Sam Darwish explains IHS Towers strategic vision

Transcription

1 Tower Xchange Journal of record for the international tower industry Issue 21 November TowerXchange Asia: < Updated who s who in Asian towers < The implications of MNO consolidation for Indian towercos < Indonesian towercos offer city poles, fibre and more TowerXchange Europe: < Broadcast assets for sale in Europe < Top European towercos five and ten year visions < European tower power report TowerXchange CALA: < Tower One: a new listed towerco for the Americas < Wholesale LTE network drives co-lo growth in Mexico < The latest opportunities emerging for towercos in Argentina TowerXchange MEA: < TowerXchange Africa & Middle East < IPOs on the horizon for Africa s towercos < The Middle East s first tower deal < TowerXchange Meetup MEA 2017 reports Sam Darwish explains IHS Towers strategic vision Don t miss Meetup Asia, December 12-13, Marina Bay Sands, Singapore 1 TowerXchange Issue 20 Tower Xchange

2 Contents Regular and special features Asia: India, Indonesia and exclusive CFO access 152 Who s who and Asia Procurement Matrix 175 Indonesia market update 180 CFOs: the anchor to vision 184 Impact of Indian consolidation Europe: long term forecasts, broadcast towers, power report 189 Procurement matrix and tower power report 205 Market studies: Turkey and Russia 213 Ten year plans: towerco interviews 213 Broadcast editorial and interviews 5 Asia tower count, analysis and news 35 China tower market FAQ 52 TowerXchange Meetup Asia agenda 58 Europe tower count, analysis and news 73 TowerXchange Meetup Europe agenda 83 CALA tower count, analysis and news 100 MEA tower count, analysis and news 123 Introduction to the tower industry 124 Ranking the top 275 towercos worldwide 131 Women in Towers: European edition 140 Communications Infrastructure Regulatory Working Group TowerXchange s who s who 311 Directory of over 200 vendor profiles. New: ABLOY, Aerial Application, Ascot Industrial, Ausonia, Bhaskar Solar, EGE Battery, Flexenclosure, Microtex, Reddot, TowerShield and Shangdong Zhaowei Steel Tower Company CALA: Mexico, Argentina and a new towerco Meetup Americas panel summaries 245 New telecom law in Argentina 246 TowerOne: a new towerco 250 Mexican towers market study MEA: First Middle East deal, IHS interview 253 IHS interview and Kuwait deal analysis 265 Towerco IPO editorial 286 Meetup MEA panel summaries 307 Safaricom interview TowerXchange Meetup calendar < TowerXchange Meetup Asia, December 12-13, 2017 < TowerXchange Meetup Europe, April 17-18, 2018 < TowerXchange Meetup Americas, June 20-21, 2018 < TowerXchange Meetup MEA, October 9-10, TowerXchange Issue 21

3 With special thanks to the TowerXchange Inner Circle Our informal network of advisers: About TowerXchange (Chairman) Daniel Lee Managing Director Intrepid Advisory Partners Zhiyong Zhang Chairman & President Miteno Akhil Gupta Chairman Bharti Infratel Nat-sy Missamou Sharing New Business Program Director, Orange Nina Triantis Managing Director, Global, Head of Telecoms & Media Standard Bank Terry Rhodes CEO Eaton Towers Marc Ganzi President, Digital Bridge & Mexico Tower Partners Arun Kapur Co-Founder Irrawaddy Green Towers James Maclaurin formerly CEO edotco David Murphy Director - TMT, EMEA Standard Chartered Bank Dagan Kasavana CEO Phoenix Tower International Chuck Green Director edotco Group Suresh Sidhu CEO edotco Malcolm Collins Chief Executive CTIL Ted Zhong Founder & CEO, Astro Tower Hal Hess EVP, International Operations and President, EMEA and Latin America American Tower Nobel Tanihaha President Director PT SOLUSI TUNAS PRATAMA (STP) Umang Das Chief Mentor American Tower Gilles Kuntz CEO TowerCo of Madagascar Maria Scotti CEO Torrecom David Meganck Founder and COO Acsys Tilak Raj Dua Director General TAIPA Dimitris Lioulias GM of Strategy Saudi Telecom Company Kurt Bagwell President International SBA Communications Jim Eisenstein Chairman & CEO Grupo TorreSur Bimal Dayal CEO Indus Towers Inder Bajaj Advisor, Helios Investment Partners & former CEO HTN Towers Tunde Titilayo Vice Chairman SWAP International Peter Bendall Senior Vice President Macquarie Infrastructure and Real Assets Jeffrey Eldredge Partner Vinson & Elkins Enda Hardiman Managing Partner Hardiman Telecommunications Ltd. Adeel Bajwa CEO Dhabi Group Scott Coates CEO Wireless Infrastructure Group Carlo Ramella COO, EI Towers and Chairman, Towertel Alexander Chub President Russian Towers Founded in 2012, TowerXchange is your independent community for operators, towercos, investors and suppliers interested in EMEA, CALA and Asian towers. We re a community of practitioners formed to promote and accelerate infrastructure sharing. TowerXchange don t build, operate or invest in towers; we re a neutral community host and commentator on telecoms infrastructure. TowerXchange produces a bi-weeky newsletter and quarterly journal, both available to subscribers, which cover industry news and provide deep insights into telecoms infrastructure worldwide. We also host annual Meetups on each of four continents to bring together the leading tower industry stakeholders. TowerXchange was founded by Kieron Osmotherly, a TMT community host and events organiser with 21 years experience, and is governed with the support and advice of the TowerXchange Inner Circle an informal network of advisors 2017 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 TowerXchange Issue 21

4 Empowering tomorrow s connected world effectively cost-efficient energizing communities empowering communication Connectivity is at the core of everything we do. Providing first-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 4 TowerXchange Issue 21

5 TowerXchange s analysis of the independent tower market in Asia Selected Asian tower market size comparisons, Q Laos 7,374 Nepal 6,000 Afghanistan 7,000 Sri Lanka Myanmar 7,500 13,620 Cambodia 9,310 Australia 15,100 Philippines 16,300 Malaysia 22,682 Bangladesh 30,000 Asian tower markets with <5,000 assets South Korea 30,000 Pakistan 34,305 Thailand 52,483 Vietnam 70,000 Indonesia 93,549 Japan 220,000 India 461,550 China 1,945,384 also manages an additional 8,700 towers. Over in China, the world s largest towerco China Tower Corporation (CTC) celebrated its third anniversary in July and continues to drive towards a public listing in Hong Kong. It was reported by Reuters that CTC had picked China International Capital Corp Ltd (CICC) and Goldman Sachs to lead its IPO, pending final board approval; more banks could also be added to the final sponsor team. And while CTC is keen to list by the end of the year, it will likely take place in Q This summer also saw the formation of the China Independent Tower Alliance, currently with 60+ member organisations. China s 200+ independent towercos have been lifted by a government document recognising and legitimising their role in the country s co-build, co-share system. New Zealand 4,000 PNG 1,500 Singapore 1,000 Mongolia 1,000 1,992,467 of Asia s 3,047,847 towers are owned or operated by towercos representing 65% of the total inventory of assets. Exciting news and developments continue to emerge from the region, with the highlight being edotco s two announced acquisitions in Pakistan months apart from each other, first in June then late August. The Tower Share (Tanzanite Brunei 500 Rest of Oceania 400 Bhutan 100 Source: TowerXchange Tower) portfolio includes ~700 towers at the price of US$90mn, while the Pakistan Mobile Communications Ltd (Jazz) sale and leaseback deal include ~13,000 towers at US$940mn. edotco is quickly jumping the global ranks to become not just one of the best, but one of the world s biggest towercos. Including the acquisitions, edotco would own ~31,600 towers, putting it in eighth spot out of the 272 towercos TowerXchange currently track. It The Indonesian tower market remains strong, with new builds and co-locations being added. There s a lot of business as usual in this mature market, however, also a bit of buzz with the refinancing of KIN and STP. The major players have typically complemented their organic growth with acquisitions and with a good number of smaller towercos in the ecosystem, consolidation will continue to be expected. Myanmar on the other hand is seeing a surge of new entrants rolling out BTS for fourth operator Mytel, while the existing towercos are enjoying a boost in tenancy ratios also through Mytel and increasingly MPT. However, current political turbulence is making it more difficult to attract international investment. 5 TowerXchange Issue 21

