint, many
fear it might be difficult to enforce contracts.
Whats your take?

I believe towers can fall under the REIT (Real Estate Investment Trust) model
and the securitisation legislation does help to guarantee those investments.
Additionally, foreign entities investing in a trust such as a REIT arent
taxable according to local law, which helps considering our levels of taxation
can be quite high

taxation can be quite high.


TowerXchange: And with regards to currency,
how would you advise international companies
looking at investing in the country?

Miguel Arrigoni, Chairman & CEO, First Corporate


Finance: The securitisation law was created
back in 1996 (Trust Law N. 24,441) and is quite
sophisticated. In fact, its an exact replica of the U.S.
securitisation law. Its a strong weapon that has
been used a lot in the country; specifically, 90% of
the financing we do is developed using it.

Miguel Arrigoni, Chairman & CEO, First Corporate


Finance: There are several financial tools that
protect investors from inflation and currency
fluctuation. There are some new rules that allow
indexing and inflation adjustments for example.
And if you bring US$ into the country, you could
purchase a swap insurance here in Argentina to
protect your investment.

I believe towers can fall under the REIT (Real Estate


Investment Trust) model and the securitisation
legislation does help to guarantee those
investments. Additionally, foreign entities investing
in a trust such as a REIT arent taxable according
to local law, which helps considering our levels of

Additionally, contracts now can be stipulated in US$


but Id also like to remind international investors
that local banks hold very high level of liquidity to
leverage investments made in Argentinian pesos.
There is quite a lot of local capital that is just
waiting to be invested in the country!

XX | TowerXchange Issue 16 | www.towerxchange.com

Dont get me wrong; Argentina has a negative


track record in many areas but also a very bad
brand whose image is possibly worse than reality.
Its reputation needs to be restored to boost the
confidence of investors and the international
community as a whole.

TowerXchange: Do you have any advice


for towercos now assessing a move into
Argentina?

Miguel Arrigoni, Chairman & CEO, First


Corporate Finance: I think Argentina represents a
wonderful opportunity for towercos and I believe
it all depends on timing. My advice would be
to start studying the market sooner rather than
later, especially since I believe 2017 will be a
great year for various local industries, including
telecommunications.
Id also like to remind foreign investors that
Argentina has a long history of highly productive
and successful overseas businesses. The many
national crises did erase much of its memory but
now Argentinians are ready to embrace progress
and this is an unmistakable signal for the telecom
industry to start investing to boost its presence
and level of service in the country
www.towerxchange.com | TowerXchange Issue 16 | 151

Innovattel/Torresec on Cuba
and Argentina
The Puerto Rico based towerco on its entrepreneurial venture into new markets

Jose Arana, VP of Operations and Fausto Leon, Director of


Sales,Innovattel/Torresec with a guest at Informtica 2016

Over the past year, Innovattel/


Torresec has announced its
entrance in the Argentinian
market. Since then, the towerco
has participated in a telecom fair
in Cuba as one of the very few
U.S. companies invited to join.
In this interview, TowerXchange
catches up with its COO, Juan
Cueria, for an update on the
status of things in Argentina
and to find out the real potential
of the much discussed Cuban
telecom market.

Keywords: Americas Insights, Argentina, Build-to-Suit, Business Model, C-Level Perspectives,


Caribbean, Central America, Country Risk, Cuba, Ecuador, Innovattel, Insights, Leasing & Permitting,
Market Entry, Market Overview, New License, New Market Entrant, Peru, Puerto Rico, Regulation,
South America, Tax, Torresec

Read this article to learn:


< Views on the path to an open telecom market in Cuba
< What challenges may lie ahead when doing business in Cuba?
< How are things going for Innovattel/Torresec in Argentina?

TowerXchange: Please reintroduce Innovattel/


Torresec for any readers unfamiliar with your
company.
Juan Cueria, VP & COO, Innovattel/Torresec: Innovattel/
Torresec is a Puerto Rico based tower company active in
Ecuador, Peru, Colombia, Puerto Rico and Argentina.
TowerXchange: Tell us about your recent experience
in Cuba.
Juan Cueria, VP & COO, Innovattel/Torresec: Jose
Arana,our VP of Operation and Fausto Leon, our Sales
Director have recently participated in Informtica
2016, the IT and telecom forum held in Havana,
Cuba. Innovattel/Torresec was one of a few U.S. firms
approved to exhibit at the event and we were able to
showcase our business model, meet several government
officials and various executives from the local telecom
industry.
TowerXchange: What do you think about the
potential of the Cuban market? Is it likely to open to
carriers and towercos? And when?
Juan Cueria, VP & COO, Innovattel/Torresec: There is
a lot to be developed in the Cuban telecom sector and
the tower industry will be the next to follow. Cuba is
entering a crucial phase with many changes happening
at all levels. And at this stage, the pace of things still
suggests that it will take some time for the Government
to give access to new carriers and, as a consequence, to
towercos.

< Permitting, regulatory conditions and contracts in Argentina


Our view is that it will take about three to five years for
152 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange: Has the Government expressed


any interest in awarding spectrum to foreign
companies and opening up the mobile industry?
Juan Cueria, VP & COO, Innovattel/Torresec: We
dont think that the Cuban Government is interested
in awarding spectrum to international operators
for the time being. This is a crucial step that will
completely reshape the telecom industry and we
believe it will require some time to materialise.
TowerXchange: Do you know how many towers
are in the country right now? Are they suitable
for sharing or how many could be needed by a
new entrant?
Juan Cueria, VP & COO, Innovattel/Torresec: Our
first studies indicate that there are approximately
500-700 structures installed in the island of Cuba.
We are talking about towers that are shared by
radio companies, TV stations and ETECSA, which to
date is the only operator active in the country.
These sites are currently being shared so they could
potentially be used by multiple telecom tenants.
However, we dont even know how many additional
sites are needed as there arent any actual plans
for additional spectrum to be assigned or anything
alike.
TowerXchange: If you were to enter Cuba today,
what would be the top three challenges to solve
and deal with?
XX | TowerXchange Issue 16 | www.towerxchange.com

Juan Cueria, VP & COO, Innovattel/Torresec: To


date, accessing the Cuban telecom market is a very
hard task. There arent well defined commercial
agreements with the U.S. as of now and local
telecom regulations as well as property laws do
need to be amended and modernised. Having
said that, these are changes that tend to happen
relatively quickly once things pick up momentum.
Some key challenges of doing business in Cuba
under present conditions relate to how to register
a corporation and how to complete all the required
paperwork, how to import steel structures and
other construction materials as well as how to
ensure security at sites.
TowerXchange: How are you doing in
Argentina?
Juan Cueria, VP & COO, Innovattel/Torresec: We
are making progresses every day. Construction
has begun in several locations and weve been
assigned search rings in many different areas of
the country. We are now working very closely
with municipalities and other entities across each
territory to ensure our sites are deployed timely.
TowerXchange: Do you foresee carriers
divesting towers anytime soon in Argentina?
Juan Cueria, VP & COO, Innovattel/Torresec: This
is a crucial discussion in Argentina but it does
present considerable tax implications for the seller.
At this time, this is definitely a hurdle for operators
in their decision making process.

any real change to happen and for any new carrier


to enter and start operating in Cuba.

In Argentina, more than 80% of


existing sites dont have permits

TowerXchange: How are you dealing with issues


such as permitting and land management in
Argentina? How challenging is it to obtain
permits and negotiate with landlords?
Juan Cueria, VP & COO, Innovattel/Torresec: In
Argentina, more than 80% of existing sites dont
have permits. The new government is working
on a telecom regulation that should considerably
improve things in the very near future. However,
today we are building on a pre-feasibility basis.
These are very challenging conditions and we are
moving ahead with precautions and trying to avoid
very high risks but dealing with landlords is no
harder than in any other country where we operate.
TowerXchange: In terms of currency and
inflation, how are contracts being negotiated?
Juan Cueria, VP & COO, Innovattel/Torresec:
Currently, we are negotiating contracts in
Argentinian pesos with adjustment factors to be
calculated twice a year
www.towerxchange.com | TowerXchange Issue 16 | 153

IFC on the Argentinian


telecom tower industry
Improved investibility of the countrys telecom sector in light of the new Presidency
IFCs Head of TMT for Latin America,
Guillermo Mulville is based in Buenos Aires
and has an in-depth knowledge of Argentinas
dynamics. Much has changed since President
Macri came into office and his attempts to
re-open doors to international investors are
being positively perceived. However, the
country still has to prove itself and in this
analysis, Guillermo shares with TowerXchange
readers insights into its telecom sector, MNOs
investment plans and potential for the creation
of an independent tower market.

Keywords: 3G ,4G, ARPU, Americas Insights, Argentina, Build-to-Suit, Capex, Carve Out, Country
Risk, Debt Finance, IFC, Infrastructure Sharing, Insights, Investment, MLA, Market Forecasts, Market
Overview, Network Rollout, New License, Opex Reduction, Private Equity, QoS, Regulation, Risk, Sale &
Leaseback, South America, Tax

Read this article to learn:


< How Argentina is changing under the new Presidency
< Investments and divestments ahead for MNOs
< The new telecom regulator and its key role in promoting infrastructure sharing
< The growth potential of the local telecom sector
< What is in it for towercos? Assessing risks and opportunities

154 | TowerXchange Issue 16 | www.towerxchange.com

Argentina has the fourth largest population in


Latin America and is the third largest economy
after Brazil and Mexico, representing around 10%
of Latin Americas GDP. The local mobile telecom
sector accounts for less than 4% of the countrys
GDP, indicating that there is strong growth potential.
The new Government is actively working to improve
the business environment and to re-build external
relations. In just a few months, President Macris
administration has liberalised the foreign exchange
market, devalued an appreciated currency, and
reached an agreement on the long-standing dispute
with sovereign debt hold-outs, opening up the
international capital markets to the corporate
sector.
However, resumed economic growth is only
expected for the second half of the year. Inflation
remains stubbornly high and the Government
is taking a gradualist approach to addressing
the huge fiscal deficit it inherited from the
prior administration. In the telecoms sector, the
Government has appointed very professional and
committed teams at the ministerial and regulatory
levels in order to tackle the challenges ahead.
At IFC we are very bullish on the country and its
telecoms sector. The recent spectrum auctions,
added to the new political and economic
environment, provide the ingredients for a new
phase for the sector following a long period of
underinvestment. Approximately US$9bn of
investments are now expected by MNOs in the next
five years.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Carriers - whats changing and why?


The new authorities took the immediate decision
to merge the sectors two regulators, AFSCA and
AFTIC, into the National Entity for Communications
(ENACOM). And last month, ENACOM received
congressional approval to begin a reform of the
Digital Argentina Law which was passed in 2014.
The new context is expected to promote convergence
and competition, and eliminate discretionality.
MNOs had been starved for spectrum for many
years. Economic mismanagement under the
Kirchners affected investments, resulting in serious
QoS issues as MNOs were ill-equipped to deal with
increased traffic.
The allocation of 4G spectrum in 2015 was wellreceived by MNOs, which ended up paying a total
of US$2.2bn, 13% above the base price. While
capacity and QoS are improving, the new phase
of infrastructure deployment has only recently
commenced. Mobile broadband investments will
be key. According to GSMA, current 3G and 4G
subscriber penetration will increase from 37% to
56% by 2020. This context provides for a favorable
outlook for infrastructure sharing business models.
Argentinas mobile market has a structure which
should also favor infrastructure sharing. SIM
penetration is around 140%, with 90% of unique
subscriber penetration and over 28mn mobile
broadband connections. Blended ARPUs, even after
the recent devaluation, stand above US$7. Market
share is evenly distributed between the three main
XX | TowerXchange Issue 16 | www.towerxchange.com

35%

1,500-2,000
new sites needed
per year 2016-2018

average

Income
tax rate

21%

1:
BTS firm
active in

Argentina
(Innovattel)

US$7+

VAT
1%

ARPU

32-33%:

the market

share of each

of the three

top MNOs

$$$$

the new

expected combined
MNOs investments

regulator
ENACOM
resulting

from the
merge of

AFSCA

Wealth and
tax
AFTIC

operators: Claro (Amrica Mvil) with 33% of market


share, Movistar (Telefnica) with 32% and Personal
(Telecom) with 32%. Nextel, recently bought by
Grupo Clarins Cablevision, has a 3% market share
but is expected to become more prominent once
it invests beyond iDEN. But for this it will require
additional spectrum.
Are towercos likely to enter Argentina anytime
soon?
Argentina has over 16,000 cellular towers, the
third-largest tower count in the region after Brazil
and Mexico. However, practically all towers are
MNO-owned. Historically, there have been many

140%
SIM penetration

US$9bn:
in the next five years

$$$$

16,000
existing towers
in Argentina

US$2.2bn:
Raised during the 2014

4G spectrum auction

inhibitors to the development of an independent


tower model. These included long periods of
macro instability, limited long term financing,
high inflation coupled with inadequate inflation
adjustment indices, regulatory uncertainty
and an interventionist government policy and
high levels of perceived corruption (Argentina
ranks 107th among 168 countries ranked by
Transparency International). In particular,
foreign exchange restrictions meant that MNOs
accumulated substantial Peso-liquidity, which
in a high inflationary environment with FX
constraints prompted them prioritise capex
over opex.Local MNOs, previously skeptical of
infrastructuresharing, now seem open to embracing
www.towerxchange.com | TowerXchange Issue 16 | 155

In our view, the outlook has changed completely


in just a few months, but this will not imply an
avalanche of new independent tower operators until
the new landscape is assimilated. So far, there have
only been few announcements of signed master
lease agreements, Innovattel/Torresec being the first
independent tower operator to announce that they
have secured BTS contracts with two of the leading
wireless operators in Argentina, for which they have
raised financing from Albright Capital Management.
Interestingly, the Ministry of Telecommunications
and ENACOM are working with the city of Buenos
Aires to make available public building rooftops
for mobile antennas, helping improve capacity in
one of the highest populated areas of the country.
Furthermore, they are in negotiations with other
municipalities to improve the tower permitting
process.
The development of the sector will also depend
on the continued improvement in the overall
business environment. High inflation rates and still
unreliable indices imply that leases will likely be
US$-denominated over the medium term, which is of
course beneficial for towercos but which constitutes
currency mismatch risks that MNOs typically
want to avoid. Also, while restrictions on future
156 | TowerXchange Issue 16 | www.towerxchange.com

repatriation of funds has in theory been addressed,


banks are wary of such risks and still require
political risk mitigation, such as that provided by
multilateral financiers like IFC. Taxation is another
issue which may delay a faster development of
infrastructure sharing. An income tax rate of
35% is particularly hefty in Sale-and-Leaseback
transactions, in which the towers have been carried
in MNO books at cost in an accounting context of
no adjustment for inflation. Also, operational taxes,
such as 21% VAT for any lease operation, a wealth
tax of 1% on the book value of assets, added to gross
income tax, corporate income tax and various stamp
taxes, are obstacles to faster sector growth.
Finally, while we see strong interest in Argentina
from many middle market towercos, the market is
watching closely the decisions of Amrica Mvil and
Telefnica of creating their own infra-cos.
Country risk vs opportunity
Country risk is evidently high on investors
minds. However, having been an outcast from the
international markets for such a long time does
provide interesting investment opportunities now
that the Government is undertaking market friendly
policies through credible and highly committed
technical teams.
Agreement with the debt holdouts [Note of author:
this is expected mid-April, so we assume already
achieved by the time this article is published] was
arguably the last impediment in terms of allowing
Argentina to graduate from an exotic market to

Local MNOs, previously skeptical of


infrastructure sharing, now seem
open to embracing the model. MNOs
face accelerated build-out needs, for
which they need built-to-suit partners.
Without considering Nextel, we
estimate that the three large MNOs
will pursue a combined 1,500-2,000
new sites per year in the next couple
of years alone

themodel. MNOs face accelerated build-out


needs,for which they need built-to-suit partners.
Withoutconsidering Nextel, we estimate that the
three largeMNOs will pursue a combined 1,5002,000 new sitesper year in the next couple of years
alone.

an emerging market once again. Presently, we


see a short window of opportunity in which equity
and debt investors can expect to obtain high riskadjusted returns.

High inflation, high fiscal deficit and the perceived


risk of repatriating funds are still worries for
international investors but in our mind these risks
are offset by the sectorial opportunities arising after
a decade of underinvesting.
At IFC we have a long history of investing in
Argentina. Our current portfolio amounts to over
US$1bn, while we have mobilised additional third
party funds in excess of US$550mn. The bulk of such
portfolio is in infrastructure projects, with financial
markets, agribusiness and technology accounting for
the balance
www.towerxchange.com | TowerXchange Issue 16 |

XX

Virgin towerco markets: Bolivia


Are towercos going to enter Bolivia in light of its complicated past?
Build to suit (BTS) tower companies tend to be
attracted by densification plans, and the launch
of 4G LTE usually entails substantial investments
by carriers to enhance their network capacity.
However, in spite of all three active operators
having commenced their 4G rollout across Bolivia,
the country has so far failed to attract independent
towercos, possibly as a result of a history of
nationalisation of key international organisations.
In this editorial, TowerXchange takes a look
at the countrys mobile market, its promising
growth pattern as well as its troubles to attract
international towercos.

Keywords: 4G, Americas, Bolivia, Build-to-Suit,


Editorial, Entel, LTE, Market Entry, Market
Overview, Millicom, Nuevatel PCS, QoS, South
America, Tigo, TowerXchange Research, Trilogy
By Arianna Neri, Head of Americas, TowerXchange

International Partners, Universal Access, Viva

Read this article to learn:


< The challenges of doing business in Bolivia
< Improved economic conditions trigger international investments
< The mobile sector: investments and expansion plans
< Could BTS towercos enter Bolivia?

XX | TowerXchange Issue 16 | www.towerxchange.com

Back in May 2008 Bolivian President Evo Morales


decided to re-nationalise the Empresa Nacional
de Telecomunicaciones (Entel), after months of
disputes with its majority shareholder Telecom
Italia. The move was in line with Morales plans to
nationalise key sectors including telecoms, gas and
power. Negotiations with Telecom Italia became
tense when Morales demanded a payment from
the Italian telco of US$60mn to cover unpaid taxes
and fines for failing to provide good service in rural
areas and complying with coverage obligations.
Telecom Italia brought the case before the World
Banks International Centre for Settlement of
Investment Disputes (ICSID) in spite of the Bolivian
government threatening to withdraw from it due
its perception of ICSID often taking the side of
international companies rather than governments.
The controversy settled a few months later when
the Bolivian government agreed to pay US$100mn
to Telecom Italia and the parties signed an
agreement to cease any further demands.
Telecom Italia isnt the only international
organisation that Morales Administration decided
to nationalise. Over the following couple of years,
Morales celebrated International Workers Day
- May 1 - by nationalising key companies in the
hands of international investors such as Air BP, Pan
American Energy, ELFEC, Rurelec and GDF Suezs
subsidiary Corani.
Back in 2013, the President did threaten to
nationalise the other two mobile network operators
www.towerxchange.com | TowerXchange Issue 16 | 157

active in Bolivia; Trilogys Viva and Millicoms Tigo.


Specifically, Morales accused the two companies of
avoiding cooperation with criminal investigations
by providing useful information in a timely
manner when requested by the police. While
insisting that the operators were obliged to help
the authorities, Morales never mentioned specific
cases or referred to actual investigations. To date,
both Viva and Tigo are active players in the mobile
market.
Positive signs from the Bolivian economy
In spite of its natural resource wealth, Bolivia
is still to date Latin Americas poorest country.
However, its per capita GDP has risen by 25% since
2005 and is expected to grow by 4.5% in 2016 (vs
3.7% regional average).
In July 2015, Fitch upgraded its outlook on Bolivia
to BB/Stable thanks to its improvements to the
sustainability of its hydrocarbons production
and its overall regulatory framework while the
countrys inflation has been consistently below
regional average (2016E: 4.9% vs 7.3% regional
average).
Morales nationalisation strategy did limit the flow
of international investments but since 2011, such
investments have more than doubled (US$0.9bn
in 2011 vs US$2.1bn in 2014) and, according to
Fitch, the risks of nationalisation have considerably
eased since 2013. Its also important to note that the
government has paid US$690mn in compensation
to expropriated international companies.
158 | TowerXchange Issue 16 | www.towerxchange.com

Bolivias fast facts

Economy
Population

10.8mn (Q4 2015)

Fitch rating

Poverty headcount BB/Stable


ratio 39.3% (2014) (July 2015)

Inflation 4.9% (2016E)

Mobile sector

98%

SIM penetration
(Q4 2015)

Connections 106mn
(Q4 2015)

$$$$$$$
$$$$$$$
$$$$$$$
Foreign investments

US$2.1bn (2014)

Carriers
23.1%

Entel

49.6%
30%

Tigo
Viva

Sources: TowerXchange, Economist Intelligence Unit 2015, Fitch Country Report, GSMA Intelligence, the World Bank

Although still the poorest country in the region,


according to the World Bank the percentage of
people living below the poverty line decreased
from 51.3% in 2009 to 39.3% in 2014.
No country for independent towercos?
Since its nationalisation, Entel has focused
on granting universal access to the Bolivian
population under its Territory with Total

Coverage initiative which has been pushing to


enhance the role of mobile networks rather than
fixed lines.
The lack of commitment to technological
innovation has resulted in the level of service being
considerably behind regional standards, network
capacity being insufficient and SIM penetration
being the lowest in the region at 98% (source: GSMA
Intelligence).
www.towerxchange.com | TowerXchange Issue 16 |

XX

Economy

Ease of doing
business
rank

Starting a
business

Dealing with
construction
permits

Getting
electricity

Registering
property

Getting
credit

Protecting
minority
investors

Paying
taxes

Trading
across
borders

Enforcing
contracts

Resolving
insolvency

Bolivia

157

178

150

101

143

126

144

189

124

136

92

Source: World Bank Group - Doing business report

The overall inadequacy of the Bolivian network


has recently resulted in fines against the three
operators. In fact, this past February, the national
regulator, Autoridad de Regulacin y Fiscalizacin
de Telecomunicaciones y Transportes (ATT), has
sanctioned each of them US$4.5mn for bad service
and call drops during the year 2015.
As a measure to improve its offering, dominant
player Entel has recently announced a US$1bn
five-year investment plan which will focus mainly
on enhancing the quality of mobile infrastructure
and ensuring coverage of rural communities. Tigo
invested US$130mn to expand its infrastructure
across the country and Viva committed to US$80mn
in 2015.
The emphasis on mobile infrastructure would
usually have attracted BTS-focused towercos
to enter Bolivia to support mobile network
operators in their coverage extension and network
densification plans. It should also be noted that one
of Bolivias operators towers have been offered for
sale on several occasions in recent years. However,
there are still no international towercos in Bolivia,
perhaps because doing business in the country isnt
easy.
XX | TowerXchange Issue 16 | www.towerxchange.com

In fact, Bolivia ranks 157th (out of 189) in the


World Banks ease to do business chart and it has
so far failed to leverage its richness in natural
resources, especially since nationalising gas and
power companies. To date, the countrys GDP stands
at US$6,500 or 156th out of 230 worldwide, which
places Bolivia among the poorest countries in the
American continent.
The ease to do business chart reports aspects such
as starting a business and dealing with construction
permits - which can take more than 200 days to
expedite - for which Bolivia ranks in 178th and
150th place. These positions could well scare off BTS
firms looking at doing business in the country, while
the ability to enforce contracts isnt one of Bolivias
strength either.
The threat of nationalisation combined with a less
than favourable business environment, especially
in the construction sector, has so far hindered the
development of the telecom sector and the entrance
of independent towercos, although TowerXchange
still feels that that the Bolivian market could present
interesting opportunities for towercos seeking to
acquire assets, especially since the launch of 4G
LTE.

Bolivian telecom sector still poised for growth


The Bolivian telecom market is indeed growing fast
and generated revenues of up to US$1bn in 2014
which could rise to US$1.5bn by 2019 according to a
2015 report by Pyramid Research.
As of December 2015, Bolivia had 10.2mn
subscribers out of approximately 10.7mninhabitants
with Entel leading the market share(46.9%),
followed by Tigo (30%) and Viva (23.1%). Entel
started offering 4G LTE services back in April
2014 and was soon joined by Tigo (July 2014). Viva
announced its 4G LTE launch in July 2015.
With all three MNOs now rolling out 4G LTE
across the country, cell site densification is a top
priority and the entrance of BTS firms in Bolivia
could positively impact the growth and overall
modernisation of the local telecom sector.
Beyond the dynamics of the telecom industry and its
growth projections and in spite of Fitchs improved
outlook on Bolivia, international tower companies
might still seek a certain degree of reassurance
before committing to any level of investment in the
country. And that might be tricky to obtain
www.towerxchange.com | TowerXchange Issue 16 | 159

American countries. Guyana ranks the highest with


96% pre-paid subscribers.

Share Square: Bolivia


10.4 million mobile subscriptions by the end of 2015, giving a
penetration rate of 96%
Bolivias national subscriber base grew significantly between
2007 and 2013, almost tripling in size from 3.6mn subscribers
to 9.8mn in the six years

Passive

The 4G market in Bolivia is expanding rapidly due to a trend of


increasing smartphone and tablet usage across the country
In recent years operators have invested heavily in lengthening
the countrys fibre infrastructure as well as improving Bolivias
connectivity with international submarine cables. Rural
coverage is also expected to significantly benefit from the
deployment of Bolivias first telecommunications satellite
The market is heavily monitored by the Bolivian government
who also have substantial market influence as the majority
shareholder of the largest operator

None

Current Sharing

Active

3 MNOs: Entel, Tigo and Viva

Bolivia

No towercos currently operate within Bolivia. A lack of market


stability is thought to have discouraged towercos from entering
the market

3G

4G
Technology Deployment

Opportunity for towercos entry with


focus on high Lease Up Rate (LUR)

Opportunity for Outsourcing


by MNO to towercos

Mobile subscriptions- market share


23.1%

Entel
46.9%

30%

Tigo (Millicom)
Viva (Trilogy)

160 | TowerXchange Issue 16 | www.towerxchange.com

Limited opportunity for new


entrant towercos

Mobile market overview


Bolivia had an estimated population of 10.8mn
people and 10.4mn mobile subscriptions at the
end of 20151, giving a mobile penetration of 96%
- the third lowest level of penetration in South
America ahead of only Guyana (84%) and Ecuador
(80%). Around 90% of subscribers have a pre-paid
account, which ranks 2nd highest amongst the South

There are three mobile network operators (MNOs)


serving the Bolivian market (See figure 1). The largest
operator, Entel, serves 4.9mn subscribers which
equates to a market share of 46.9%. The second
largest operator by subscriber numbers is Tigo
(Millicom) which has 3.1mn subscribers (30.0%) and
VIVA, the smallest of the three operators, serves the
remaining 2.4mn (23.1%) subscribers.
Key mobile developments
Bolivia has low mobile penetration for the South
American region when compared with the highest
performing countries of Suriname (175%), Uruguay
(159%), Chile (146%) and Argentina (144%). However,
Bolivias national subscriber base grew significantly
between 2007 and 2013, almost tripling in size from
3.6mn subscribers to 9.8mn in the six years. Since
2013 subscriber growth appears to have stagnated
somewhat, only increasing by 0.6mn in the two
years to the end of 2015. Forecasts predict that the
subscriber base will reach 13.2mn by 2020.
Entel first launched 3G services in Bolivia in Q3 2008
and enjoyed monopoly status for two years until
Tigo joined the market, shortly followed by Viva in
the first half of 2011. The uptake of 3G subscribers in
Bolivia was initially slow however the market quickly
developed and the number of new subscribers per
quarter reached 244,000 at its highest point in 2013.
This number has since fallen, averaging 133,000 new
subscribers per quarter in 2015 and this number is
expected to remain relatively constant up to 2020.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Bolivias first telecommunications satellite was


launched in December 2013 and came online in
April 2014 with the purpose of providing internet
and mobile connections to Bolivians in areas not
currently covered by the operators infrastructure.
Rollout of 4G
Entel first launched 4G services in Q4 2012 and was
the sole provider within the market until Q4 2013
when the regulator, ATT (Autoridad de Regulacin y
Fiscalizacin de Telecomunicaciones y Transportes),
assigned 4G LTE spectrum in the 700MHz band to
Tigo and Entel following successful bids at auction.
The third operator, Viva, chose not to participate in
the auction.
Entel first offered 4G services in the cities of La
Paz, El Alto, Santa Cruz and Cochabamba in April
2014. The market responded well to the service
offering and reports stated that Entel signed up to
2,000 subscribers in its first week of operation. Tigo
quickly followed Entel to the 4G market launching
its services in July 2014, citing that demand was
clearly present as demonstrated by a trend of
increasing smartphone and tablet usage across
the country. Viva launched its 4G services exactly
one year after Tigo in the 1700MHz and 2100MHz
frequency bands.
Entel leads the way in terms of market share in
4G with 0.37mn (68.3%) of the total 0.55mn 4G
subscribers. Tigo holds 24.8% market share with
0.14mn subscribers and the smallest 4G provider,
Viva, serves 0.04mn subscribers, a market share of
6.9%.
XX | TowerXchange Issue 16 | www.towerxchange.com

As the 4G market matures and coverage begins to


reach the more rural areas, operators are investing
in physical infrastructure, in order to improve their
service offering to subscribers. In the last two years
Tigo and Entel have invested heavily in lengthening
the countrys fibre infrastructure as well as
improving Bolivias connectivity with international
submarine cables.
MNOs activity
Entel (Empresa Nacional de Telecomunicaciones),
Bolivias largest mobile operator by market share
was state owned until 1995 when it was acquired by
Telecom Italia (TIM). Entel operated as a subsidiary
of TIM for thirteen years until the Bolivian President
decided to re-nationalise a number of the countrys
energy services and the government reclaimed the
operator through a contentious supreme decree.
Entel has posted a positive financial performance in
Q1 2016 and has recently announced a significant
investment plan to increase the countrys fibre-optic
backbone by 4,000km.
Tigo (Millicom) first entered the Bolivian
telecommunications market in 1991 under its
previous guise of Telecel which launched Bolivias
first analogue cellular network. In 2006, with a
market share of 23%, the company rebranded to use
the more recognised Tigo name, whilst remaining a
subsidiary of Luxembourg-based Millicom.
Viva (Trilogy) is the market name for the mobile
operator NuevaTel PCS de Bolivia which was
acquired by U.S. holding company Trilogy
International Partners in 2006. Following an

investment of US$100mn, which included the


deployment of 200 new antennas, Viva reached 75%
coverage by geographical territory in 2012.
Regulation and the tower sharing market
Telecommunications in Bolivia was regulated by
SITTEL (Superintendencia de Telecomunicaciones),
until 2009 when the Bolivian government
decided to consolidate the regulatory authorities
of three sectors: transportation, post and
telecommunications. The resulting regulator is
ATT (Autoridad de Regulacin y Fiscalizacin de
Telecomunicaciones y Transportes).
ATT regulates the entire telecommunications
industry, including radio spectrum, merger
and acquisition activity, coverage and service
agreements and price competition. A major initiative
of the ATT in recent years has been to encourage
all subscribers to reregister their phones with their
operators in order to switch off unregistered devices,
in an attempt to decrease the amount of mobile
phone related crime in the country - which has been
on the rise.
No towercos currently operate within Bolivia,
eventhough market developments, including the
three operators rolling out 4G and prioritising cell
site densification, could favour the entrance of
infrastructure investors.
Reports suggest that a lack of market stability is a
significant factor driving the lack of towercos within
the Bolivian market. In 2008, following months of
disputes, the Bolivian president Evo Morales decided
www.towerxchange.com | TowerXchange Issue 16 | 161

to re-nationalise the countrys largest operator Entel,


purchasing a 50.9% stake from majority shareholder
TIM. This move coincided with the re-nationalisation
of major oil and gas companies through a mixture of
decrees and acquisition, as part of an initiative by the
president to reclaim the countries basic services.
In 2013, Morales is reported to have threatened Tigo
and Viva with re-nationalisation following claims that
the operators were not communicating with police in
a timely manner during investigations surrounding
the countries rising mobile phone related crime.
Government interference is likely to have influenced
the poor ranking Bolivia received from the World
Bank in its 2015 ease of doing business indicator
Bolivia was given a ranking of 157th out of 189
countries.

increase the service offerings available to the


10.4mn mobile subscribers.
The market remains heavily monitored by the
Bolivian government who also have substantial
market influence as the majority shareholder of
the largest operator. Reports suggest that potential
towercos are dubious with regard to government
interference and the volatility displayed during the
re-nationalisation of Entel, and are only likely to
enter the market when a more stable environment
is evident
1. GSMA

Guest columnist Marcus Dowdeswell

Despite the increasing favourability of the market, it


is reported that towercos require further convincing
before seeking to acquire infrastructure within the
market.
Conclusions
With the 8th largest population in South America
(10.8mn people) and the third lowest mobile
penetration (96%), there is considerable room for
subscriber growth in the Bolivian mobile market.
4G services have been launched and consumer
appetite is growing rapidly with all three operators
now providing a service in the country. Major
advancements in fibre infrastructure as well as rural
coverage in the form of satellite deployment have
been witnessed and are expected to significantly
162 | TowerXchange Issue 16 | www.towerxchange.com

Guest columnist Ed Siegle

Marcus Dowdeswell is a Consultant in Mott


MacDonalds Digital Infrastructure practice,
working with telecommunications operators,
vendors and investors across the Middle East and
Africa. Marcus has analysed tower markets across
three continents and has recently been working as
a Market Analyst on multi-million dollar mobile
tower transactions in Africa and the Middle East,
covering tens of thousands of tower assets. Marcus
graduated with a BA in Business Finance and is an
Associate Member of the Institute of Consulting

Ed Siegle is a Principal Consultant in Mott


MacDonalds Technology & Communications
Division. He has 20 years of experience
as a consultant, primarily focused on the
telecommunications industry, working for
operators, vendors, investors, regulators and
public sector organisations. His particular
expertise lies in market analysis, commercial
due diligence, product and market strategy
development, demand forecasting and business
case production.

In the course of his career he has worked for


clients in the UK, Europe, the USA, Africa and
Latin America. He has spent over 2 years living
and working in Latin America, including 18
months in Brazil where he helped establish
new offices for two consultancies. Over the past
3 years he has been part of a Mott MacDonald
team commissioned to execute a series of
advisory projects for towercos looking to invest in
developing markets

www.towerxchange.com | TowerXchange Issue 16 |

XX

Is Telesites a force to be
reckon with?
My views on the Mexican towerco and its growth potential

By Arianna Neri, Head of Americas, TowerXchange

Telesites isnt just a new entity in the Mexican tower


market, but a towerco evolved from the genes of one of
the strongest mobile network operators in the Central
and South American telecom landscape. A towerco
which started trading with close to 11,000 towers in
the unique Mexican tower market. Analysts have been
underwhelmed with Telesites, and the companys IPO
was followed by a swift devaluation. However, closer
analysis reveals a good reason for the volume of post IPO
sales, while Telesites build volume has been impressive.
The key challenge remains achieving the companys
bullish forecast of a tenancy ratio of 1.5 by 2020.

Keywords: AT&T, American Tower, Americas, Amrica Mvil, Build-to-Suit, Carve Out, Co-locations,
Editorial, IFETEL, Investment, MLA, Mexico, Regulation, Telefnica, Telesites, Tenancy Ratios, Towerco,
UBS, Valuation

Read this article to learn:


< Expectations versus reality: Telesites growth pattern to date
< Is 1.5x a realistic tenancy ratio by 2020?
< How many towers are needed in Mexico by 2018?
< Towerco KPIs applied to Telesites: papers, assets, permits, rates and growth

XX | TowerXchange Issue 16 | www.towerxchange.com

Necessity is the mother of invention and Carlos Slim


had to create Telesites to address the regulators
concerns about the dominant position of Amrica
Mvil in the Mexican telecom market. The story is
well known to everyone but since its debut on the
Mexican Stock Exchange, back in December 2015,
Telesites shares have failed to impress and many
jumped to the conclusion that the towerco was
nothing but a financial exercise and a mechanism
for the Mexican giant to keep operating and avoid
IFETELs further restrictions.
The companys trading debut was met with
lukewarm reactions from the market and many
analysts recommended selling as early as two days
after its IPO on 21 December 2015. Another factor
that drove the initial sale of shares was the initial
assignment of Telesites shares to Amrica Mvils
shareholders as a condition of the spin-off. A fact
that forced many investors to sell their shares to
meet composition requirements for their portfolios.
Many investors sold their shares within one month
of trading to re-balance their positions and drove
the initial valuation of the stock down. In fact,
Telesites started trading at MX$12.9 and is now
stable in the 10s, with some analysts forecasting
further drops within this year.
Telesites performance in the stock market received
plenty of media coverage due to its link to Carlos
Slim, the second richest man in the world with an
estimated net worth of US$77.1bn, and the relative
speed at which the spin-off came to life, mostly due
to the pressure of the Mexican regulator.
www.towerxchange.com | TowerXchange Issue 16 | 163

Organic growth and tenancy ratio: expectations


vs reality

Telesites tower count

Source: TowerXchange

15,000

But if we look beyond the dynamics of the financial


market, how is Telesites doing as a towerco
in Mexico? Did Mexico need it and if so, is the
company likely to meet the goals it set for itself?
Telesites originally forecasted organic growth
plans ofas many as 1,000 new towers per year,
exclusivelyfor its anchor tenant Amrica Mvil.
A planned growth considerably higher than the
expectation of any other listed towerco in the
CALA market. Along with its organic growth plans,
Telesites shared tenancy ratio goals of 1.5x by 2020.
In terms of organic growth, in 2015 the company
has been overachieving and grew its portfolio from
10,865 (Q1 2015) to 12,874 (Q4 2015), adding 2,009
new sites in less than twelve months of operations.
Its original plan to reach 18,000 new sites by
2020 seems more achievable now than when first
announced.
If Telesites was to maintain this growth pattern,
we would see its tower count surpassing 20,000 by
2018. However, beside Amrica Mvils expansion
plans, I am not sure the other carriers are likely to
greatly contribute to the towercos growth.
On one hand Telefnica doesnt have a history of
high investments in Mexico and isnt likely to bring
seizable business to Telesites, particularly given
that Telefnica is currently creating its own carveout towerco, Telxius. And the remaining player in
164 | TowerXchange Issue 16 | www.towerxchange.com

12,555

12,874

12,000
10,865

9,000

Q1 2015

Q2 2015

Q3 2015

Q4 2015

the market, AT&T, is reportedly reducing its new


build plans having audited assets acquired from
Nextel and Iusacell.

by 2018 but this number could be reduced since


sites acquired from Nextel have greater potential of
utilisation than originally thought.

In 2015 American Tower renewed a 14-year global


MLA with AT&T which covers the U.S. as well as
Mexico and referred to expectations for doubledigit organic growth in the country, which hints
that the alliance between AT&T and American
Tower could include the carriers new sites in
Mexico.

The governments planned shared 4G network (Red


Compartida) could further dampen the demand
for new sites but for now the project is still up
in the air. In fact, the bidding process has been
postponed to give more time to the Secretariat of
Communications and Transport (SCT) to deal with
the requests for clarification submitted by the
contestants. In order to function, its been estimated
that the Red Compartida will require around 12,000
new sites at a cost of US$7bn. But to date, many
seem sceptical with regards to the likelihood of this

As said, AT&T isnt likely to build aggressively in


Mexico. In fact, they originally forecast around
3,200 new sites (between swaps and new builds)

www.towerxchange.com | TowerXchange Issue 16 |

XX

(x)
1.5

22,000
20,000

1.4

18,000
1.3
16,000
1.2
14,000
1.1

12,000

2015e

2016e

Total towers

2017e
Tenants

mega-project ever reaching scale.


In terms of tenancy ratio, Telesites outlook to
bring it up to 1.5x by 2020 seems bold. First of all,
Amrica Mvils new builds - which are likely to be
100% developed by Telesites - will dilute its tenancy
ratio and, as previously discussed, Telefnica and
AT&T may contribute only marginally to its growth.
Experts at UBS have forecasted the demand for new
sites to reach 5,000 by 2020 and commented that
XX | TowerXchange Issue 16 | www.towerxchange.com

2018e
Tenancy ratio

2019e

Experts at UBS have forecasted


the demand for new sites to reach
5,000 by 2020 and commented that
even with Telesites taking 80%
share we believe this will drive
its tenancy ratio to only 1.24x by
2020. This scenario is created on
the premise of AT&T/American
Tower alliance which would cut
out Telesites from any BTS project
assigned by the U.S. operator

2020e
Source: UBS Estimates

even with Telesites taking 80% share we believe


this will drive its tenancy ratio to only 1.24x by
2020. This scenario is created on the premise of
an AT&T/American Tower alliance which would
exclude Telesites from any BTS project assigned by
the U.S. operator.

Telesites value considerations

Tenancy ratio to expand: 2015-2020

Looking at critical considerations to maximise the


valuation of a towerco, Id like to compare them
against Telesites.
PAPER

As previously mentioned, Telefnica has a history


of low investments in Mexico and many Mexican
players have confirmed that to date, the Spanish
operator hasnt announced any change of strategy.

Amrica Mvils dominant position in the telecom


sector has spread its effects on to Telesites, which
is subject to peculiar rules aimed at de-risking its
www.towerxchange.com | TowerXchange Issue 16 | 165

Five critical considerations to maximise towerco valuations

real estate, media, retail and financial services.


Its unclear whether these oasis have been
transferred to Telesites but in any case I am
convinced that the towerco will meet high quality
standards and excel at building sites.
PERMITS

Paper

Assets

Permits

preponderance in the Mexican market. Specifically,


Telesites must offer equal terms and prices to all its
customers and publicise the terms and conditions
as well as prices.
Additionally, Telesites is subject to ad-hoc
regulatory inspections which are a definite
incentive for the company to ensure its paperwork
is always up to date and in order.
ASSETS
At the time of the spin-off, Amrica Mvil didnt
transfer all of its assets to the new entity and
possibly retained the core of its portfolio to avoid
having to share it with its competitors. However,
with close to 13,000 sites (or 50% of all sites in
Mexico) in its portfolio, Telesites has much to offer
to its customers.
Its important to highlight that Amrica Mvil didnt
166 | TowerXchange Issue 16 | www.towerxchange.com

Rates

Growth

only build towers but added so-called telecom oasis


to its portfolio. These sites are highly remunerative
commercial centres filled with stores, restaurants
and services, where cables are turned into works of
art and towers become much more than steel and
grass.
An example is the Green Corner, located in a
building owned by Carlos Slim. It hosts a massive
telecom switch on the last floor and has a tall
telecom tower on top. There is a restaurant on
the top floor whose rooftop is entirely covered
by solar panels. Instead of hiding cables and
equipment, they became part of the design, along
with a monitor showing how many kW are being
generated by the site.
This reminds us that Telesites isnt just a towerco.
But a towerco created by a King Midas whose
empire encompasses virtually every industry in
Mexico, including telecoms, education, health care,

Permitting is one tricky business in most countries


in CALA. And obtaining municipal permits in
Mexico isnt easy.
Having been in the business for decades, I am sure
Amrica Mvil knows its way around the complex
local permitting system and Telesites can count
on the experience of its parent company on this
matter.
RATES
As previously mentioned, Telesites is forced to
publicises its terms and conditions and offer fair
prices to its customers by IFETEL, in light of its
preponderance in the market.
Telesites rent prices are aligned with the typical
lease rates charged by Mexican towercos. In fact,
in 2015, the average net monthly rent per tenant
in 2015 was MX$18,600 (~US$1,050) plus land rent
pass-through of around MX$10,000 (~US$570).
GROWTH
Growth is indeed the most thorny aspect of
www.towerxchange.com | TowerXchange Issue 16 |

XX

Even with the Red Compartida actually happening,


we are talking about thousands of new sites needed
to bring Mexicos mobile services in line with the
rest of OECD countries. And in my view, there is
only one mobile network operator - for now - able
to satisfy the cell site densification needs of the
country. And that is Amrica Mvil.
Far from the - sometimes abstract - dynamics of the
stock market, Telesites is a tower company. And its
business is to build towers in Mexico (and beyond).
So far, Telesites has added 2,009 sites in Mexico in
less than a year, which seems quite an impressive
result to me.

What we like about Telesites


Telesites may outperform their own forecast
build volumes, but that will only make their

So far, Telesites has added


2,009 sites in Mexico in less
than a year

all. In fact, if on one hand Telesites might have


overestimated its tenancy ratio growth as well as
the demand for new sites by Telefnica and AT&T,
we need to remember that Mexico still needs
as many as 70,000 new sites to reach its desired
coverage and enhance its capacity.

beyond Mexico, with 300 sites being built on behalf


of Claro in Costa Rica and the potential to start
operations in fourteen other countries in CALA, a
move which could turn the towerco into the largest
and most regionally widespread towerco in the
region.

target tenancy ratio of 1.5 by 2020 even more


difficult to achieve. There are few precedents
of carve-out, operator-led towerco driving
tenancy growth of that magnitude over their
first four years of existence, in fact none that
TowerXchange are aware of. There are simply
not enough tenancies up for grabs in Mexico to
achieve that number, and those are available
will be keenly fought for in this crowded
towerco market.
But this doesnt mean to say that we think the
Telesites is a bad idea or a bad investment. A
towerco adding 0.05 tenants per tower per year
in investible markets can still be a bankable

There is much uncertainty about Telesites growth


potential but I would argue that the CALA tower
industry as a whole is an uncertain business,
as shown by the hard times faced by Brazilian
towercos after years of excitement. And Mexico is
simply no different. With as many as twenty-three
towercos ranging from Mom and Pop shops to listed
companies such as Telesites and American Tower,
the country is a complex place to do business
and growth forecasts are unpredictable just like
anywhere else in the region.
It must be added that Telesites is already expanding
XX | TowerXchange Issue 16 | www.towerxchange.com

Telesites is likely to face several challenges along


its path towards success. Regulatory limitations,
competition from the best in class such as
American Tower, Mexico Tower Partners and SBA
Communications (outside of Mexico), scarcity of
new business from the second and third operators
in Mexico However, its DNA tells me that the
company has a clear strategy in mind, in spite
of what analysts think. And Telesites is poised
to expand way beyond Mexico, even if the terms
of its growth arent those that the stock market
necessarily expects

proposition. By 2020 Telesites could have a


tenancy ratio over 1.2 and a footprint in half a
dozen or more CALA countries. Amrica Mvil
is the most credit worthy tenant in CALA, and
Telesites are optimally positioned to become
their supplier of choice. The fundamentals of
the tower business hold true: this is a growing
infrastructure business, built on a proven
business model, with long term contracts
securing recurring revenue over a ten-plus
year horizon. Whats not to like?

www.towerxchange.com | TowerXchange Issue 16 | 167

Regional coverage:

Africa and the


Middle East features
The past quarter has seen some notable transactions in the African tower industry
with Airtel agreeing the sale of their towers in Tanzania and the DRC and IHS
completing Africas first towerco consolidation of scale. Read TowerXchanges
analyses of two key deals - American Towers acquisition of 1,350 Airtels sites in
Tanzania and IHSs takeover of HTN Towers in Nigeria.
Hotspot Networks COO Charles Iyoha, who have also just sold their Nigerian portfolio
to IHS shares some of the challenges faced by middle-market towercos in surviving
in an increasingly competitive marketplace whilst BMIs Amy Cameron compares the
strengths and weaknesses of Africas big four towercos.
Plus, as interest in Algeria ramps up with the possibility of Djezzy towers coming to
market, Mott MacDonald shed some light on key dynamics at play in the countrys
telecoms sector.
Whats more, dont miss TowerXchanges definitive guide to the African tower
industry with our 12-page whos who in African and Middle Eastern towers

Dont miss:
169 TowerXchange whos who in African and Middle Eastern Towers
182 BMI industry trend analysis: African towercos comparing the Big Four
186 TowerXchanges analysis of American Towers acquisition of Airtels Tanzanian Towers
191 TowerXchanges analysis of IHSs acquisition of HTN Towers 1,211 towers
196 Challenges for African middle-market towercos and Hotspots tower sale to IHS
199 Share Square: Algeria

168 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange whos who in


African and Middle Eastern Towers
TowerXchange presents an A to Z of MNOs, towercos, investors and advisors who are key
stakeholders in the tower industry in SSA and MENA
TowerXchange takes a deep dive into the African tower industry, providing the most comprehensive
directory to date of the key MNOs, towercos, investors and advisory firms active in the market.
Keywords: Africa, African Infrastructure Investment Managers, Africell, Africa Mobile Networks, Airtel, Albright
Capital Management, Algeria, American Tower, Analysys Mason, Atlas Towers, BCTek, Blackstone, Burkina
Faso, Cameroon, Capital Group Private Markets, The Carlyle Group, Cell C, Central African Republic, Chad, Cote
dIvoire, Citi, Communication Towers Nigeria, Congo, Connect Africa, Convergence Partners, Credit Suisse, Delmec,

African Infrastructure Investment Managers:


Joint venture between Macquarie and Old Mutual
with capital at work in IHS.
Africell: One of Africas new entrant MNO success
stories, Africell have used a low cost, rapid rollout
strategy, favouring co-locations over new tower
build. When last we spoke to them, in the DRC
Africell has not built a single tower but has captured
20% market share by co-locating on 180 Helios
towers. With a presence in the DRC, Sierra Leone,
Gambia and Uganda, Africell have not conducted
any tower sales to date but have inherited a
network from Orange in Uganda where towers had
been sold to Eaton Towers.

Development Partners International, Digital Bridge, Djezzy, DRC, Eagle Towers, Eaton Towers, Econet, Egypt,
Emerging Capital Partners, Ernst & Young, Etisalat, Ethos Private Equity, Expresso Telecom, Fanasia, FMO, Gabon,
Ghana, Globacom, Goldman Sachs, Guinea, Guinea Bissau, Hardiman Telecommunications, Helios Investment
Partners, Helios Towers Africa, HOI-MEA, Hotspot Network, HTN Towers, IFC, IHS Towers, International Finance
Corporation, Infratel, ING Bank, Intrepid Advisory Partners, Investec Bank, Iran, J.P. Morgan, Jordan, Kenya, KPR
Consult, Kuwait, Lap GreenN, Lazard, Liberia, Liquid Telecom, Macquarie Group, Madagascar, Malawi, Mali, Maroc
Telecom, mCel, MENA Towers, Millicom/ Tigo, MNOs, Mobinil, Moov, Mott MacDonald, Mozambique, MTN, Niger,
Nigeria, Ooredoo, Orange, Pro High Site Communications, Providence Equity, RIT Capital Partners, Safaricom,
Saudi Arabia, Saudi Telecom Company, SBA Communications, Senegal, Sierra Leone, Smile, Sonatel, Soros, South
Africa, Standard Bank, Standard Chartered, Sudan, SWAP, Tanzania, TAP Advisors, TASC, Telkom Kenya, Telkom
South Africa, Tigo, Towerco, TowerCo of Madagascar, Towershare, TowerXchange Research, Tunisia, UAE, Uganda,
Unitel, Viettel, Vodacom, Vodafone, Wendel, Whos Who, Yield Capital Partners, Zain, Zambia, Zimbabwe

Read this article to learn:


< Details of Africas independent towercos

Africa Mobile Networks: Rural towerco with an


interesting business model that targets either tier
one or tier two anchor tenants with a proposition
that combines active and passive infrastructure and
which focuses on rural areas of countries with less
mature coverage. AMN broke ground in Benin in
2014, is now in four countries and expects to have
a footprint in seven countries by the end of 2016
including Cameroon, the DRC, Ivory Coast, Nigeria
and Guinea.
Airtel: The worlds third largest mobile network
operator, Airtel has a footprint in 14 African
countries.

< The footprints of Africas leading MNOs and their attitudes towards tower divestments and
infrastructure sharing
< An introduction to some of the most credible current and prospective investors into European towers
< An introduction to the TMT advisory firms with experience of tower transactions

XX | TowerXchange Issue 16 | www.towerxchange.com

Tower sale and leasebacks are a strategic priority


for Airtel in Africa and to date, the operator has
closed tower transactions in eight countries; Nigeria
(with American Tower), Rwanda and Zambia (with
www.towerxchange.com | TowerXchange Issue 16 | 169

IHS), Ghana, Uganda, Burkina Faso and Kenya (with


Eaton Towers) and Congo Brazzaville (with Helios
Towers Africa). Airtel has also announced, but not
yet closed, the sale of their towers in Niger (to Eaton
Towers), Tanzania (to American Tower) and the DRC
(to Helios Towers Africa). In total Airtel has now
sold, or agreed to sell, 11,100 African towers across
ten countries, raising over US$2bn.

Figure one: Airtel African tower sale - what has closed, and who is
buying what?

Airtel still retains towers in Malawi, Chad, Gabon,


Seychelles and Madagascar. Transactions in Malawi
and Chad had been cancelled. Rumours have
also emerged of a potential tower sale in Gabon.
Whether the Malawi and Chad transactions will
come back to market remains to be seen. Airtels
recently agreed the sale of their operations in
Burkina Faso and Sierra Leone to Orange, whilst an
initial agreement regarding a sale of their opcos in
Chad and Congo has lapsed.
Albright Capital Management: Chaired by former
US Secretary of State Madeleine Albright, Albright
is an investor and advisory firm dedicated to the
emerging markets and an investor in Helios Towers
Africa.
American Tower: The worlds largest independent
commercial towerco with a tower count of over
140,000, American Tower have a portfolio of
10,163 towers in Africa spread across Nigeria,
Ghana, South Africa and Uganda and when their
transaction with Airtel in Tanzania closes this
number will increase to 11,513.

Sold to Eaton Towers (Niger announced, all


others closed)
Sold to American Tower (Tanzania
announced, all others closed)
Sold to Helios Towers Africa (DRC announced,
all others closed)
Sold to IHS
Currently retains towers
No opco present

Source: TowerXchange

Favouring markets with relatively stable political


170 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

A history of American Towers acquisitions in Africa

Source: TowerXchange

Year

Country

Seller

Tower
count

Deal value
(US$)

Cost per
tower (US$)

Deal Structure

2016

Tanzania*

Airtel

1,350

179,000,000

132,600

SLB

2014

Nigeria

Airtel

4,700

1,090,000,000

231,915

SLB

2011

Uganda

MTN

1,000

89,000,000

174,510

Joint venture (AMT 51%, MTN 49%)

2010

Ghana

MTN

1,876

21,850,000

228,375

Joint venture (AMT 51%, MTN 49%)

2010

South Africa**

Cell C

1,400

200,000,000

142,857

SLB with right to acquire 1800 more

*deal expected to close H1 FY16 **Cell C deal included 1,400 existing towers plus the option to acquire up to 1800 to be
constructed. Cost of only original 1,400 towers only included here

and macroeconomic environments, the company


has declined participate in certain processes because
of concerns in these areas but remains likely to
be a contender for key tower transactions across
the continent. In addition to closing the Tanzanian
deal, the company is focused heavily on integrating
the 4,700 towers acquired from Airtel in Nigeria,
including the upgrade of power management
systems across most sites.

to build up to scale to bid for MTNs South African


towers, Atlas Tower is an interesting company to
watch.
BCTek: Nigerian towerco with a 20 year contract
to manage and market a portfolio of 700 towers
originally built as a surveillance network, over 80%
of which are police compounds.

Blackstone: Serial towerco investor currently


working with Phoenix Tower International in CALA.
American Tower now provides full power as a
service across their entire African portfolio except in Recently evaluated investment opportunities in one
South Africa, where power remains a pass through. of Africas privately owned towercos.
Capital Group Private Markets: Private equity fund
Analysys Mason: Marco Cordoni and his team at
Analysys Mason are among the go-to-guys for tower focus on emerging markets with a diverse portfolio
market analysis and due diligence on a global basis. including investments in Eaton Towers.
Atlas Towers: US towerco, starting up operations
in South Africa. A build to suit towerco, Atlas had
built 120 towers in South Africa by Q1 2016. Trying
XX | TowerXchange Issue 16 | www.towerxchange.com

The Carlyle Group: Private equity and alternative


asset management firm with money at work in
Indonesian towers. Yet to invest in Africa.

Cell C: South African operator who monetised their


towers back in 2010 with a sale to American Tower.
Cell C maximised upfront capital in their deal with
the towerco in order to raise capital for rollout
and to grab market share, but in doing so agreed a
high leaseback rate which some commentators feel
distorts the South African tower market to this day where Cell C remain the only MNO to have divested
their assets.
Citi: One of the worlds leading tower transaction
advisory groups can be found within the TMT team
at Citi.
Communication Towers Nigeria: Nigerian
towerco which claims to have 500 cell sites
across all 36 states. Given the current appetite for
Nigerian towers, they could represent an attractive
acquisition target.
Connect Africa: Company focussed on bringing
connectivity to rural areas in Africa. Most recently
Connect Africa has deployed a series of Wi-Fi
hotspots in rural areas across Zambia. These base
stations costs less than $10,000 and are partly
funded by advertising. Connect Africa has over 200
sites deployed successfully with three operators.
Convergence Partners: Firm focussed on earlystage investments in the African TMT sector. Had
looked at an investment in the tower industry a few
years ago.
Credit Suisse: Debt providers playing a key role in
the African tower industry.
www.towerxchange.com | TowerXchange Issue 16 | 171

A history of Eaton Towers acquisitions in Africa

Source: TowerXchange

Year

Country

Seller

Tower
count

Deal value
(US$)

Cost per
tower (US$)

Deal Structure

2015

Egypt

MobiNil

1,350

179,000,000

132,600

SLB

2014

Ghana, Burkina Faso, Kenya

Airtel

2,500

SLB

& Uganda*
2012

Uganda

Warid

1,000

89,000,000

174,510

SLB

2012

Uganda

Orange

1,400

200,000,000

142,857

SLB

2010

Ghana

Vodafone

750

MLL

* Eaton acquisition of Niger tower expected to close imminently

Delmec: The tower experts in consultation and


engineering, providing global solutions to operators,
towercos and regulators on standards, guidance and
due diligence for portfolio management. Engaging
audit, assessment and analysis for structural
enhancement, capacity and maintenance as
individual activities or by way of managed services.
Development Partners International: Private
equity fund focussed on Africa with money at work
in Eaton Towers.
Digital Bridge: Serial tower entrepreneurs Mark
Ganzi and Ben Jenkins are building another empire
having sold their last venture, GTP, to American
Tower for US$4.8bn. Digital Bridge is an investment
vehicle through which stakes are invested in
towercos around the world. Digital Bridge recently
172 | TowerXchange Issue 16 | www.towerxchange.com

appointed Phil Cooper as Managing Director


EMEA and are known to have an interest in the
ongoing Mobily and Zain transactions in Saudi (and
doubtless would be interested in the STC towers if
they come to market).
Djezzy: Algerian MNO owned 51% by the State, 49%
by VimpelCom. With VimpelCom having a much
publicised strategy to divest their tower portfolio, the
operator has initiated the process in Russia with the
sale of 10,400 towers expected to close imminently.
Whilst a sale of their CIS towers is thought to be next
on the cards, it is widely expected that their c. 6,000
Algerian towers will come to market in the near
future.
Eagle Towers: Private towerco with a portfolio of 50
towers in South Africa.

Eaton Towers: Well on its way to reaching its


goal of having a portfolio of 10,000 towers across
a diverse set of markets, Eaton Towers owns and
operates over 7,000 towers in Ghana, Uganda,
Egypt, Burkina Faso, Kenya, and South Africa,
with a transaction to acquire Airtel Nigers towers
imminent, plus a substantial supplementary
acquisition in Egypt.
As a mature business, the companys focus has
switched from acquisitions to the integration and
improvement of operational efficiency of their
towers.
There has been speculation that American Tower
might have an interest in acquiring Eatons South
African towers. Currently with Capital International
as majority investors, Eaton Towers are thought to
be building the company for an eventual sale to a
strategic.
Eaton provides full power as a service, except in
South Africa where power is a pass through.
Econet: The leading MNO in Zimbabwe, Econet
has been under pressure from the government to
share its towers. Econet owns ~500 of Zimbabwes
1,400 towers. To date, Econet has not partnered with
towercos in any of its jurisdictions.
Emerging Capital Partners: Private equity fund
focussed on Africa; investors in IHS.
Etisalat: Etisalat has monetised their Nigerian
towers, selling a total of 2,691 towers in two
www.towerxchange.com | TowerXchange Issue 16 | 170

tranches to IHS. The company has a process under


way in KSA, with Mobilys 9,600 towers up for
grabs. The company has a presence in 15 countries
across Africa and the Middle East, also operating
under the names MOOV, ONATEL, Mauritel,
Sotelma and Canar and owning a 53% stake in
Maroc Telecom. Maroc Telecom runs its own tower
strategy.

Etisalats footprint and history of tower sales

Ethos Private Equity: Private equity firm with


money at work in Eaton Towers since May 2015.
Expresso Telecom: Tier two MNO Expresso
has sought BTS and SLB counterparts in several
markets but has not yet consummated a deal.
Currently has a footprint in Sudan, Ghana, Guinea,
Mauritania and Senegal.
EY: TMT strategy and corporate finance advisory
team with extensive experience of advising on
tower transactions.
Fanasia: Iranian tower builder with experience of
building over 400 sites. Has recently become the
first independent telecom tower company in Iran
with 27 operational sites.
FMO: Dutch development bank 51% government
owned, 49% by commercial banks and financial
institutions. Have invested in African towercos.
Globacom: Operator which has to date been
disinclined to sell towers and has yet to widely
share their assets. A sale by Glo could be highly
attractive for towercos, if they did come to market
XX | TowerXchange Issue 16 | www.towerxchange.com

Sold to IHS
Tower sale underway
Etisalat retains towers
Maroc Telecom (53% owned by Etisalat)
retains towers
No opco present

Source: TowerXchange

www.towerxchange.com | TowerXchange Issue 16 | 173

Estimated tower count, Expresso Telecom


Sudan

1600

Senegal
Mauritania
Guinea Conakry
Ghana

Source: TowerXchange

450
300

raised US$95mn in funding from Standard Bank


to continue building new sites in the country,
where they will soon have competition from
American Tower. Joint venture partners Millicom
restructured their equity in Helios Tanzania, DRC
and Ghananian operations into a 24% stake at group
level, which Millicom is now seeking to monetise.
Helios Towers Africa provides full power as a
service.

150
300
500

with the company having a footprint in key markets


including Nigeria, Ghana and Cote dIvoire where
towercos already have a presence. While a tower
divestiture remains unlikely, trying to predict Mike
Adenugas next move is a fools errand!
Goldman Sachs: Experienced advisors on tower
transactions and lenders to towercos. Investment
arm has a minority stake in IHS.

1000

1500

2000

a primary focus on the sub-Sahara region. Helios


portfolio companies operate in 35 African countries
across a range of industry sectors, with telecom
infrastructure and services playing an important
part. Founder investors in Helios Towers Africa.
Exiting their investment in HTN Towers.

Helios Towers Africa: Following a challenging


2015, marred by operational difficulties and three of
four deals with Airtel falling through, Helio Towers
Hardiman Telecommunications: A unique
Africa enters 2016 with a new management team
consultancy equally capable advising on engineering at the helm. The company, possessing a portfolio of
and operational issues as they are on commercial
6,556 towers in Tanzania, the DRC, Ghana and Congo
strategy and corporate finance. Extensive experience Brazzaville. has put a heavy focus on improving
advising on both the buy-side and sell-side in tower
operational efficiencies, with new CEO Kash Pandya
transactions.
coming with experience from the diesel genset
industry. Helios Towers Africa announced the
Helios Investment Partners: Investment firm
acquisition of 950 Airtel DRC towers in May 2016.
making private equity investments in Africa, with
Local subsidiary Helios Towers Tanzania recently
174 | TowerXchange Issue 16 | www.towerxchange.com

HOI-MEA: Egyptian managed service provider and


tower manufacturer which also owns a portfolio
of 50 towers in the country built for Vodafone and
Etisalat.
Hotspot Network: Nigerian towerco which built a
network of 160 sites through build to suit contracts
with Airtel and Etisalat. Their tower portfolio
has recently been acquired by IHS for just over
US$5mn and the company will now focus on rural
broadband and data centre management.
HTN Towers: One of the oldest towercos in Africa,
HTN Towers (formerly Helios Towers Nigeria)
built a portfolio of 1,211 towers with a tenancy
ratio per live tower of 2.2, turning over US$73.3mn
with EBITDA of US$31.7mn in FY2014 before their
announced sale to IHS.
IHS Towers: Towerco with the largest African
portfolio, totaling 23,493 towers (pro rata for
the completion of the HTN acquisition) across
Nigeria, Cote dIvoire, Cameroon, Zambia and
Rwanda. Highly acquisitive, having completed ten
www.towerxchange.com | TowerXchange Issue 16 |

XX

A history of Helios Towers Africas acquisitions in Africa


Tower Deal value
Cost per
count
(US$)
tower (US$)

Source: TowerXchange

Year

Country

Seller

2016

DRC

Airtel

950

2014

Congo B

Airtel

390

*58,027,671

*148,789

SLB

Vodacom

1,149

75,000,000

87,616

SLB with direct investment in HTT**

1,020

80,000,000

130,719

Joint Venture (Helios 60%, Millicom 40%)***

2013 Tanzania

2010 Tanzania Millicom/ Tigo

Deal Structure
SLB

2010

DRC

Millicom/ Tigo

729

45,000,000

102,881

Joint Venture (Helios 60%, Millicom 40%)***

2010

Ghana

Millicom/ Tigo

750

54,000,000

120,000

Joint Venture (Helios 60%, Millicom 40%)***

* TowerXchange estimates, transaction values and tower counts not disclosed


** Vodacom sold 100% of equity in towers but subscribed to acquire a 24.5% interest in Helios Towers Tanzania
***Millicom/ Tigo restructured stake into a 24.5% stake at group level, now looking to monetise

transactions of scale in the continent, and currently


in the process of closing Africas first in market
consolidation.
IHS remains a private company (with Wendel as
primary investors with a 35% stake in the company)
which has raised a huge amount of capital for
African telecom infrastructure. IHS are widely
expected to be gearing up for an IPO since their scale
probably creates a barrier to a strategic sale. IHS
are rumoured to now be pursuing towers in Saudi
Arabia and MTNs South African towers, as well as
further in-market consolidation in Nigeria.

extensive experience in towers, including some of


the landmark European transactions.

billion dollars in debt and equity into eight towercos


across emerging markets, with an objective to
double that total investment by 2018.

KPR Consult: Renowned tower doctors goto guys for structural / technical due diligence,
improvement capex planning, decommissioning
and just about anything to do with tower design
and maintenance.
Lap GreenN: Operator who has tried to monetise
towers in Uganda but has been hindered by trading
restrictions placed on the Libyan owned parent.
The company also has a presence in Cote dIvoire,
Sierra Leone and South Sudan.
Lazard: Investment advisory firm with extensive
experience in the tower industry. Has represented
Orange in most tower transactions.

Infratel: Rural infraco in the DRC whose equipment


is on 800 cell sites.

Liquid Telecom: Leading independent data, voice


and IP provider in Eastern, Central and Southern
Africa.

ING Bank: Leading Dutch bank with considerable


experience of providing debt finance to the tower
industry.
Intrepid Advisory Partners: Advisory firm
established by Daniel Lee, the Rainmaker of the
African tower industry Dan advised on 11 of the
first 13 deals to close in Africa.

Macquarie Group: Serial towerco investors, with


capital at work in Arqiva, Russian Towers, Axicom
(formerly Crown Castle Australia), Mexico Tower
Partnersand Viom Networks (soon to be part of
ATC India). Macquarie also has an excellent TMT
advisory practice with experience of advising on
tower transactions.

Investec Bank: South African based bank providing


debt and advisory services to the tower industry.

Maroc Telecom: Etisalat injected their Atlantique


Telecom assets while acquiring 53% equity in
Maroc Telecom, which has a footprint in Morocco,
Benin, Burkina Faso, CAR, Cote dIvoire, Gabon,

IHS provides full power as a service.


International Finance Corporation (IFC): The IFC
is a member of the World Bank Group, the worlds
leading DFI. The IFC has invested around half a
XX | TowerXchange Issue 16 | www.towerxchange.com

J.P. Morgan: Leading TMT advisory team with

www.towerxchange.com | TowerXchange Issue 16 | 175

Mali, Mauritania, Niger and Togo. Maroc Telecom


has not yet monetised any towers.
mCel: Former fixed line incumbent, mCel has about
1,200 of Mozambiques 4,800 towers. The former
market leader is under huge pressure from the
aggressive network rollout investments of Vodacom
and new entrant Viettel, and may respond my
monetising their towers.
MENA Towers: Early stage towerco with offices in
the UAE, Cote dIvoire and Pakistan.
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 hasnt done a SSA tower deal since.
With IHS acquiring #1 and #2 ranked operators MTN
and Airtels towers in Rwanda, if Millicom is ever
going to part with their Rwandan towers, its going
to be sooner rather than later. In Senegal it is also
thought that if the Sonatel (Orange) towers come to
market, it is highly likely that Millicom would look to
follow suit. Millicom owns, and is in the process of
selling, a 24% stake in Helios Towers Africa.
Mobinil: Orange opco in Egypt. See Orange.
Mott MacDonald: Digital Infrastructure team
has extensive experience of advising on tower
transactions and investments.
MTN: MTN, with a presence in 20 African countries,
has monetised their towers in seven representing
the majority of their most attractive portfolios.
176 | TowerXchange Issue 16 | www.towerxchange.com

A history of IHS acquisitions in Africa

Source: TowerXchange

Tower Deal value


Cost per
count
(US$)
tower (US$)

Year

Country

Seller

2016

Nigeria

Hotspot

160

Company acquisition

2016

Nigeria*

HTN

1,211**

Company acquisition

2015

Nigeria

Etisalat

555

SLB

2014 Rwanda & Zambia

Airtel

1,113

181,000,000

162,624

SLB

2014

Nigeria

MTN

8,850

882,000,000

196,700

Joint Venture (IHS 49%, MTN 51%)

2014

Nigeria

Etisalat

2,136

485,000,000

227,060

SLB

MTN

1,269

SLB
MLL

2014 Rwanda & Zambia

Deal Structure

2013

Cameron & Cote dIvoire

Orange

2,000

2012

Cote dIvoire

MTN

931

141,000,000

151,450

SLB

2012

Cameroon

MTN

827

143,000,000

172,914

SLB

2010

Nigeria

Visafone

800

67,000,000

83,750

SLB

* Transaction expected to close Q2 2016


**Plus HTNs managed services and co-location marketing agreement concerning SWAP Telecoms & Technologies 702
towers will be transferred to IHS following completion of the transaction

The company has raised around US$2.5bn to


date and retained equity in selected markets.
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. This was then followed up with sale and
leasebacks of 100% of the equity in their towers
in Cameroon, Cte dIvoire, Rwanda and Zambia this time with IHS as the counterparty. Their most

recent transaction was a sale of 49% equity in their


Nigerian towers to IHS, with MTN retaining a noncontrolling 51% stake with protective rights in the
new entity.
Whilst the remainder of their opcos on the content
are relatively small entities with modest tower
portfolios - their 9,000 South African towers
represent one attractive target for acquisition.
Whilst the company stepped back from a potential
www.towerxchange.com | TowerXchange Issue 16 |

XX

Millicoms footprint and history of tower sales

South African tower sale to American Tower back


in 2013 (still viewing their towers as a source of
competitive advantage), the recent fine in Nigeria
(US$5.2bn reduced to US$3.9bn) may be a motivator
for them to once again consider monetisation.
Ooredoo: Ooredoo with a presence in Algeria, Iraq,
Kuwait, Oman and Tunisia has preferred to retain
towers but has been exposed to deep partnerships
with towercos in Myanmar which may influence
their strategy as the MENA tower market starts to
open up. Back in early 2016, Ooredoo launched a
RANsharing agreement with Tunisia Telecom to
minimise the costs of their network rollout.