6 YOUR SIGNAL STARTS HERE. FLORIDA HEADQUARTERED. INTERNATIONALLY CONNECTED. TOWER OWNERSHIP LEASING SITE MANAGEMENT SITE DEVELOPMENT CONSTRUCTION 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 SITE sbasite.com 2017 SBA Communications Corporation. All Rights Reserved. 6 TowerXchange Issue 21

7 The regulatory environment for towercos and infrastructure sharing varies from mature tower markets such as India and Indonesia, where the regulatory regime is well established, to regulatory environments still drafting policy such as Bangladesh and Nepal, where independent towercos are a relatively new business model. Afghanistan: An average of 500 towers are added to the Afghan tower network every year, which totalled 5,897 towers in mid-2015; TowerXchange would estimate the total count is now around 7,000. While Roshan, Etisalat and MTN all retain their towers, all have been linked with prospective tower divestitures / outsourcing in recent years, with AWCC going so far as to carve out ~1,500 towers into their subsidiary towerco, Frontier Tower Solutions. Afghanistan tower counts, Afghan calendar year Western calendar year Tower count Source: MCIT, Afghanistan As of the end of September 2016, there are over 27mn GSM subscribers, with 21mn of them being active. Mobile telephone base stations total 6,861 providing approximately 89% population coverage. Services in rural areas and villages are being rolled out under the Telecommunication Development Fund (TDF), which has grown to US$74mn, with more than 55 sites to be built through the TDF subsidy in the next two years and an additional 100 sites planned for the future. To date, most rural sites are off grid, and even many urban and suburban. Australia: Axicom (formerly Crown Castle), Broadcast Australia and a handful of smaller independent towercos own around 2,600 towers of Estimated site count for Australia ~400 ~300 20,000 rooftops ~2,000 ~8, ~1,800 Ground based towers Axicom Broadcast Australia Other independent developers nbn Telstra Vodafone Optus Others: government agencies, local wireless operators and ISPs Source: TowerXchange 7 TowerXchange Issue 21

8 One of Africa s 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 8 TowerXchange Issue 21

9 Tower deals in Asia (excluding carve-outs) Source: TowerXchange Year Country Seller Buyer Tower count Deal value US$ Cost per tower US$ Deal structure * India Pakistan India Pakistan India India India Australia Malaysia Malaysia Malaysia India Vietnam Indonesia India Myanmar Australia India Malaysia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia India Indonesia India India India India Indonesia Indonesia Vodafone-Idea Cellular Pakistan Mobile Communications Ltd (Jazz) Nettle Infrastructure (Bharti Infratel) Tower Share (Tanzanite Tower) Ascend Telecom Infrastructure Bharti Airtel (Infratel) Bharti Airtel (Infratel) Southern Cross Austereo edotco Group edotco Group edotco Group Reliance VNI (SEATH) XL Axiata Viom Networks Digicel MTC Crown Castle KEC International KJS XL Axiata Hutchison Hutchison PT Central Investindo Indosat Infratel Essar Telecom Infrastructure Hutchison Aircel Viom Networks Transcend Infrastructure XCEL Telecom Bakrie Hutchison American Tower edotco & Dawood Hercules Corporation Ltd. Secondary share sale on BSE and NSE edotco IDFC Alternatives Nettle Infrastructure Investments (Bharti) KKR/CPPIB consortium Axicom Kumpulan Wang Persaraan Innovation Network Corporation of Japan Khazanah Nasional Berhad Brookfield OCK Group Protelindo American Tower edotco MIRA-led consortium American Tower YTL Power Int l STP STP Protelindo Protelindo Tower Bersama Tower Bersama American Tower Protelindo GTL Infrastructure QTIL American Tower American Tower STP Protelindo 19,812 13,000 39, ,222 90,255 90, ,379 1,972 2,500 42,200 1,250 1, $1,200,000,000 $940,000,000 $402,000,000 $88,900,000 $91,200,000 $1,061,500,000 $951,600,000 $9,500,000 $100,000,000 $400,000,000 $200,000,000 $1,700,000,000 $50,000,000 $250,000,000 $1,180,000,000 $221,000,000 $1,600,000,000 $13,000,000 $15,000,000 $460,000,000 $68,000,000 $519,000,000 $432,000,000 $165,900,000 $1,800,000,000 $2,407,000,000 $23,000,000 $170,000,000 $34,000,000 $500,000,000 $60,542 $72, $127,000 $169,643 $25,355 $100,000 $902,934 $34,121 $48,544 $131,429 $226,667 $207,600 $97,079 $111,943 $102,857 $133,722 $70,336 $98,266 $62,615 $135,428 SLB SLB Sold 3.65% (6.75 crore shares) Company acquisition Acquiring 33% stake Acquiring 11.32% stake Acquiring 10.3% stake SLB Acquiring 5.4% stake Acquiring 21.5% stake Acquiring 10.7% stake Acquiring 51% controlling stake Company acquisition SLB Acquiring 51% controlling stake Acquiring 75% controlling stake Company acquisition Company acquisition Company acquisition SLB SLB SLB Company acquisition SLB Company acquisition SLB SLB SLB Company acquisition Company acquisition Company acquisition SLB SLB Totals / average 407,548 17,052,600,000 $113, *Crown Castle Australia (now Axicom) transaction excluded from totals and averages as it not a natural comp for the other S and SE Asian transactions **Bharti Airtel (Infratel) tower count inclusive of its shares in Indus Towers ***Average 9 TowerXchange cost per Issue tower 21 is calculated only on deals involving 100% acquistions/slb

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11 the total pool of 15,100 towers in the Australian market. The majority of towers are owned by Telstra, with Optus and Vodafone playing catchup, particularly in rural areas. In urban areas Vodafone and Optus share RAN. A further 1,800 towers have been recently erected by nbn, the Government-owned new broadband network, while a handful of government agencies and small local wireless operators and ISPs represent a further 2,000 between them. Ground based towers, primarily used for rural coverage, are supplemented by around 20,000 rooftop sites, although not all of these are occupied. In late February 2017, Axicom purchased 56 towers (45 transmission sites) from Southern Cross Austereo for A$12.6mn (US$9.25mn) in a sale and leaseback deal. This is the first deal involving a tower portfolio between a broadcaster and an independent towerco. The portfolio will help Axicom, which now owns over 1,900 sites in the country, expand its footprint into five regional markets in NSW, Queensland, Victoria, South Australia, and Tasmania. Competition is also heating up as the fourth operator TPG Telecom enters the market. TPG spent A$1.26bn for two blocks of 700MHz spectrum and will spend A$600mn to build out its network, with an initial 2,400 sites to start. There will likely be some co-location opportunities for independent towercos. For now the regulator ACCC has decided against mandatory infrastructure sharing in rural areas, which would ve allowed TPG to access Telstra or Optus networks. Bangladesh: Estimates vary between there being just under 30,000 and 35,000 towers in Bangladesh, of which 6,500+ have been shared amongst the operators to date. TowerXchange believes the actual total to be around 29,900. As of June 30, 2016, there were 69,009 base transceiver stations across the country according to the government. There are currently four operators in the country with Telenor s Grameenphone (GP) as market leader with 55mn+ subscribers. GP s network covers 99%+ of the population, with 12,000+ 2G sites and 10,000+ 3G sites; the split for greenfield sites versus rooftop is 55% to 45%. Meanwhile, VEON (formerly VimpelCom) is preparing Banglalink s towers for sale, with the portfolio set to be optimised through ongoing consolidation of sites duplicated by the edotco portfolio. There are 5,890 assets, excluding inbuilding solutions (IBS), which Banglalink may add to the process, bringing it up to about 6,000 total. Out of that, about 50% are green field sites which predominantly service suburban and rural areas, with the other 50% being urban rooftops. In light of the particular climate of Bangladesh, especially during monsoon season, the autonomy of cells sites is of particular concern in the country. edotco operates a network of 8,300 towers, the majority of which were transferred from Axiata s Bangladeshi opco Robi. As a result of the Robi and Airtel merger, edotco is currently assessing which sites of the 3,000+ in Airtel s portfolio it will absorb into its portfolio. One of the most anticipated developments in the country is the towerco licensing regime. A final draft of the guideline was submitted by the Bangladesh Telecommunication Regulatory Commission (BTRC) to the government for approval in July Industry consultation on the framework began in 2016 and after a few revisions now propose the issuance of three licenses for telecom infrastructure management, 60% foreign direct investment and exclusion of MNOs from being eligible for application. edotco Bangladesh currently operates under a statement of nonobjection. Assuming edotco applies and receives one of the licenses, this opens the door for either a new local towerco to enter the market and/or acquisitions by towercos seeking expansion and growth beyond their home markets. Infrastructure sharing in Bangladesh started back in the early 2000s, when the first barter arrangements took place between two MNOs CityCell and Aktel (now Robi). Commercial tower sharing then kicked in following the introduction of tower sharing guidelines by the BTRC Grameenphone was the pioneer, establishing its wholesale business division back in 2010, followed by others in 2013 and TowerXchange Issue 21

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13 Estimated tower count for Bangladesh 4,100 7,800 Grameenphone 3,800 Banglalink edotco Airtel Teletalk, CityCell and non-traditional MNOs 6,000 8,300 Sources: TowerXchange research, edotco, Hardiman Telecommunications Revenue market share of MNO in infra-sharing in Bangladesh 7% 12% Cambodia: With a crowded mobile market consisting of six operators serving a population of 15.5mn, and a regulator that supports infrastructure sharing, there is continued potential for the 9,250+ site tower market in Cambodia to grow. There has been an influx of Chinese operators and vendors prepared to invest heavily in this market. While on the operational front, challenges still remain including 20% of sites being off-grid and the risk of landmines in the more remote areas. edotco operates a portfolio of 2,000 towers in Cambodia, and manages a further 1,000. As of January 2017 local tower builder Camtowerlink Communications has built six towers around the Angkor Wat temple UNESCO World Heritage complex, with an agreement with the Aspara Authority to build an additional 18 camouflaged towers in the park. Some operators in this market, such as Mfone, have fallen victim to the intense competition and price wars leaving some infrastructure assets abandoned. 36% 45% Grameenphone edotco Banglalink Airtel-Robi China: Now covered in China FAQs India: For an updated analysis of the Indian tower market and what could change in the imminent future, please read TowerXchange s editorial later in this journal. Source: Market Intelligence Indonesia: Indonesia remains one of the most mature tower markets in the world, with solid tenancy ratios, excellent organic growth, and 13 TowerXchange Issue 21

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15 strong market caps boasted by three major towercos; Protelindo (14,614 towers), Tower Bersama (13,375) and STP (7,000). IBS Tower, KIN, Centratama (formerly known as Retower), Persada Sokka Tama and Balitower also have some scale in Indonesia. Indonesia s towercos build 3,000-5,000 towers, rooftops and infill sites per year, tenancy ratio growth compares favourably to many other global tower markets, with around 0.13 tenants added per tower per year. Tower ownership in India today 10, ,000 15,000 10,926 14,421 25,000 65, ,730 57,963 Indus Towers American Tower Reliance Infratel Bharti Infratel GTL Infrastructure IDEA Cellular Infrastructure Ascend Saurava Towers BSNL Reliance Jio Reliance Vodafone India Bharti Airtel MTNL XL Axiata has completed the sale of 2,500 telecommunication towers to Protelindo for Rp3.56 trillion (US$250mn) in cash. XL signed a deal to leaseback most of the towers for ten years. 55 5,222 28,000 8,400 8,886 39,099 45,000 Services Tower Vision MTS Others The future of Telkom-owned Mitratel and their 13,113 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, although it remains unclear whether some of these towers are being marketed by Mitratel. One of the big news over the summer was the refinancing of STP and KIN, who reportedly retained Morgan Stanley and HSBC respectively for the process. Providence Equity who is believed to hold 40% stakes in KIN is apparently exiting the Asia market, following its moves in scaling back on India also. Protelindo and Tower Bersama are holding firm against downward pressure on lease rates, which are believed to average around US$1,200 in Indonesia. Meanwhile, the new battleground for competition between Indonesia s towercos seems to be microcells and fibre, as illustrated by Protelindo s acquisition of iforte. STP also has substantial fibre and microcell portfolios after its acquisition of fibre company Bit, while Balitower have also added Sources: TowerXchange Research, TAIPA, PwC substantial stock of smaller sites to their portfolio. TowerXchange has also identified a company by the name of PEKAPE who has a partnership with Alfamart and offers a mix of assets including microcell poles, self-supporting towers and nanosites. A spectrum auction for the 2.1GHz and a 2.3GHz bands was planned for the first half of 2017 but the project has been delayed as announced back in May by Indonesia s Ministry of Communications and Information Technology (MCIT). Japan: Japan is one of the most sophisticated 15 TowerXchange Issue 21

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17 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 378,000sq km. LTE was launched as early as 2011 by former Stateowned monopoly NTT DOCOMO and in 2012 by the other MNOs, SoftBank and KDDI (au). DOCOMO has already started rolling out LTE-A. Japan s 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 to date their penetration remains negligible. Laos: The 7,473 towers in Laos all remain operatorcaptive, but there are possible opportunities to acquire towers from all but the market leading MNO Unitel, which owns 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 Veon has long sought to exit Beeline Laos, whose towers could potentially be monetised by an acquirer. Estimated tower count for Indonesia 13,375 13,113 14,614 8,600 7,000 4,000 3,677 1,300 1, ,510 18,000 3,250 *12,539 are tower sites, while 71 are DAS networks Towerco-owned Mitratel Tower Bersama Protelindo STP IBS Tower KIN Persadasokka Tama Centratama Menara Balitower Gihon PEKAPE Others Operator-captive Telkom + Telkomsel XL Indosat Source: TowerXchange Indonesia s four publicly listed towercos key stats for 2016 year-end Towers/sites Sites leased/tenants Tenancy ratio Protelindo 14,562 24, Tower Bersama 12,610* 20, STP 6,898 11, IBS Tower 3,677 4, Source: Company reports 17 TowerXchange Issue 21

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19 Malaysia: Towercos own roughly 63.8% of Malaysia s towers, led by edotco s 3,800 towers Estimated tower count for Laos carved out of Celcom/Axiata. A further 3,200 towers are owned by 14 different State-backed and other 423 independent towercos, while turnkey infrastructure provider OCK Group owns ~200 sites in this market with plans to build an estimated 70 to 100 more sites 1,100 1,950 LTC in the country. Naza Communications and Omnix Malaysia are also active. Unitel ETL There are an estimated 22,682 towers now in Malaysia, representing almost 2,000 mobile Beeline (VimpelCom) subscribers per tower. A new ground based tower in Malaysia costs around RM300,000 (US$69,000). Around 1,000 new towers went up in 2015, with 4,000 Source: TowerXchange Celcom building through edotco and Maxis and DiGi building their own although DiGi has since signed a collaboration agreement with edotco Estimated tower count for Malaysia Source: TowerXchange which includes co-location and new BTS sites. The State-backed towercos also continued to expand, including through over 2,000 rural sites supported edotco State-backed towercos 3,900 3,200 by Malaysia s Universal Service Provision Fund. YTL 5,000 It has been estimated that an additional 8,000 structures may be needed in Malaysia for 4G, Naza Communications OCK although much of that demand will be met by microcells, lamp-poles, DAS and IBS. Omnix Unaccounted for 148 1,732 Mongolia: In 2013 the government separated telecom service providers from infrastructure providers in the challenging 3mn population, 1.5mn sq km Mongolian market. The infrastructure Operators DiGi Maxis Telekom Malaysia 1,000 3,400 3,800 providers, including State -owned ICNC, Mobi Network and Sky Network, run towers, active 1,000 2,000 3,000 4,000 5, TowerXchange Issue 21