JV with Helios Towers Africa


JV with Helios Towers Africa, Millicom
opco subsequently sold to Orange
Millicom retains towers
No opco present

XX | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

Orange: Orange may have only agreed deals with


towercos in three markets (Cameroon, Cote dIvoire
and Egypt), but they represent three of their most
investable markets. In Cameroon and the Cote
dIvoire, Orange entered into an MLL agreement
with IHS, whilst in Egypt, MobiNil sold one third of
their towers to Eaton Towers (to whom Orange had
also sold towers in Uganda prior to the operation
being transferred to Africell). In terms of future
potential transactions, Mobinil may not be done
monetising Egyptian towers, with a few thousand
still retained by the company. Orange towers in
Senegal (Sonatel) had been rumored to be coming to
market under an MLL deal structure, bundled with
less attractive portfolios in Mali and the Guineas,
but that transaction seems to have gone cold,
possibly because of the opposition of entrenched
Union interests in Senegal. Orange has recently
acquired Millicoms local opco in the DRC (whose
towers had previously been sold to Helios Towers
www.towerxchange.com | TowerXchange Issue 16 | 177

Africa) and Liberias Cellcom, their acquisitions of


Airtels opcos in Sierra Leone and Burkina Faso are
expected to close imminently.

MTNs footprint and history of tower sales

[PURPLE] - Cancelled tran


[YELLOW] - MTN retains t
[GREY] - No opco present

Pro High Site Communications: South African


towerco with a portfolio of eleven towers.
Providence Equity: Communications and media
investment specialists with capital at work in Indus
Towers (India), Grupo Torresur (Brazil) and KIN
(Indonesia). Believed to have an interest in the
Mobily and Zain processes in the Middle East.
RIT Capital Partners: Chaired by Lord Rothschild,
RIT Capital Partners is an investment trust, listed on
the London Stock Exchange with a widely diversified
portfolio, including an investment in Helios Towers
Africa.
Safaricom: Kenyan MNO, possessing Vodafone as
a shareholder, dominates its the Kenyan mobile
market. Whilst the company considers its towers
too strategic to sell, Safaricom has for some time
been swapping or leasing their tower portfolio, by
far Kenyas largest and most extensive, to MNOs and
other tenants.
Saudi Telecom Company: Market leading operator
reported to be considering the sale of their ~16,400
towers in KSA. Has previously explored forming a JV
towerco with competitors Mobily and Zain.

Sold to IHS
JV with IHS
JV with American Tower
Cancelled transaction looking likely to return
MTN retains towers

SBA Communications: Publicly listed US towerco


with over 25,000 towers in North and South America.
Has a potential interest in Africa.
178 | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

No opco present

www.towerxchange.com | TowerXchange Issue 16 |

XX

Oranges footprint and history of tower sales

Smile: LTE pioneer, Smile, with a presence in


major cities in the DRC, Nigeria, Tanzania and
Uganda rely primarily on co-location on third
party towers in order to rollout their network.
Sonatel: See Orange
Soros: Quantum Strategic Partners (QSP) is a
private investment vehicle, managed by Soros
Fund Management LLC. QSP focuses globally on
investments in several strategies, including capitalintensive start-ups, buyouts, and growth equity
transactions. Investors in Helios Towers Africa.
Standard Bank: Bank with a presence in 20 subSaharan countries, Standard Bank has extensive
experience in the tower industry, most recently
completing a US$95mn equivalent upsizing of the
syndicated term loan facilities for Helios Towers to
finance its next phase of expansion in Tanzania.

MLL with IHS


1/3 of towers sold to Eaton, sale of remaining
towers on the cards

Standard Chartered: South African bank with


extensive experience providing debt and advisory
services to the telecoms sector.

Opco acquired from Millicom who previously


sold towers to with Helios Towers Africa
Orange retains towers

SWAP: Another claimant to the title of Africas


first towerco, SWAP owns 702 Nigerian towers
which were being managed and marketed by
HTN Towers, the agreement for which will
be transferred to IHS upon completion of the
acquisition.

Orange present with non controlling interest


Orange presence pending closure of
acquisition of Airtel local opco
No opco present
Sold to Eaton Towers, operation subsequently
sold to Africell

XX | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

TAP Advisors: Boutique M&A and investment


advisory firm with long history of advising on
tower deals.
www.towerxchange.com | TowerXchange Issue 16 | 179

TASC: Towerco with an undisclosed number of sites


in Jordan.

Vodafone, Vodacom and Safaricoms African footprint

Telkom Kenya: Orange recently announced the


sale of their 70% stake in Telkom Kenya to Helios
Investment Partners. Telkom Kenyas 2013 Manage
with License to Lease (MLL) arrangement with Eaton
Towers governing 1,000 towers was subsequently
cancelled.
Telkom South Africa: South African MNO with just
2.9% mobile market share in the country. Telkom
have had an on/off tower sale of with estimates
suggesting their portfolio includes around 3,500
sites. The regulators recent rejection of a network
sharing deal with MTN could further motivate the
operator to look at monetisation of their passive
infrastructure
Tigo: See Millicom
TowerCo of Madagascar: Present solely in their
domestic market, TowerCo of Madagascar has built
an impressive reputation in the African tower
industry. Originally carving towers out of MNO
TELMAs portfolio and subsequently building new
towers, TowerCo of Madagascar has established a
portfolio of 700 towers. A challenging market, with
poor infrastructure and annual floods, TowerCo
of Madagascars performance in Madagascar is
made even more impressive and their track record
is thought to be one of the reasons why Airtel has
struggled to sell their Madagascan towers.

Sold to Helios Towers with 24.5% stake


acquired in Helios Towers Tanzania
MLL with Eaton Towers
Vodafone retains towers
Vodacom retains towers
Safaricom retains towers
No opco present

Source: TowerXchange

Towershare: Towerco with a portfolio of 800 sites in


180 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

Tower portfolios of Africas big four towercos


IHS Africa

15882*

2435

2408

1964

Republic of Congo, Mozambique, Nigeria and


Lesotho whilst Vodafone is present in Egypt and has
a controlling stake in Safaricom in Kenya. Vodacom
South Africa runs what is effectively an in-house
tower company, with around 9,500 towers and a
tenancy ratio of around 1.8.
Wendel: Family fund, leading investor in IHS.

804

American Tower

Eaton Towers
1400

2126

1927

1393

4717

2000

1600

300 700

500 500 70
***

1350
**

Helios Towers Africa


1793****

3582

787

394

* Pending closure of the HTN acquisition (expected Q2 2016);

Unknown Country

South Africa

DRC

Rwanda

** Pending closure of the Airtel transaction (expected Q2 2016);

Uganda

Nigeria

Cote dIvoire

Zambia

Tanzania

Ghana

Cameroon

Congo B

Kenya

Burkina Faso

Niger

Egypt

*** Airtel transaction expected imminently


****Pending closure of the Airtel DRC acquisition

Pakistan known to be interested in transactions in


the MENA region.

XX | TowerXchange Issue 16 | www.towerxchange.com

Zain: Operator with a process under way to


sell 5,200 towers in Saudi Arabia and a further
1,600 towers in Kuwait, Zain is also rumoured to
be looking at a tower sale in South Sudan. The
company also has operations in Iraq, Sudan,
Bahrain and Jordan but has sold most of their
African operations to Airtel

Who have we missed?

network of guyed masts in Mozambique may be


coming to market, although the structural capacity
of the towers is uncertain.

Advance apologies: were bound to have

Vodafone/ Vodacom: Apart from an early manage


with license to lease (MLL) deal in Ghana with
Eaton Towers and the sale of 1,149 Tanzanian
towers to Helios Towers Africa in 2013 (where
Vodacom acquired a 24.5% stake in Helios Towers
Tanzania), Vodacom and its parent company,
Vodafone consider their tower assets too strategic to
divest. Under the Vodacom brand, the company has
a presence South Africa, Tanzania, the Democratic

mission to assemble everyone at the 4th Annual

Unitel: Largest of Angolas MNOs.


Viettel: Africas most aggressive new entrant,
Vietnamese military backed Viettel had initially
seemed reluctant to accelerate time to market
by leveraging co-location. However they have
since reached co-location agreements with IHS in
Cameroon and Helios Towers in Tanzania, the latter
of whom attracted ~1,000 co-locations. Meanwhile
rumours suggest that Viettels rapidly deployed

Yield Capital Partners: Investment advisors


involved with Helios Towers Africa.

missed one or two key stakeholders in African


towers if so wed like to know as were on a
TowerXchange Meetup Africa on October 1920 in Johannesburg! If you feel your company
should be profiled in the TowerXchange whos
who in African towers, please email Laura
Dinnewell, Head of TowerXchange Africa, at:
ldinnewell@towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 | 181

BMI industry trend analysis:


African towercos comparing the Big Four

Amy Cameron, BMI Reasearch

BMI View: IHS Towers and


American Tower Corporations
acquisition of Nigerias towers
has enabled them to cement their
positions as the leading players
among Africas big four tower
firms. If Helios Towers Africa and
Eaton Towers cannot outbid their
larger rivals for new assets in the
remaining attractive markets, they
may seek scale through a merger
or become acquisition targets.

Keywords: 3G, 4G, Acquisition, Africa, Africa & ME Research, American Tower, BMI Analysis, Burkina
Faso, Cameroon, Co-locations, Cote dIvoire, Country Risk, DRC, East Africa, Eaton Towers, Egypt, Exit
Strategy, Ghana, Helios, Helios Towers Africa, HTA, Kenya, Logistics, LTE, Market Forecasts, Masts &
Towers, Multi-Region, Network Rollout, Niger, Nigeria, North Africa, Regulation, Risk, Rwanda, Sale &
Leaseback, South Africa, Tanzania, Tower Count, Towercos, Uganda, Unreliable Grid, Urban vs Rural,
Valuation, West Africa, Zambia

Read this article to learn:


< The influence of macroeconomic and regulatory factors in key African tower markets
< The difference in operational risk exposure between Africas big four towercos
< The strengths and weaknesses of each of the big four towercos geographic profiles
< What the implications of such factors are on the future of IHS, American Tower, Eaton Towers and
Helios Towers Africa in sub-Saharan Africa

182 | TowerXchange Issue 15 | www.towerxchange.com

In order to gain a true understanding of the


strengths and weaknesses of each of Africas big four
tower firms, we have used our telecoms forecasts,
macroeconomic forecasts and operational risk
data to assess the size and growth outlook across
each companys footprint in the region. In this
comparison, we include all markets where tower
firms own or manage at least 500 towers, estimating
that a smaller presence in any market is too little to
reap the benefits or be exposed to the risks.
Helios Towers Africa
Looking at the comparative data in the Big Four
Macro And Operational Comparison, 2016 table,
Helios Towers Africa is in a weaker position
than its three larger rivals. Although the average
urbanisation rate across its markets is slightly
higher than other tower operators footprints, the
total population and therefore total addressable
telecoms market is the smallest of the four, and
less than half the size of American Towers total
addressable market.
On the operational risk side, Helios Towers Africa
also faces a more challenging environment than its
peers, in large part owing to the poor operational
risk profile of the DRC. BMIs Operational Risk
Index is a combined assessment of the trade and
investment, logistics, labour market and crime
and security environments. Owing to a volatile
political and security climate and underdeveloped
infrastructure, the DRC has an overall Operational
Risk score of 23.4 for 2016, compared with the
regional average of 35.4 for sub-saharan Africa.
www.towerxchange.com | TowerXchange Issue 15 |

XX

Drilling down, it has a score of just 4 out of 100


for the business cost of crime, highlighting the
considerable challenges Helios Towers Africa faces in
one of its largest markets.

Table: Big Four Macro And Operational Comparison, 2016

IHS
Number Of Countries

However, there are bright spots for Helios Towers


Africa. Its portfolio of markets has the strongest
mobile subscriptions growth outlook over the five
years to 2020, and the second strongest growth for
3G/4G subscriptions. This is in large part boosted
by the DRC, where Helios Towers Africa has thus
far held a monopoly in the tower market. Strong
subscription growth is also accompanied by one of
the brightest macroeconomic profiles, with robust
average annual GDP growth of 6.2% to 2020 across
its markets. These circumstances will drive rising
demand for capacity and coverage from its tenants,
providing attractive organic growth prospects.

Total Mobile Subscriptions


(mn)
Mobile Subscriptions 5-Year
CAGR (%)
Total 3G/4G Subscriptions
(mn)
3G/4G Subscriptions 5-Year
CAGR (%)
GDP Per Capita (USD)
Average Real GDP Growth
2016-2020 (%)
Operational Risk Index
Total Population (mn)
Average Urbanisation Rate (%)

Helios Towers
Africa

American Tower

Eaton Towers

228.133

354.92

139.106

221.464

5.3

4.5

6.4

3.3

60.758

108.74

36.966

57.759

24.9

19.3

21.5

13.0

1,366

2,054

1,475

1,316

6.2

4.9

6.2

5.7

40.2

43.1

34.6

37.6

262.8

365.5

167.6

248.3

45.9

43.5

49.0

31.7

Eaton Towers
Although Eaton Towers also has a small presence in
South Africa with 300 towers, by TowerXchanges
estimate, the number of towers is too small for the
company to truly benefit from the market and have
therefore excluded South Africa from its footprint in
the comparative analysis. Nevertheless, its presence
across six populous countries in Africa means its
addressable market of mobile and 3G/4G subscribers
is similar to that of regional giant IHS.
The main factor putting Eaton in a weaker position
is the significantly weaker growth outlook for basic
and advanced mobile services across its footprint. We
forecast mobile CAGR of just 3.3% and 3G/4G CAGR
XX | TowerXchange Issue 15 | www.towerxchange.com

All forecasts by BMI. Source: BMI, National Sources, Regulators, Operators

of 13.0% across Ghana, Uganda, Burkina Faso, Niger,


Like Helios Towers Africa, Eaton Towers also
Kenya and Egypt between 2015 and 2020. There are
benefits from being the only tower player in a
HTA
a number of factors underpinning this weak growth
handful of risky markets, namely Egypt, Burkina
outlook. While Ghana and Egypts voice mobile
Faso and Niger. While we believe weak economic
Looking
at
the
comparative
data
above,
Helios
Towers
Africa
is in
a weaker
position
itscountries
three larger
markets are already highly penetrated, leaving less
outlooks
will
curtail
growth
in than
these
room for growth,
also expect
slow urbanisation
subscriptions
telecoms
sectors
during
ourthan
forecast
period, over
rivals.we
Although
the average
rate across
its markets
is slightly
higher
other tower
growth in landlocked and predominantly rural
the long term their large, underserved populations
operators' footprints, the total population and therefore total addressable telecoms market is the smallest of
markets of Burkina Faso, Niger and Uganda. Of
present good opportunities. Egypt in particular
the
four,
and
less
than
half
the
size
of
American
Tower's
addressablepotential
market. owing to is location
Eatons six main markets, the urbanisation rate
holds total
considerable
was above 50% only in Ghana, while in Niger and
between the Middle East, Europe and North Africa,
Uganda less than
20%
of
the
population
lived
in
but
we do not
expect it to
reach
its potential
On the operational risk side, HTA also faces a more
challenging
environment
than
its peers,
in large part
urban areas, making it more costly to reach many
until it recovers from current macro pressures
owing to the poor operational risk profile of the DRC. BMI's Operational Risk Index is combined
including currency depreciation, and high
consumers with advanced networks.
assessment of the trade and investment, logistics, labour market and crime and security environments.

Owing to a volatile political and security climate and underdeveloped


infrastructure,
the DRC hasIssue
an overall
www.towerxchange.com
| TowerXchange
15 |
Operational Risk score of 23.4 for 2016, compared with the regional average of 35.4 for Sub-Saharan

183

Operational risk profile of the top five markets (by population size)
Opera/onal Risk
70
60
50
40
30
Trade & Investment

20

Crime & Security

South Africa
Nigeria

10

Tanzania

Egypt
DRC

Logis/cs


Labour Market
Source: BMI

unemployment and security risks.


The Big Two
IHS and American Tower stand out as the
companies with the strongest growth outlook in
Africa because of their presence in the regions
two most significant markets, Nigeria and South
Africa. American Tower benefits from a presence in
both countries, resulting in the largest addressable
mobile and 3G/4G markets among the four tower
firms, while South Africa offers a significant boost
to the average GDP per capita across its footprint.
184 | TowerXchange Issue 15 | www.towerxchange.com

to all operators. In Nigeria, tight SIM registration


regulations, MTNs fine and postponed license
auctions are dampening investment and growth,
while the South African governments inability to
agree on spectrum licensing policy is preventing
mobile operators from deploying full scale LTE
networks.
IHS draws its strength from its dominance of
the Nigerian market, having acquired MTN and
Etisalats towers and announced the acquisition
of rival HTN Towers in March 2016. It has further
solidified its presence in Nigeria through its
acquisition of the broadband infraco licence for the
North Central Zone in 2015, for which it will roll out
wholesale fibre optic networks in the region around
capital city Abuja. Despite the regulatory challenges
noted above, Nigerias huge population makes it
the most exciting market in the continent, with the
3G/4G subscriber base expected to more than triple
to 108mn between 2015 and 2020, by our forecasts.

As the biggest tower operator present in the South


African market, combined with its strong financial
position owing to its global reach, American Tower
is in a good position expand its presence in South
Africa when towers come to market.

While IHS currently has no footprint in South


Africa, the company has cultivated a deep
partnership with MTN, which would make them
strong contenders, alongside American Tower,
should MTN SAs towers come to market.

However, American Towers presence in Nigeria


and South Africa, both of which are dealing with
severe macroeconomic issues that are unlikely to
be resolved in the short term, weighs on the GDP
growth outlook across its footprint. Moreover,
both markets also have difficult telecoms
regulatory environments, posing additional risks

IHS also benefits from being the sole tower operator


in countries with rapidly growing telecoms markets
and bright economic prospects. BMIs country
risk team forecasts Cote dIvoire to be the fastest
growing economy in Sub-Saharan Africa over the
five years to 2020, which we expect to have positive
knock-on effects in demand for more advanced
www.towerxchange.com | TowerXchange Issue 15 |

XX

Nigeria By Far The Most Attractive Market


Nigeria By Far The Most3G/4G
Attractive
Market
Subscriptions
Forecast (000)
3G/4G Subscriptions Forecast (000)

150,000

100,000

50,000

2015e

2020f

Meetup
Africa 2016
19-20 October, Sandton
Convention Centre, Johannesburg

Nigeria
South Africa
Egypt
Tanzania
Ghana
Congo (DRC)
Cote d`Ivoire
Kenya
Zimbabwe
Uganda
Cameroon
Zambia
Burkina Faso
Rwanda
Congo-Brazzaville
Niger
e/f = BMI estimate/forecast. Source: BMI, National Sources, Operators

telecoms services from consumers and enterprises


pursue other options in order to remain competitive
alike. Meanwhile, Viettels entry into the Cameroon
against their larger rivals. One possibility is that
= BMI estimate/forecast. Source: BMI, National Sources, Operators
market has sparked strong competition and opened
the two smaller players will merge to form a larger
regional player. Airtel is still under discussions
demand for data services.
to sell its towers in the DRC, and should a second
What Next?
tower player acquire them then Helios Towers
Africa will be faced with competition in all of its
markets, which could accelerate a move towards
IHS impressive footprint across many of Subconsolidation. More likely, they will become
Saharan Africas most promising markets make it
acquisition targets for IHS or American Tower, or a
a highly investible company, positioning it well for
third player, such as SBA, looking to enter Africas
its touted IPO over the next two years. By contrast,
high growth telecoms markets
Eaton Towers and Helios Towers Africa will have to
XX | TowerXchange Issue 15 | www.towerxchange.com

The 4th annual retreat for250 leaders of the


African telecom tower community
www.towerxchange.com/meetup/meetup-africa/

www.towerxchange.com | TowerXchange Issue 15 | 185

TowerXchanges analysis of
American Towers acquisition of
Airtels Tanzanian Towers
American Tower joins Helios Towers Africa in one of Africas most investible tower markets

Breaking news!

On 5th May 2016, Airtel agreed the sale of 950


towers in the Democratic Republic of Congo
(DRC) to Helios Towers Africa. The divestment
also includes towers that are currently under
construction. The agreement is subject to
statutory and regulatory approval from the

By Laura Dinnewell, Head


of EMEA, TowerXchange

On 21 March, Bharti Airtel announced they had reached a deal with American
Tower Corporation to sell their 1,350 Tanzanian towers. The deal, which is expected
to close in H1 FY16, had a purchase price of US$179mn, representing an average cost
per tower of US$132.6k. Under the terms of the agreement, Airtel will be the anchor
tenant on the towers with an initial ten-year lease, with the deal potentially to be
expanded to include an additional 100 sites that are currently under development.
The move is the latest in Airtels strategy to divest their assets across the continent
and helps to bolster American Towers African portfolio, adding a fifth country to
their footprint. TowerXchange take a detailed look at the transaction, what it means
for both companies and how it affects the dynamics in the African tower industry.

Keywords: 3G, 4G, Acquisition, Africa, Airtel, American Tower, Burkina Faso, Chad, Co-locations, Congo
Brazzaville, Country Risk, Deal Structure, East Africa, Eaton Towers, Ghana, IHS, Insights, LTE, Madagascar,
Malawi, Masts & Towers, Millicom, MNOs, Network Rollout, Niger, Nigeria, Rwanda, Sale & Leaseback,
Seychelles, Tanzania, Tower Count, Transfer Assets, Uganda, Valuation, Viettel, Vodacom, Zambia

relevant authorities.

In a statement to the press Helios Towers


Africa CEO Kash Pandya said HTA is proud
to be chosen by Airtel as its partner for the
ownership and management of its existing
infrastructure. This is a ground-breaking move
for HTA, and Airtels decision is a significant
endorsement of HTAs reputation, management
team and operating track record.

Christian De Faria, Executive Chairman, Bharti


Airtel International Netherlands BV (BAIN),
added: We are pleased to strengthen our
partnership with HTA in Africa. The agreement
is in line with our stated philosophy of

Read this article to learn:


Airtels history of selling towers in Africa
Growth projections for the Tanzanian mobile industry
Who owns Tanzanias 8,800 towers?
Details of the recent tower sale in Tanzania including deal value, tenancy ratios and forecasted
revenue for American Tower
< How the transaction will affect the countrys build to suit market
<
<
<
<

186 | TowerXchange Issue 16 | www.towerxchange.com

divesting passive infrastructure and promoting


sharing of towers to enhance operational
efficiencies that will further the growth of
telecom services. Airtel remains committed
to DRC and will continue to invest in its
operations and serve customers with worldclass services.

www.towerxchange.com | TowerXchange Issue 16 |

XX

Table one: Airtel tower sales in Africa

Source: TowerXchange

Country

Buyer

Tower
Count

Deal Value
(US$)

Cost per
Tower (US$)

Deal
structure

Tanzania*

American Tower

1350

179,000,000

132,593

SLB

Rwanda & Zambia

IHS

1113

181,000,000

162,624

SLB

Nigeria

American Tower

4700

1,090,000,000

231,915

SLB

Ghana, Burkina

Eaton

2,500**

371,972,250**

148,789**

SLB

Helios Towers Africa

390**

58,027,671**

148,789**

SLB

Faso, Kenya &


Uganda**
Congo Brazzaville

* Transaction expect to close H1 FY16 **TowerXchange estimates. Transaction values and tower counts not disclosed.
Sale of Niger towers with Eaton expected imminently

Airtels appetite to divest towers in Africa

tower portfolio and US$1.88bn.

To date, Airtel has closed tower transactions in eight


countries; Nigeria (with American Tower), Rwanda
and Zambia (with IHS), Congo Brazzaville (with
Helios Towers Africa);Ghana, Uganda, Burkina Faso
and Kenya (with Eaton Towers, although Airtels
opco in Burkina Faso is in the process of being sold
to Orange)when closed, the Tanzanian transaction
will represent the ninth (see table one).In a media
statementin October 2015, Airtel confirmed that
a total of 8,300 towers (representing 60% of their
total tower base) had been sold across the eight
countries, raising US$1.7bn for the company the
Tanzanian transaction will take this to 73% of their

In the same 2015 statement the MNO noted that


tower sales and leaseback shall continue to remain
a strategic priority for Airtel in all its operating
countries across Africa and accordingly the balance
of towers will be disposed over a period of time.

XX | TowerXchange Issue 16 | www.towerxchange.com

Airtel still retains towers in Malawi, Chad and the


DRC and whilst transactions in these markets had
been cancelled, it appears that a DRC tower sale is
very much back on the table, with Eaton Towers and
Helios Towers Africa battling it out for the portfolio.
Whether the Malawi and Chad transactions will
come back to market remains to be seen but we

can expect a healthy appetite from Africas big


towercos if they do. Eaton are expected to close the
acquisition of ~500 Airtel towers in Niger shortly.
Whilst Airtels initial tower strategy had been
to carve out their passive infrastructure into an
operator owned towerco, Africa Towers (in line with
the strategy they had followed in India with the
successful creation of Bharti Infratel), the company
changed direction in 2014 and commenced a
process to divest their African tower assets. In an
interview with TowerXchange in 2015, Christian De
Faria, CEO of Airtels African Operations explained
the change in tack We found that some African
operators were not always keen to lease towers
from a company with one competitive operator as
the sole shareholder. As the monetisation of the
assets was always one of the options we considered,
we were motivated to monetise our tower assets
sooner rather than later, as other African MNOs
have done. Monetising passive infrastructure also
provided an opportunity for Airtel to strengthen
our capital structure. We were frequently being
approached by companies interested in acquiring
our towers. There was huge appetite from Africas
towercos, which were already well established in
Africa at that time
The African independent towerco landscape and
American Towers footprint
Tower ownership in Africa is dominated by the big
four towercos; IHS, American Tower, Eaton Towers
and Helios Towers Africa (see figure two). The
worlds largest independent commercial towerco
with a tower count of over 140,000 (pending closure
www.towerxchange.com | TowerXchange Issue 16 | 187

Figure one: Airtel African tower sale - what has closed, and who is
buying what?

of the Viom Networks acquisition in India), American


Tower have a portfolio of 10,163 towers in Africa
spread across Nigeria, Ghana, the DRC and Uganda.
The Tanzanian transaction, when closed, will take
this count up to 11,513 and whilst only making a
small indentation on IHS market lead, it adds a fifth
country to the organisationss tower portfolio.

1
2
American Tower has typically 3
favoured markets
with relatively stable political and macro-economic
4 largest economies in
environments, and as one of the
Sub-Saharan Africa with a population of 54.3mn and
5
a GDP growth of 6-7% YOY in 2009-2015, the country
fits the bill.
6
Why are the Tanzanian towers a good acquisition
for American Tower?

The transaction, with an initial ten-year lease


agreement with Airtel as anchor tenant provides
long term stability to cash flows and with three credit
worth tier one MNOs supplemented by an aggressive
new market entrant and several niche operators
(see figure three) a wireless penetration forecasted
to grow from 70% in 2015 to 90% by 2019, and 3G
and 4G penetration expected to grow at a nearly 50%
CAGR in the same period the co-location potential
on the sites is high.

Sold to Eaton Towers (Niger announced, all


others closed)
Sold to American Tower (Tanzania
announced, all others closed)
Sold to Helios Towers Africa (DRC announced,
all others closed)
Sold to IHS
Currently retains towers
No opco present

188 | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

The average tenancy ratio on Airtels towers is


1.35 and American Tower forecast the portfolio to
generate year one property revenue of US$50mn with
an expected gross margin of US$21mn. American
Tower forecast growth in line with their benchmarks
laid out for the African market.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Figure two: Estimated number of towers owned or managed by towercos in MEA


804
IHS Africa

American Tower

2435

2408

2126

1927

1393

1400

1600

2000

1350**

4717

300
Eaton Towers

500***
700

70

500
Helios Towers Africa

1793**** 787

1964

15882*

3582

394

Unknown Country

South Africa

DRC

Rwanda

Uganda

Nigeria

Cote dIvoire

Zambia

Tanzania

Ghana

Cameroon

Congo B

Kenya

Burkina Faso

Niger

Egypt
Madagascar

5000

10000

* Pending closure of the HTN acquisition (expected Q2 2016);


** Pending closure of the Airtel transaction (expected Q2 2016);
*** Airtel transaction expected imminently
****inclusive of Airtel deal just announced governing 950 towers

How does the transaction change the Tanzanian


tower market?
Tanzanias number one and number two operators,
Vodacom and Millicom, have both divested their
tower portfolios, with Helios Towers Africa scooping
both portfolios (see table two) giving Helios Towers
39% ofTanzanias towers. TowerXchange estimate
that the Helios Towers Tanzania (HTT) tenancy
ratio now exceeds 1.5, and would be higher had
it not been for their high volume of new builds.
The divestiture by number three operator, Airtel,
to American Tower brings a second independent
towerco to the Tanzanian market and places a
further 15% of Tanzanias estimated 8,800 towers
into towerco hands.
XX | TowerXchange Issue 16 | www.towerxchange.com

15000

20000

25000

Source: TowerXchange

With strong growth forecast in the Tanzanian


mobile market, along with continued rollout of 3G
and 4G, and with the aggressive entrance of Viettel
prompting renewed investment in networks by
incumbents, a number of build to suit contracts
are up for grabs in the county. The entrance
of American Tower into Tanzania introduces
competition for Helios Towers Tanzania (who had
also previously agreed to acquire the Airtel portfolio
before the transaction was cancelled) but with such
substantial growth forecast, the country should
easily accommodate two towercos.
Tanzania remains an ideal market for the
independent towerco model. With three strong
incumbent operators and an aggressive new market

entrant, none of which has dominant market share,


Tanzania still has relatively low penetration, so
there is a lot of growth potential. The regional
nature of Tanzanias mobile networks, with each
operator dominant in a different part of the country,
creates a perfect environment for infrastructure
sharing as each operator seeks a broader footprint
across the country. Recently acquired by Millicom,
Zantel is strong in Zanzibar; Millicoms own brand
Tigo is dominant in coastal areas, Vodacom in the
Arusha area, and Airtel is strong in the Lake zone.
Tanzania is also host to several other licensed MNOs,
ISPs and WiMAX operators further raising the glass
ceiling on prospective tenancy ratios.
With regards to future tower transactions by MNOs,
it is estimated that 4,000 are held by operators in the
country. New market entrant Viettel have built 3,000
towers in an aggressive network rollout (and are
believed to also be co-locating on an additional 1,000
Helios Towers sites) and a further 300 tower are
estimated to sit in the hands of Tanzanias smaller
operators. Following the acquisition of Zantel by
Millicom, Millicom have acquired the companys
~700 towers (having previously sold all their own to
Helios Towers Africa) and a decision has yet been
reached as to whether the company will also look to
sell these towers. Whilst the former Zantel towers
are likely to represent an attractive acquisition
target, whether a Viettel towers sale would pique
the interest of towercos American Tower of Helios
Towers Africa remains to be seen, with rumor in
the market suggesting that the structural capacity
of many of these sites may not be sufficient for colocation
www.towerxchange.com | TowerXchange Issue 16 | 189

Table two: Tower transactions in Tanzania

Source: TowerXchange

Tower

Cost per

Year

Country

Seller

Buyer

2016

Tanzania

Airtel

American Tower

1,350

179,000,000

132,593

SLB

2013

Tanzania

Vodacom

Helios Towers Africa

1,149

75,000,000

87,616

SLB with direct investment in HTT

2010

Tanzania Millicom/Tigo Helios Towers Africa

1,020

80,000,000

130,719

Joint venture (HTA 60%, Millicom 40%)

Figure three: Tanzanian mobile


network operator subscriber
market share
1%
28%

count

Deal value US$

Deal structure

tower US$

Figure four: Ownership of Tanzanias c.8,800 towers

700

300

1,149
Helios Towers Africa sites acquired from Vodacom

3%
4%

1,020

32%

Helios Towers Africa sites acquired from Millicom


Helios Towers Africa built sites
Airtel sites to be acquired by AMT

3,000
28%

Viettel sites

1,281

4%

Former Zantel sites, now owned by Millicom


Sites owned by smaller operators

Vodacom

Airtel

Tigo / Millicom

Halotel / Viettel

Smart Zantel TTCL

190 | TowerXchange Issue 16 | www.towerxchange.com

1,350

Source: TowerXchange

www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchanges analysis of
IHSs acquisition of HTN Towers
1,211 towers
An in depth analysis of IHSs pioneering first African towerco consolidation

By Laura Dinnewell, Head of EMEA,


TowerXchange

On 10 March 2016 IHS, Africas largest towerco, announced the


acquisition of HTN Towers portfolio of 1,211 sites in Nigeria in a
landmark deal signifying the first in-market consolidation in the African
towerco segment. When closed, the transaction would take IHSs tower
countin Nigeria to 15,882 towers, 54% of the countrys 29,250 total (figure
one). In addition, HTNs managed services and co-location marketing
agreement concerning SWAP Telecoms & Technologies 702 towers will be
transferred to IHS following completion of the transaction (expected in
Q216) rendering further Nigerian towers under their control.