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21 equipment, fibre and microwave backhaul. More than half Mongolia s ~1,000 towers are shared. Myanmar: Currently 60% of the cell sites in the country are owned by towercos. The 13,620 sites in Myanmar are unequally spread across seven towercos and three MNOs. State-owned MPT owns 3,500 sites, while Telenor and Ooredoo have about 1,500 between them, though mostly rooftops. The fourth operator consortium, led by Viettel may utilise consortium partner Star Holdings Corporation s ~400 captive towers (up to 1,000 including co-location with MPT), which were previously utilised by MECtel. The new MNO will operate under the Mytel brand with formal launch in 2018, and it will use a combination of co-location with towercos and MNOs, as well as BTS and own build in order to rollout its network. The split between co-locations and new builds will be around 50/50. Estimated total number of sites in each Myanmar MNOs network (inclusive of co-locations) 1,000 4,500 5,300 7,200 MPT Telenor Ooredoo Mytel Source: TowerXchange Breakdown of ownership of the 13,620 towers TowerXchange estimates have been built to date in Myanmar Independent towerco towers MNO captive towers TowerXchange has learned of several new towercos 2500 now active in the market place including New Tower Development (NTD), Myanmar Technology Gateway (MTG), MNTH, DLRE, CommBiz, ITMB, MAPCO, along with potentially a handful more others. Out of the list, MTG was also a previous subcontractor for Ooredoo and Telenor, building about 200 towers. We are in the process of crystallising all the new entrants; as expected, there are several connections to the consortium of minority stakeholders in Mytel. The word on the street is most have been awarded IGT Apollo edotco PAMEL OCK *Telenor and Ooredoo portfolios are primarily rooftops EFT MIG *Telenor *Ooredoo Mytel MPT Source: TowerXchange 21 TowerXchange Issue 21

22 Network Overview Site Status List Home Map Alarm List Online Site Status Total number of sites: 100 Load disconnected: 3 Low system voltage: 10 Priority load disconnected: /12/ :00 17/12/ :00 18/12/ :00 18/12/ :00 Alarm Status Information: 100 Error: 300 Warning: 200 Fatal: /12/ :00 17/12/ :00 18/12/ :00 18/12/ :00 System Status Off-line sites: 2% Genset start alarm: 2% Manual mode: 5% 12% 10% 8% 6% 4% 2% 0% 17/12/ :00 17/12/ :48 17/12/ :36 17/12/ :24 17/12/ :12 18/12/ :00 18/12/ :48 18/12/ :36 Power Uptime 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Power Source Runtime 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Diesel Consumption Priority load disconnected Load disconnected Normal opera on Ba ery run me Solar runtime Grid run me Genset run me Total fuel filled Total fuel lost Total consumed diesel Tenant Connections Per Site Tenant Load Distribution Tenancy Ratio Administrator Average tenancy ra o Mul tenant site tenancy ra o RoHS COMPLIANT NETWORK OVERVIEW 01-Dec 02-Dec 03-Dec 04-Dec 05-Dec 06-Dec 07-Dec 08-Dec 09-Dec 10-Dec 11-Dec 12-Dec 13-Dec 14-Dec 15-Dec 16-Dec 17-Dec 18-Dec 19-Dec 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec 25-Dec 26-Dec 27-Dec 28-Dec 29-Dec 30-Dec 31-Dec 01-Dec 02-Dec 03-Dec 04-Dec 05-Dec 06-Dec 07-Dec 08-Dec 09-Dec 10-Dec 11-Dec 12-Dec 13-Dec 14-Dec 15-Dec 16-Dec 17-Dec 18-Dec 19-Dec 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec 25-Dec 26-Dec 27-Dec 28-Dec 29-Dec 30-Dec 31-Dec 01-Dec 02-Dec 03-Dec 04-Dec 05-Dec 06-Dec 07-Dec 08-Dec 09-Dec 10-Dec 11-Dec 12-Dec 13-Dec 14-Dec 15-Dec 16-Dec 17-Dec 18-Dec 19-Dec 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec 25-Dec 26-Dec 27-Dec 28-Dec 29-Dec 30-Dec 31-Dec in 22 TowerXchange Issue 21

23 BTS with Mytel, in the range of 75 to 100 sites, growing up to 300 sites for the next round. Existing towerco OCK has also confirmed an order of 300 towers from Mytel, to be delivered by the end of 2017, with a further 70 co-locations on existing sites built for Telenor. To date, OCK has completed 550 of an original order of 920 sites for Telenor. At the same, KBZ Towers is operating as a rooftoponly player, offering space from KBZ Bank branches across the country. In general tower building activities were quite muted for the last few months, likely due to the rainy season, as well as negotiations for BTS and colocations with Mytel. On average, most of the mature towers that are two-plus years old have a tenancy ratio around 1.6, with some portfolios reportedly as high as the 1.8 to 1.9 range. By late 2017 and beginning of 2018, the Myanmar market will certainly have some portfolio tenancy ratios growing to 2.0 once Mytel rolls out. Grid power is unreliable even in major cities and in rural areas often non-existent, so Myanmar s towers typically have robust backup power systems. Lithium batteries are now being tested and solar integration will also be explored. Ooredoo s dalliance with retaining power assets is now behind them, so all new towers are built on a tower+power business model. TowerXchange is also picking up signals of potential ESCO plays. The MNOs are ramping up 4G rollouts as MPT, Telenor and Ooredoo each acquired the 1800MHz spectrum, valid for 12 years, at a cost of US$80mn. 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 US$1.365bn. There have been no tower deals in Nepal to date, but this move by the Axiata Group may pave the way for edotco to enter the market in the near future. In fact, there is a draft Infrastructure Development and Sharing Regulation put together by the Nepal Telecommunications Authority (NTA) that is currently under review by the Ministry of Information and Communications (MoIC). It introduces a license for the provision of telecommunications infrastructure, though some concerns were raised as the draft appears to suggest that should such license be extended, it would not be available to another provider for five-years, effectively creating a monopoly. Some infrastructure sharing appears to be underway, as Nepal Telecom (NT) had indicated in June it will extend coverage to 175 locations within a year, with 138 with base transceiver stations (BTS) or network extension platforms that will be shared with other phone companies. The State-owned operator is said to be at the final stage of inviting bids for the procurement of equipment including BTS towers. TowerXchange will be looking to undertake further market studies for a dedicated report on Nepal s telecom infrastructure landscape. New Zealand: There are early signs of a nascent tower industry emerging in New Zealand, where Spark and Vodafone New Zealand have substantial but ageing tower networks, newer entrants 2degrees have leveraged co-location where possible while building a few hundred towers. 2degrees may have an appetite to sell their towers and partner with a towerco on BTS. Parallel infrastructure is substantial, while the need for improved rural coverage, particularly on the South Island where tourist and agribusiness drive demand, has prompted the government s Rural Broadband Initiative to invest in over 100 towers. A total of around 4,000 ground based towers are supplemented by around 7,000 rooftop sites, primarily used in the larger cities. Pakistan: Roughly 40% of Pakistan s towers will soon be owned and operated by edotco, which is consolidating 13,000 towers from Jazz (Mobilink+Warid) together with Tanzanite Towers 700 sites, both acquisitions coming at a cost of a little over US$1bn. edotco s acquisition of Pakistan s largest and most pervasive tower network, securing the market leading MNO as their anchor tenant, is a milestone in the country s increasing adoption of infrastructure sharing. With over 10,000 co-locations on Pakistan s ~36,300 towers, tenancy ratios are already over 1.25, and growing at around TowerXchange Issue 21

24 Cabinets Batteries Gensets Solar WE ARE SHAPING POWER MANAGEMENT ONE GREENPOLE STATION AT A TIME. GreenPole provides turnkey hybrid power solutions for the telecom industry, and distributes power related products such as gensets, genset spare parts, batteries, solar street lights, solar aviation lights and other solar related products and solutions in emerging markets. greenpole-ps.com 24 TowerXchange Issue 21

25 Estimated tower counts for Pakistan 7,100 6,100 7,400 13,700 edotco* Telenor CMPak (Zong) Ufone *Jazz remains the anchor tenant on the majority of edotco towers. Jazz has retained a small number of strategic sites, the count for which is undisclosed Source: TowerXchange tower companies in The Philippines. The glass ceiling on tenancy ratios created by the market structure - a cosy duopoly between Globe and Smart, neither of which urgently needs to raise capital - means towercos are unlikely to prioritise the country, despite its scale (over 100mn subscribers). A reportedly burdensome tax regime, compounded by complex permitting processes, further disincentivises investment in The Philippines by international towercos. The prospective entry of SMC as a third MNO, in a joint venture with Aussie giants Telstra, recently faltered, although SMC are reportedly in dialogue with Telenor in a renewed attempt to enter the market. The new Philippine government may look more favorably on increasing competition than the previous incumbent. per year, driven by 3G and more recently 4G rollout. While #2 and #3 MNOs Telenor Pakistan and CMPak (Zong) have been pioneers in RANsharing, neither is under pressure to divest their towers. However, Telenor has co-locations on over 1,500 towers. #4 MNO Ufone may be more inclined to monetise their 6,100 sites. There are opportunities to create efficiencies by decommissioning parallel infrastructure in Pakistan, for example 2-3,000 of edotco s sites are believed to be within 250m of each other. However, many sites may be retained for the densification of the network as MBB penetration rises from a relatively low base of 24%. Pakistan s MNOs have called for neutral hosts to deliver up to 100 IBS. Power remains the number one operational challenge in Pakistan, although grid conditions are improving. For more information, see TowerXchange s updated Pakistan tower market study, which appears later in this Journal. Philippines: There are currently no independent Operational costs in The Philippines are phenomenal, largely as a function of the geography of the country: a maintenance visit to a remote tower can require a flight, a boat and a donkey ride up a mountain! This has resulted in substantial outsourcing to managed services subcontractors. To counteract the opex challenge, both Globe (which has an estimated 7,300 towers) and Smart (9,000) are currently investing in substantial network modernisation programmes, including the upgrade of backup power solutions. South Korea: According to GSMA Intelligence, SIM penetration was at 113% among a population of 50.4mn in Q South Korea boasts one 25 TowerXchange Issue 21

26 26 TowerXchange Issue 21

27 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. The Ministry of Science, ICT and Future Planning (MSIP) has tried multiple times over the years to license a fourth MNO, however, failed again in February 2017 as none of the three applicants (Sejong Telecom, K Mobile, and Quantum Mobile) met the criteria. Estimated tower count for The Philippines 7,300 Globe 9,000 Smart 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. SK Telecom recently noted it will invest KRW 6tn in infrastructure for network leadership in 2017, while maintaining overall capex similar to Meanwhile, KT is looking to make the 5G experience available at the 2018 Winter Olympics. TowerXchange is starting to pick up the first faint signals that towerco activity may be emerging in South Korea. Sri Lanka: As of 31 July 2017, edotco owns 2,200 towers and manages a further 1,200 towers in the country. High levels of bilateral sharing means tenancy ratios are closer to two than one all over the country. Sri Lanka is now mostly covered with 3G, and 4G is driving need for cell site densification. Dialog and Mobitel hold all of the 4G spectrum, and any other players that want to offer this will need to engage in RANsharing. There are around 7,500 towers in the country. Bharti Airtel had been rumoured to be looking at selling its 2,500 towers, but seems to have cooled on the idea. Thailand: Thailand has a tower market unlike any other in the world! Ownership of towers is in dispute as a function of BOT (Build-Operate- Transfer) concessions that are now expiring. Thailand s 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 Source: TowerXchange concessions for the 850 and 1800MHz bands, failed to reach an agreement with majority stakeholder DTAC to create a 49-51% JV towerco, into which 11,000 disputed towers were to be injected. Negotiations to create a prospective 12,000 tower JV towerco between AIS and TOT, which ran the 900MHz concession, were called off late in 2015, but the process has resumed with the recent creation of a committee to pave the way for the creation of the joint venture. CAT and TOT have started to discuss an informal partnership without a merger, and may consolidate some of their similar core businesses to remain competitive in the post-concession era. At the same time, AIS and TOT are expected to sign a contract 27 TowerXchange Issue 21

28 NorthStar ACE - The future of energy storage management 28 Visit us at TowerXchange Meetup Asia 2017 in booth 216 TowerXchange Issue

29 Estimated tower ownership in Thailand 800 5,000 1,500 11,000 Proposed DTAC-CAT towerco 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 signalling the launch of a joint-trial commercial The steady lease-up of DIF s towers is a good service on the state agency s 2.1GHz spectrum. sign, but there is little progress towards any joint TowerXchange estimate there are 52,483 towers in ventures. With one auction for 900MHz spectrum Thailand, of which 12,183 sit on the balance sheet of cancelled after the successful bidder Jasmin failed DIF, formerly TRUEGIF, a towerco created by True to pay its first instalment, a re-auction was held in Corp and SCB Asset Management and successfully which AIS was the only bidder. The Thai market listed on the Thai stock exchange. DIF has little continues to be complex and unpredictable; this debt, a high leverage ceiling, and an appetite and the 49% FDI limit may deter some investors. to consolidate more Thai towers especially if True reduces their shareholding to increase the Towards the end of 2016, TOT announced its perceived independence of the entity. intention to sign a partnership contract with Advanced Wireless Network (AWN) to help grow A further 10,000 towers were built by AIS and 800 its existing 5,320 base stations in the 2.1GHz band. by DTAC outside the concession for 3G usage. True s Under the agreement, AWN would roll out 11,000 non-concession towers sit on DIF s balance sheet new base stations for TOT, for which TOT would It all gets very confusing! later purchase the total capacity of the network at the set budget of Bt10bn. AWN is also leasing towers from TOT at Bt3.6bn per year for 15 years, as well as TOT s 2G-900MHz at Bt2bn per year for a duration of five years. A September 2017 note by Daiwa Capital Markets suggested growth to the DIF portfolio as TRUE may add more telecom towers and optical fibre into the fund. Vietnam: Malaysia-based OCK Group completed its acquisition of Vietnam s largest independent towerco Southeast Asia Telecommunications Holdings Pte. Ltd. (SEATH) in January 2017 for US$50mn. SEATH has 1,983 towers in the country. OCK has allocated US$5mn to US$8mn for its expansion, with plans to build 200 to 250 sites per year in the country. OCK may seek to consolidate other members of a fragmented group of around 30 local towercos who between them own ~10,000 towers. Alcazar Capital and ASEAN Towers Vietnamese subsidiary Golden Towers has around 350 towers in the country, and may also be engaged in consolidating existing independently owned towers in Vietnam. TowerXchange has learned of another player that may sit between OCK and Golden Towers, with potentially towers. JTOWER, an in-building solution (IBS) specialist recently expanded beyond its home market in Japan to Vietnam as it acquired the IBS portion of SEATH for US$10.2mn. This is said to be the largest IBS portfolio in the country, which included over 29 TowerXchange Issue 21