Keywords: Acquistion, Africa, Africa & ME Insights, Africa & ME News, Airtel, American Tower, BCTek, Buildto-Suit, Capex, Deal Structure, EBITDA, Etisalat, Globacom, Hotspot Network Towers, HTN, IHS, Investment,
Lease Rates, Market Forecasts, Masts & Towers, MNOs, MTN, NATCOM, Nigeria, News, Operational Excellence,
RMS, Site Level Profitability, SLA, Solar, SWAP Telecoms & Technology, Tenancy Ratios, Tower Count, Uptime,
Urban vs Rural, Valuation, West Africa

Read this article to learn:


< The estimated valuation of the IHS-HTN acquisition
< HTNs revenue, EBITDA, tenancy ratio and TCF
< What degree of improvement capex is expected to be invested in integrating HTNs towers
< Why Nigeria represents an important growth market for IHS
< Whether further tower transactions could be on the cards in Nigeria

XX | TowerXchange Issue 16 | www.towerxchange.com

What do we know about the valuation and deal


structure?
Under the terms of the transaction, IHS will acquire
HTNs entire issued share capital from investors
Helios Investment Partners, Pembani Group,
First City Monument Bank and other minority
shareholders. Whilst IHS have declined to comment
on the deal value, a look at the history of tower
transactions in Nigeria (table 1a) gives an average
cost per tower of US$208,548 and puts an estimate of
the HTN portfolio at US$252.6mn. IHSs transaction
history in Africa over the past six years (table 1b)
shows a lower average cost per tower of US$192,195,
valuing the HTN deal at US$232.7mn. One must note
however that average cost per tower represents
an imperfect way to estimate transaction value as
numerous factors pertaining to tenancy ratios, lease
rates and location come into play.
What do we know about the health of the HTN
Towers portfolio?
In the financial year ending 31 December 2014,
HTN Towers achieved US$73.3mn revenue and
US$31.7mn EBITDA, rising to US$36mn revenue and
$19.8mn EBITDA for H1 2015 (a growth in EBITDA
margin from 43% to 55%).
HTN Towers boast one of the highest tenancy
ratios in Africa at 2.2 tenants per live tower, having
increased roughly 0.25 every year from 2010 to 2014
(any tenancy ratio growth above 0.2 per annum is
considered very healthy). Monthly TCF (tower cash
flow) per live HTN site sat just under US$4,500.
www.towerxchange.com | TowerXchange Issue 16 | 191

In the first half of 2015, 65% of HTNs adjusted


revenues came from three credit worthy, tier one
GSM operators: MTN, Airtel and Etisalat with a
further 16 broadband and telecommunications
customers sitting as tenants on HTN towers, joined
by broadcasting, transmission and corporate
tenants (figure two). Over 70% of HTN Towers
adjusted revenue now comes from the big three
Nigerian MNOs.
What degree of improvement capex do IHS
anticipate?
Given IHSs excellent reputation and strong SLA
results, we asked the amount of improvement
capex anticipated to bring the towers up to IHSs
standard. We are purchasing quality assets and
as such, the capex required is targeted at replacing
equipment at the end of its life explained our
source. HTN has implemented hybrid battery
solutions across over three quarters of its tower
sites and the majority are connected through
remote management. Going forward HTNs towers
will be further enhanced with alternate solar
optimisation and seamlessly integrated into our
portfolio to ensure the tower uptime continues
to match our industry standard of over 99%. All
tower sites will also be connected to our state-ofthe-art network operating centres so that we can
effectively monitor them 24/7.
What do we know about the location of HTNs
sites and their overlap with IHSs existing
portfolio?
192 | TowerXchange Issue 16 | www.towerxchange.com

Figure one: Who owns 29,250 Nigerias towers?


550

IHS own and BTS towers


IHS towers acquired from MTN

2,970

6,000

IHS towers acquired from Etisalat


IHS towers to be acquired from HTN
SWAP Telecoms & Technology (management and

200

marketing agreement to be transferred to IHS)

500
700

8,850

IHS towers acquired from Hotspot Network


American Tower Assets acquired from Airtel
BCTek
Communication Towers Nigeria

4,716

160 702

Other small Nigerian towercos

1,211

2,691

HTN has a complementary, attractive urban-centric


portfolio with significant coverage in Lagos and
Abuja and almost half its towers in Nigerias top 10
cities. The exact amount of overlap between the two
portfolios is unknown but HTNs IPO documentation
suggested that just under 10% of their sites were
within 100m of an IHS tower.
Why does Nigeria represent an important market
for IHS?
Nigeria is Africas largest economy and is the largest
market in Africa in terms of mobile consumption
with 151.2mn mobile connections. It has a healthy
competitive MNO environment with six operators

Globacom
NATCOM
Source: TowerXchange

and new data providers entering the market as data


usage in the country continues to grow apace, with
37% YOY growth in mobile broadband usage. There
is still potential for substantial amendment revenue
for towercos with 3G still being rolled out and LTE
being piloted.
In the press release announcing the HTN Towers
acquisition, Issam Darwish, IHS Executive Chairman
and Group CEO said We remain committed to the
Nigerian tower market where coverage levels are
yet to mature and explosive data growth continues.
The growing data traffic and increased smartphone
use presents an exciting market opportunity for
IHS, with the potential for up to 40,000 more towers
www.towerxchange.com | TowerXchange Issue 16 |

XX

Table 1a: Tower transactions in the Nigerian market

required to meet this demand.

Year

Country

Seller

Buyer

Tower
count

Deal value
US$

Cost per
tower US$

2016

Nigeria

Hotspot

IHS

160

$5,020,000

$31,375

2016

Nigeria

HTN Towers

IHS

1211

Portfolio acquisition

2015

Nigeria

Etisalat

IHS

555

SLB

2014

Nigeria

Airtel

American Tower

4700

$1,090,000,000

$231,915

SLB

2014

Nigeria

MTN

IHS

8850

$882,000,000

$196,700

Joint venture (IHS

Deal structure
Portfolio acquisition

49%, MTN 51%)


2014

Nigeria

Etisalat

IHS

2136

$485,000,000

$227,060

SLB

2010

Nigeria

Starcomms

SWAP

407

$81,000,000

$199,017

SLB

2010

Nigeria

Visafone

IHS

800

$67,000,000

$83,750

SLB

2010

Nigeria

Multilinks

HTN

400

MLL
Source: TowerXchange

Could we see any further acquisitions by IHS in


Nigeria?

Table 1b: IHS transactions in the African market


Year

Country

Seller

Buyer

Tower
count

Deal value
US$

Cost per
tower US$

2016

Nigeria

Hotspot

IHS

160

$5,020,000

$31,375

2016

Nigeria

HTN Towers

IHS

1,211

Portfolio acquisition

2015

Nigeria

Etisalat

IHS

555

SLB

2014

Rwanda & Zambia

Airtel

IHS

1,113

$181,000,000

$162,624

SLB

2014

Nigeria

MTN

IHS

8,850

$882,000,000

$196,700

Joint venture (IHS

Deal structure
Portfolio acquisition

49%, MTN 51%)


SLB

2014

Nigeria

Etisalat

IHS

2,136

2014

Rwanda & Zambia

MTN

IHS

1,269

SLB

Orange

IHS

2,000

MLL

2013 Cameroon & Cote dIvoire

$485,000,000

$227,060

2012

Cote dIvoire

MTN

IHS

931

$141,000,000

$151,450

SLB

2012

Cameroon

MTN

IHS

827

$143,000,000

$172,914

SLB

2010

Nigeria

Visafone

IHS

800

$67,000,000

$83,750

SLB
Source: TowerXchange

XX | TowerXchange Issue 16 | www.towerxchange.com

IHS was born in Nigeria and already has a


substantial presence in the country with 600 staff
on the ground and an existing portfolio, prior to
the proposed HTN Towers acquisition, of 14,511
towers following sizeable acquisitions from MTN
and Etisalat in the past two years. The company
has also just acquired Hotspot Networks portfolio
of 160 sites. Nigeria is IHSs largest market in terms
of tower ownership, accounting for 68% of their
total portfolio of 23,493 towers (figure three) and
the acquisition further strengthens IHSs position
as the leading mobile infrastructure provider in the
country.

Inorganic growth opportunities are limited in


Nigeria, where only Globalcom and NATCOMs
towers remain on MNO balance sheets. There exists
some potential to absorb portfolios of some of
Nigerias smaller towercos in a country where 79%
of towers are held by independent towercos, the
most recent acquisition of Hotspot Networks 160
sites being an example of this.
With, however, a potential 40,000 additional towers
needed to meet growing data traffic and smartphone
usage in the country, significant growth can be
expected in the countrys build-to suit market which
remains a critical focus for IHS following their
acquisition of HTN Towers
www.towerxchange.com | TowerXchange Issue 16 | 193

Figure two: HTN Towers customer mix H1 2015

35%

27%

Please feel free to contact the TowerXchange team

MTN

Kieron Osmotherly
Founder & CEO
E: kosmotherly@towerxchange.com

Etisalat

Jo Jefferies
Executive Assistant to CEO
E: jjefferies@towerxchange.com

Airtel
Others, primarily broadband customers

21%
17%
Source: TowerXchange

Figure three: IHSs African tower counts, pro rata for the completion of
the HTN Towers deal
Nigeria 15,882

Cote dIvoire 2,435

For editorial & speaking enquiries regarding Americas:


Arianna Neri
Head of Americas
E: aneri@towerxchange.com
For editorial & speaking enquiries regarding Africa or Europe:
Laura Dinnewell
Head of EMEA
E: ldinnewell@towerxchange.com
For editorial & speaking enquiries regarding Asia:
Ian Ferguson
Head of Asia
E: iferguson@towerxchange.com
For advertising opportunities & event participation:
Annabelle Mayhew
Chief Commercial Officer
E: amayhew@towerxchange.com
M: +44 7423 512588
Emma Jones
Business Development Manager
E: ejones@towerxchange.com
Toya Smith
Business Development Manager
E: tsmith@towerxchange.com

Cameroon 2,408

For media partnerships & to request additional subscriptions:


Harpreet Sohanpal
Head of Marketing
E: hsonanpal@towerxchange.com
For the designers of the TowerXchange Journal & brand:
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Source: TowerXchange
194 | TowerXchange Issue 16 | www.towerxchange.com

2016 Site Seven Media Ltd. All rights reserved. Neither the whole nor any
substantial part of this publication may be re-produced, stored in a retrieval
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www.towerxchange.com | TowerXchange Issue 16 |

XX

Commentary on IHSs acquisition of HTN Towers, by Kieron Osmotherly, Founder & CEO, TowerXchange
This makes sense. After the music stopped on the

now coming from tier one GSM operators. Factors

Africa / Nigeria-centric towerco play of substantial

game of who will buy Nigerias towers, HTN

limiting value: uncertainty surrounding the

scale before this deal, they still will be afterward.

Towers was left without a proverbial chair to sit

NCC fine on MTN and its implications for capex

The characteristics of the business, through the

on as IHS scooped the Etisalat and MTN towers

spend in 2016 and beyond; the presence on HTNs

lens of investors in a prospective future IPO,

(the latter in a joint venture with their anchor

balance sheet of a residual ~300 of an initial 491

would be far more substantially affected by a

tenants), and American Tower entered Nigeria

zero tenant towers acquired from Multi-Links;

substantial acquisition in Saudi Arabia or South

through the acquisition of Airtel Nigerias towers.

and the simple fact that HTNs towers are the most

Africa, which may or may not happen later this

Apart from an on-off deal to consolidate HTN

leased up in Africa insofar as there is a glass

year.

and SWAP, HTN had little prospect of inorganic

ceiling on tenancy ratios, this portfolio is closest to

growth, and two fierce competitors for organic

it. How much value can IHS add?

Does this transaction mark the start of in-market


consolidation of SSA towercos? Maybe, but I

growth, with IHS and ATC Nigeria poised to split


the BTS market between them. No wonder Helios

This is where IHS is the most logical consolidator

doubt it. We could see a few more middle market

IP and other HTN Towers backers had been

of HTN. IHS has scale, and an excellent track

towercos rolled up; HTN Towers agreement

seeking an exit for over a year, culminating in

record of delivering on client expectations.

to manage and market SWAP Telecoms &

coming to the brink of an IPO in Q4 2015.

Their sites have been extensively modernised,

Technologies 702 towers transfers to IHS as part

as have HTNs, while IHS can readily integrate

of this deal, and could be a precursor to a full

Before readers ask, no we dont know the value

HTN Towers portfolio into their state-of-the-art

acquisition. But do I expect IHS to acquire Helios

of the IHS-HTN deal. Within the main body of

NOC. This integration should proceed swiftly and

Towers Africa or Eaton Towers in 2016? No. Never

this article, weve hinted at a US$232.7-252.6mn

smoothly, once the deal is closed.

say never, but we think those assets will come to


market in 2017-18.

range. Factors driving value: HTN has been


EBITDA positive since FY2012 (making US$37.1mn

While the deal is pending approval, the presence

adjusted EBITDA on US$78mn adjusted revenue in

of the worlds largest independent towerco,

IHS has consolidated their position as the leading

FY14), has a high tenancy ratio at 2.2, and a strong

American Tower, in Nigeria should calm any

tower company in Nigeria, and in SSA. Whilst

operating history against SLA and MTTR KPIs.

regulatory concerns about IHSs market share in

we dont know the economics to comment on

HTN Towers has also largely recalibrated their

terms of tower count creeping toward 54%.

value, in terms of fit, this is such a no-brainer that

revenue mix away from an initial reliance on

What are the implications for IHS? This is not a

the only question is why the deal didnt happen

CDMA operators, with over 70% of their revenue

transformational transaction. IHS were a West-

sooner

XX | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 | 195

Challenges for African middlemarket towercos and Hotspots tower


sale to IHS
An interview with Hotspot Network Limited COO, Charles Iyoha

Charles Iyoha, COO, Hotspot Network Limited

Hotspot Network Limited established itself as one of


Nigerias larger middle-market towercos, developing
a portfolio of 160 sites in urban areas through build
to suit agreements with Airtel and Etisalat. The
company has just announced the sale of their tower
portfolio to leading Nigerian towerco IHS. We speak
to Hotspot Network Limited COO, Charles Iyoha to
discuss the challenges towercos face in the Nigerian
market, the motivations behind their recent tower
sale, and what the future has in store for Hotspot.

Keywords: Access Control, Acquisition, Africa, Africa Insights, Africa & ME, Airtel, American Tower,
Anchor Tenant, Build-to-Suit, C-level Perspectives, Co-locations, Deal Structure, Energy, Etisalat, Hotspot,
Hotspot Network, IHS, Insights, Leasing & Permitting, Managed Services, Masts & Towers, MNOs,
Monitoring & Management, MTN, Nigeria Network Rollout, Novation of Leases, Passive Equipment, Tax,
Tower Count, Towercos, Urban vs Rural, Valuation, West Africa

Read this article to learn:


<
<
<
<
<

The origins of Hotspot Network and how they grew their portfolio to 160 sites
Issues surrounding taxation and challenging community relations in the Nigerian market
The difficulties for a middle-market towerco competing with Africas big four towercos
Motivations behind and details of the sale of Hotspots tower portfolio to IHS
What the future has in store for Hotspot Network Limited

196 | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Please introduce Hotspot


Network Limited.
Charles Iyoha, COO, Hotspot Network Limited:
Hotspot Network Limited was established in 2008
as an engineering services company focused on
services which included telecom managed services,
wireless solutions, satellite solutions, microwave
solutions, engineering support service and colocation services.
In 2013, we turned our full focus to co-location
services and signed an agreement with Etisalat and
Airtel in Nigeria to provide specialised co-location
and infrastructure sharing services to them. At this
time, we didnt have any towers of our own in place,
rather we signed an agreement with billboard
companies to use their giant monopole billboards
for telecom purposes and then shared the profits
from the operator lease payments.
Later in the same year, we decided it would be
wiser to also build our own structures to help our
competitiveness and growth. As such, we started
building disguised towers and water stanchions
and acquiring redundant billboards from billboard
owners. By the end of Q1 2016 we had developed an
infrastructure base of over 160 sites.
We have never been involved in providing power
as a service to the tenants on our sites, rather
we leased the ground and tower space and the
operators brought their own power equipment.
Our sites are primarily located in urban areas
www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange: How did the dramatic growth


of IHS and entrance American Tower into the
Nigerian market in 2014 affect dynamics and
the growth opportunities for middle-market
towercos such as Hotspot?
Charles Iyoha, COO, Hotspot Network Limited:
Whilst we had rapid growth between late 2013
and 2015, growing our infrastructure base from
zero to 160+ sites, the entrance of American
Tower and IHS had a significant impact on our
business. The sale of Airtel, MTN and Etisalat
towers to the two players in 2014 and 2015
created two significant competitors in the
Nigerian tower industry. With the operators
having sold their assets to the two towercos, their
appetite to use our infrastructure was greatly
reduced. We found that operators wanted to use
the sites owned by American Tower and IHS and
as such, the role for middle market towercos was
brought into question. Whilst I am a big advocate
of competition and the merits that it brings to an
industry, the size of the two companies made it
very difficult for us to compete.
After careful analysis, we realised we had to be
smart about the entrance of American Tower
and IHS into the Nigerian market. We decided
the smart thing to do was to align with one of
the big players and so we reached out to them
XX | TowerXchange Issue 16 | www.towerxchange.com

We realised we had to be smart about the entrance of American Tower


and IHS into the Nigerian market. We decided the smart thing to do
was to align with one of the big players and so we reached out to them

where it is typically been challenging for


operators and towercos to get a license to build
new infrastructure. We developed a handful of
sites in other scattered locations.

both. Having worked with IHS in the past and with them having an

appetite to roll-up smaller tower portfolios, we eventually decided to


go with them

both. Having worked with IHS in the past and with


them having an appetite to roll-up smaller tower
portfolios, we eventually decided to go with them.
TowerXchange: What can you tell us about
the details of the transaction with IHS and
the integration of Hotspot towers into their
portfolio?
Charles Iyoha, COO, Hotspot Network Limited:
Under the new arrangement with IHS, they will
acquire all our infrastructure and all existing lease
agreements on third party sites (e.g. billboard
sites) and we will now work together with them

to grow their middle market, helping them


with specialised tower rollout. We finalised
the agreement with IHS about two months
ago and received approval from the Nigerian
Communications Commission three weeks ago.
We are now in the process of changing over all
the landlord agreements (which always takes
a long time in the Nigerian market), as well as
getting consent from the operators. The Etisalat
consents are pretty much complete and we expect
to have the Airtel consents finalised within the
next couple of weeks. IHS will upgrade the sites to
their specification, a key element of this will be in
bringing power to the sites.
www.towerxchange.com | TowerXchange Issue 16 | 197

management. We will also continue to work with


IHS to help them with specialised tower rollout.
TowerXchange: Do you think that the acquisition
of middle-market towercos by the larger players
in inevitable?

In some states towercos have


as much as three different
licenses for the same tower
and the government and the
regulator need to step in here

TowerXchange: Whats next for the Hotspot


team?

Charles Iyoha, COO, Hotspot Network Limited:


Having adopted an outsourced model, the number
of permanent employees at Hotspot at the time of
the transaction is about 30. We will continue to
work with IHS to ensure the seamless integration
of our sites into our portfolio and then some of the
team will be integrated onto IHS payroll.
Hotspot Network Limited as a company will
continue to operate, however our focus is going to
shift to rural broadband rollout and data centre
198 | TowerXchange Issue 16 | www.towerxchange.com

Charles Iyoha, COO, Hotspot Network Limited:


As mentioned previously, in as much as I love
competition and the benefits it brings to an industry
I see a limited future for smaller towercos. Their
acquisition is inevitable, in the most immediate
future by IHS, but then also by American Tower as
their appetite to roll-up smaller towercos grows.
Within the next two to three years I foresee major
consolidation in the market by IHS and American
Tower.
Operators want to rid themselves of the overheads
and operational burdens associated with the
management of portfolios of 3,000+ towers on
a daily basis, especially in Nigeria with all the
problems that come with business here. They have
done the smart thing by partnering with reputable
and financially stable towercos to manage their
network rollout so that they can focus on their
primary business of selling airtime.
TowerXchange: Beyond competition from other
towercos, what do you see as some of the biggest
challenges facing towercos in the Nigerian
market?
Charles Iyoha, COO, Hotspot Network Limited:
There are lots of issues that towercos have been

facing since the telecoms boom started in 2001.


Some of these issues have been curbed or reduced
thanks to the regulator, but we do still have major
problems.
One of the problems is the issue of double taxation.
In some states towercos have as many as three
different licenses for the same tower and the
government and the regulator need to step in here.
Towercos are ready to pay their fair share of taxes
but instances where we have to pay federal, state
and local government taxes all for one tower should
be looked into. Federal, state and local governments
see the telecoms sector as a hugely profitable
industry and view it as an opportunity from which
they can obtain revenues. Such high taxation is
however seriously affecting towerco bottom line
and so there needs to be some harmonisation to
better manage this. The introduction of a single
body to which towercos pay taxes would help
alleviate the problem and this is something that it
currently being looked into.
Another major challenge in the Nigerian market
relates to the the issue of community relations
which affects everything in Nigeria. Youth
unemployment is high and the telecoms sector is
viewed as a rich resource they can tap. Whilst it is a
complicated issue, it can be addressed by enabling
laws to protect tower companies. Recently the
Inspector General of Police has stated that the police
will ensure free and unhindered access to all base
stations in the country. Whilst this is a step in the
right direction, we are waiting to see how his men
will enforce this
www.towerxchange.com | TowerXchange Issue 16 |

XX

the North African countries.

Share Square: Algeria


45.4 million mobile subscriptions by the end of 2015, giving a
penetration rate of 113%
The auction for 3G licences was severely delayed by the
incumbent regulator, licences were eventually awarded in Q4
2013. 4G licences are expected to be launched in Q4 2016

Passive

There is good population coverage of 2G and MNOs are


currently expanding their 3G service offering to reach the
uncovered areas
No towercos operating at present; only small scale local sharing
agreements between Mobilis and Djezzy
North Africa remains one of the last regions uncharted
by towercos, however a stabilising political and economic
environment is expected to encourage investment in the near
future.

None

Current Sharing

Active

3 MNOs: Djezzy, Mobilis and Ooredoo

The towerco market is currently non-existent however it is


expected to emerge, especially if the political and economic
stability in Algeria continues. The largest risk in the market is
the heavy government presence within two of the three MNOs

Algeria

3G

4G
Technology Deployment

Opportunity for towercos entry with


focus on high Lease Up Rate (LUR)

Opportunity for Outsourcing


by MNO to towercos

Mobile subscriptions- market share

28.7%

37.5%

Djezzy
Mobills (Algerie Telecom)
Ooredoo

33.9%

XX | TowerXchange Issue 16 | www.towerxchange.com

Limited opportunity for new


entrant towercos

Mobile market overview


Algeria had an estimated population of 40.0mn
people and 45.4mn mobile subscriptions at the end
of 2015, giving a mobile penetration of 113% - the
second lowest level of penetration of the six North
African countries, only higher than Egypt (101%).
Around 90% of subscribers in Algeria have a prepaid account, which ranks second lowest amongst

There are three Mobile Network Operators (MNOs)


serving the Algerian market, each holding a
substantial share of the subscriber base. Djezzy
currently holds the largest market share with
17.0mn subscribers closely followed by Mobilis
(Algerie Telecom) with 15.3mn and Ooredoo
(NMTC) who serve 13.0mn subscribers.
Key mobile developments
Algerias mobile subscriber base has grown rapidly
in recent years, increasing by just less than 30mn
in the last 10 years. Estimates suggest that the
increase will begin to slow marginally with the
subscriber base expected to reach 52.5mn in 2020.
The tender for 3G licences was first announced
in Algeria in Q2 2008, however it took until Q4
2013 for the auction to take place and the licences
to be awarded. Postponements were reportedly
due to the Algerian government completing
the acquisition of local mobile operator Djezzy.
The three main operators, Djezzy, Mobilis and
Ooredoo, all successfully acquired licenses through
the auction process and began to roll-out their 3G
service offerings almost immediately. By March
2014, Ooredoo had extended its network to reach
70% of the population which provided the operator
with a commanding 71.7% share of the market.
As the other two operators established their 3G
networks they quickly eroded the market share of
Ooredoo - culminating in the market share split
shown above.
www.towerxchange.com | TowerXchange Issue 16 | 199

Developments in 4G
In January 2016, the Algerian regulatory authority
(Autorite de Regulation de la Poste et des Telecoms,
ARPT) invited interested parties to submit proposals
for participation in the countrys 4G auction.
Successful bidders are expected to be notified in
May 2016 with the launch of the licences officially
taking place in Q4 2016. A stipulation attached to
the purchase of the 4G licences is believed to be
expansion into the Southern regions of the country
within the first three years.
Algeria is generally in line with the 4G
developments of its North African neighbours.
The Tunisian regulatory authority has accepted
proposals for 4G licences which are expected to be
allocated in April 2016, the Sudanese regulatory
authority awarded its first 4G licence to MNO
Zain in February 2016 and reportedly the most
advanced 4G market in North Africa is Morocco
where all three incumbent MNOs were granted 4G
licences at auction in March 2015. Egypt and Libya
are reportedly less advanced in the roll-out of 4G
services however promising regulatory and market
activities have been observed.
Operator activity
Mobilis (Algerie Telecom) is a subsidiary of the fixed
telephony, internet and satellite communications
provider Algerie Telecom which is solely owned by
the Algerian government. In a bid for independence
Mobilis unveiled plans in 2015 to acquire its own
fibre optic network infrastructure which has
200 | TowerXchange Issue 16 | www.towerxchange.com

caused a dispute with its parent company which


currently provides Mobilis with fibre capacity on
its own infrastructure. Orange and Vodafone have
expressed interest in acquiring a stake in Mobilis
in recent years, however reports suggest that a
listing of a 20% stake of Mobilis on the Algiers Stock
Exchange is most likely.
In Q1 2015 the Algerian government purchased a
51% stake in Djezzy from Global Telecom Holding
(GTH), a holding company of the Russian-backed
VimpelCom group. GTH maintains a 45.57%
share and the remaining 3.43% is owned by
private conglomerate Cevital. In Q4 2014 Djezzy
commissioned Alcatel-Lucent to upgrade its GSM
network, using a microwave solution to upgrade its
backhaul architecture.
Ooredoo rebranded from Nedjma in 2013 and is
part of the Kuwait based Ooredoo Group. Ooredoo
is the smallest operator in Algeria by total market
share, however it sits very closely behind market
leader Mobilis when considering the number
of 3G subscribers, 6.1mn to 6.7mn subscribers
respectively. In 2014, Ooredoo and Alcatel-Lucent
built a 400Gbps backbone in order to support
the countrys growing 3G market and in order to
deliver improved speeds and capacity to Algerias
main towns and cities.
Regulation
ARPT is an independent institution with separate
legal and financial operations from the Algerian
government. ARPT oversees a number of postal and

telecommunication matters, including spectrum


licensing, promoting competition, dispute resolution
and supply regulation.
Although ARPT is managed separately from the
Algerian government, instances have been reported
which suggest cooperation between the two parties.
The most noticeable of these instances was the
five year delay in auctioning the 3G licences which
caused significant frustration for the incumbent
mobile operators. The delay is reported to have
been due to the 51% stake acquisition by the
Algerian government of the MNO Djezzy.
ARPT is governed by a board and designated
CEO which are chosen by the Algerian President.
The board is provided with the powers required
to manage its operations and the board uses a
majority voting system where the Chairman has the
casting vote.
The tower sharing market
North Africa remains one of the last regions
uncharted by towercos. Reports suggest that
instances of political instability, such as the Arab
Spring in 2011, and unpredictable regulatory
involvement have caused investors to stay away
from the region to date. Analysts advise that as the
region stabilises politically and economically, the
countries will benefit from improved outsourcing
readiness and more passive infrastructure deals
are expected. Algeria follows the same trend as the
other North African countries and the estimated
17,500 towers in Algeria currently belong to the
three operators.
www.towerxchange.com | TowerXchange Issue 16 |

XX

Although independently managed tower sharing


is yet to develop within Algeria, Mobilis and
Djezzy signed a sharing agreement in Q1 2014
with the main aims reported to be a reduction in
environmental impacts and expenditure whilst
improving the network coverage of both operators
across the country. This sharing agreement came
less than six months after an agreement was signed
by Mobilis with the tower construction company
Tubprofil to erect future towers on Mobilis behalf.
Conclusions
With the second highest population in North Africa
(40.0mn people) and one of the lowest mobile
penetrations (113%), there is considerable room for
subscriber growth in the Algerian mobile market.
There is a good population coverage of 2G and the
incumbent MNOs have recently been authorised to
complete the roll-out of 3G services to the remaining
uncovered areas of the country. To date, Algeria
has matched the technology developments of the
other countries within the region with 4G licenses
expected to be awarded to successful bidders by the
end of 2016.
The three MNOs have a similar market share
which encourages competition. The three MNOs all
successfully acquired 3G licences and are reported
to have submitted proposals for 4G licences which
will help to ensure a continuation of competitive
pricing within the market. Concerns have been
raised about the regulatory authoritys involvement
and influence within the market in recent years,
especially considering the links with the Algerian
XX | TowerXchange Issue 16 | www.towerxchange.com

government and its financial interest in two of the


three MNOs (Mobilis and Djezzy).
Algeria has a good 2G population coverage and
a largely developed 3G coverage, however the
mobile penetration remains relatively low for the
region which would suggest a suitable environment
for growth. As the growth potential is realised,
future rollout is expected to be largely driven by
4G deployments and expansion. In combination
with stabilising political and economic conditions,
the Algerian market is expected to entice passive
infrastructure investment in the near future

Participate in the
TowerXchange
community
Tower
manufacture
& installation

Investors &
advisers

Independent
towercos

Guest columnist Marcus Dowdeswell

Tower

Xchange
Decision
makers
at
operators

Regulators
& policy
makers
Equipment
& managed
services

Marcus Dowdeswell is a Consultant in Mott


MacDonalds Digital Infrastructure practice,
working with telecommunications operators,
vendors and investors across the Middle East and
Africa. Marcus has analysed tower markets across
three continents and has recently been working as
a Market Analyst on multi-million dollar mobile
tower transactions in Africa and the Middle East,
covering tens of thousands of tower assets. Marcus
graduated with a BA in Business Finance and is an
Associate Member of the Institute of Consulting

Join the TowerXchange LinkedIn group at

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TowerXchange-4536974

www.towerxchange.com | TowerXchange Issue 16 | 201

Regional coverage:

Asia features
TowerXchange CEO Kieron Osmotherly visited Beijing and Shanghai
on a tour of stakeholders in the new Chinese co-construction and
infrastructure sharing regime, including meeting the MIIT and three of
the countrys leading independent towercos. Two reports from that trip:
our FAQs and a look at the independent towerco sector.
Meanwhile, we flew Ian Ferguson the Head of TowerXchange Asia out
to Jakarta to meet Indonesias leading towercos and MNOs and report
on his findings. Ian recently relocated to KL, so he also spent some time
this month with our friends at edotco, including learning about their
operations in Sri Lanka and Myanmar, and touring their echo NOC.

Dont miss:
203 China tower market FAQs
215 Chinese independent towercos
220 edotco 360: Sri Lanka
223 edotco 360: echo NOC
226 edotco 360: Myanmar
228 Efficient tower markets
236 MNOs perspective: Indonesia
239 Moodys on XL-Protelindo
242 Cam Towerlink in Angkor Wat
245 TowerXchange study Laos
248 BMI on Indian tower market
252 Indus Towers on SCM

202 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

China tower market FAQs


What we know, and what we still dont know, about Chinas new tower market

By Kieron Osmotherly, CEO, TowerXchange and Christie Liu, Head of China & Myanmar

Kieron Osmotherly, Founder and


CEO of TowerXchange, recently
completed a whistle stop tour of
several important stakeholders
in the emerging Chinese telecom
tower industry, taking fourteen
meetings in Beijing and Shanghai.
With deep gratitude to my
meeting counterparts for their
input and for their generous
hospitality, heres what I learned.

Keywords: 4G, ARPU, Air Conditioning, Asia, Asset Register, Bankability, Batteries, Best of
TowerXchange, Build-to-Suit, Carve Out, China, China Mobile, China Telecom, China Tower Company,
China Unicom, Construction, Country Risk, Debt Finance, Exit Strategy, Guodong, IBS, Infrastructure
Sharing, Lease Rates, Leasing & Permitting, MIIT, Market Forecasts, Market Overview, Masts & Towers,
Miteno, New Market Entrant, O&M, On-Grid, Operator-Led JV, Outdoor Equipment, Pass-Through, Q
Towers, RMS,Regulation, Research, Rooftop, SASAC, Shelters, Stakeholder Buy-In, Tax, Tenancy Ratios,
Tower Count, TowerXchange Research, Towercos, Transfer Assets, Valuation

Read this article to learn:


<
<
<
<
<

What is China Tower Company? What does it own and how fast is it growing?
What is the scale and forecast growth of the independent towerco sector in China?
How does a new tower get built now?
What are the economics of the tower business in China? How do they compare to the US?
How investible are Chinese towers, and what opportunities are there for FDI?

XX | TowerXchange Issue 16 | www.towerxchange.com

Market context
What are current levels of mobile / SIM
penetration and ARPU?
According to Q4 2015 GSMA Intelligence statistics,
there were 1.3bn connections in China, representing
95% SIM penetration.
Blended ARPU ranges from RMB 40-56 (US$6-8.50)
depending which operators annual results you are
reading.
What is the status of Chinas 4G rollout?
Chinas three MNOs added 1.02mn 4G base stations
to their networks in 2015.
After deploying 1.1mn 4G base stations in the last
three years, China Mobiles 4G coverage is virtually
equal to their 2G GSM coverage, so expect their rate
of build and co-location to slow in 2016, adding
perhaps a further 200,000 base stations. China
Telecom and China Unicom are approximately
a year behind in 4G rollout, so expect sustained
growth levels from both in 2016 and the first half of
2017, slowing thereafter depending on the timelines
to 5G.
How many new towers were built in China in
2015?
Most interviewees agreed that a total of ~150,000
new towers had been built in 2015, with some
suggestion that total demand could have been for
www.towerxchange.com | TowerXchange Issue 16 | 203

1000
800

826.2

822.9

817.2

815.4

Source: Quarterly and annual reports,


TowerXchange presentation

Who owns Chinas telecom towers? What is the


current size and forecast growth of the Chinese
telecom tower industry?

600
400
200

294.8

289.3

188.8

191.4

Q115

287.6

Q215

China Mobile

China Unicom

286.7

194.3

197.9

Q315

Q415

In November 2015 China Mobile, China Unicom and


China Telecom transferred (most) of their towers to
China Tower Company.
Nobody knows exactly how big China Tower
Company (CTC) is yet, including CTC as they are
deeply embedded in the process of auditing and

China Telecom

Chinas 4G base station rollout, FY15


China
Mobile

China
Unicom

1,100,000

380,000

310,000

China
Telecom

400,000

510,000

330,000
200,000

400,000

600,000

Build before FY15

800,000

1,000,000

1,200,000

Source: MNO quarterly and annual reports, TowerXchange presentation


204 | TowerXchange Issue 16 | www.towerxchange.com

as many as 400,000. With over a million 4G base


stations rolled out in 2015, over 80% must have been
co-located on existing sites: tenancy ratios will have
risen sharply.

In 2015, China Telecom


installed 80% of their new
4G base stations on towers
formerly owned by China
Mobile, avoiding significant
expense

Chinas MNO subscriber numbers (mns) FY2015

www.towerxchange.com | TowerXchange Issue 16 |

XX

integrating assets. It seems like at least one, if not


more, of Chinas MNOs are or were delaying the
transfer of the last 10% of the most strategically
located towers.
Consensus of opinion was that Chinas total tower
and rooftop count was in the 1.2-1.3mn range.
TowerXchange have used 1.18mn in our models to
err on the side of caution, inclusive of the ~20,000
towers owned by Chinas highly fragmented market
of 200+ independent towercos. Further detail on
the structure, scale and forecast growth of Chinas
independent tower companies is provided later in
this report.
What is the vision behind creating CTC?
The Ministry and other government stakeholders
have been promoting a culture of efficient
infrastructure sharing in China for eight years.
CTC was formally created in November 2015 to
consolidate and share existing towers, to construct
shared additional towers, and to save land and
tower resources.
One of the goals of CTC is to improve the customer
experience from, in some cases, a few hundred KB
per second, to as much as 20MB per second once 4G
is fully deployed.
CTC is also seen as a mechanism for reducing
the gap between competing MNOs by providing
China Unicom and China Telecom with access to
China Mobiles vast tower network, enabling them
to accelerate and catchup their 4G rollout. If 4G
XX | TowerXchange Issue 16 | www.towerxchange.com

Research methodology and contextual notes


This report is a result of primary market research; conversational interviews structured upon a selection
from a standard set of questions that form the section headings in this FAQ.
The anxiety of my generous Chinese hosts to help, their justifiable pride in their achievements, and
their resultant reluctance to say I dont know, combined with a complex landscape of overlapping and
conflicting interests, means I must caution that the source material for this report is subjective in nature,
and no stakeholders had access to all the facts. TowerXchange have neither the language skills, nor is
there information available, to verify much of what was said. Or, to put it another way, we asked the same
questions 14 different times and got 14 different answers!
If youre interested in investing in China, drop me an email and well schedule a chat. Ill be happy to make
further introductions. But you need to do your own research; this document should not be used as the basis
for any investment decisions. kosmotherly@towerxchange.com

coverage were complete, using VoLTE could enable


refarming of valuable spectrum.

IBS are widely deployed in China, but there are not


many DAS.

Opportunities to diversify CTC into other shared


infrastructure, and the sheer scale of the business,
means the vision is less to create the worlds largest
and most valuable towerco, but to create one of the
worlds largest and most valuable infrastructure
companies.

We did hear of one towerco with a substantial


streetlamp project in one of Chinas major cities
they called them information poles and spoke of
how they were supporting the Smart City vision.

Does CTC also own assets beyond the macro


network, such as rooftops, IBS, DAS and
transmission infrastructure?
CTC has absorbed most, if not all, Chinas legacy
towers, monopoles and rooftops. There is an
appreciation at CTC that the co-construction
and sharing model can extend beyond towers to
transmission infrastructure, but that does not seem
to have been incorporated yet.

Does China Tower Company only own and lease


up the towers, or do they undertake O&M too?
The current incarnation of CTC is primarily an asset
management company. Although CTCs estimated
30,000 employees sounds like a lot, its a drop in the
ocean compared to the ~1.5mn employees of Chinas
three State owned MNOs.
Whilst CTC continues to recruit and scale up,
at present most of the O&M work remains
subcontracted.
www.towerxchange.com | TowerXchange Issue 16 | 205

Who are the principal stakeholders in China


Tower Company who are they answerable to?
Further to a recent investment by China Reform
Corporation, which has been likened to a
sovereign wealth fund with a particular focus on
reforming State-owned Enterprises, China Mobiles
shareholding has been diluted to 38%, China Unicom
to 28.1% and China Telecom to 27.9%.
While the MIIT (Ministry of Industrial and
Information Technology) defines policy, CTC is
effectively answerable to SASAC, the State-owned
Assets Supervision and Administration Commission.

Shareholders in China Tower Company


China Reform
Corporation
6%
China
Telecom
27.9%

China
Mobile 38%

China Mobile
China Unicom
China Telecom
China Reform Corporation

China Unicom
28.1%
Source: TowerXchange

What is the organisational structure of China


Tower Company, including the autonomy of
provincial subsidiaries?
Mr Jilu Tong is the President / General Manager of
CTC.
There are three levels of CTC management:
headquarters in Beijing; branches of CTC have been
established in all 31 Provinces, with a further 3-4,000
at city / municipality level.
As O&M and some oversight capabilities come inhouse, expect junior satellite offices at county level.
Does CTC have some kind of right of first refusal
to build new towers for the three State owned
MNOs?
Some sources told us that all build to suit (BTS)
206 | TowerXchange Issue 16 | www.towerxchange.com

processes were supposed to be open. Other sources


told us that the official structure of the Chinese
tower market is that the MNOs are no longer
building their own towers, and all the work is being
undertaken by CTC. While MNO builds have more
or less halted, the reality is that CTC currently lacks
the capacity to meet 100% of MNO demand, which in
a practical sense means in some cases third parties
are contracted to build sites which are then are
transferred to CTCs balance sheet.
In other instances it seems that the independent
towerco steps in as a fallback option if CTC lacks
the capacity, or gets too bogged down in process, to
meet MNO demands on time. Chinas private tower
companies are often more energised and faster to
market, said one interviewee.
In other instances it seems the independent

towercos simply undercut CTC, as a function of


lower management costs. On still other occasions
it seems that independent tower companies might
have better local site hunters, and are able to
leverage relationships with MNO network planners
at provincial or municipality level to secure direct
orders.
CTC has a scale advantage from the legacy towers,
but no significant advantage when competing for
new BTS contracts, said one interviewee.
In some provinces the carriers are more open to
new entrants as they dont feel its in their interests
to have a monopolistic towerco, whereas in other
provinces CTC are more entrenched, said another
interviewee.
TowerXchange dont think a Right of First Refusal
type arrangement is the primary risk to the
www.towerxchange.com | TowerXchange Issue 16 |

XX

What is the mix of GBTs versus rooftops in China,


and how has CTC affected tower design?

certainly lower the glass ceiling on prospective


tenancy ratios in China, and would be value
destructive to both CTC and independent towercos.

CTC has standardised tower design.

There might be 8-10 bidders for


a tower build contact, but in one
recent instance there were 34
bidders for a contract for around
1,000 towers. However the short
deadline created barriers to entry
for new entrants and underfunded small towercos

independent sectors organic growth potential


rather the single biggest risk might be that the
current window of opportunity for independent
towercos to build may close if CTC reaches full
capacity, particularly if accompanied by a shift in
policy toward a more protectionist attitude toward
State-owned entities like CTC.
Is it easy to get a new tower built?
While Chinas citizens once welcomed towers and
coverage, over the past five years there has been
a growing NIMBY (Not In My Back Yard) mentality
that has actually helped the independent towerco
sector as it has enabled Chinas MNOs to improve
community relations by putting a third party
between themselves and local residents.
XX | TowerXchange Issue 16 | www.towerxchange.com

Around two thirds of Chinas ~1.18mn sites are GBTs


(Ground Based Towers mostly monopoles), the
other third are rooftops.
Approximately how many of Chinas towers are
currently shared? What are the tenancy ratios?
Tenancy ratios are difficult to quantify without
hard data from the CTC portfolio. What we do know
is that there was little bi-lateral sharing before
the creation of CTC, an agreement between China
Unicom and China Telecom notwithstanding.
However, with 1.02mn new base stations added in
2015, as many as 80% co-located, we would forecast
the current tenancy ratio to be in the 1.7-1.9 range.
In the independent sector, it was suggested a
tenancy ratio of around 1.5 was average, but
TowerXchange heard of decent sized independent
portfolios with tenancy ratios as high as 2.8.
What is the typical capital outlay for a new tower
in China?
RMB 250-350,000 (US$35-50,000).
What would be the impact of consolidation from
three to two MNOs?
Consolidation from three MNOs to two would

While there has been rumor of MNO consolidation,


the governments current strategy appears to be
to accelerate China Unicom and China Telecoms
4G rollout by providing access to China Mobiles
towers, and in doing so start to even out the
competitive imbalance. If the creation of CTC does
not have the desired effect in terms of competitive
rebalancing, only then would the issue of MNO
consolidation return to the agenda.
The scope of a China Unicom-China Telecom
merger would likely be limited to their wireless
businesses, given that a combined entity would
have 80-90% share of the wireline market.
Are there any significant non-traditional
tenants on Chinas telecom towers?
The usual mix of MVNO, enterprise industrial
communications equipment, traffic monitoring,
first responder networks and Wi-Fi equipment
are all prospective additional tenants. However,
Chinas tower companies did not seem bullish
about the revenue potential of this category. When
we asked if non-traditional tenants could make up
as much as 0.2 of a tenancy ratio on a well leased
up portfolio of towers, they thought that number
sounded high.
Is there any prospect of active infrastructure
sharing in China?
www.towerxchange.com | TowerXchange Issue 16 | 207

The only infrastructure sharing agreement of


scale in China before CTC was China Telecom and
China Unicoms deep collaboration to share 4G
and transmission to improve economics in low
utilisation, remote areas.

Regulation
Are Chinas independent towercos licensed?
No, there is no licensing regime for towercos in
China, and no immediate prospect of a licensing
regime being introduced.
Does the Ministry of Industrial and Information
Technology (MIIT), regulator or National
Telecommunications Infrastructure Coconstruction and Sharing Office have the right to
define the pricing of lease rates?
State stakeholders insist that lease rates will be
defined by the market, and that they have no right to
intervene in lease pricing enshrined into regulation.
Now there is a board of Directors in place to create
more separation between CTC and their parent
MNOs, CTC lease price negotiations are likely to
conclude. While it may be tempting to imagine that,
when 94% owned by their tenants, CTC would agree
to a cost plus very low markup margin, it must
be borne in mind that China is trying to create an
infrastructure powerhouse with an RMB 280bn+
(US$40bn+) valuation!
What is the status of rural coverage in China?
208 | TowerXchange Issue 16 | www.towerxchange.com

Despite the huge land area, rural coverage in


China may be better even than the US; even in
low population density areas of Tibet you will see
coverage signs.

subways, railways, highways, airports, railway


stations and other public transportation key sites
and large venues and multi-owner commercial
buildings, government office buildings and other key
sites.

How are tower companies taxed?


There was no reported special tax status for tower
companies in China, meaning they would be subject
to VAT at 17%, 6% tax on the service business, 11%
as tower owners.
State owned enterprises have sometimes been
affording special tax treatment, enabling them
to consolidate. There was no clear indication yet
whether this might apply to CTC.
Is document number 586 (2014) the latest
regulation governing co-construction and
sharing? Is it now fully enforced?
This is the most recent document, and it has
been fully implemented. But document 586 is an
agreement not a regulation. It was proposed by
the MIIT and agreed with Chinas three MNOs to
improve resource utilisation; reducing occupation
of land and improving the appearance of the
landscape.
A couple of excerpts from document 586 (please
forgive any translation imperfections):
From January 1, 2015, in principle, the three basic
telecom carriers shall no longer build towers and
other base facilities themselves, as well as IBS in

The MIIT, SASAC or the province


telecommunication authorities will severely punish
the three basic telecom carriers, if the following
behaviors were found. Basing on severity such
punishment could be recommended to upper level
unit to fire the related management. Such dismissed
staff shall not be engaged within three years.
i. Without the approval of the provincial
coordination agencies, construct towers and other
ancillary facilities, as well as IBS in public transport
and construction of buildings and other key areas
ii. Without the consent of the provincial
coordination agencies, refuse to open sharing when
the existing telecommunications infrastructure is
suitable for sharing
iii. Without the approval of the provincial
coordination agencies, build parallel infrastructure
iv. Independently build new infrastructure when
joint construction should be carried out
v. Violation of requirement of infrastructure
sharing in key areas (key areas including key public
transportation sites, key buildings, scenic parks and
other places identified by local communications
administration, and inter-province key fiber
cable construction, and the domestic extension of
international transmission)
vi. Violate national standards on optical fiber ToHome construction
www.towerxchange.com | TowerXchange Issue 16 |

XX

vii. Sign exclusivity agreement with the third


parties in the construction of telecommunications
infrastructure (including leasing)

the National Land Ministry to resolve these issues.

Clause vii. above calls attention to the fact that


MNOs would appear to not have permission to sign
exclusive agreements with third parties (towercos),
suggesting a degree of limitation on deep build to
suit partnerships

Who are the independent tower companies in


China? How much market share do they have?
How fast are they growing and what is the top
end for their potential market share?

Who owns the land under Chinese towers and on


what basis is tenure granted to infrastructure
firms to build towers on that land?
All land in China belongs to the government, but
Land Use Rights can be secured for a 15 year term
for industrial use, usually at a reasonable cost. As
renewal fees cannot be defined up front, there is
some exposure to risk of lease escalations when
renewing after 15 years, but in general it was felt
that escalations would be fair in a market where a
State owned Entity was dominant.
Above ground level, the telecom structures
themselves belonged to Chinas MNOs and now
belong to CTC, or they belong to the independent
towerco.
How complete is the paperwork on Chinas
towers?
It was widely acknowledged that not all the towers
in China, whether CTC or independently owned, had
a complete set of licensing, permitting and leasing
paperwork. CTC are reportedly in discussions with
XX | TowerXchange Issue 16 | www.towerxchange.com

Tower market

The creation, scale and growth of CTC has already


inaugurated a culture of infrastructure sharing
in China and, especially whilst CTC gets up to
capacity, independent towers are springing up and
prospering in regions where local relationships
enable them to build quicker than the State owned
CTC.
At the end of 2014, China may have had as few as
10-20 independent towercos owning ~5,000 towers.
By the end of 2015, those numbers had increased
to ~20,000 towers among as many as 200 towercos.
Independent towercos built ~10% of Chinas
new towers in 2015, a proportion which bullish
commentators feel could reach 30% within a year.
It is axiomatic to say, but readers must be reminded
of the sheer scale of China; an independent
tower sector can still thrive even with less than
2% market share, especially when one considers
TowerXchanges forecast that that market share
will rise to 6.5% over the next three years.
TowerXchange have spoken to a few bullish tower
industry leaders who feel the glass ceiling on the
scale of the independent tower sector in China
could be as high as 20% within five years - that
could represent 400,000 towers, the equivalent scale

of the entire tower market in the European Union!


While there are independent towercos active in
Chinas largest cities, Shanghai, Beijing, Tianjin,
Guangzhou and Shenzhen, perhaps the highest
penetration of independent towers can be found
in Provincial capitals, tier two and tier three
cities in some of which TowerXchange has heard
unconfirmed reports that independent towercos
have a market share significantly in excess of 50%.
With the exception of four or five towercos with
quadruple digit tower counts, Chinas independent
towerco market is highly fragmented and localised,
with five to ten towercos in each of Chinas 31
Provinces. There could be more than 200 towercos
in China.
Are there any valuation benchmarks set by
towerco financing or tower sales?
One source suggested that Chinese towers with an
average tenancy ratio of 1.5 were changing hands
for an average of RMB 450-500,000 each (US$6570,000 each). Another source put the figure at RMB
700,000 (US$100,000) with a tenancy ratio of 2.0. A
third source suggested a 51% stake in a portfolio of
several hundred towers with a tenancy ratio above
2.0 had been acquired at a valuation again of RMB
700,000 (US$100,000) per tower.
Guodong, which is probably Chinas largest
independent tower company with 6,000 towers,
secured a RMB 700mn (US$100mn) investment
reportedly at a high teens valuation they were very
proud of.
www.towerxchange.com | TowerXchange Issue 16 | 209

Chinese tower industry dashboard, 2015-17

China tower market end FY17

China tower market end FY16

China tower market end FY15


1.7%

3.6%
Estimated tower and
rooftop count, end
FY15: 1,180,000, of
which independent
sector owned ~20,000

98.3%
China Tower Company

96.4%

6.5%
Forecast tower and
rooftop count, end
FY16: 1,400,000, of
which independent
sector will own 50,000

Strategic sites MNOs are rumored to have not yet transferred

Forecast tower and


rooftop count, end FY17:
1,550,000, of which
independent sector will
own 100,000

93.5%

Independent towercos

Detail on the independent towerco segment


Independent tower market
end FY15, ~20,000 assets
8,000 towers
spread across
4 Tier one
towercos

8,000 towers
spread across
35 Tier two
towercos

Source: TowerXchange

Forecast independent tower market


end FY16, forecast 50,000 assets
41,000 towers spread
across 10 Tier one
towercos

92,000 towers spread


across 15 Tier one
towercos

6,500 towers spread


across 30 Tier two
towercos
1,500 towers spread across 500 Onesies
and twosies
25 Tier three towercos

2,100 towers spread across 30


Tier three towercos

Tier one, 1000+ towers subdivided into three classes:



210 | TowerXchange Issue 16 | www.towerxchange.com

Forecast independent tower market end FY17,


forecast 100,000 assets

400 Onesies
and twosies

5,000 towers spread across


25 Tier two towercos
2,700 towers spread across 35 Tier three towercos

300 Onesies
and twosies

Organic growth play


Rollup play
Graduating tier twos achieve scale
Tier two: 100-999 towers
Tier three: 10-99 towers
"Onesies and twosies" <10 towers
www.towerxchange.com | TowerXchange Issue 16 |

XX

The transfer of China Mobile, China Unicom and

In conclusion, it seems increasingly apparent

China Telecoms towers to CTC reportedly yielded

that CTC is a prospective acquirer of independent

an average of just US$22,000 per site, significantly

towers, if the price is right, but that CTC and the

below replacement cost. But an asset transfer

independent sector can co-exist.

between entities all fundamentally State owned


(and owned by each other) is a poor valuation

Is there a risk of State Nationalisation of

benchmark. The low acquisition cost reflects the

independent towers?

depreciation of an inventory of ten plus year old


towers, towers which were built to gain market

Some sort of compulsory purchase order of

share and with less of a view toward longevity and

independently owned towers, at an unfavorable

structural capacity, so significant improvement

valuation, or independent towercos simply

capex will be required. The low price point also

finding CTC building towers adjacent to theirs,

reflects the mixed bag of assets being transferred,

is the Armageddon scenario for Chinese tower

inclusive of everything from substantial ground

entrepreneurs and their investors.

based towers, a great many monopoles, rooftops,


and even small Wi-Fi offload sites.

It must be acknowledged that nationalisation


of assets is a risk hanging over several thriving

Is China Tower Company a potential buyer of

independent tower markets in other nations. Is that

independent tower companies towers?

risk present in China? Yes. Did it seem like that was


a concern whilst the independent sector had a single

TowerXchange were unable to verify that SASACs

digit market share? No.

original vision was for CTC to acquire all Chinas


telecom towers, both from the three MNOs and

The impression TowerXchange got from the MIIT

from independent towercos. There seems to be an

was that, while their initial vision for CTC was

increasing realisation that independent towercos

to to create a State-owned natural monopoly to

play a helpful role in accelerating rollouts.

maximise efficiency, a pragmatic view was now

Nonetheless, while they have not yet completed

being taken on the independent tower sector,

any acquisitions of scale, CTC were believed to

appreciating the positive role of market forces in

have made an offer to acquire Chinese towers

setting a fair lease price, and appreciating that

at ~US$80,000 each. Whether that valuation is

the supplementary capacity and hunger of an

still current remains unclear, and whether such

independent tower sector could accelerate the

a valuation may be attractive to current owners

achievement of the Ministrys ultimate goals:

depends on tenancy ratio, TCF and uniqueness of

to support efficient sharing of resources, and to

location.

accelerate the rollout and adoption of 4G.

XX | TowerXchange Issue 16 | www.towerxchange.com

China is progressing and promoting


entrepreneurship, said one interviewee, with
reference to the risk of asset seizure. The China
Dream as proposed by President Xi is built on an
open, competitive market.
Do Chinas tower companies have much appetite
for International opportunities?
Chinas tower sector seems largely pre-occupied with
their huge and changing domestic market. However,
for the handful of Chinese towercos with appetite
for opportunities overseas, capital may be accessed
for opportunities within the One Belt, One Road
footprint through associated investment firms such
as the Silk Road Fund and the Asian Infrastructure
Investment Bank.
What are typical lease rates and terms in China?
Lease rates are a complicated formula based on
height and weight of equipment, desirability of
location et cetera. Most interviewees agreed that a
range of RMB 4,500-6,000 pcm was common (US$650900). The lowest we heard was RMB 3,500 (US$500)
in less developed cities, rising to RMB 11,000 in (over
US$1,500) on high rental cost sites in major cities.
TowerXchange would recommend using an average
lease rate of RMB 6,000 (US$900) pcm for models.
Like India, when additional tenants are added
to Chinese towers, existing tenants leases are
discounted.
Lease terms are typically 10+10 years.
www.towerxchange.com | TowerXchange Issue 16 | 211

Down payments for new sites have been reduced


to a single year since the advent of CTC, adversely
affecting independent towerco cash flows.
How do the economics of a single tower in China
compare to the USA?

Russia

Europe

See U.S. versus China macro tower build


economics. Note that when an additional tenant is
added, lease rates are discounted for both the new
and original tenant in China. This is not the case in
the US.

Central Asia

Middle
East
South Asia Southeast
Asia

Mediterranean Sea

We must emphasise that you must treat this table


with a pinch of sale China data is averaged based
on multiple sources but all sources are subjective.

South China Sea

Indian
Ocean

South Pacic

Who owns Chinas broadcast towers are MNOs colocating on them too?
China Broadcasting and Media Group has the 700
MHz license and owns most of Chinas broadcast
towers. TowerXchange have not yet been able to
ascertain if these towers are offered for co-location
by Chinas MNOs.

The blue route is the 21st Century Maritime Silk Road, and the red routes are the Silk Road Economic Belt

U.S. versus China macro tower build economics


One tenant US

Two tenants US

One tenant China

Two tenants China

Construction costs

$275,000

$50,000

Tenant revenue

$20,000

$50,000

$12,000

$20,000

How can early stage towercos in China access


capital?

Opex

$12,000

$13,000

$7,000

$10,000

Gross margin

$8,000

$37,000

$5,000

$10,000

China offers a challenging path to scale for local


tower entrepreneurs. Raising debt from Provincial
financial institutions is complex, time consuming
and expensive. While private, domestic investment

Gross margin %

40%

74%

42%

50%

ROI

3%

13%

10%

20%

Investment

212 | TowerXchange Issue 16 | www.towerxchange.com

Source: U.S. illustration drawn from of American Tower presentation, June 2015, does not reflect any American Tower financial data.
China data from TowerXchange research

www.towerxchange.com | TowerXchange Issue 16 |

XX

is gradually becoming more available to debt-funded


infrastructure firms with contracted long term
cash flows, like towercos, Chinese capital markets
have historically been predisposed to invest only
in profitable companies, at the expense of business
models like telecom towers that naturally lend
themselves to a degree of leverage. Small tower
companies in particular struggle with the fact that
towers are not securable.
State and provincial level investment funds may not
be inclined to invest in entities which compete with
State-owned CTC.
Please explain the latest rules regarding foreign
ownership of, or investment in, communications
infrastructure?

mechanism for foreign direct investment in China


via an international holding company, a WOFE
(Wholly Owned Foreign Enterprise), in which USD,
EUR or other currency could be invested, which could
be registered in the Caymans, Delaware et cetera,
and which could be listed on the NASDAQ or other
international stock exchange.
The VIE structure was apparently first used in this
sector over 20 years ago to facilitate investment in
China Unicom, with subsequent VIE investments in
Alibaba, Tencent and Baidu.
A critical question when leveraging a WOFE to invest
in China is where the IP sits, at holding company
or local subsidiary level? If the latter, international
investors could be exposed to risk.

potential IPO or trade sale.


CTC may be a prospective trade sale counterparts,
although management attention appears to be
focused on integrating newly acquired legacy towers
in the near term. At least one of the Indonesian tower
companies is believed to have an appetite to invest
in China, while TowerXchange has learned of two
domestic rollup plays.
Could a major international strategic investor be
interested in acquiring Chinese towers? Probably not
at the current scale of the independent market, where
the largest independent towerco claims to have 6,000
towers, but if an independent towerco could build
or rollup 30-50,000 towers, they may attract interest
from some of the more acquisitive international
towercos.

TowerXchange understand, but have been unable


to confirm, that passive infrastructure is not
considered a sensitive asset class, so FDI may be
possible into Chinese joint ventures, particularly
those in free trade areas, or through VIEs. We have
heard unconfirmed reports of one foreign investor
acquiring a 51% stake in a towerco.

A VIE would be a viable but suboptimal route to


investing in a Chinese tower company, said one
interviewee. yes you can do it, but it may adversely
affect valuation.

An interested investor called attention to the


VIE (Variable Interest Equity) structure, which
enables foreign investors to invest in sensitive
infrastructure, do investors still need to use this
or is more direct investment now permitted given
the recognition that passive infrastructure is less
sensitive?

In the event a foreign investor was seeking exit from


a listing entity, they might seek to sell their equity to
the domestically listed entity, releasing capital at an
agreed exchange rate.
What are the potential exit strategies for investors
in Chinese towers?

Some sources suggested that entities listed on that


stock exchange can only accept investment in RMB,
meaning foreign investors would have to exit at the
time of listing, or setup a new entity. More recently it
seems that qualified international investors can invest
in companies listed on the Shanghai stock exchange.

One TowerXchange source defined VIE as a

As in any market, exit strategies tend to focus on

There is one listed tower company on the Shenzen

XX | TowerXchange Issue 16 | www.towerxchange.com

What would foreign investors options be to


repatriate capital?

When considering exit through IPO, the perception


remains that Chinese companies need three years of
profitable trading history to list as an A share on the
Shanghai stock exchange. There was some suggestion
that unprofitable companies might soon be allowed to
list, but apparently that potential reform will not take
place imminently.

www.towerxchange.com | TowerXchange Issue 16 | 213

stock exchange, Beijing Miteno Communication


Technology Company Limited (300038), with at least
one planning to list in Shanghai in 2016. It should
be noted that there is approximately a two year wait
to list on the Shanghai stock exchange.
While the Shanghai stock exchange opens access
primarily to domestic investors, a listing, or dual
listing, on the Hong Kong stock exchange offers
more exposure to international liquidity and
an increased level of transparency with which
international investors are more comfortable. Most
of Chinas large infrastructure entities are listed in
Hong Kong.
Most stakeholders TowerXchange spoke to assumed
a better valuation would be achieved on the
Shanghai stock exchange (the P/E multiple in
Shanghai might be 30-50x compared to 10x in Hong
Kong), but there are precedents where higher
valuations were realised in Hong Kong (e.g. in the
insurance industry), while the current appetite
of international investors for towers as an asset
class, and the valuation of natural comps, may also
contribute to a potential healthy valuation of a tower
company on the Hong Kong stock.

A stock market listing of CTC in 2017-18 is openly


discussed and widely anticipated as a means of
repaying Chinas three MNOs the full value of injected
legacy assets.

Who is responsible for site modernisation and air


conditioning, towercos or MNOs?
Unconfirmed reports suggest CTC is responsible for

While those closest to CTC would not speculate


which stock exchange might be used, the widespread
assumption would be that Hong Kong would be the
logical choice. One analyst we spoke to suggested
around 30% of the equity in CTC could be floated.

shelters AND air conditioning.

Power

Is there any formal mechanism favoring or

While most new sites are built with outdoor


equipment, few legacy sites have been modernised
with, for example, free cooling.

requiring a degree of local content from suppliers

Are power costs passed through from China Tower


Company to the MNOs?

to CTC?
Apart from the need for vendors to be certified

Power is a pass through, sometimes paid up front.

by the MIIT, we could find no formal mechanism


favoring local content, but anecdotally it seemed that

What proportion of the cell sites are on-grid, on


unreliable grids or off grid?

a significant majority of CTCs procurement was from


Chinese companies such as Huawei, ZTE and China
ComService

Almost all on reliable grid connections.


What backup power solutions are typically on cell
sites? Are towercos or MNOs responsible for them?
Towercos have recently been required to provide

Will it be possible to invest in CTC? Is there a


plan to list China Tower Company on the stock
market in future?

backup battery banks, typically with 4-8 hours float.

While it is widely believed that more third party


investors will be afforded an opportunity to buy in
to CTC prior to IPO, it is not clear whether foreign
investors will be able to participate.

Are remote monitoring systems typically deployed

214 | TowerXchange Issue 16 | www.towerxchange.com

considering making RMS a National standard.

Most batteries are lead-acid. There are very few


backup DGs.

on cell sites?
RMS is deployed on some, not all cell sites. CTC is

Special thanks
TowerXchange are grateful to the Ministry of
Industrial and Information Technology, and to Miteno,
Guodong, Q Towers, China ComService (STUDPI),
Capital Associates, Decode China, Nicholas Shao,
Cartesian Capital, PowerHF and the IFC for their input
and for their kind hospitality in Beijing and Shanghai.
We are also grateful to the many prospective
international investors whose input into defining
these questions shaped this report.
China Tower Company has graciously offered to
meet us upon our next visit, and we look forward to
updating this report at that time

www.towerxchange.com | TowerXchange Issue 16 |

XX

How to achieve scale in the


Chinese independent towerco
market: Build or buy?
What constitutes scale in a fragmented, million tower market?
What is the size and structure of the independent towerco
market in China? How investible are those towercos? What
will be the role of independent towercos as China continues
its evolution toward a philosophy of shared infrastructure,
injecting 1mn+ legacy towers into China Tower Company
(CTC); can independent towercos compete with CTC?
TowerXchange recently visited the leaders of several
independent Chinese towercos in Beijing and Shanghai:
heres what we learned.

By Kieron Osmotherly, CEO, TowerXchange

Keywords: Asia, Asia Research, Bankability, Build-to-Suit,


China, China Tower Company, Construction, Country
Risk, Exit Strategy, Guodong, Lease Rates, MIIT, Q Towers,
Market Overview, Miteno, ROI, Regulation, Research,
Risk, SASAC, Sinonetstone, TowerXchange Research,
Towercos, Valuation, Whos Who

Read this article to learn:


< The structure of the independent towerco market in China
< What constitutes scale in a million tower market?
< The risks of competing with China Tower Company
< Organic versus inorganic growth
< Three towercos to watch in China

XX | TowerXchange Issue 16 | www.towerxchange.com

Its 4pm in Beijing but 9am back home Ive just


effectively worked through the night again and the
jet lag has kicked back in. I havent slept much on
my week-long tour of the Chinese tower industry,
but Ive learned a lot from 14 face to face meetings
and meals in which Ive drunk a lot of tea, drunk
rather too much wine, and decided TowerXchange
needs to expand our research practice to cover the
highly investible, exciting, massive new Chinese
tower market.
Independent towercos own just 1.7% of Chinas
~1.18mn towers. TowerXchange forecast
independent towerco penetration in China to rise to
6.5% by the end of FY17.
If that sounds small, consider this: by the end
of 2017 we forecast that independent towercos
will own 100,000 towers in China, and the largest
independent towerco in China will probably be one
of the top ten largest towercos in the world by tower
count.
The structure of the independent towerco market
in China
In 2014, as few as 5,000 towers were owned by
independent towercos in China, with the balance,
and most the new build, remaining on the books
of the countrys three State-owned MNOs. With the
advent of CTC came a moratorium on MNOs building
their own towers, but whilst CTC gets up to capacity,
there is a window for local tower builders and real
estate entrepreneurs to build towers for the MNOs.
Of the ~150,000 new towers built in 2015, around
www.towerxchange.com | TowerXchange Issue 16 | 215

Hundreds of new independent towercos have


been created to exploit this new and potentially
expanding window of opportunity, creating a
highly fragmented market of ~200 independent
tower companies. A handful of 1,000+ towercos
(exemplified by Guodong, Miteno and Sinonetstone)
represent ~40% of the independent tower market in
China, a further ~35 regional towercos with tower
counts between 100 and 999 (for example China
Victory, Q Towers and Senno Telecom) represent
the next 40%, with the final 20% represented by
~25 towercos with double digit counts (for example
Sanyuan Tec) and the usual assortment of onesies
and twosies.
How does an MNO get a new tower built in China
since the creation of CTC?
While the original vision might have been for
Chinas MNOs to discontinue building their own
towers and for all new build to go through CTC (the
MNOs do seem to have stopped building, and the
majority of new builds are going through CTC), the
reality is that new towers are commissioned through
a variety of different formal and informal processes
as you move across Chinas vast territory, and there
are ample opportunities for third parties to secure
business.
216 | TowerXchange Issue 16 | www.towerxchange.com

dont assume CTC will build all the new towers under the new coconstruction regime in China: there are opportunities for independent
tower companies to cultivate local relationships, to be lean and agile, to
build towers faster or cheaper than CTC can

10% were built by independent towercos. Some of


the more bullish estimates I heard in China were for
that proportion to rise as high as 30% within a year.
And with China Telecom and China Unicom racing to
catchup China Mobiles 4G rollout, China is building
a lot more towers!

Before TowerXchange came to China, we had heard


reports of a formal Clearing House type system
through which MNOs commissioned new towers.
While that may be the case in some regions, its
not something we encountered. Where the local
network planner has a good relationship with CTC,
and where CTC has the capacity, CTC will generally
build and own the tower. Where CTC lacks the
capacity, their preference is to contract a third party
purely as a tower builder the third party makes
a modest margin, but the tower ends up on CTCs
balance sheet. But we heard of plenty of instances
where independent tower companies were able to
step in and build their own tower in the absence
of CTC capacity. And we heard of instances where
independent tower companies were able to undercut
CTC sometimes by as little as 3%, sometimes by a
double digit percentage.

was normal, one interviewee said they participated


in a process with 34 bidders!

Open processes are used to attract bidders for tower


build projects in several parts of China we heard
reports that competing with eight different bidders

Id like to propose three different definitions of scale


when discussing the Chinese tower market. One, at
what scale can a tower company be a meaningful

So dont assume CTC will build all the new towers


under the new co-construction regime in China:
there are opportunities for independent tower
companies to cultivate local relationships, to be lean
and agile, to build towers faster or cheaper than CTC
can. While CTC will still build the majority of new
towers, how large a majority may depend on how
long it takes CTC to get up to capacity.
Whilst this window exists for Chinas independent
tower companies to get to scale, what does success
look like?
What constitutes scale in a million tower
market?

www.towerxchange.com | TowerXchange Issue 16 |

XX

stakeholder within a regional market, for example


within one of Chinas 31 Provinces? Two, at what
scale do an independent Chinese tower companys
options increase in terms of access to capital?
And three, at what scale could a Chinese tower
company consider an IPO or trade sale at a scale
necessary to meet private-equity-type return
expectations?
A tower company doesnt have to have a double
digit market share in a million tower market to
still be an interesting and investible business.
Dont think about China as one country of a
million towers, but as a collection of 31 Provinces,
each with differing network investment needs,
and each with its own set of local stakeholders.
There are over 180 cities in China with over one
million inhabitants in their urban area and 32
cities with over 3mn inhabitants. TowerXchange
heard report of one of those top 32 cities where
two independent tower companies share over 80%
of the towers between them. If an independent
towerco has great local site hunters, can cultivate
relationships with local network planners, can
cultivate relationships with local city planners, and
can build a significant footprint in a dense urban
area, thats one definition of scale, whether it takes
a few hundred towers or a few thousand!
Our second definition of scale concerns access
to capital. Access to capital is the principle
growing pain for Chinese independent tower
companies seeking to reach scale. Chinese banks
do not yet recognise towers as securable assets
and, even where a dialogue can be established
XX | TowerXchange Issue 16 | www.towerxchange.com

with a financial institution, accessing debt is time


consuming and expensive. While internationally
telecom tower companies are accepted as operating
a business model which naturally lends itself to a
degree of leverage, the investment culture in China
strongly favors investment in profitable companies.
While tower entrepreneurs worldwide are used to
the challenge raising capital for a portfolio of less
than 1,000 towers, the definition of scale insofar as
it concerns access to capital is determined less by
site count and more by bottom line profitability in
China.