30 Print & Digital AGL Summits AGL Magazine Applied Wireless Technology AGL Buyers Guide Website edigest Over 13 Years of Serving the Wireless Industry Original content and news from a veteran team of wireless industry editors. FREE subscriptions at aglmediagroup.com 30 aglmediagroup.com Prentice Drive #2090, Ashburn, VA TowerXchange Issue 21

31 Towerco penetration in Asia now and forecast by Q418 Please feel free to contact the TowerXchange team % 100% 60% China Myanmar 83% 68% India 65% Indonesia 34% 34% 34% 31% 31% 30% Malaysia Sri Lanka Australia 53% 28% 26% 26% Thailand Bangladesh 23% 19% 21% 18% Cambodia Vietnam Current penetration Forecast, Q % 38% Pakistan Kieron Osmotherly Founder & CEO E: Jo Jefferies Executive Assistant to CEO E: For editorial & speaking enquiries regarding Americas: Arianna Neri Managing Director, Americas & Asia E: For editorial & speaking enquiries regarding Africa: Laura Graves Managing Director, EMEA E: For editorial & speaking enquiries regarding Europe: Frances Rose Head of Europe E: For editorial & speaking enquiries regarding Asia: Christie Liu 刘晓郁 Head of Asia E: For advertising opportunities & event participation: Annabelle Mayhew Chief Commercial Officer E: M: Sarah Kerr Commercial Manager E: Toya Smith Senior Operations Manager E: 120 IBS. JTOWER is optimistic on the Vietnamese market and sees opportunities for further consolidation on this side of things. In October 2016, 4G licenses were granted to three of the major MNOs: military-run Viettel, Government-owned MobiFone and VNPT. The licenses are valid through 2024 and allow the operators to roll out LTE services using the 1,800MHz spectrum. Six months later, Viettel rolled out 36,000 BTS across the country and launched its 4G LTE network with nation wide coverage of 95% of the population. To date, towers have not been widely shared in Vietnam, hence considerable parallel infrastructure with an estimated 70,000 towers in the country For media partnerships & to request additional subscriptions: Harpreet Sohanpal Marketing Director E: Alex Macbeth Head of Marketing, EMEA E: The TowerXchange Journal is published by Site Seven Media Ltd 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 TowerXchange Issue 21

32 For Tower People. By Tower People. Covering domestic and international tower news. Now read by over 8,250+ wireless infrastructure professionals. Sign up & find out why insidetowers.com/towerxchange 32 TowerXchange Issue 21

33 Asia heatmap MYANMAR 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 33 TowerXchange Issue 21

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35 China tower market FAQs China Tower Corporation with 1.9mn towers prepares for 2018 IPO; independent towercos unite for strength in numbers Christie Liu, Head of Asia China is home to the world s largest towerco China Tower Corporation (CTC), as well as a fragmented but substantial ecosystem of 200+ independent towercos. CTC s much anticipated IPO on the Hong Kong Stock Exchange has been delayed to 2018 (likely Q1) from its original target of 2017 year-end, with a goal to raise US$10bn. The formation of the China Independent Tower Alliance (CITA) this summer, on the heels of document No. 92, is paving way for consolidation and financing of the country s independent towercos. Read on for your one-stop-shop on the shape of the Chinese tower marketplace. Keywords: 4G, Air Conditioning, ARPU, Asia, Asset Register, Bankability, Batteries, Best of TowerXchange, Build-to-Suit, Carve Out, China, China Mobile, China Telecom, China Tower Corporation, CTC, China Unicom, Construction, Country Risk, Debt Finance, Exit Strategy, General Office of the State Council, Guodong, IBS, Infrastructure Sharing, Lease Rates, Leasing & Permitting, Liu Aili, Market Forecasts, Market Overview, Masts & Towers, Ministry of Industry and Information Technology, MIIT, Miteno, New Market Entrant, O&M, On-grid, Operator-led JV, Outdoor Equipment, Pass-Through, Procurement, Regulation, Research, RMS, Rooftop, State-owned Assets Supervision and Administration Commission of the State Council, SASAC, State Administration for Industry and Commerce of the People s Republic of China, SAIC, Shelters, Shining Star International Holdings Limited, Stakeholder Buy-in, Sun Kanmin, Tax, Tenancy Ratios, Tong Jilu, Tower Count, Towercos, TowerXchange Research, Transfer Assets, Valuation Read this article to learn: < What is China Tower Corporation, how does it operate, and what does it own? < Lease rates for China Tower and independent towercos < Growth opportunities and regulatory landscape < Valuation benchmarks, tenancy ratios, and investibility What are the number of 4G customers in China? As of October 2017, China Mobile reported mn 4G customers, while China Unicom had mn 4G subscribers, and China Telecom indicated mn 4G terminal users. How many new towers were built in China over the years? According to CTC, prior to its establishment, there were approximately 1.44mn towers/sites built by the three operators over 30 years between 1985 and It was reported that asset transfers of roughly 1.5mn towers happened around the end of 2015 and beginning of By September 2016, CTC was suggesting they had around 1.63mn towers, and by year-end around 1.7mn towers. Overall, CTC build volume for 2017 is ~200,000 towers. In terms of independent towerco output for the time period, estimates would be in the range of 20,000 to 30,000. How many towers are in China and who owns them? To date China Tower Corporation owns ~1.9mn towers. The 200+ third-party towercos will own approximately 40-50,000 towers. Guodong Networks 35 TowerXchange Issue 21

36 (headquartered in Shanghai) has the largest cross-country portfolio, with presence in virtually all provinces now and an estimated tower count of 15,000. Beijing-based Miteno is the second largest independent towerco, with an estimated 4,500 towers in its portfolio. There are a further handful of towercos who own assets in the 1,000 to 2,000 range, including Sino Netstone, Bright Financial Leasing, Beijing RLZY and Shanxi Haina. It should be noted that the definition of a tower in China is inclusive of monopoles, rooftop structures and lamppost sites. What is the future growth of in China? CTC still has a lot of building to do, including continuing coverage on the 62 subway lines and 53 of the high-speed train lines within the next three years. China Tower Corporation site/tower counts by year YTD 0.5mn 1.44mn 1.5mn 1.7mn 1.9mn 1.0mn 1.5mn 2.0mn China Tower Corporation coverage of subway and high speed lines Subway (62 lines) High speed (53 lines) Completed as of September km 1,208km Completed as of August ,625km 10,218km Total upon completion (over next three years) 3,800km 11,660km Source: China Tower Corporation CTC has also developed strategic partnerships with 20+ provinces and autonomous regions to better integrate network planning and construction into local planning, as many local governments are keen to drive economic development through enhanced mobile and broadband coverage. Reportedly the new arrangements are more comparable to what operators were dealing with in the past. This theoretically paves the way for faster build out. There is some speculation that within three year s time tower construction could slow down in China. The standards for 5G are yet to be defined and many commentators have indicated that 4G is more than enough to meet the current needs of the general mobile consumer. Generally 5G would mean higher site density and smaller equipment mounted at lower heights. On the independent side, one source estimates that there could still be 50,000 to 100,000 towers available to for independent towercos to build, given the size of the country. The need for macro towers will decrease over time as major coverage projects get completed. Ultimately, tower growth will be dependent upon the operator demand. Major cities will need more infill sites to provide the density needed to meet growing heavy data demands. More light-pole integrated tower designs that are sleeker, smaller, and faster to deploy will likely play a role, often with microcell and small cell rather than macro cell equipment mounted on them. 36 TowerXchange Issue 21