International tower companies have visited to China


to meet with the countrys local tower companies,
indeed more than one international tower company
already has capital at work in Chinese towers. But to
provide a meaningful exit, an international strategic
investor is going to need more scale than there is
currently to be found among Chinas independent
tower companies. Appetite and interest might
increase for a portfolio of 25,000+ Chinese towers, a
scale which TowerXchange forecast Chinas largest
independent tower company could reach by the end
of FY2017.

Our third definition of scale naturally follows the


last: if they can raise capital, how big does a Chinese
independent tower company have to become in
order to realise the kind of exit which would satisfy
a private equity investor looking to deploy RMB
300mn+ / US$50mn+?

In summary; if you define scale as a function of the


importance a towerco has attained in a regional
market, the road to scale for Chinas independent
tower companies may be shorter than you think. If
you define scale as a function of access to capital, its
a long and painful march to scale. And if you define
scale as having the option to exit via IPO or trade
sale, you may need 5,000+ towers and RMB 500mn+
TCF to realise the former option, 25,000 towers and
RMB 2.5bn+ TCF to realise the latter.

A Chinese independent towerco of scale has a


range of options, from single or dual IPOs on the
Shanghai, Shenzen or Hong Kong stock exchanges,
to realising an exit through a trade sale. There is
one listed tower company in China, Beijing Miteno
Communication Technology Co. Ltd (Miteno),
but Miteno is an imperfect benchmark for scale
because the company has a substantial tower design,
manufacture and installation business in addition
to their 1,000 tower portfolio. A pureplay tower
company might need to be approaching Tower
Cash Flow (TCF) of RMB 500mn (US$175mn), and
might need to be profitable, before an IPO became a
realistic option. And there is a long queue to list on
Chinas domestic stock exchanges.

A fourth question about scale: at what scale might an


independent tower company be seen as a challenge
to the realisation of the vision and valuation of
China Tower Company, such that this State owned
entity might be prompted to take action?
The risks of competing with China Tower
Company
We can identify the risks of Nationalisation
of independent tower companys assets, but
www.towerxchange.com | TowerXchange Issue 16 | 217

TowerXchange are not qualified to quantify those


risks. What we can say is that CTC is currently
preoccupied with auditing and ingesting over a
million cell sites, and has an order book in excess
of 100,000 towers per year. CTC is also following a
roadmap to an IPO within around 18 months. So
CTC are very busy. Aggressively competing with, or
acquiring, independent tower companies does not
appear to be a near term priority for CTC.
Any sound approach to risk management will
tell you that even if the risk has low probability,
if its prospective impact is great it must be taken
seriously, and this certainly applies to the risk of
Nationalisation of independent towers in China.
When TowerXchange speaks to international
investors about China, this is one of the first
questions they ask.
So if they wanted to, how could CTC apply pressure
to the independent sector in the Chinese tower
market? One, the State could increase the pressure
on Chinas three MNOs to order all new towers
through CTC. Chinas infrastructure sharing
guidelines already prohibit signing exclusive
agreements with third parties for the construction
or leasing of communications infrastructure, but
to date hasnt precluded individual build projects
being assigned to independent towercos. Even if the
MIIT, or more likely SASAC, tightened up restrictions
on use of third parties, there would likely be a time
lapse between policy change and enforcement. That
said, I would characterise the attitude of the MIIT
toward independent towercos as progressive, so this
paragraph represents exploration of one scenario,
218 | TowerXchange Issue 16 | www.towerxchange.com

and is a scenario I currently feel is unlikely to be


played out.
The second way CTC could apply pressure to
independent towercos is a more commercial
strategy; simply build parallel infrastructure
alongside independent towerco sites, or aggressively
undercut independent towerco prices. Neither
seems a likely course of action for a company that is
both struggling to build up build capacity, and at the
same time seeking to build an attractive valuation
for IPO. Chinas aforementioned infrastructure
sharing guidelines explicitly prohibit the building of
parallel infrastructure (on pain of dismissal!), so this
scenario is even less likely.
A third course of action might be some sort of
compulsory purchase order of independent
infrastructure, presumably at a price favoring
the State owned entity. This kind of open
Nationalisation of assets would seem to fly in the
face of The China Dream proposed by President Xi
Jinping, built on an open market system driven by
competition.
While Nationalisation undoubtably scores high
impact risk, whilst the independent towerco sector
in China represents <10% of the total market, my
feeling is that Nationalisation risk scores low on
probability.
Organic versus inorganic growth
Lets establish a few baseline numbers before
considering the relative merits of building versus

buying towers in China. The economics of an


individual Chinese tower are more comparable to
Indian than to the U.S. tower market, with capital
outlay per Chinese tower of 250,000-350,000 RMB
(US$37,500-52,500) and lease rates in a RMB 4,5006,000 pcm range (US$650-900). It should be noted
that a significant proportion of Chinese ground
based towers are monopoles, which reduces both
steel and land costs.
There hasnt been enough transaction volume to
set a reliable benchmark for the acquisition of an
existing tower, but TowerXchange has heard reports
of valuations from RMB 350-600,000 per tower
(US$52,500-90,000). We were told that at one point
CTC had a standing offer to buy existing independent
towers for around US$80,000 each, but that intel was
not repeated during our visit so it either had little
effect, or the offer is no longer on the table.
I spoke to some very smart tower entrepreneurs in
China who favor organic growth; theyre building
fast, and think they can achieve scale without paying
a premium for inorganic growth whilst the market
is under-supplied. I also spoke to some equally
smart and respected tower entrepreneurs who
enthusiastically evangelised the rollup of small to
mid-sized independent Chinese tower portfolios to
accelerate the path to scale.
From Brazil to Myanmar, from Nigeria to Indonesia,
most tower entrepreneurs will tell you the return
on capital invested (ROCI) to build a new tower
will generally comfortably exceed ROCI in an
acquisition. Many of those entrepreneurs also
www.towerxchange.com | TowerXchange Issue 16 |

XX

bemoan the escalating premium to be to acquire a


tower once valuation benchmarks are known, and
once aggressive competition drives those valuations
up.
So it seems with China, one thing will be the same
as in any other tower market; if you build smartly,
you create value; and if you acquire towers with
discipline, you can also create value. But you need
to have the discipline to walk away from bad deals.
Perhaps some of the excitement about Chinese stems
from the fact that valuation benchmarks havent yet
been established; and perhaps valuations havent
been inflated yet.
Three towercos to watch in China and a dark
horse international contender!
We currently believe that Guodong is the
largest independent tower company in China.
TowerXchange met with Guodongs management
team at their Shanghai head office, and were
impressed with the clarity of their vision. One of
Chinas first independent tower companies, Guodong
was established in 2008, claims to have been
profitable since 2013, and at time of writing had a
portfolio of ~6,000 towers spread across 25 of Chinas
31 provinces, with a particular concentration in
densely populated coastal cities.
As Chinas only listed tower company (300038),
Miteno raised RMB 598mn when they listed on the
Shenzhen Stock Exchanges Growth Enterprises
Market. Founded in 2004 as a tower designer
and manufacturer, supply of steelwork remains
a key part of the business, and CTC is a key client
XX | TowerXchange Issue 16 | www.towerxchange.com

Kieron meets Mr Lu Jie, Chairman of Guodong

of Miteno. Meanwhile, Miteno has built up a


portfolio of their own 1,000+ towers, the majority
of which are in Jilin Province in the North of
China, and is working on a rollup strategy which
is both ambitious and which has international
precedent. While Miteno represents a potential
platform for international investors to participate
in the Chinese tower market, Miteno also has
their own international ambitions, with appetite
for opportunities across the One Belt, One Road
footprint.
Q Towers was one of the first bona fide independent

tower companies in China and, while they dont


boast a tower count as substantial as Guodong or
Mitenos, their vision is equally big, and equally
credible and there is plenty of room in China for
all three and more!
A dark horse, international tower company, who
shall for now remain nameless, already has secured
a substantial stake in at least one, perhaps as
many as half a dozen Chinese tower companies.
This international investor has a track record of
rolling up tower companies, and has the capital and
credibility to drive to scale rapidly
www.towerxchange.com | TowerXchange Issue 16 | 219

edotco 360: Our first look


at the tower market in Sri Lanka

TowerXchange: This is our first interview with


edotco focussed on your operations in Sri Lanka;
can you give us an overview of this market and
your recent projects?

Mohan Villavarayan, MD of edotco Sri Lanka shares detailed insight into the
countrys rapid telecoms growth

Mohan Villavarayan, MD, edotco Sri Lanka: The


telecom market consists of seven operators; the
two large constellations are Sri Lanka Telecom,
which owns Mobitel, and Dialog. Both players are
essentially into quad-play. In terms of market share
Dialog is number one at the moment. Additionally,
we have Etisalat, Airtel, Hutchison and Lanka Bell
who have relatively lower market share in terms
of subscribers and revenue. The tower sharing
market largely consists of these seven operators,
broadcasters and the armed forces.

Sri Lanka is one of the smaller telecoms markets in Asia, but


one where the tower sharing business model has been in play
for several years already. We spoke with Mohan Villavarayan,
Managing Director of edotco Services Sri Lanka Ltd. to hear
about the steady ongoing development taking place there. Mohan
has spent the last twenty years in senior positions within the
telecommunications industry. Since 2010 he has led the passive
infrastructure business for Dialog Axiata PLC and was responsible
for establishing strong relationships with all operators and
broadcasters within the country and for achieving a tenancy ratio
of two plus. In February 2016 he assumed the position of Country
Managing Director of edotco Services Lanka (Pvt) Ltd.

Mohan Villavarayan, MD, edotco Sri Lanka

Keywords: 3G, 4G, Airtel, Asia, Asia Insights, Axiata Group,


Dialog, edotco, Etisalat, Hutchison Whampoa, Lanka Bell,
Licensing, Market Overview, Mobitel, Off-Grid, Power,
Regulation, Tower Count, TRCSL, Sri Lanka, Insights

Read this article to learn:


< An overview of the Sri Lankan telecoms market
< A history of infrastructure sharing inSriLanka
< Tower counts and projected tower builds in Sri Lanka
< The regulatory situation in Sri Lanka

220 | TowerXchange Issue 16 | www.towerxchange.com

Tower counts are generally estimated as we


dont have access to accurate information. In
our estimation Dialog has the largest base at
approximately 2,100 towers (excluding IBS) followed
by Mobitel, Airtel, Etisalat, Hutch and Lanka Bell.
Dialog started sharing towers six years ago, and have
engaged in unrestricted sharing. Most of the smaller
operators have now stopped building their own
towers, its only the two market leaders that build
out new sites, and if the smaller operators want to
increase their coverage they share with one of them.
Sri Lanka still has no specific license for towercos
and at present we have established edotco Services
Lanka (Private) Limited which can provide all
towerco specific services with the exclusion of
owning a tower (for which a license is required).
ESLL also manages Dialog Towers, which is
the business unit within the Dialog Group that
www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange: We have an estimate that you


have around 4,000+ tenants on approximately
2,000 towers. Is this the case? Are there plans to
build or acquire more?
Mohan Villavarayan, MD, edotco Sri Lanka: At
present, we have 2,100 towers in Sri Lanka, and the
tenancy ratio is approximately 2.13. M&A will be a
major part of edotcos strategy, but naturally we will
be selective; it all depends on which towers become
available in this market and what the terms are.
TowerXchange: Roughly how many towers are
there in the country in total?
Mohan Villavarayan, MD, edotco Sri Lanka: Our
estimate is that there are total of approximately
7,500 8,000 towers in Sri Lanka. Most operators
dont share these numbers, but this estimate is
based on our knowledge of the market and reports
submitted to the regulator.
TowerXchange: What are conditions on the
ground like in Sri Lanka compared to other
markets that edotco operates in? What are the
main challenges and risks?
Mohan Villavarayan, MD, edotco Sri Lanka: Sri
Lanka is an island with a relatively small land
mass with 95% of the territory already covered.
Compared to other markets in the edotco footprint,
XX | TowerXchange Issue 16 | www.towerxchange.com

Fundamental infrastructure is critical to nation building; and we

houses the tower portfolio. We report into the


edotco headquarters in Kuala Lumpur, and have
commercial independence to provide services
within this market.

have to participate and invest in this and become a true partner to


the country, not just a foreign investor

the geographical and environmental conditions


are not a problem. The biggest challenge for Sri
Lanka at present is that the country is reaching
saturation where new tower requirements are
concerned. All the operators have completed their
2G and 3G roll-outs and 4G spectrum is available
only with Dialog and Mobitel; any of the operators
that want to provide 4G services will need to engage
in RAN sharing with them. There will be further
requirement for new towers for in-fills et cetera, but
this number is estimated at a further 1,500 2,000
towers or special structures.
TowerXchange: What are the grid conditions, and
what proportion of sites are on/off grid?
Mohan Villavarayan, MD, edotco Sri Lanka: The grid
conditions in Sri Lanka are not as good as Malaysia,
but better than those in Bangladesh by comparison,
and they are improving every year. At present, we
have fewer than 75 sites off grid. Overall grid is
at acceptable levels and as improvements to grid

uptime continue they will result in reduced use of


DGs.
TowerXchange: There have been some recent
regulatory developments in Sri Lanka; can you
share your perspective? Is the government
mandating infrastructure sharing or network
development?
Mohan Villavarayan, MD, edotco Sri Lanka: As of
now the regulators interpretation does not recognise
tower companies and licenses to build and manage
towers are only issued to operators. Several lobbies
have been made to the regulator and key decision
makers to enable the issue of a tower specific license.
Fundamental infrastructure is critical to nation
building; and we have to participate and invest in this
and become a true partner to the country, not just a
foreign investor. In the past, tower model has been
perceived as just a good deal, but now customer
demand is shifting and governments are asking what
were doing for the country.
www.towerxchange.com | TowerXchange Issue 16 | 221

TowerXchange: Will the regulator interfere in


market pricing of lease rates?
Mohan Villavarayan, MD, edotco Sri Lanka: When
licenses are issued there will most probably be
terms included where the regulator could make
determinations on lease rates like they do in the
case of operators. The regulator lets the market
play out but reserves the right to step in and make
determinations.

SriLankan tower market

7,500-8,000

towers

38%
Mobile broadband

penetration

TowerXchange: Is there some form of protection


against towers being built too close to each
other?
Mohan Villavarayan, MD, edotco Sri Lanka: At
present there is a process in place but no strict
mandate. However, the approval process to
erect towers involves applying to the TRCSL
(Telecommunications Regulatory Commission of Sri
Lanka) and there are multiple layers of approval.
The database of sites is checked, the requested
position is compared to the location of other sites,
and in some cases tower sharing may be mandated.
However, if these particular towers are over loaded
or if the operator concerned does not permit
sharing, approval is granted for the construction of a
new tower.
Ten to fifteen years ago it was common to see towers
within a few metres; now there are far fewer. There
arent strict regulations on tower locations, but in
some cases the regulator will listen to objections.
Some of the local concerns include radiation,
proximity to population centres and the potential for
lightning strikes.
222 | TowerXchange Issue 16 | www.towerxchange.com

125%

95%
Coverage

SIM penetration
Challenger MNOs

Etisalat, Airtel,
Hutchison &LankaBell

2 market leaders
with 4G spectrum:
Dialog, Mobitel

Population edotco: 2,100 towers with

Further

and <75 off grid

towers needed

21mn

a tenancy ratio of 2.13

TowerXchange: Is foreign direct investment in


telecom infrastructure / real estate permitted or
capped?
Mohan Villavarayan, MD, edotco Sri Lanka: At
present there are no regulations preventing FDIs
in telecom infrastructure. Non-nationals are not
permitted to purchase of real estate but can lease to
the required extent; in general foreign investment is
permitted and encouraged.
TowerXchange: Are taxation regimes fair

1,500-2,000

regarding tower transfers, lease sales and


equipment import?
Mohan Villavarayan, MD, edotco Sri Lanka: At
present there are no taxes that are specific to the
tower sector. At the point of transferring towers VAT
would be payable on the purchase consideration.
Most operators have duty free exemptions when
importing tower and energy equipment. Within the
telecommunications sector the present regime
exempts VAT when operators invoice each other for
services including passive infrastructure sharing
www.towerxchange.com | TowerXchange Issue 16 |

XX

edotco 360: echo NOC tour


How edotcos echo remote monitoring solution is optimising site efficiency

edotco NOC, Kuala Lumpur

TowerXchange recently paid


a visit to edotcos NOC at their
headquarters in Kuala Lumpur
to see the nerve centre of echo,
edotcos remote monitoring
solution. echo enables edotco to
pro-actively monitor and gather
data on the performance of all
passive infrastructure elements
at sites across its footprint and
transmit the information in
real-time to the NOC. We were
curious to find out more about
the system and see firsthand
how it is enabling operational
excellence.

Keywords: 3G, 4G, Asia, Asia Insights, Batteries, Capex, edotco, DG Runtime, Dimensioning, Energy
Efficiency, Energy Storage, Fuel Security, Invendis, Loading, Logistics, Monitoring & Management,
NOC, O&M, Off-Grid, On-Grid, Operational Excellence, Opex Reduction, Outdoor Equipment, Risk,
RMS, Shelters, Site Level Profitability, Site Management System, Site Visits

Read this article to learn:


< How echo is increasing operational efficiency across edotcos footprint
< Combatting fuel theft and unauthorised site access
< Optimising grid connections and identifying faulty equipment
< Creating new dashboards to streamline data usage

XX | TowerXchange Issue 16 | www.towerxchange.com

The echo NOC has an elaborate dashboard view


over the workstations and four large screens
that provide data on individual clients across the
footprint with a series of sensors on each site that
measure a range of systems including AC and DC
power levels, real-time temperature data if there is
a cabin, and cell levels for batteries. These sensors
provide a host of data that ground crews can refer
to and act on when necessary. echo also includes
an automated alarm system that can automatically
escalate to the appropriate level in the hierarchy
when there is an incident, depending on the issue
(e.g. site breach, fuel level drop, fire alarm).
The site managers in each country have access to
the same dashboards, but only for their specific
sites as access is profile-based. The field managers
can view the dashboard on their computer or
phone, and receive alerts via an app. Some markets
such as Bangladesh capture a lot of different data;
edotco offers a full end-to-end O&M service there
so there is more data and more complexity, but
this provides more opportunities for optimisation.
Currently there are 2,100 sites with echo in
Bangladesh, 3,000 in Malaysia and 44 in Sri
Lanka; the plan is to roll out RMS across the whole
footprint. edotco met its target of 5,000 in last years
rollout, and this process is continuing in phases.
The team in the NOC is primarily focussed
on data crunching and analytics, and they
create dashboards based on the incoming raw
transactional data. For example they can track
energy usage patterns, how the site is behaving,
www.towerxchange.com | TowerXchange Issue 16 | 223

If a site is on-grid but is receiving low frequency


power, they can see all three phases of power
and identify when they are out of balance or
insufficiently powered and receiving power on
only one phase. On a lot of legacy sites the grid
connection isnt set up in the optimal manner,
or hasnt taken into account the increased
requirements of new 3G or 4G equipment and
the three phases need to be rebalanced. The data
on grid and battery usage and charge cycles can
help to identify sites that are less efficient, and
determine how much can be saved over a certain
time frame by servicing them, and how long it
would take to recoup the cost of servicing. In
many cases up to US$300 per month can be saved
if the phases are balanced and the right level of
grid, battery and generator usage is achieved.
In Bangladesh there were 700 to 800 sites where
this approach was applied and the savings can
definitely be seen over time. Optimisation like this
can also have a potentially positive impact on the
lifespan of equipment, but this would be over at
least a ten year period and so is hard to qualify at
this stage.
echo also provides new data on parts of the site
that had previously been overlooked including DG
batteries. These batteries are needed to start the
224 | TowerXchange Issue 16 | www.towerxchange.com

In many cases up to US$300 per month can be saved if the


phases are balanced and the right level of grid, battery and
generator usage is achieved

and how much money is being spent operating it.


The NOC has a group level view of all echo sites
in the edotco footprint, and it can spot trends and
situations where individual sites are operating
inefficiently, or even spot outright fuel theft.

generator when it needs to go into action, much


like a car. In the past the charge on these batteries
wasnt typically tracked and low battery levels
often werent detected until the battery failed.
edotco have been successfully tracking DG batteries
and have identified batteries that needed to be
replaced, which has a direct impact on uptime.
In addition to this, echo also has the capability to
track the performance of individual batteries. In
the past when one battery was faulty the whole
back of batteries would often be replaced. The data
that echo now provides means they can identify
individual faulty batteries and deal with them,
which also helps improve uptime and reduces
capex.

with the amount that energy providers bill for. In


the past they didnt have the data to dispute bills
and generally had to go along with the charges
from the utility providers. Now with a full range
of data on energy consumption across all sites
in the region, edotco are in a position to identify
discrepancies and dispute bills. In Bangladesh
there was a case where 600 sites were billing a
consistently higher amount, and thanks to the
data on hand the utility company agreed to look
at the metres and discovered that they needed
servicing. They also find there are situations where
the bill is based purely on an estimate which can
also be disputed; these adjustments can lead to
considerable savings.

Another major area where echo makes a difference


is in providing data to compare actual energy use

Fuel theft is a challenge edotco faces in several


markets, and echo is already enabling a rapid
www.towerxchange.com | TowerXchange Issue 16 |

XX

The smart locks use the same system as a banking pass,


providing a unique code each time the door is accessed, as
well as a tracking mechanism. Since the installation of smart
locks in Bangladesh there have been no thefts

response; theyve identified twelve to thirteen cases


of fuel theft since last August, and there was one
in Malaysia as recently as last month. The grid in
Malaysia is good and the generators dont generally
run except for certain extreme circumstances; in
this case the sensors detected a sudden drop in the
fuel level at 3am and the field team was able to
respond within 24 hours. In the past theft like this
might have gone unnoticed for two to three months
between site visits. All of the energy and fuel data
can also be used to understand the basic patterns of
each site, and introduce new efficient policies, such
as providing just enough fuel for up to two days
of uptime instead of always having the maximum
XX | TowerXchange Issue 16 | www.towerxchange.com

amount of fuel on site. Maintaining excess fuel


on site costs more, and can contribute to loss via
theft. Sometimes local maintenance teams have
agreements that dont include specific guidelines
on the number of trips, and this may result in
inefficiencies. The edotco footprint is spread
across several countries, and each market has its
own problems, so there are definitely benefits to
monitoring each holistically at group level.
The risk of theft means that security is a major
issue, and the introduction of smart locks with
digital keys purchased from Acsys has been very
successful, especially in Bangladesh where 1,000 of

these smart locks have been installed. These smart


locks have replaced the old padlocks which had
keys that could be easily copied so that if a theft
occurred the perpetrator couldnt be identified.
The smart locks use the same system as a banking
pass, providing a unique code each time the door
is accessed, as well as a tracking mechanism. Since
the installation of smart locks in Bangladesh there
have been no thefts. Ultimately no system is foolproof, and in some cases entire cabins are stolen
with industrial equipment, as has happened even
here in Malaysia in the past; but the real-time data
on site access has proven effective in stopping
small-scale thefts.
edotco is using the data collected from echo to build
dashboards to help management make decisions on
tower operations. Last year was mostly focussed on
rolling out the systems, but now that these are in
place the data has already been put into use and is
having a strong impact. edotco have worked closely
with supplier Invendis to add an analytical layer
to the platform, and they have discussed what they
would like to see in the next releases of the OS, and
shared a lot of input on which datasets should be
built in to streamline use. Their wish list of tools for
the next release includes Excel integration, and the
ability to generate a list of sites based on specific
issues such as battery or fuel consumption. Flexible
and dynamic reporting that allows a focus on, for
example, a specific area like grid, by month, and
by region instead of a dump of all of the data will
help to make the system even more effective going
forward
www.towerxchange.com | TowerXchange Issue 16 | 225

edotco 360: An update on


edotcos operations in Myanmar
Oliver Coughlin shares insight the development plans of edotco Myanmar
edotco has been busy
consolidating its new footprint in
Myanmar since the acquisition of
MTC last December. We caught up
with Oliver Coughlin, MD of edotco
Myanmar for an update on how
the merger was progressing, and
what new developments we can
expect to see over the next few
months.
Keywords: Asia, Asia Insights,

TowerXchange: How have things progressed since


the acquisition of MTC in December?
Oliver Coughlin, MD, edotco Myanmar: By virtue
of the detailed planning that took place pre the
acquisition the transition has been very smooth,
professional and very positive. The dynamics have
changed somewhat due to the fact that Digicel was
more of an operator and edotco is a pure towerco.
I think that Digicel spotted a great opportunity in
Myanmar, and edotco spotted a great company in
MTC.
The acquisition has been extremely positive for our
customers, staff and the future of company. edotco
is investing in this market for the long haul with the
goal of being the largest towerco and were happy
to be a part of it. edotco also brings a lot of value
including the capacity to monitor sites with echo;
their methods are very useful and well proven in
other markets.

Build-to-Suit, Co-location, Digicel,


Digicel MTC, edotco, Energy, M&A,
MTC, Myanmar, New License,
RMS, Telenor, Tenancy Ratios,
Oliver Coughlin, MD, edotco Myanmar

Towercos, Viettel, Whos Who

Read this article to learn:


< How the acquisition of MTC has progressed since December
< Which services edotco plans to offer in Myanmar
< edotco Myanmars plans for organic and inorganic growth
< When to expect further consolidation in the Myanmar tower market

226 | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Do you have any further updates


on whether edotco will be providing co-locations,
build-to-suit, transmission, fibre and operations
and maintenance in Myanmar?
Oliver Coughlin, MD, edotco Myanmar: All operators
in Myanmar are aggressively seeking co-location due
to both the speed of rollout and the savings gained.
From a co-location perspective edotco Myanmar
continues to have the highest tenancy ratios in
Myanmar, currently at 1.84 and heading for 2. This
is mainly due to the quality and location of our 1,250
tower portfolio, and 98% of our infrastructure is
www.towerxchange.com | TowerXchange Issue 16 |

XX

With regards to build to suit, we are in discussions


with a number of operators with a view to
providing BTS solutions. edotco Myanmar has a
great track record of building quality infrastructure
in Myanmar, therefore we have the capability,
the resources, expertise and the financial backing
to expand our portfolio and this is our absolute
intention. The time-frame will depend on successful
conclusion of contract negotiations in the coming
weeks.
edotco also has a proven track record of providing
services such as transmission fibre and O&M in a
number of markets in Asia and it is our intention to
offer these services across Myanmar in the coming
months as well.
TowerXchange: How is edotco adapting its power
provision model for the Myanmar market?
Oliver Coughlin, MD, edotco Myanmar: edotco
Myanmar clearly understands that the provision
of power is a pre-requisite to receiving an order
for BTS in Myanmar; accordingly we are at
the advanced stages of discussions with power
providers and system integrators and should
XX | TowerXchange Issue 16 | www.towerxchange.com

finalise these within the coming weeks. It is


important to note that edotco provides power to
operators as standard practice in a number of
existing markets such as Bangladesh and Malaysia,
therefore we in will benefit hugely in Myanmar
from our colleagues experience in these other
markets.
TowerXchange: Telenor continues to build new
sites at a steady pace; how will this affect demand
among towercos?
Oliver Coughlin, MD, edotco Myanmar: Telenor have
been very successful in Myanmar and I am pleased
to say that we have a very successful co-location
agreement in place with Telenor. We obviously
hope to expand the services we provide Telenor
and indeed all operators in Myanmar in the coming
months.
TowerXchange: How will the arrival of the fourth
operator impact the market in Myanmar?
Oliver Coughlin, MD, edotco Myanmar: From a
consumer point of view, competition is good. edotco
Myanmar is ideally suited to provide any new
entrant with rapid access to approximately 34% of
the population by virtue of the location and quality
of our existing portfolio; considering our proven
track record in building high volume rollout across
the Union of Myanmar we look forward to any
future opportunities with new entrants, although
we understand this is a major undertaking for the
regulators and the applicants and will take time to
finalise.

edotco has clearly stated that


its intention is to aggressively
increase its portfolio in
Myanmar, and this will be
achieved by organic and
inorganic growth opportunities

specifically designed for multi-tenant occupancy;


we have successfully co-located all of the operators.
We can give each client immediate access to
approximately 34% of the population as we have
built towers in all of the main cities and large towns
in Myanmar, and we have also built on the main
transit routes between the commercial centres
across the country.

TowerXchange: We predict that there will be at


least one towerco acquisition by the end of 2016;
what are your thoughts on this? Are there some
opportunities for inorganic growth?
Oliver Coughlin, MD, edotco Myanmar: edotco has
clearly stated that its intention is to aggressively
increase its portfolio in Myanmar, and this will
be achieved by organic and inorganic growth
opportunities. We do expect the towerco landscape
to change in the coming years and we will evaluate
every opportunity on its merit. Myanmar is a tough
market and requires a lot of capability, resources
and financial backing from those that would like to
remain competitive. I have seen other companies
enter this market with high aspirations, but the
realities on the ground dictate that some will be
looking for exit strategies in the short to mid term
www.towerxchange.com | TowerXchange Issue 16 | 227

Analysys Mason on the


characteristics of efficient tower markets
An edotco-commissioned report isolates the keys to tower market success
Analysys Mason recently produced
an independent study to investigate
the structures and characteristics of
efficient tower markets, commissioned
by edotco Group. Through investigating
a wide variety of tower markets, and
identifying the common characteristics
of the efficient markets they isolated
a subset which are thought to be most
efficient.
Keywords: Africa, Americas, American
Tower Corporation, Analysys Mason,
Asia, Bharti Infratel, Eaton Towers,

Definition and identification of efficient tower


markets
Towercos traditionally improve the efficiency
of mobile markets by increasing the sharing of
passive infrastructure between mobile network
operators (MNOs). Thus, we define efficient tower
markets as markets where towercos have achieved
a high degree of tower sharing. Such markets are
characterised by:
< High proportion of towers owned by towercos
(instead of MNOs)
< High tenancy ratio of towers owned by towercos
We have benchmarked 20 countries where
towercos are active. The markets are evaluated for
the share of towers owned by towercos and the
tenancy ratio achieved by those towercos.
We identified six countries where more than 50%
of towers are owned by towercos and with tenancy
ratios of 1.5x and above for towers owned by
towercos, namely the United States, Nigeria, Ghana,
India, Indonesia, and Germany.

edotco, Energy Management, Europe,


Helios Towers, IHS, Indus Towers, JV
Towercos, Market Overview, MNOs, STP,
Towercos, Viom Networks

Read this article to learn:

In the following sections, we will look at the tower


market structure and regulations in these six
selected markets to understand common traits,
based on which we will then suggest best practices
for encouraging the formation of efficient tower
markets.

< Tower ownership models in efficient tower markets


< Foreign ownership of towers in efficient tower markets
< Moving beyond passive infrastructure sharing
< Licensing of towercos in efficient tower markets

228 | TowerXchange Issue 16 | www.towerxchange.com

Tower ownership models in efficient tower


markets
In the past, MNOs owned, built, and operated their
towers. However, increasing competition and
www.towerxchange.com | TowerXchange Issue 16 |

XX


declining mobile revenue have forced MNO to
focus on their core business. Networks are often
viewed as non-core and non-differentiating, leading
to more and more MNOs divesting their towers.
There are a few ways MNOs can divest its towers,
including by spinning off to a subsidiary, forming a
towerco joint venture with other MNOs, or selling to
independent towercos.
We have defined four key groups of tower
owners:
< MNOs: MNOs which still own some or all of their
towers
< MNO-owned towercos: Towercos which are
wholly-owned subsidiaries of an MNO
< Towerco joint ventures (JVs): Towercos which are
partly-owned by one or more MNOs
< Independent towercos: Towercos which are not
affiliated to any MN

Scale, often through foreign ownership, increases towercos operational efficiency

Figure 1: Key trends and characteristics of efficient tower markets and key conclusions [Source: Analysys

Figure 1: Key trends and characteristics of efficient tower markets and


Mason, 2016]
key
conclusions
Source: Analysys Mason, 2016

Figure 2: Identification of efficient tower markets [Source: TowerXChange, tower company reports, press

2 Introduction
releases, Analysys Mason, 2016]

The six efficient tower markets allow for different


tower ownership models. In all six markets,
some MNOs still own some or all of their towers.
MNOs which divested their towers do so by
forming a towerco subsidiary, forming a JV with
other MNOs or third parties, or selling the towers
to independent towercos. All markets appear to
have grown organically with towercos entering
the markets at a wide range of times and market
circumstances, based on market opportunity.

Figure 2: Identification of efficient tower markets


Source: TowerXchange, tower company reports, press releases, Analysys Mason, 2016

Analysys Mason has undertaken an independent study to investigate the structures and
characteristics of efficient tower markets, commissioned by edotco Group.
Through investigating a wide variety of tower markets, we have identified markets which are
thought to be most efficient. Section 3 provides details on how we have defined and identified
efficient tower markets.

All towerco ownership models can be efficient in


promoting tower sharing. In India, for example,
Bharti Infratel (an MNO-owned towerco), Indus
XX | TowerXchange Issue 16 | www.towerxchange.com

We identified six countries where more than 50% ofwww.towerxchange.com


towers are owned| by
towercosIssue
and16 with
TowerXchange
| 229
tenancy ratios of 1.5x and above for towers owned by towercos, namely the United States, Nigeria,

Figure 3: Ownership models of towercos in efficient tower markets [Source: TowerXchange, tower company

Figure
3: Ownership
models
of towercos in efficient tower markets
reports, press
releases, Analysys
Mason, 2016]
Source: TowerXchange, tower company reports, press releases, Analysys Mason, 2016

Indonesia, and the United States) can easily achieve


scale without having to expand internationally,
many towercos in smaller markets expand to other
markets to achieve scale. This is illustrated in the
chart in Figure 5. For example, leading African
towercos, such as IHS, Helios Towers, and Eaton
Towers, are all present in multiple African markets.
Markets which are open to foreign ownership can
benefit from transfer of knowledge and expertise
from the worlds largest towercos.

Figure 4: Foreign ownership of


towercos in efficient markets
Source: TowerXchange, tower company reports, press releases,
Analysys Mason, 2016

Towers (a towerco JV between 3 MNOs), and


such as American Tower Corporation, Eaton
The six efficient tower markets allow for different tower ownership models. In all six markets,
Viom Networks (an independent towerco), all have
Towers, and Helios Towers have full ownership
some
MNOs
still
own
some
or
all
of
their
towers.
which divested
their towers
do so by
tenancy ratio of above 2.0x.
of MNOs
their subsidiaries.
In Indonesia,
it is possible
forming a towerco subsidiary, forming a JV with other
MNOscompanies
or third parties,
the towers
for foreign
to hold or
fullselling
ownership
Key
finding: Markets
have grown
organically
into
of publicly-listed
towercos
at least one
to independent
towercos.
All markets
appear
to have
grown organically
withand
towercos
entering the
a range of tower ownership models, all of which
towerco is estimated to be majority foreign
markets at a wide range of times and market circumstances, based on market opportunity.
can be efficient.
owned. The only partial exception would
be in the United States, where the Federal
All towerco
ownership
modelsincan
be efficient
promoting towerCommission
sharing. In (FCC)
India,restricts
for example,
Foreign
ownership
of towercos
efficient
tower in Communications
Bharti Infratel (an MNO-owned towerco), Indus Towers
(aindirect
towerco
JV between
3 MNOs), and
markets
direct and
investments
in telecom
Different
markets (an
adopt
different policies
to 20 and 25%
Viom Networks
independent
towerco), all haveinfrastructure
tenancy ratiocompanies
of above 2.0x.
regarding foreign ownership of towercos. Most
respectively. However, the US also permits this
efficient tower markets allow for 100% foreign
cap to be waived should the FDI be coming
Key
finding:
Markets
have
grown
organically
into
a range of tower ownership models, all of
ownership on towercos, as shown in the table in
from a country that typically permits similar
which
can
be
efficient
Figure 4.
investments in their markets.
In Nigeria, Ghana, India, and Germany, towercos
While towercos in large markets (e.g. India,
230 | TowerXchange Issue 16 | www.towerxchange.com

www.towerxchange.com | TowerXchange Issue 16 |

XX

In Nigeria, Ghana, India, and Germany, towercos such as American

Figure 5: Leading towercos by their number of towers and countries


Source: Tower company reports, press releases, Analysys Mason, 2016

over network QoS management, ensuring high


network uptime by offering remote monitoring
solutions as well as disaster recovery.
Figure 5: Leading
Figure 5: Leading

towercosManagement
by
their by their
towercos
Local market conditions affect

the
type of
initiatives
number of
towers
and
number
of
towers
and that towercos undertake.

Energy and network QoS management are


typically offered by towercos that are present
Tower company
Tower company
in markets with poor grid power, especially in
reports,
press releases,
less
developed
areas. Examples of these markets
reports, press
releases,
India,
Nigeria,
Analysys
Mason,
2016]and Ghana. ICT solutions
Analysysinclude
Mason,
2016]
such as network planning, small cells, and fibre
backhaul are typically offered by towercos that
are present in more developed markets where the
above solutions are required to keep up with ever
increasing demand for bandwidth, such as in the
United States, Germany, as well as urban areas in
Indonesia.

countries [Source:
countries [Source:

Towercos that are most active in investing in these


new areas, as well as their initiatives, are listed in
Figure 6.
These initiatives tend to be undertaken by
Initiatives in new areas undertaken by towercos
energy model with MNOs and invest in initiatives
towercos with scale, i.e. towercos with a large
Key
finding:
Most
efficient
markets
allow
100%
foreign
ownership
which
lets towercos deliver
with scale
to reduce energy costs, particularly by reducing or
number of towers. To undertake the above
the
advantagestheir
of scaleeliminating
even in smaller
markets
Leading towercos
evolvedMost
and extended
diesel foreign
and reducing
energy usage
initiatives,
towercos often require substantial
Keyhave
finding:
efficient markets
allow 100%
ownership
which lets towercos
deliver
business models
undertake initiatives
newin smaller markets
investments.
thetoadvantages
of scale in
even
areas beyond passive infrastructure sharing. The
ICTsolutions: Towercos are well-positioned to
three key areas where towercos are expanding into
offer MNOs, their existing customers, solutions to
Larger towercos typically have better ability to
are:
help extend coverage and capacity such as network
raise necessary funding for these initiatives than
planning, small cells (including in-building
smaller towercos. They are also better suited to
Energy management: Towercos can take over
as well as fibre backhaul.
trial new
ideas and
Leading towercos havesolutions),
evolved and
extended their business models to undertake
initiatives
intake
newlonger-term decisions
energy management by negotiating for a fixed
Network QoS management: Towercos can take
and risks as compared to smaller towercos.

6 Initiatives in new areas undertaken by towercos with scale

6 Initiatives in new areas undertaken by towercos with scale

areas beyond passive infrastructure sharing. The three key areas where towercos are expanding

XX |

Leading towercos
in new
into have
are: evolved and extended their business models to undertake initiatives
TowerXchange Issue 16 | www.towerxchange.com
www.towerxchange.com
areas beyond passive infrastructure sharing. The three key areas where towercos are expanding

| TowerXchange Issue 16 | 231

in Figure 6.
Figure 6: Known initiatives by towercos in new areas [Source: Tower company reports, press releases,

Figure 6: Known initiatives by towercos in new areas


Analysys Mason, 2016]

Source: Tower company reports, press releases, Analysys Mason, 2016

will be awarded the licence.


Auction: Limited number of licences, parties
that bid the highest will win the licences. An
auction may or may not have pre-qualification
requirements.
Beauty contest: Limited number of licences,
parties that are most qualified will be awarded the
licences.
Efficient markets may or may not require prequalification, but none restricts the number of
licenses. Our findings are illustrated in Figure 7.

They also have the scale to build in-house teams of


awarding licences to towercos. We look into the
These
initiatives
tend
to
be
undertaken
by
towercos
with scale,
i.e.oftowercos
engineers to design, develop and implement their
following
aspects
licensing:with a large number
of tower. To undertake the above initiatives, towercos
often in
require
a of
substantial
initiatives.
< Restriction
number
licences investments.
< Requirement
for pre-qualification
of applicants
Larger towercos typically have better ability to raise
necessary funding
for these initiatives
than
Particularly for cost-saving initiatives, a larger
smaller towercos. They are also better suited to trial new ideas and take longer-term decisions and
tower portfolio also allows for greater economies
In awarding any type of telecommunications
risks as compared to smaller towercos. They also
have the scale to build in-house teams of
of scale.
licence, there are broadly four different methods
engineers to design, develop and implement that
theircaninitiatives.
be adopted:Particularly for cost-saving
Key
finding:aTowercos
withportfolio
scale are evolving
to for greater economies of scale.
initiatives,
larger tower
also allows
increase efficiency in other areas, such as offering
Open registration: No limit on number of licences,
energy management, ICT solutions, and network
any party that registers will be awarded the
Key finding: Towercos with scale are evolving to increase efficiency in other areas, such as
QoS.
licence/ allowed to operate

offering energy management, ICT solutions, and network QoS

Licensing of towercos in efficient tower markets


Different markets adopt different policies in

Competency-based licensing: No limit on number


of licences, any party that meets pre-qualifications

7 Licencing of towercos in efficient tower markets


232 | TowerXchange Issue 16 | www.towerxchange.com

There is no limit on number of licences for


towercos in the six efficient tower markets. In
fact, we are not aware of any market which limit
number of licences for towercos.Limiting number
of licences may be detrimental to both mobile and
tower markets. In general, numbers of licences
are limited only when it concerns the use of a
scarce resource, e.g. wireless spectrum, for which
licences are typically awarded via auction or
beauty contest. This is not the case for licences
for towercos. Limiting the number of licences
for towercos will thus create artificial scarcity,
which may lead to licensees being able to charge
monopolistic pricing. This, in turn, may lead to
MNOs lowering their investment in improving
their network coverage and capacity and less tower
sharing.
Pre-qualifications are required in Nigeria, Ghana,
www.towerxchange.com | TowerXchange Issue 16 |

XX

licenses. Our findings are illustrated in Figure 7.

and Indonesia. To obtain a licence in these markets,


parties are required to demonstrate financial and
technical capabilities. In Nigeria, for example,
the Nigerian Communications Commission (NCC)
require licence applicants to submit their business
plan, technical plan, and organizational plan along
with relevant legal documents.

Figure 7: Approach to licencing of towercos in efficient tower markets [Source: Regulators websites, tower

Figure
Approach
to licencing
of towercos
in efficient tower markets
company7:
websites
and reports,
Analysys Mason,
2016]
Source: Regulators websites, tower company websites and reports, Analysys Mason, 2016

The NCC will evaluate these plans and award


licence to applicants that it deems to be competent.
Pre-qualifications are not required in the United
States, Germany, and India. In United States
and Germany, there is no separate licensing for
towercos but there is a need to register certain
types of tower infrastructure. In India, towercos
are required to register with the Department of
Telecommunications under the Infrastructure
Provider Category-I (IP-I) category but no licence
will be issued.
Pre-qualification requirements ensure that
licence holders have the technical and financial
capabilities to promote tower sharing based on
global best practices, invest in increasing the
quantity and quality of its towers, and invest
in initiatives in new areas (such as energy
management, ICT solutions, and network QoS
management). While this requirement results in
a more complex process than open registration,
it ensures that only competent towercos enter the
tower market.
There is no limit on number of towerco licences in
XX | TowerXchange Issue 16 | www.towerxchange.com

Competitive dynamics in efficient tower markets


efficient tower markets or in any market that we
We look at the current competitive dynamics of
are aware of. Limiting number of towerco licences
There is no limit on number of licences for towercos in the six efficient tower markets. In fact, we
towercos that arise as a result of the licensing
may be detrimental to both mobile and tower
are
not
aware
of
any
market
which
limit
number
of licences
foroftowercos.
policy
in each
the efficient tower markets. In
markets as it creates an artificial scarcity, leading
particular, we look at market share of towercos
to monopolistic pricing that deters MNOs network
Limiting Pre-qualifications
number of licences
may be detrimental
to both
mobile
and tower
In general,
based
on their
ownership
modelmarkets.
and the time
of
investment.
are required
in half
their
entry
into
the
market.
ofnumbers
the efficient
tower
markets
but
not
required
in
of licences are limited only when it concerns the use of a scarce resource, e.g. wireless
the other half. Requiring pre-qualifications adds to
spectrum, for which licences are typically awarded via auction or beauty contest. This is not the
Lack of restriction in number of licences for
the complexity of the process but ensures that only
case
for
licences
for
towercos.
Limiting
the
number
fortower
towercos
will
towercosofinlicences
all efficient
markets
hasthus create
competent towercos enter the market.
attracted
with at least three
towercos
artificial scarcity, which may lead to licensees being
ableinvestment,
to charge monopolistic
pricing.
This, in
presentin
in improving
each market.their
We observe
a range
of
Key
finding:
with efficient
towertheir
markets
turn,
may Countries
lead to MNOs
lowering
investment
network
coverage
and
competitive dynamics across the six efficient tower
award network infrastructure licences to any party
capacity and less tower sharing.
markets, as shown in Figure 8.
that registers or meets qualifications.
www.towerxchange.com | TowerXchange Issue 16 | 233

Figure
8: Market
share of share
towercos of
in efficient
tower markets
[Source:tower
TowerXchange,
tower company
Figure
8: Market
towercos
in efficient
markets
reports,
press releases,
Analysys
Mason,
2016]
Source: Regulators
websites, tower
company
websites
and reports, Analysys Mason, 2016

attractive for other towercos to enter the market.


There are towercos that entered a market late but
were able to capture a large share of towers than
earlier entrants.
Key finding: A clear licensing policy which
encourages investment will attract multiple
towercos and create a more competitive tower
market.
Conclusions
Having analysed market structures and
characteristics of the six efficient tower markets,
we find three key conclusions
< Efficient tower markets accommodate a range of
tower ownership options
< Scale, often through foreign ownership,
increases towercos operational efficiency
< Open markets with fewer restrictions have
proven to be the most efficient

The presence
with
a substantial
being
the does
largest.
example,
American
The
presenceofofa atowerco
towerco
with
a substantial market
share
notFor
seem
to make
it lessTower
attractive
market share does not seem to make it less
Corporation is not the first entrant in most of its
for other towercos to enter the market. For instance, the presence of IHS, which started in Nigeria
attractive for other towercos to enter the market.
markets but it has managed to gain larger market
in
did the
notpresence
deter American
Tower
Corporation
to than
entertowercos
much later
in 2014.
Theearlier.
creation of
For2001,
instance,
of IHS, which
started
share
that entered
years
Indus
Towers,
which
wasdeter
formed
as a JV
that combine towers from three large MNOs in India in
in Nigeria
in 2001,
did not
American
Tower
Corporation
enter Viom
much later
in 2014.
The entering the
We observe
a range
2007,
did nottodeter
Networks
from
market in
2009.of competitive dynamics in the

creation of Indus Towers, which was formed as


six efficient markets, but differences in
a JV that combine towers from three large MNOs
competitive dynamics do not seem to have any
Towercos that entered early into the market do not always end up being the largest. For example,
in India in 2007, did not deter Viom Networks
correlation to the efficiency of tower market. In
American
Tower
Corporation
is
not
the
first
entrant
in most
its markets
but it with
has managed
from entering the market in 2009. Towercos that
addition,
theof
presence
of a towerco
substantialto
entered
early
into the
market
not always
endentered
up
market
does not seem to make it less
gain
larger
market
share
thandotowercos
that
years share
earlier.
234 | TowerXchange Issue 16 | www.towerxchange.com
We
observe a range of competitive dynamics in the six efficient markets, but differences in

Efficient tower markets accommodate a range


of tower ownership options. All efficient tower
markets have grown organically into a range of
ownership models. Towers are owned by MNOs,
independent towercos and combinations of both
in all markets. Towercos have entered markets at
a wide range of times and market circumstances,
based on market opportunity.
All of these tower ownership models can be
efficient in promoting tower sharing among MNOs.
Scale, often through foreign ownership, increases
towercos operational efficiency in new areas
www.towerxchange.com | TowerXchange Issue 16 |

XX

Efficient tower markets accommodate a range of tower ownership options


Scale, often through foreign ownership, increases towercos operational efficiency
Open markets with fewer restrictions have proven to be the most efficient

Figure 9: Key trends and characteristics of efficient tower markets and


key conclusions
Figure 9: Key trends and characteristics of efficient tower markets and key conclusions [Source: Analysys

Source: Analysys Mason, 2016

Mason, 2016]

Meetup Americas
2016
16-17 June, Florida

Meetup Africa 2016


19-20 October, Johannesburg

Meetup Asia 2016


Efficient with
towerscale
markets
accommodate
range
ownership
Towercos
are actively
investinga in
new of tower
There
is no limitoptions
on number of towerco licences in
areas, offering energy management, ICT solutions,
efficient tower markets or in any market that we
All
efficient
tower
markets
have
grown
organically
into
a range
of ownership models.
Towersinare
and network QoS. Compared to smaller towercos,
are
aware
of. Pre-qualifications
are required
larger
are better
able to raise
funding,
some of the
tower
markets.
While it may
ownedtowercos
by MNOs,
independent
towercos
and combinations
of efficient
both in all
markets.
Towercos
have
conduct trials, and make long-term decisions and
add to the complexity of the licence award process,
entered markets at a wide range of times and market circumstances, based on market opportunity.
risks.
pre-qualifications requirement ensures that only
All of these tower ownership models can be efficient
in promoting tower sharing among MNOs.
competent towercos enter the market.
Most of the six efficient markets allow 100%
foreign
on towercos,
which lets foreign
Clear and operational
flexible licensing
policyin
which
Scale, ownership
often through
foreign ownership,
increases towercos
efficiency
new areas
towercos deliver the advantages of scale even
encourages investment will attract multiple
in
smaller markets.
Openare
markets
with investing
fewer
towercos
the market,
creating
an efficientICT
and
Towercos
with scale
actively
in new
areas,intooffering
energy
management,
restrictions have proven to be the most efficient.
competitive tower market
solutions, and network QoS. Compared to smaller towercos, larger towercos are better able to raise
funding,
conductIssue
trials,
make long-term decisions and risks.
XX
| TowerXchange
16 |and
www.towerxchange.com

13-14 December, Singapore

Meetup Europe 2017


4-5 April, London

www.towerxchange.com
www.towerxchange.com | TowerXchange Issue 16 | 235

MNOs perspective on
competition and shared
infrastructure in Indonesia

Redefining mobile networks for the 4G era

The Indonesian telecoms sector has been expanding


fast for over a decade; growth in subscriber
numbers, data services and revenues have been
strong, and recent changes in regulation are
helping the industry to evolve. According to GSMA
Intelligence, Indonesia has 341.8mn subscribers,
making it the fourth largest mobile market in
the world. Its population of 259.1mn has a SIM
penetration of 132%, and the GNI per capita is
US$4,000. As a result of this high penetration
rate, MNOs are increasingly shifting their focus to
arresting the decline in ARPU.
Keywords: 3G, 4G, ARPU, Asia, Asia Insights, Axiata Group, Fibre, Hutchison 3G, Indonesia, Indosat,
Internux, M&A, MNOs, Protelindo, RANsharing, Regulation, Sampoerna Telekomunikasi, Smartfren,
Spectrum, Telkomsel, XL Axiata

Read this article to learn:


< The demands placed on network infrastructure by Indonesia leapfrogging from 2.5G to 4G:
investing in fibre, microcells and small cells
< The prospects for mandated infrastructure sharing
< The prospects for further consolidation among Indonesias ~35 towercos
< From RANsharing to a possible joint venture towerco

236 | TowerXchange Issue 16 | www.towerxchange.com

The fact that prepaid is the dominant payment


model with 98% of the market adds to price
competition. The practice of subsidising mobile
devices by bundling their purchase with service
operation contracts remains largely unexplored
in Indonesia, which makes it easy for customers
to switch providers as soon as a better offer comes
their way. Moreover, many Indonesians have
multiple SIM cards in active use, allowing them
to take advantage of lower call rates to specific
numbers, free texts or bonus data volumes at
certain times of the day. It can be challenging to
generate revenue under these conditions and this
partly explains why average revenue per user
(ARPU) is low in Indonesia when compared to other
countries in the region.
Indonesia has a young population that moved
straight to mobile and has embraced data services;
mobile broadband penetration is at 37% and
climbing, and handheld devices are the preferred
method of accessing the Internet. Indonesia is still
predominantly a 2.5G market, and leapfrogging
from there to 4G is a huge task that will require
substantial investment in infrastructure and
equipment.
While the mobile market in Indonesia has
experienced tremendous growth for several years,
it is becoming more and more competitive and
margins have been shrinking. MNOs have been
bracing for change as growth rates have levelled
off and pricing wars have intensified. The market
is still dominated by Telkomsel with its 45% share,
www.towerxchange.com | TowerXchange Issue 16 |

XX

but the landscape has changed with the addition


of a number of newer operators backed by foreign
partners: Indosat, XL Axiata, and Hutchison 3G.
The market is rounded out by several other local
players: Internux, Sampoerna Telekomunikasi
and Smartfren, making a total of seven MNOs.
Telkomsel was the first to launch 4G in December
2014, followed shortly by XL Axiatas launch in
three cities later the same month. Indosat received
a 4G concession in the 800MHz, 900MHz and
1800MHz bands in early 2015.

Estimated tower count for Indonesia


Towerco-owned
14,737

11,389

7,770
2,185

5,500
The MNOs in Indonesia are employing different
strategies to deal with their competitive
environment. For the most part they are very
focussed on interconnection, spectrum and
network sharing, and the recent introduction of
SIM card registration last year. Telkomsel holds the
dominant position in the market and has the most
comprehensive coverage of the country, and as a
result they limit the amount of network sharing
they do and are very choosy about which sites they
share with their competitors. At this point tower
sharing isnt mandated by the government, but
there are indications that the regulator is serious
about network sharing and it is thought that this
will be enforced at some point. If this happens
there is a possibility that when there are two or
three towers close together the one with the lowest
tenancy would have to be decommissioned, which
would of course have a major impact on the owner.
In addition to the main towercos, there are up to 35
independent companies that partner with MNOs in
XX | TowerXchange Issue 16 | www.towerxchange.com

Source: TowerXchange

8,500

1,000
1,000
450
208
1,000

18,000
4,000

Indonesia to provide towers. Although dominated


by three large independent towercos, Protelindo,
Tower Bersama and STP, plus Telkoms Mitratel,
many of the rest are extremely small organisations
with fewer than fifty towers and in some cases only
single digit tower portfolios. Already subjected to
considerable rollup, there may be the potential for
further consolidation in the market, but many of
these smaller companies have existing contracts
with the MNOs that offer extremely favourable
conditions that would make it nearly impossible for
a larger towerco to make profitable. In general the
MNOs in Indonesia are happy with the status quo
and wouldnt want to see too much consolidation

Mitratel
Tower Bersama
Protelindo
STP
IBS Tower
KIN
Persada Sokka Tama
Retower Asia
Balitowers
Others
Operator-captive
Telkom + Telkomsel
XL
Indosat

of the tower industry as it could limit their options


and their negotiating power.
Indonesia is a large country with population
centres spread out across several smaller islands;
achieving coverage of the whole country requires
the MNOs to have partnerships with some of the
small local towercos in some cases, and close
relationships with the local governments. There are
thirty smaller cities across the country that have
their own local government, and they reserve the
right to approve or reject proposed developments.
MNOs are also preoccupied with changing
www.towerxchange.com | TowerXchange Issue 16 | 237

collaborate on rollouts, especially in areas with


lower population densities outside Java. Some
towercos are responding to the increased demand
for fibre to support the growth of data by acquiring
companies with fibre assets. Protelindo acquired
iForte in mid-2015, and STP acquired a company
named Bit which also owned fibre assets.

Indosat and XL Axiata have been engaged in RANsharing for some


timeAnother possible step in terms of partnership would be
the creation of a joint venture towerco to pool and optimise their
tower assets

technology and the impact it has on their business.


Demand for smaller, more efficient towers in
urban population centres is growing, as well as
smaller base stations, and there is increasing
pressure to provide more efficient energy solutions.
Indonesia is also promoting the development of
smart cities initiatives, creating opportunities for
all the countrys MNOs and towercos. The demand
for connectivity in urban centres continues to
increase, and the number of cells is growing as a
result. However, the cost of building new towers,
especially in urban centres, is very high, and rents
in some locations are becoming prohibitively
expensive. This leads to MNOs increasingly trying
to get more out of existing sites with equipment
238 | TowerXchange Issue 16 | www.towerxchange.com

upgrades instead of new builds, while Indonesia


is also home to some of the most expansive and
impressive microcell and small cell deployments by
towercos.
In terms of fixed services, for those operators that
provide this in addition to wireless, competition is
also increasing. There are some small, agile fibre
providers that have had some success identifying
blank spots in coverage and making strategic land
purchases. They then quickly roll out fibre in the
area to provide connectivity for future occupants.
Some operators, such as Indosat and XL Axiata,
have joined forces to pool their fibre resources to
support backhaul for their wireless services, and

RANsharing is another form of partnership


between MNOs that is becoming increasingly
common. Indosat and XL Axiata have been
engaged in RANsharing for some time, and this has
also been extended to include co-operation on the
rollout of some sites for LTE services. Partnerships
like this can greatly reduce opex and help smaller
operators to remain competitive, and keep
shareholders happy. The model is so successful that
Indosat and XL Axiata are in the process of creating
a separate entity to manage their networks outside
of Java; the process is underway and it should be up
and running in 2016.
Another possible step in terms of partnership
for Indosat and XL Axiata would be the creation
of a joint venture towerco to pool and optimise
their tower assets. At this stage, however, the
tower industry in Indonesia isnt open to foreign
companies, and both Indosat and XL Axiata are
both controlled by foreign companies, Ooredoo and
the Axiata Group respectively. While there have
only been unconfirmed rumors of the prospective
opening of the tower industry to foreign ownership,
if this were to change it could have a huge impact
on the market
www.towerxchange.com | TowerXchange Issue 16 |

XX

Moodys perspective on the latest


XL tower sale to Protelindo
XL Axiatas US$270mn tower sale to Protelindo will strengthen Protelindos
competitive position and improve XL Axiatas leverage

Keywords: Acquisition,
Anchor Tenant, Asia,
Asia Research, Axiata,
Bankability, Cashflow
Finance, Deal Structure,
Debt Finance, Indonesia,
Lease Rates, MNOs,
Moodys Investors Service,
Protelindo, Research, STP,
Sale & Leaseback, Tenancy
Ratios, Third Party Reports,
Tower Bersama, Towercos,
Valuation, XL Axiata
By Nidhi Dhruv, VP & Senior Analyst, Moodys Investors Service

Read this article to learn:


< The profile of Protelindo and the benefits of the deal for them
< The impact on Protelindos tenancy mix
< The financial profile of XL Axiata, and the impact of the sale
< The projected timeline of the deal

XX | TowerXchange Issue 16 | www.towerxchange.com

The sale of 2,500 telecommunications towers


owned by mobile operator, XL Axiata Tbk (Ba1
stable), when consummated, will strengthen
Profesional Telekomunikasi Indonesias
(Protelindo, Ba1 stable) position as the largest
independent tower company in Indonesia by
towers and tenants.
Post-acquisition, Protelindo will operate about
14,700 towersrepresenting a 19% share of the
Indonesian tower marketwith about 24,700
tenants. By comparison, the second largest
independent tower company, Tower Bersama
Infrastructure (Ba3, stable), had about 11,389
towers at 31 December 2015 that were leased to
18,796 tenants.
Exhibit 1
Acquisitions help tower companies achieve scale
and give them a competitive edge by expanding
their geographic footprint. For example, Solusi
Tunas Pratamas (STP, unrated) acquisition of 3,500
towers from XL in December 2014 cemented STPs
position as a strong, third largest independent
tower operator in Indonesia.
Acquisitions have been central to the growth
strategies of Indonesian independent tower
companies, with more than 35% of each
independent tower companys portfolio comprising
assets obtained from acquisitions. In Protelindos
case, the acquisition of XLs towers will increase
to 58% its proportion of acquired towers to total
towers.
www.towerxchange.com | TowerXchange Issue 16 | 239

Exhibit 1: Protelindos market share will increase to 19% from 16% postXL Tower acquisition
After XL Tower sale to Protelindo

Before XL Tower sale to Protelindo


8%

16%

8%

5%
15%

8%

19%

15%

32%

32%
9%

9%

12%
Protelindo

Tower Bersama

12%
STP

Others

Telkorn & Telkornsel

XL

Indosat

Source: Company reports, industry reports and Moodys investors service estimates

Exhibit 2: Indonesias three largest independant tower opertators


acquired more than 35% of their tower portfolios
100%
80%
60%
40%
20%

STP
Acquired

Protelindo
Built

240 | TowerXchange Issue 16 | www.towerxchange.com

TBI

Source: Company filings, Moodys investors service estimates

Exhibit 2
The acquisition will also improve Protelindos
tenancy mix, because 2,432 of the 2,500 acquired
towers will have XL as their anchor tenant. Pro
forma for the acquisition, Protelindo expects its
share of revenue from mobile operators with
meaningful market shares to increase to about 51%
(including Netherlands towers) from 49% for the
quarter ended December 2015.
The tower transaction is structured as a sale and
leaseback agreement, whereby XL will lease back
2,432 towers under a ten year agreement. XL has
agreed to pay a monthly lease rate of IDR10 million
per tower, of which, IDR2 million is subject to an
annual inflation escalator equaling the lower of 7%
or Indonesias official inflation rate.
Over the last two years, Protelindo has significantly
improved its scale and credit profile. Its leverage has
strengthened through EBITDA growth, supported
by a significant increase in the number of tenancies
on its towers. Protelindo increased its total tower
tenancies to about 21,000 at 31 December 2015
compared to about 14,800 at 31 December 2012. As
a result, adjusted EBITDA doubled to IDR3.8 trillion
during this period.
Hence, Protelindos financial metrics are resilient
and can easily accommodate this acquisition.
Protelindo will fund the acquisition primarily
through a IDR3.0 trillion (US$227 million) bank loan.
The remaining IDR568 billion (US$43 million) will
be paid with internal cash. The companys strong
financial profile, and the EBITDA-accretive nature of
www.towerxchange.com | TowerXchange Issue 16 | 237

4.0x
Negative

Adjusted leverage

3.5x

Positive

Adjusted cross debt / EBITDA

Exhibit 3: Protelindos can maintain leverage within its current rating


threshold despite tower acquisition

2.5x

Upward rating trigger


<2.5x

3.0x

2.0x
2014

Downward rating trigger


>3.5x-4.0x

2015

2016F

the tower business, means that the additional debt


will not materially weaken Protelindos leverage or
interest coverage metrics.

2017F

2018F

Source: Company filings, Moodys


investors service estimates

region, which increases the marketability of these


towers to the larger, more creditworthy mobile
operators. This will help Protelindo grow the tenancy
ratio on the acquired towers.

Exhibit 3
Protelindos own tenancy ratio stands at 1.7x.
The acquired towers will also boost Protelindos
pro-forma revenue and EBITDA by about IDR490
billion and IDR390-IDR400 billion. Given Protelindos
growing EBITDA from a higher number of tower
tenancies, we expect the companys leverage to
gradually improve.
The acquired towers have a tenancy ratio of about
1.5x, where the majority of colocation (multiple
mobile operators leasing space on the same tower)
contracts are with Hutchison 3 Indonesia (H3I,
unrated), an indirect 66%-owned subsidiary of CK
Hutchison Holdings Limited (A3 stable).
About 65% of the acquired towers from XL are
located in the more densely populated Java/Bali
XX | TowerXchange Issue 16 | www.towerxchange.com

Higher tower tenancy ratios indicate a tower


companys effectiveness in adding co-locations;
thereby driving higher EBITDA margins. Protelindos
ability to increase co-locations on its towers is
therefore critical in its ability to deleverage quickly
following the acquisition.
As for XL, the sale will improve the companys
reported leverage, because XL plans to use the
IDR3.57 trillion (US$270 million) proceeds from the
sale of its non-core assets to repay debt. In addition,
XL has also announced a rights issue to repay its
US$500 million shareholder loan from parent
company, Axiata Group Berhad (Baa2 stable), which
will further reduce its adjusted debt to about IDR31.5

trillion from IDR40.5 trillion as of December 2015.


To XLs benefit, the rental costs for leasing back the
towers from Protelindo will be below prevailing
average tower rental rates in Indonesia. However,
the lease deal with Protelindo will increase its
consolidated rental expense, which we capitalise
and add to gross adjusted debt under our standard
adjustments.
Still, even after factoring in our operating lease
adjustment, we expect a net reduction in adjusted
debt following the tower sale and rights issue, and
expect XLs pro forma leverage to improve to about
2.6x from 3.3x as of December 2015
Both Protelindo and XL expect to complete the
transaction by 30 June 2016. The deal is subject to
certain conditions, including a joint audit of the
towers under consideration, and the reassignment of
the co-location tenancy agreements to Protelindo from
XL.
Any imminent ground lease renewal risk for
Protelindo is mitigated by XLs agreement to renew
all ground leases coming due over the next 12 months
on these towers. There are no remaining regulatory
approvals required, and XL will not require any
consent solicitation from its banks, because these
towers are not pledged as collateral on its bank loans.
XL is unlikely to dispose of any more of its towers,
because the company believes its remaining towers
are strategic in nature
www.moodys.com
www.towerxchange.com | TowerXchange Issue 16 | 241

Cam Towerlink: Increasing


connectivity in Cambodia
Yusoff Zamri discusses Cam Towerlinks ground-breaking project to connect
Angkor Wat
Continuing our coverage of the Cambodian tower
market, we recently caught up with Yusoff Zamri, CEO
of Cam Towerlink, a new entrant to the Cambodian
tower market, and discussed their first project providing
wireless connectivity to the Angkor Wat temple grounds,
a UNESCO World Heritage site, for the first time. With
over 23 years of telecoms experience covering both the
operator side with Celcom, Hello Axiata and Uzmacom,
and the vendor side with Lucent Technologies,
Schlumberger Network Solutions and ZTE, Yusoff is now
responsible for launching Cam Towerlinks services in
this competitive telecoms market.

Yusoff Zamri, CEO, Cam Towerlink

Keywords: Asia, Asia Insights, Build-to-Suit, BTS


Hotel, Cambodia, Cam Towerlink, Cootel, edotco,
Emaxx, Fibre, Market Overview, Qb, RAN sharing,
Regulation, Seatel

Read this article to learn:


< Cam Towerlinks project to provide connectivity at Angkor Wat
< Cam Towerlinks future plans for expansion in Cambodia
< The impact of the recent telecoms law passed in Cambodia
< The next opportunities in the Cambodian tower market

242 | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Please tell us about Cam


Towerlink and its background.
Yusoff Zamri, CEO, Cam Towerlink: We came to
Cambodia in 2014, focusing on the tower business,
providing services including tower rollouts,
power solutions, IBS, COW (Cellular on Wheels)
and BTS hotels. We have a staff of ten all based
in Cambodia, and we are founded by a group of
three shareholders in Malaysia, which also created
an IT company called Mutiara Teknologi, which
was responsible for rolling out the 999 emergency
service in Malaysia. After the success of this large
project the shareholders wanted to explore other
opportunities outside of IT and in other markets,
and decided to invest in the tower industry.
TowerXchange: What can you tell us about your
recent project to provide connectivity at Angkor
Wat?
Yusoff Zamri, CEO, Cam Towerlink: Companies
have been trying to provide coverage within the
restricted area of Angkor Wat since 2007, and noone has succeeded until now. I know this as I was
the CEO of Hello Axiata from 2007-2009 and I was
not successful back then. For Angkor Wat we are
rolling out camouflaged tower structures around
the temple site to provide a good signal for visitors.
We have approval to deploy six towers to start
with on the temple grounds, and then our plan is
to expand into the surrounding area and provide
coverage within the temple itself. More than likely,
this will require a camouflaged BTS hotel solution.
Weve started the initial deployment now and this
www.towerxchange.com | TowerXchange Issue 16 |

XX

should be up and running by June. The project also


includes 30km of fibre, which will connect all of
the sites into a ring. Were talking to six potential
tenants, and we expect to have an average of four
tenants per tower once the expansion takes place.
We plan to add a common antenna for all tenants
on the towers; this would be the ideal scenario but
it would depend on all operators agreeing to have
the antennae pointing in the same directions. We
expect to have this finalised and operational by June
as all of the operators are keen to start providing
coverage on this new site. I believe this is a good
start for Cam Towerlink.

Were talking to six potential


tenants, and we expect to have
an average of four tenants
per tower once the expansion
takes place. We plan to add
a common antenna for all
tenants

XX | TowerXchange Issue 16 | www.towerxchange.com

Angkor Wat, April 2008, pre-coverage!

TowerXchange: What will be the next project for


Cam Towerlink?
Yusoff Zamri, CEO, Cam Towerlink: We have
started initial surveys into the surrounding Angkor
Wat area; were looking at over twenty potential
sites which are spread over a wide area, but we
need approval from the authorities managing the
temple. Were engaged in ongoing discussions
with the authorities, and with the operators

that are interested. We are of course looking at


areas covering the whole of Cambodia as well.
Concurrently we are looking into acquiring any
tower assets we can in Cambodia, and there are
assets available around the country.
TowerXchange: What can you tell us about the
telecoms regulation that was passed in Cambodia
recently? What has the impact on the market
been so far?
www.towerxchange.com | TowerXchange Issue 16 | 243

step forward that it has finally been implemented.


TowerXchange: How is the tower market in
Cambodia? Do you see demand increasing?
Yusoff Zamri, CEO, Cam Towerlink: edotco and
Cam Towerlink are the only towercos in Cambodia
at this point; edotco is the leader with over one
thousand towers. Cam Towerlink is just getting
into the market with the Angkor Wat project, and
the plan is to expand into other areas soon, and
also to acquire assets. We have been in talks with
Viettel who have some assets to dispose of, as a
result of their takeover of Beeline last year.
There are also three new Chinese operators in
Cambodia, Seatel, Cootel and Emaxx, that are all
in expansion mode. Some of them are building
towers and we are in discussions with them about
potential partnerships. We are of course talking
to the rest of mobile operators (Viettel, Mobitel,
Smart and Qb) to see how we can support them in
Cambodia.

Coverage Angkor Wat style!