37 What is the vision behind creating China Tower Corporation? With the approval of the General Office of the State Council and led by State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and the Ministry of Industry and Information Technology (MIIT), the joint venture was formed to promote a culture of infrastructure sharing in China. Also referred to as co-build, coshare. CTC was formally created on 15 July, 2014 to consolidate and share existing towers, to construct shared additional towers, and to save land and tower resources. In 2015 alone, compared to MNOs own build, CTC was able to realise savings of 265,000 sites, 13,000 acres of land and CNY 50bn of investment. By August of 2017, the same metrics have improved to savings of 568,000 sites, 27,700 acres of land, and CNY 100.3bn. It also calculated an approximate steel materials savings of 7.1mn tonnes. 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 Mobile s vast tower network, enabling them to accelerate and catch up their 4G rollout. If 4G coverage were complete, using VoLTE could enable refarming of valuable spectrum. The formation of CTC not only allows China to accelerate 4G rollout, but also to enable the implementation of the country s mobile broadband network strategy. In addition, with 5G on the horizon, a central infrastructure provider such as CTC enables the country to remain a global leader. The creation of CTC is also a reform of sorts, to drive efficiency and inject new energy into the industry. Opportunities to diversify CTC into other shared infrastructure, and the sheer scale of the business, means the vision is less to create the world s largest and most valuable towerco, but to create one of the world s largest and most valuable infrastructure companies. Does CTC also own assets beyond the macro network, such as rooftops, IBS, DAS and transmission infrastructure? CTC has absorbed most, if not all, China s 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. IBS are widely deployed in China, but there are not many DAS. Smart city projects are picking up across the country, so more microcell and street lamp poles are being deployed (sometimes through independent towercos). This year, CTC has also shared stats on having fulfilled 33,000 indoor coverage related requests, totaling 850mn sq. meters. Does China Tower Corporation only own and lease up the towers, or do they undertake O&M too? CTC is responsible for the construction, operation, and maintenance of towers. Having said this, given engineering design, construction, and the likes are also included as service categories on the online procurement platform, it would be reasonable to expect a certain level of sub-contracting of O&M. Who are the principal stakeholders in China Tower Corporation who are they answerable to? China Mobile is the largest stakeholder of CTC at 38%, while China Unicom and China Telecom own 28.1% and 27.9% respectively. China Reform Corporation, likened to a sovereign wealth fund with a particular focus on reforming State-owned Enterprises, owns the remaining 6%. While the Ministry of Industry and Information Technology (MIIT) defines policy, CTC is effectively answerable to SASAC, the State-owned Assets Supervision and Administration Commission. 37 TowerXchange Issue 21

38 Shareholders in China Tower Company China Telecom 27.9% China Reform Corporation 6% China Unicom 28.1% China Mobile 38% What is the governance structure of CTC? The current board of CTC remains unclear. At one point, TowerXchange understood there to be nine members total on the board. However, with the reassignment of Liu Aili (former chairman of the board and head of CTC) and new leadership yet to be announced, there is limited transparency at present. Mr. Tong Jilu is one of the senior executives of CTC and expected to still be one of the board members. The other board member identified is Sun Kanmin, who is an executive with China Telecom. This governance structure is said to have evolved from the past, when more company members would also be part of the board, and was created China Mobile China Unicom China Telecom China Reform Corporation specifically to avoid inefficiency and abuse of power. What is the organisational structure of CTC? There are 15 business units/departments within CTC, including management, construction and maintenance, finance, human resources, business partnerships, operations and development, audit, telecommunications technology research institute, information technology research institute, and more. There are three levels of CTC management: Headquarters in Beijing, provincial branches, and city/municipal offices. In total, there are 31 provincial-level branches with 383 local, city-level branches. What has been the financial performance of CTC? China Mobile s networking leasing costs to CTC for 2016 were CNY 28.1bn, with 1.11mn towers rented, while China Unicom paid CNY 19.5bn to access 690,000 towers, and China Telecom spent CNY 14.0bn for the rental of 610,000 towers, according to a Nomura March 2017 report. Former CTC chairman and general manager Liu Aili reported CTC breaking even in 2016, with a net profit of CNY 80mn. Goldman Sachs noted CTC becoming profitable in Q416, with EBITDA margin at 59%. Moving forward, CTC is expected to enjoy operating leverage from tenancy ratio growth as the three MNOs continue to rapidly deploy their 4G networks. How and what does CTC buy? The Tower Online Platform officially launched in the summer of 2015, one year after the creation of CTC. As of 5 September, 2016, there were 723 suppliers officially registered on the system, with 74% having been shortlisted and 58% having successfully received purchase orders. Spending through the Tower Online Platform reached CNY 26bn. The platform was created to increase supply chain transparency and efficiency, allowing CTC staff to see who made a purchase, from which manufacturer, at what costs, plus comments and ratings on product quality, delivery, service, et cetera. 38 TowerXchange Issue 21

39 It hosts nearly 30 major supplier and five service categories, including the likes of tower, air conditioning, shelter, battery, idas, engineering design, construction, and more. Suppliers can register on the platform for free, as long as they hold a valid manufacturing license in China (for product providers), are registered with the State Administration for Industry and Commerce of the People s Republic of China (SAIC), and pass a third-party audit. A lot of smaller players are not on the platform for one reason or another, but instead work through those that are and act as subcontractors; such partnership arrangements could provide a point of access to sell to CTC for international vendors. For further details, please refer to TowerXchange s article What and how China Tower Corporate buys. CTC balance sheet comparison China Tower Corporation (in CNY, 100mn s) 30 June, Dec, 2016 流动资产 / Current assets 非流动资产 / Non-current assets 2, , 资产合计 / Total assets 3, , 流动负债 / Current liabilities 1, , 非流动负债 / Non-current liabilities 负债合计 / Total liabilities 1, , 净资产 / Net assets 1, , Ending 30 June, 2017 Six months period Ending 30 June, 2016 Six months period 营业收入 / Operating income 净利润 / Net profit Source: U 學在線, citing CTC 1H2017 reports, Translation to Chinese by TowerXchange Does CTC have some kind of right of first refusal to build new towers for the three State-owned MNOs? In general, the MNOs in China are not to build their own towers anymore. CTC is absorbing most of the MNO demands. However, the MNOs at the provincial level are able to put out RFPs for builds based on what CTC does not accept, rejects, or does not deliver on time. Since the formation of CTC, the consensus seems to be that the three operators, China Mobile, China Telecom, and China Unicom, all have different attitudes towards third-party towercos; some accept their continuing role in the market, others do not. Rumour is that China Mobile has been the most accommodating of independent towercos of the three. But there is also another layer of complexity at the geographical level, where some operators in some regions are happy and willing to work with independent towercos, while others won t touch them at all. Most CTC management used to work for the operators, and as such have influential customer relationships, as well as with government. All in all, independent towercos in Beijing appear to have been be hit hardest, where operators reportedly won t entertain conversations with independent towercos. In the past, a source has noted that China s private tower companies are often more energised and faster to market. Independent towercos at this point provide value to MNOs not only in slightly discounted pricing, but also in terms of more effective local site acquisition and overall efficiency in certain circumstances. CTC has a scale advantage from the legacy towers, 39 TowerXchange Issue 21