Yusoff Zamri, CEO, Cam Towerlink: The new


telecoms law was passed in January of 2016. Its
generally perceived as good news, and it gives the
government guidelines for managing telecoms
in Cambodia. Now the government can properly
regulate this industry and can levy fines or jail
terms for non-compliance, so its being taken quite
seriously.
244 | TowerXchange Issue 16 | www.towerxchange.com

The Cambodian government is actively promoting


tower sharing and wants to see it implemented
like in Malaysia, and to have the collaboration of
the operators and towercos. There is a lot of legacy
infrastructure in urban areas, and the government
is pushing with this new law to have this updated or
replaced and to reduce overlaps. The New Telecom
Law had been discussed since 2007, so its a major

TowerXchange: What do you expect to happen


next in the Cambodian market?
Yusoff Zamri, CEO, Cam Towerlink: It depends how
the implementation of the new law progresses
and remains to be seen how the regulator wants
to proceed. It will take time but the regulator is
definitely more gung-ho since the law was passed.
Its not perfect, but now they have a real platform
to regulate the telecoms industry in Cambodia
which can only be an improvement
www.towerxchange.com | TowerXchange Issue 16 |

XX

TowerXchange market
study: Laos
4G is being rolled out and more than one MNO has incentive to monetise towers,
but government involvement and slow growth disincentivise investment

By Kieron Osmotherly, CEO, TowerXchange

The mountainous, landlocked country of Laos is


has the lowest population density in the ASEAN
region, with a population of just under 7mn spread
across 238,800 sq km. There are just under 7,500
towers in the market, all remaining MNO-captive.
Four MNOs, three of which are majority Stateowned, participate in a relatively slow growing
market. However, 4G deployment has begun, and
3G coverage is already widespread. With possible
windows of opportunity to invest in the #2, #3 or
#4 operators towers, its time for TowerXchange to
examine the tower market in Laos.

Keywords: 4G, ARPU, Asia, Asia Research, Batteries, Beeline, Country Risk, Decommissioning, ETL,
Infrastructure Sharing, Investment, LTC, Laos, Market Overview, Masts & Towers, On-Grid, QoS,
Regulation, Research, Skilled Workforces, Tower Count, TowerXchange Research, TowerXchange
Research Asia, Unitel, Viettel, VimpelCom

Read this article to learn:


< The mobile market in Laos and impact of government stakeholdings
< The prospects for tower divestitures in Laos
< The culture of infrastructure sharing in Laos

Mobile market in Laos


The mobile market growth in Laos had been
slowing, but SIM penetration climbed 11.3%
between Q4 2014 and Q4 2015 to 78%, according to
GSMA Intelligence.
The two clear market leaders are LTC, 51% State
owned, which has money from Shenington
Investments, and Unitel, also 51% State owned,
which has money from Viettel. Unitel invested
heavily in tower building and has by far the
countrys largest network.
ETL is controlled by Ministry of Defence and have
been in financial difficulties for some time, with the
government increasingly seeking to arrest the bleed
of money. Interest from China in acquiring ETL
reportedly floundered on concerns about payroll
and pensions. Subsequent management changes and
allocation of spectrum for 4G has put ETL on a path
toward IPO. LTC and Unitel are already listed.
Number four MNO Beeline, from which VimpelCom
have been seeking to exit, recently successfully
arrested a decline in subscriber base. Having sold
their opcos in Cambodia and Vietnam, Laos remains
an anomaly on the VimpelCom balance sheet. The
Russian parent company has been through at least
three rounds of trying to divest Beeline Laos, but no
party has so far met their valuation. Beeline is cash
flow positive, so the company is under no pressure
to accept a low bid.

< Current status of 4G rollout


< Power generation and cell site energy in Laos

XX | TowerXchange Issue 16 | www.towerxchange.com

A fifth MNO Sky Telecom, also owned by the


military, own spectrum but dont have a network.
www.towerxchange.com | TowerXchange Issue 16 | 245

With a population of around 7mn and GDP per


capita of US$5,400 (Source: CIA Factbook, 2015), by
most metrics Laos should be a three MNO market,
and a merger between Beeline and Unitel or ETL
might be one way of creating a more rational
market.

How many towers are there in Laos and who owns them?
423
1,950

1,100

LTC

Prospects for tower divestiture

Unitel

Unitel dont need cash with Viettel behind them, and


their 4,000 towers give them a genuine coverage
differentiator. LTC seem similarly disinclined to
monetise towers, although rumours that Shenington
Investments may be seeking an exit could create a
window of opportunity.

ETL
Beeline (VimpelCom)

4,000
Source: TowerXchange

ETLs IPO could slip further in the future, and the


company is heavily indebted, so may be receptive
to an offer to buy their towers. An approach may be
best directed to the government, with the incentive
that the cash from monetising towers could be
reinvested in upgrading networks.
Beeline currently has 711 sites, 423 sites for which
Beeline holds the lease, plus 288 sites co-located on
shared towers. At the end of 2014 Beeline owned 444
sites, but they removed BTSs from 21 non revenue
generating tower sites in 2015, as the operator only
had a handful of towers in these areas so not enough
coverage to generate customer demand.
VimpelCom is in the process of monetising towers
worldwide, but may prefer a full sale of their Beeline
opco in Laos. Much depends on who the new owners
of Beeline might be moentising their towers
could provide a nice cash injection to enable a 4G
246 | TowerXchange Issue 16 | www.towerxchange.com

launch, and the Beeline towers are generally in good


condition.
Infrastructure sharing to date
There are currently no independent towercos in
Laos, although TowerXchange are tracking at least
one interested party. There are third party TV and
radio towers, and the Ministry of Defence own a few,
but most tower structures remain operator-captive.
There is quite an active market for bi-lateral
infrastructure sharing swaps with no money
changing hands. One MNO reportedly tried to
instigate a lease price of US$150 per month, but
other operators were reluctant to pay. LTC share
quite extensively, ETL and Unitel also share. As the
smallest network, 40% of Beelines base stations are
co-located on third party towers.

Coverage and profitability


Laotian MNOs make most of their margin in
Vientiane (the commercial capital with a population
of 760,000), Savannakhet (population around
120,000, the second city and manufacturing hub),
Pakse (population 88,000, where there are tea and
coffee plantations), and in Luang Probang in the
Northeast (population 55,000, a cultural and tourist
centre). It is difficult to find enough ARPU to provide
economic coverage outside these areas.
4G
LTC has launched 4G, primarily in the largest
city Vientiane, while Unitel also rolled out 4G in
Savannakhet. ETL has a loan to roll out 4G, while
Beeline seem inclined to focus on provision of high
quality 3G in Vientiane. With ARPU is just under
www.towerxchange.com | TowerXchange Issue 16 |

XX

US$5, and not much disposable income, there is little


demand for premium 4G handsets, so the business
case to invest US$100mns in 4G is weak for the
challenger MNO.
Regulatory environment
There is a risk of conflicts of interest given
government majority stakes in three MNOs: ETL are
100% State owned, Unitel and LTC are 51% Stateowned the government even owns 22% of Beeline.
This was exemplified in 2011 when a price floor
was introduced in response to a disruptive new
market entrant (Millicom, whose majority stake
was later acquired by VimpelCom) undercutting
the tariffs of government owned incumbents. After
a stand-off on pricing and promotions, Beelines
interconnect with the other three MNOs was denied
for several months, with the government supporting
the incumbents. The so-called Beeline Crisis (201112) slowed mobile growth and continues to cast a
shadow over the investibility of the Laotian telecom
market.
Access to the Ministry and other government
stakeholders in Laos is reportedly good, and there
have been signals of intent to take a more liberal
approach to the regulation of telecommunications.
Ease of doing business
Doing business in Laos is difficult. Laotians are a
friendly, incredibly laid back people, but projects
require close supervision to keep on time. In a
telecoms context this means it can be difficult to
get high quality I&C work done on time, and much
XX | TowerXchange Issue 16 | www.towerxchange.com

must be done in-house. There are few proven


infrastructure companies to provide support.
Similarly it can be challenging to motivate and
retain staff; one MNO reported staff turnover as
high as 30% annually, and head hunting can be
a problem. There is a shortage of experienced,
well educated prospective employees, and salary
expectations can be high. The opening of the ASEAN
employment market should help, making it easier
for foreign workers to take jobs in Laos.
Chinese investment
Chinese investment in Laotian infrastructure is
widespread. Laos is known as the battery of Asia,
and there are hundreds of hydropower schemes
planned, many Chinese backed, with some increase
in Thai investment.
Huawei is by far the biggest telecom investor
in Laos, with a substantial team on the ground
supported by good warehouse infrastructure.
Power
Laos has a surplus of power generation which they
export, so grid availability is good in the country,
and new sites can be connected to the grid quickly
and efficiently. There are still unannounced outages,
so backbone sites have DG and battery backup: 4-6
hours battery backup is standard.
Network investments
Network performance is generally acknowledged to

be poor in Laos.
Most network investments are in the upgrading of
sites for 4G; there are very few new sites in Laos,
and most of those are urban infill concrete poles.
Beeline built just six sites last year, less than a fifth
of the total they were building back in 2012.
What do towers cost in Laos?
Cost per site depends on what you are building
of course, but for example a 60m guyed mast
tower with capacity for two operators and four
microwave dishes would cost approximately
US$24,000, including foundations, tower, and
electrical equipment. O&M works out at around
US$900 per site per year, inclusive of the
maintenance of both passive and active equipment.
Given the deficiency of high-rise structures in Laos,
it is perhaps unsurprising that less than 5% of
urban sites are rooftops. Most sites are guyed mast
towers, a few are free standing.
Conclusions on the investibility of Laotian
towers
While there may be an opportunity for a tower
company to invest in Laos, they would have to
be comfortable with the level of government
involvement in telecoms in the country. The
deficiency of local steel may also be an issue, with
towers having to be imported from Vietnam or
China. China may indeed be the most likely source
of investment in Laotian towers, with the country
being eligible for One Belt, One Road funding
www.towerxchange.com | TowerXchange Issue 16 | 247

BMI Research:
A look at the Indian tower market
Telecoms demand growth eclipses challenges in an evolving market structure
Changes to telecoms regulations and
market conditions in the past year
will impact the towers market in India
in various ways. Weighing the positive
impacts of 3G and 4G proliferation
against the risks of evolving telecom
regulation, we believe that growth
prospects for towers market are
bright, with greater opportunity in
diversification into other areas of
mobile network support.
Keywords: 3G, 4G, Aircel, Asia, Bharti
Airtel, Bharti Infratel, BMI Research,
BSNL, Facebook, India, Infrastructure
Sharing, M&A, Market Overview, KPIs,
QoS, Regulation, Research, Tenancy
Ratios, Third Party Research, TRAI,
Videocon, Xiaomi

Read this article to learn:


< The impact of advanced networks on consolidation
< Forecasted subscriber growth in India until 2020
< Regulatory changes in spectrum and network sharing
< Potential challengers for rural coverage

248 | TowerXchange Issue 15 | www.towerxchange.com

Consolidation and advanced mobile networks


The pressing need for operators to establish scale
in order to rationalise investments into advanced
networks and services has spurred rampant
consolidation in the private telecoms sector. If
the motive of the M&A is to liberalise the target
companys spectrum holdings and integrate the
operators networks, then the number of mobile
sites in demand will diminish. However, as we
believe acquisition targets will be smaller players
with limited geographical footprint and financial
capability, the risk to tower companies will not
be too great. A few recent examples are Reliance
Communications forthcoming mergers with
SSTL and Aircel, and Bharti Airtels acquisition of
spectrum from broadband wireless access (BWA)
operator Augere Wireless.
Conversely, major long-term tenants will be rolling
out advanced mobile networks to capitalise on
rising smartphone affordability and demand
for broadband connectivity, which will improve
sharing revenues and tenancy ratios.
3G and 4G networks, a major source of growth
for the Indian towers sector, are being rolled out
aggressively as operators seek to recoup their
investments in spectrum. The speed of 3G/4G
rollouts is also driven by factors such as anticipated
demand, operators strategies, and heated
competition resulting from market consolidation.
According to the Department of Communications
(DoT), operators rolled out 14,751 3G sites in H215.
One such factor driving demand is Prime Minister
www.towerxchange.com | TowerXchange Issue 15 |

XX

BMI is bullish on growth in 3G/4G and the ICT


industry for several reasons. Firstly, India
outperforms the region in real GDP growth, which
our Country Risk team forecasts to reach 7.2% in
FY2016-2017 (year-ending March). In particular,
we are bullish on the countrys manufacturing and
services sectors, to which the aforementioned Make
in India initiative plays an integral role. India also
continues to implement Pro-business reforms, as
exemplified in the governments FY2016/17 union
budget for corporate tax rates for small enterprises
XX | TowerXchange Issue 15 | www.towerxchange.com

Mobile phone subscribers, 000

1,200,000

3G & 4G phone subscribers, 000

1,000,000
800,000
600,000
400,000
200,000

f
20
20

f
19
20

f
18
20

f
17
20

f
16
20

15
20

14
20

13
20

20

12

11

We forecast strong 3G/4G subscription growth of


85.6% in our current five-year forecast period, from
173.7mn at end-2015 to 322.3mn by end-2020. While
this growth rate factors in the positive effects of
operators subsidised data and smartphone bundles,
as well as the rising middle class, we highlight
that our end-2020 forecast figure represents a
population penetration of just 23.2%. Keeping
in mind that initial rollouts are focused on the
wealthier and more densely populated and urban
cities, this means there is still plenty of room for 2G
to 3G/4G subscriber migration to take place through
the medium-to-long-term, particularly from rural
regions.

f=BMI forecast. Source: BMI research, Operators, COAI, TRAI

1,400,000

20

Modis Make in India campaign, which will expect


to compress the average selling price (ASP) of
smartphones - the most popular device for internet
access. Market leader Bharti Airtel increased its
number of 3G sites by 85.3% in 2015, a growth rate
which we believe can be sustained at least into the
medium term and will be the key upside to towers
lease rates and tenancy ratios.

Regulatory developments: Spectrum, active


infrastructure and network sharing guidelines

Recently implemented active infrastructure and


spectrum sharing guidelines mean that entering
into such sharing agreements could eliminate the
need for operators to have their own transmission
equipment such as antennas and Node B in areas
where they are sharing spectrum, reducing the
number of operators demanding tower sites and
consequently, the potential sharing revenue tower
companies could gain.

Indias telecoms sector has witnessed a series of


regulatory reforms led by the Telecoms Regulatory
Authority of India (TRAI) and the DoT that, we
believe, could further accelerate the speed of 3G
and 4G network rollouts.

The DoT has also recently approved regulations


that will allow Mobile Virtual Network Operators
(MVNOs) to launch in the market. While we believe
current market conditions leave MVNOs little room
to make a substantial impact, there will be no lack

(with turnover less than INR50mn in FY2014/15)


and new manufacturing companies (incorporated
on or after March 1) to be lowered to 29.0% and
25.0%, respectively (from 30.0%), while start-ups
set up from April 2016 to March 2019 will enjoy tax
exemptions.

www.towerxchange.com | TowerXchange Issue 15 | 249

of interest from companies hoping to establish new


verticals by entering the mobile business.

Rising middle class to lift 3G/4G adoption

Small-scale mobile operators, being able to gain


from spectrum monetisation, will be able to
broaden their network sites in circles where they
hold spectrum. For example, Videocon, a minor
operator with just a 0.7% market share, recently
disclosed plans to purchase new 2,100MHz 3G
spectrum in Punjab with the INR44.28bn it received
from selling its 1,800MHz 4G spectrum to Airtel
earlier this month. Revenue-sharing agreements
with MVNOs and more efficient spectrum utilisation
will incentivise such operators to raise their site
counts to optimise network coverage.

3,000,000

Competition and opportunities in services


The governments instructions for operators to
address the prevailing call drop issue could improve
tenancy ratios and lease rates in new areas. Noida
250 | TowerXchange Issue 15 | www.towerxchange.com

2,500,000

2,000,000

1,500,000

1,000,000

500,000

Less than USD 1,000 (000)

USD 1,000-1,500 (000)

USD 5,000-10,000 (000)

USD 10,000-25,000 (000)

f
20
20

f
20

19

f
18
20

f
17
20

f
16
20

e
15
20

e
14
20

e
13
20

e
12
20

11

20

Xiaomi, for one, could be interested in this prospect


to boost its value proposition in India. Leveraging
its experience of operating as an MVNO in China,
the smartphone manufacturers recent US$25mn
investment in local online content publisher
Hungama Digital Media Entertainment suggests
that the company is hoping to pursue more than
a hardware strategy, adding to its footing in the
Indian market. By bundling telecom services
together with mobile devices and value-added
services, companies such as Xiaomi can provide
competitively-priced packages and build customer
loyalty.

India - household income (2014-2020)

e/f=BMI estimate/forecast. Source: National Statistics, World Bank, BMI Calculation

www.towerxchange.com | TowerXchange Issue 15 |

XX

Revenue growth prospects avail

Mobile towers play key role in


national broadband connectivity

Bharti Infratel - key operating metrics (Q312-Q415)

39,000

2.15

Indias broadband subscriber market (Q415)

0%

2.10

38,500

2.00

38,000

12%

1.95
1.90

37,500

1.85

37,000

1.80

36,500

1.75
1.70

36,000

1.65

41
5
Q

31
5

21
5

11
5

41
4

31
4

21
4

11
4

41
3

31
3

21
3
Q

11
3

41
2

31
2

35,500
Sharing revenue (per sharing operator per month) (INR) (LHS)
Tenancy ratio (RHS)
districts Mobile Tower Installation Policy-2013, for
example, previously banned telecoms towers from
being situated in residential areas, but was revised
following the DoTs guidelines. Private operators
were mandated by the DoT to install 29,000 new
mobile towers, while BSNL installed 4,500 and
MTNL installed 28 in Delhi. As investments into
advanced services continue to force towers that
are still held operator-captive to be released into
the market, we believe that directives to address
telecoms quality of service (QoS) issues will
XX | TowerXchange Issue 15 | www.towerxchange.com

Source: Bharti Infratel

88%
Fixed
Wireless
Fixed wireless

Source: TRAI

translate to a booming towers market.

technological trends.

A new minor risk to tower companies in India is


the rise of independent players, such as Facebook
through its Express Wi-Fi project, which are
building up their own custom networks and
infrastructure in the country. However, this is
limited to rural regions where lease rates and
tenancy ratios are generally lower, and will
not eliminate the need for traditional telecoms
towers which can be better adapted to evolving

We believe these changes in the telecoms sector


could impact the nature of towers companies as
well. While the changing regulatory landscape
could be interpreted as a boon for mobile operators,
but a bane for the tower industry, we highlight the
opportunity for tower companies to leverage heavy
mobile network traffic to diversify their businesses
in anticipation of growing demand for fibre
backhaul and small cell network solutions
www.towerxchange.com | TowerXchange Issue 15 | 251

Indus Towers on supply chain


management and operational excellence
Supply Chain VP Deepak Sharma shares some insights into how his company improved
business partner satisfaction and set new industry standards for efficiency

Deepak Sharma, Vice President Supply


Chain, Indus Towers

The worlds largest and most renowned joint-venture towerco,


Indus Towers has been hard at work efficiently providing passive
infrastructure on a non-discriminatory basis to Indian telecom
operators and wireless broadband service providers since its
founding in 2007. The company has consistently achieved high
rankings among other industry leaders in India for the efficiency
of its operations. We spoke with Deepak Sharma, VP Supply Chain
to learn some of the methodology driving these achievements.
With over 23 years of experience managing end to end supply
chain & logistics including sourcing and operations for companies
including GE, Schneider and Aditya Birla Group, Deepak now
handles services sourcing, business partner relationship
management, demand and supply planning, warehouse & logistics,
SCM process design and pan India SCM operations at Indus Towers.

Keywords: Asia, Asia Insights, Energy Efficiency, India, Indus Towers, KPIs, Opex Reduction, Spectrum,
Supply Chain Management, Towercos

Read this article to learn:


< The roadmap that Indus Towers developed for supply chain management
< The importance of working with clients and vendors as partners
< How Indus Towers achieved highest ever score of 4.33 out of 5 in Partners ( vendors )
Satisfaction survey
< How Indus Towers optimised the operation of its warehouses

252 | TowerXchange Issue 16 | www.towerxchange.com

TowerXchange: Since you joined Indus Towers


in 2012 the company has achieved some of the
highest standards for efficiency in the industry;
can you share some detail on how you achieved
this?
Deepak Sharma, Vice President Supply Chain,
Indus Towers: Shortly into my new role at Indus
Towers, management conveyed to me that I had to
take my team through a complete transformation
to keep pace with the breakneck speed with which
Indias telecom industry has been moving. Thanks
to the support and guidance of the Management
Committee of Indus Towers, we have carried out all
that we set out to do.
In early-2013, we embarked on a three-year
transformation journey with the team. We met at
an offsite location in Goa to chalk out the vision,
the mission, and the journey roadmap. The goal
was to achieve global-best KPI benchmarks, and to
meet all internal and external stakeholder needs
and expectations by providing effective, flexible,
proactive, cost-effective and extended supplychain and logistics models through technology,
innovations, value-added services and collaborative
efforts, all within a period of three years.
Team SCM coined the slogan One Team One
Dream for the first year, 2012-13, Go Beyond for
2014-15 and Go Global for 2015-16. A slogan is a
great communication and accountability tool which
reminds you of your target and the heights to be
achieved.

www.towerxchange.com | TowerXchange Issue 16 |

XX

As part of its roadmap, the SCM team designed a


programme that it termed as 5P People, Partner,
Process, Price, and Performance. The team decided
that thereafter, everyone would only use the term
Partner for all vendors and suppliers in all the
communications.
We strongly believe in People First and hence
we prioritised People over Performance, as great
performance can be achieved only when people
are happy. Satisfied people will be encouraged to
improve partner satisfaction and together they will
work to deliver customer satisfaction.
The team decided on the following as parameters
of success. For People: in two years the company
would work on the issues of the SCM departments
employee satisfaction survey (ESAT) results and
ensure that it is the highest in the telecom industry.
For Partner: the partner (vendor) satisfaction
results should be the highest in the telecom
industry. For Price: substantial capex savings,
implementation of innovative sourcing processes.
For Process the team would generate value through
Process Excellence and undertake an overall
warehousing and logistics transformation. And for
Performance, they would win global awards for the
company.
As part of Mission People, the team set for itself the
target of becoming the number one in the industry
by achieving the following bold targets of:
< Employee Satisfaction Survey (Achieving >4.5 out
of 5)
< Partner Satisfaction Survey (Achieving 100th
XX | TowerXchange Issue 16 | www.towerxchange.com

percentile in telecom)
< Improve the Functions KRA to L5 (Outstanding)
level, and
< Contribute to Customer Satisfaction Survey
(Achieving 100th percentile in telecom)

Another major objective of the programme was


to create a gender-balanced team. The ratio of
women in the SCM team was very low to begin
with, so concerted effort was made to hire more
women into the department.

To enhance peoples performance a 4D-virtuous


cycle was initiated with the following goals.
< Set a Direction
< Skill Development (including professional,
interpersonal and excellence training through
collaboration)
< Performance-based Delivery
< Distinguish

A Womens Forum was also formed for women


employees across the county where they could
connect over video conference and discuss the
challenges faced by them at work. The Circle SCM
Heads took the responsibility of addressing these
challenges. All such initiatives led to creating
a productive and happy workforce across the
ranks.

Direction: Together we crafted a Vision for


themselves as Excellence thru Collaboration. The
entire SCM Value stream was studied, and necessary
improvement projects were undertaken to set the
right direction of movement. The team also digitally
documented the complete work process, guidelines,
and job description; and urged everyone to study
and follow the steps as recorded in the document.

Delivery: We started conducting monthly and


quarterly reviews and started giving constructive
feedback. Team was tracked against clearly
defined parameters and KPIs.

Development: We facilitated many in-house and


external training programs along with the Process
Excellence team. Another initiative called Coffee
with Boss was launched which gave an opportunity
to all the managers to meet one-to-one with their
subordinates and discuss everything which the
subordinate wanted to share, whether personal or
professional. The aim was to meet each subordinate
every quarter and ensure that every single concern
raised by the subordinate was addressed within that
quarter.

Distinguish: Drawing from my past experience


where I had organised cultural shows to connect
the workforce, I along with my team initiated
a pan-India SCM Meet in April 2014, where
rewards and recognitions were introduced for all
subsequent years.
Now all the supply-chain team members get
together once in a year to celebrate their success.
They organise shows like stage plays, fashion
shows, and dance performances that bring out
the fun and creative side of all the team members.
For one particular mega event, the team invited
members of the top managementthey were
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Critical to quality

Structured
communication
on platform with
partners

Voice of business

Business issues

Critical business
requirements

Simplification /
standardisation of
processes

Circle to circle
variation

Process
standardisation across
circles

Improve partner
performance

Low performance on
Indus KPIs

Meet Indus KPI


requirements

Improve partners
agility

Critical partner
requirement

Partner issues

Voice of partner

Standard / formalised
review mechanism

Delays in issue
resolution

No structured
platform to discuss
issues

Clarity of business
requirements &
update contact

No structured
mechanism

No future visibility /
contract review

On-time payment

Higher TAT and


payment delays

Payment irregularies

Critical for
processes

Design and
implement contract
governamce

Higher TAT for change Quick in adapting the


implementation
change

amazed to see all the companys employees


participating with much aplomb in all such funfilled and creative events such as fashion shows and
stage plays. The spirit of the team was infectious.
The idea behind such initiatives is that when people
are happy, they will focus on their jobs and will
keep the partners and customers happy. We saw a
complete turnaround in their approach to customer
254 | TowerXchange Issue 16 | www.towerxchange.com

service and they took care that there were no


integrity issues.
With all these initiatives as part of Mission
People, the team has been able to achieve an SCM
Employees E SAT Survey Score of 4.54 which is the
highest ever in the history of the organisation for
SCM.

TowerXchange: You emphasise the importance


of working with vendors as partners; can you
explain some of the benefits of this approach?
Deepak Sharma, Vice President Supply Chain, Indus
Towers: A healthy partnership is key to the success
of not just a project, but of the entire business. The
partner relationship needs to go beyond being just
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XX

Ye
ar
ly
Mo
nth
ly

Qu
ar
ter
ly

Bia
nn
ua
l

Apex
level
contract
governance

CEO CSCMO &


Corporate SCM
Head

Corperate contract
governance

Circle contract
governance

Department Head,
Fucntional Vertical
Heads
Circle CEO, Circle
Function and SCM
Head, Buyer + user
group

Basic - performance &


administration (KPI review)

transactional to become a long-term relationship.


The partner relationship also has to include making
their resources available to you to expedite a critical
path project effort or to help test out a strategic
concept.
Becoming a trusted partner means that one of
the best calls of the week from an organisation is
unexpected and begins with the words, Do you
have a minute? Id like to bounce something off you
and get your reaction. Its when an organisation
invites the partner to the office or dinner and wants
XX | TowerXchange Issue 16 | www.towerxchange.com

User group

< Top level relationship governance


< New business initiatives
< Process governance
< Senior relationship governance
< Setting strategic direction,
buinsess objectives, timeframes
< Innovation
< Partner liaison, problem resolution,
continuity
< Partner development - improving
performance and capability
< Negotiation of changes, new terms,
new services
< Risk assesment & managment
< Performance reviews (service
delivery, SLA, KPI, people
< Feedback and communication
< Capturing change and reqmt
< Contact administration
< Payments, incentives/penalties

these key parameters were evaluated, we found the


scenario to be gloomy and unexciting. Not living upto the customers expectations lead to low customer
satisfaction.
To overcome the challenges, brainstorming sessions
and gap analysis were conducted in a CFT (including
Partners). Here we kept the Low Customer
Satisfaction (C-SAT) score against the Partner
Satisfaction (P-SAT) Survey Report. We realised that
for the last 3 years the P-SAT score had been almost
stagnant.
Further study of the voice of the partner
highlighted following set of concerns: there was no
platform for dispute resolution, KPI sign offs were
delayed, payments were late, POs were delayed, and
issue resolution was slow.
The voice of the partner was studied and compared
with the voice of the business which clearly
identified the missing communication between the
partners and Indus.

to get their reaction to a new growth strategy.


At Indus Towers our major work is outsourced and
dealing with over one hundred major infrastructure
equipment partners and more than five hundred
and fifty managed services partners. Our KPIs are
delivered through all of these critical partners.
Our customers evaluate our services on the
following key parameters: the quality of
implementation (FTR, first time right), the build time
of sites, and the network uptime. In 2012 13 when

As the outcome it was decided to devise an


Effective Contract Management Programme to
ensure effective contract delivery and to monitor
its effectiveness through a scorecard to increase
partner satisfaction and improve our KPIs.
An elaborate platform was formulated and
implemented a Four Tier Contract Governance
across India.
Contract Governance was rolled out to the majority
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of the partner categories, and for each category of


partner detailed key focus areas were identified.
Partner issues were clearly identified and
prioritised based on the risk exposure. Necessary
course corrections and procedural changes were
implemented to sustain the benefits of the actions
taken and avoid repetition.
Over three years a total of 4,000 meetings were
conducted with over 10,000 concerns raised and
resolved; partners were happy as their concerns
were being noted and monitored for resolution.
These meetings have helped to identify major and
long pending areas of improvement which were
directly linked to organisation performance. Some of
the concerns having a major impact include:
On-time payment to partner
< Concern: Delayed payment to a partner was
leading to dissatisfaction in that partner due to
difficulties in the management of working capital
and constraints on business expansion.
< Our action: A focus group was formed to
achieve on-time payment. Todays we are paying
our partners on-time on ~95% of occasions, a
considerable improvement over 53% in 2012. To
ensure its sustainability we pay interest on delayed
payments.
PO delays
< Concern: Delay in providing the PO to partners
even after work completion which clearly impacts
their payments and work reconciliation.
256 | TowerXchange Issue 16 | www.towerxchange.com

Historial
jump
3.99

Best in Telecom
industry

Best in B2B
industry
4.33

4.1

3.36
2009-10

2013-14

< Our action: Clear guidelines to partner and team


were circulated not to work without a PO. Complete
value stream analysis of the P2P (Procure to Pay)
cycle was put in place, formulated to ensure the
availability of the PO on time.
Delayed KPI sign off
< Concern: Huge gap and delay in KPI sign off
leading to partner payment deduction and delay
in the payment. The major reason identified for
the delay was lack of clarity on the field and asset
tracking.

2014-15

2015-6

2015-6

Significant improvement in Indus Towers KPIs


helped us to achieve a historic Customer Satisfaction
score of 91%
For P-SAT Indus Towers is at the 100th percentile in
the Indian telecom industry ( IMRB Surveyed ) and
the 100th percentile in the B2B Segment in India
(IMRB Surveyed).
Our transformed partners have not only made us
best in the telecom industry but among the best
companies in B2B industry; I appreciate them and
thank them on behalf of Team SCM!

< Our action: System automation implemented


through i-Map and WMS and improved TOC which
clearly provided the field data leading to a reduction
of KPI sign off pendency.

TowerXchange: You encourage high levels of


teamwork in your company; what are some of the
ways you support this?

Through the Contract Governance Platform we


eliminated transformed vendors into partners. This
not only lead to a turnaround in partner satisfaction
but also defined deliverables to map performance.

Deepak Sharma, Vice President Supply Chain, Indus


Towers: I am deeply connected to Indus values and
believe that these values have helped us realise all
the goals that we had set for ourselves. We have a
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XX

catchy acronym, EXCITE, for the companys value


system. These values are:
Excellence - Ensure best-in-class processes and
a continuous improvement culture that provide
scalability and the highest quality at an optimum
cost.

FY 15-16

Customer - Be the preferred partner to our


customers with the highest levels of responsiveness
and agreed services, consistently.

Go global

Integrity - Maintain and promote the highest


standards of professional conduct by being fair,
honest and transparent in all actions and decisions.
Teamwork - Think and work together beyond self,
functional boundaries, hierarchies, businesses and
geographies. Actively encourage mutual respect,
sharing and collaboration.
Environment - Be responsible and sensitive toward
the environmentand the communitieswhere we
work. Uphold the highest standards of health and
safety at all times.
I strongly believe in teamwork, and the
achievements of Team SCM would not have been
possible without it.
We are spread across fifteen circles covering fifteen
states of India which brings huge diversification
from state to state and culture to culture. Other
than the corporate office which consists of around
27 team members, every circle team consists of six
XX | TowerXchange Issue 16 | www.towerxchange.com

Be a global face. Win global


recognitions and become a
benchmark for the rest of the
world.

FY 14-15
Go beyond

Dream big, set big targets beyond the industry and prove that
even sky is not the limit for One team.

FY 13-14
One team, one dream
Formation of team rather than working as individuals. Dream as one team,
understand pain areas of internal and external customers and set relative
targets and roadmap with Milestones. Work together and achieve the same.
Create credibility and respect.
team members. This team is headed by CSCMO of
Indus Towers.

recognition, and a lack of consideration for team


SCMs constraints within the organisation.

In year 2012-13, there was a lack of interconnectivity


between the team members, leading to work
being done in the isolation. Other demotivating
factors included low performance, no rewards or

These were indications of a lack of teamwork; we


also realised that while all other functions used to
meet to communicate with their team members and
set the work in the right direction, it was unheard
www.towerxchange.com | TowerXchange Issue 16 | 257

of in Team SCM. There was a clear need to set the


right direction for the team and communicate the
expectations clearly with them.

implemented for people development and team


building in which I was directly involved to ensure
the team was connected together:

It was in the year 2012 that the SCM heads of all


the circles met together for the first time. All of us
decided to set directions for the team and plan the
strategy to work together. The India SCM Head meet
was planned where inputs were given by all the
team to formulate the strategy by setting the vision
for Team SCM

Forum For Female (F3)


< Induct Female team members to have gender
balance
< Providing an open, safe, healthy and growthdriven atmosphere
< Launched Forum For Female where people can
listen every Quarter

Considering the four major stakeholders of SCM


function (employees, internal customers, external
suppliers and internal suppliers), the team came up
with Excellence through Collaboration as the teams
vision. In addition, we set three annual slogans to
communicate to the teams.
We completed the value stream mapping of
our function and identified several areas of
improvement. Multiple initiatives and projects were
rolled out to improve the efficiency of the teams
working on:
< Relevant and innovative product development
< New material requirement forecast process
rollout
< Purchase requisition automation
< Material requirement planning process roll out
< Warehousing process manual
< Site return process locking in the ERP
< Scrap disposal process
Furthermore, other programmes were initiated and
258 | TowerXchange Issue 16 | www.towerxchange.com

Coffee with Boss


< One to one structured but informal discussion
with reporting heads
< Resolution of professional hurdles at the office
and if possible personal
< Giving and getting constructive feedback on a
quarterly basis
< Indicating training requirements
Individual and Team Development
< Quarterly individual performance / KRA review
< Monthly Circle SCM Heads review
< Weekly team reviews and knowledge sharing
sessions
Support and Training
< Identification of individual training needs and
arranging with the help of HR. Job skill and soft skill
related training programmes
< Development of refresher and handy training
modules
Collaborate and Celebrate Success as One Team

< Team and family get-togethers. Team building


exercises
< Bouquet and chocolates to each employee spouse
on individual and team success. Birthday and
wedding anniversary wishes to family members
We started organising the pan-India SCM Meet
which was never conducted in the organisation
where we focus on team building and the review of
our initiatives and our mission.
Today we proudly say that we are part of Team
SCM and happy to work together, win together and
celebrate together.
TowerXchang