40 MNO tower-related requests fulfilled by China Tower Corporation 800, , , , , , , , , , ,000 around radiation, comparing tower emissions to common household appliances. One supplier has also mentioned having to move fast in getting a tower up and/or disguising the tower as some other unrelated light pole or billboard. Towercos who have good local government relations can often circumvent the issue also, as they are building with their approval and support. In general though the environment in China is conducive and favourable to tower building: there is a mature steel and metal processing industry; the grid is reliable and stable so downtime is insignificant, reducing opex; and the vendor network is strong having supplied over 1.9mn sites already. Fibre is widely used for backhaul so there is seldom need to accommodate microwave dishes but no significant advantage when competing for new BTS contracts, said one source. In some provinces the carriers are more open to new entrants as they don t feel it s in their interests to have a monopolistic towerco, whereas in other provinces CTC are more entrenched, said another. A Right of First Refusal type arrangement isn t necessarily the primary risk to the independent sector s organic growth potential. Rather it s the relationships and economics that may affect a towerco s ability to survive and thrive. Towercos with good connections to local government and/ or operators will continue to secure projects and Jan-Aug tenants. From there it s about having the cash flow to maintain day-to-day operations while financing continued building. New builds are now subject to the lease rate benchmarks set out by CTC, resulting in a more challenging cash flow environment compared to the past. Is it easy to get a new tower built? Source: China Tower Corporation While China s citizens once welcomed towers and coverage, radiophobia and NIMBYism (not in my back yard) now exist in China. To combat the former, CTC has relied on a more concerted and integrated effort from the government, operators, and media to propagate educational messaging What is the mix of GBTs versus rooftops in China, and how has CTC affected tower design? Around two thirds of China s sites are GBTs (ground-based towers mostly monopoles), the other third are rooftops. CTC has standardised tower designs, reportedly from 1,000 down to 155 (each design at different heights would represent one). CTC also made an effort to introduce designs of different aesthetics, functions, and heights to suit various environments. For example, the Urban Flower sits at 25m, can be integrated with lighting for the city and incorporate CTC s logo and branding. It also has a 40m tower suited for stadiums, large public spaces, et cetera, that can be a landmark structure with LED lights at 40 TowerXchange Issue 21

41 the top. There is also a more simple and sleek multipurpose tower meant to be integrated with street lighting, sensors, data, and analysis. Approximately how many of China s towers are currently shared? What are the tenancy ratios? Prior to the establishment of CTC, tower sharing was around 20% in the country. By the end of 2016, total tower sharing reached 40%, with the new towers at 70%. In some regions, tower sharing amongst the three operators were supposedly as high as 91%, and at 100% along high speed and subway lines. One local media reported 68.1% sharing rate for all sites completed in 2016 by CTC, with a tenancy ratio of 1.39 across the portfolio by the end of the year. In an exclusive interview with the People s Post and Telegraph in August 2017, Liu Aili noted tower sharing has rapidly increased from 14.3% to 73% over the three years of CTC s existence. More specifically, sharing between new builds for China Mobile, China Telecom and China Unicom have grown from 3.6% to 48.6%, 36.6% to 90.1%, and 20.9% to 92.4% respectively. What is the typical capital outlay for a new tower in China? Of course much depends on the nature of the structure, but the average seems to be in a CNY ,000 (US$37-51,800) range. What would be the impact of consolidation from three to two MNOs? Consolidation from three MNOs to two would certainly lower the glass ceiling on prospective tenancy ratios in China, and would be value destructive to both CTC and independent towercos. While there has been rumor of MNO consolidation, the government s current strategy appears to be to accelerate China Unicom and China Telecom s 4G rollout by providing access to China Mobile s 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 China s 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. CTC has made repeated mentions of business diversification and innovation to include the likes of billboard ads, sensors, weather monitoring, et cetera, so the opportunities are there given the size of its network. Is there any prospect of active infrastructure sharing in China? The only active infrastructure sharing agreement of scale in China before CTC was China Telecom and China Unicom s deep collaboration to improve economics in low utilisation, remote areas. To date, the two operators are said to be actively sharing at least 600,000 4G base stations and 14,500km of fibre transmission network. Regulation Are China s 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 Industry and Information Technology (MIIT), regulator or National Telecommunications Infrastructure Coconstruction and Sharing Office have the right to define the pricing of lease rates? No. In July 2016 CTC finalised its leasing and pricing agreements with China Mobile, China Telecom, and China Unicom, which essentially set the marketplace benchmark. The formula offers discounts for co-location and covers acquired towers, newly constructed towers, indoor distribution systems, transmission products, and service products. This has put pressure on the independent towercos 41 TowerXchange Issue 21

42 who can t charge more than what CTC is charging, especially for new towers, unless they are in highly coveted locations. All pricing on previously signed contracts are reportedly still being honoured. So while no government body or agencyhas defined lease rates, CTC has markedly influenced industry pricing. What is the pricing formula used by CTC? The formula to be used for newly-added telecommunications towers is: Product price = base price (1 co-sharing discount rate 1) + (site cost + electricity input cost) (1 cosharing discount rate 2) Base price = (standardised construction cost (1 + impairment rate) + maintenance expense) (1 + cost markup rate) useful lives of depreciation It was also confirmed there is an escalator, an inflation adjustment factor which is common in tower agreement contracts. What type of co-sharing discounts are available for operators through CTC? On new towers, a 20% discount will be applied for sites shared by two lessees and a 30% discount for those shared among three lessees, with the first sole occupier ( anchor tenant ) benefitting from a further 5% discount. When it comes to site cost and electricity, a co-sharing discount of 40% will be applied for two lessees and 50% for three lessees. Again, the anchor tenant would enjoy an additional 5% discount. For further details, please see TowerXchange s article The implications of China Tower Corporation pricing. What is the status of rural coverage in China? 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. How are tower companies taxed? There was no reported special tax status for tower companies in China. China fully implemented its VAT reform on 1 May 2016 and replaced all business tax with the valueadded tax (VAT). The construction services sector s new applicable VAT is 11% (general) and 3% (small-scale). In terms of the sale and importation of goods, logistic services, modern services, transportation, repair and processing services, asset leasing, the standard applicable rate is 17%, and 13% for some products. 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. In general it appears tower leasing tax would be 17% and static-asset (shelter, land, et cetera) would be taxed at 11%. What are some of the regulations governing coconstruction and sharing? Document No. 586 was released in 2014 and it has been fully implemented. However document No. 586 is an agreement not a regulation. It was proposed by the MIIT and agreed with China s 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 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. 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 42 TowerXchange Issue 21

43 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 To- Home construction vii. Sign exclusivity agreement with the third parties in the construction of telecommunications infrastructure (including leasing) Clause vii. above calls attention to the fact that About document No. 92: how it legitimises China s independent towercos Perceived as a turning point for the independent towercos in China, the document was released by MIIT and SASAC following an industry consultation meeting. This provided a much needed boost to the towercos who were facing challenging market conditions, roadblocks to securing and executing build to suit contracts, questions on the legitimacy of their presence in the marketplace, as well as difficulties with contracts and account receivables. Document No. 92 spelled out some key points, among them that independent towercos, along with CTC, were to be included and part of the system supporting the country s co-build, co-share vision; that should CTC lack the capacity or be unable to deliver on tower builds as agreed, it would revert the order back to the MNOs in a timely manner; that should inappropriate and anti-competitive tactics be used and thereby create a monopolistic market place, MIIT would take action to address and set forth corrective action. The document also noted other opportunities such as DAS and street poles that towercos could explore, to provide additional services within the general co-build, co-share framework 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. More recently in the Spring of 2017, document No. 92 was released to further clarify the role and status of independent towercos. Halfway through 2016, China s independent towercos were starting to feel the squeeze as Stateowned CTC began to make its presence felt. Market dynamics were such that the 200+ players felt they were in a grey space where their existence may not be supported nor permitted. Enough concern was voiced that a consultation meeting was arranged between independent towercos and representatives from the Ministry of Industry and Information Technology (MIIT). The conversations and feedback from this November 2016 meeting led to a spirit- and moral-lifting government document No. 92 clarifying and effectively legitimising the role of independent towercos. 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 is felt that 43 TowerXchange Issue 21

44 escalations are likely to remain fair in a market where a State-owned entity is dominant. Above ground level, the telecom structures themselves belonged to China s MNOs and now belong to CTC, or they belong to the relevant independent towerco. Land lease fees could also differ from region to region, project by project. One towerco mentioned not having to pay fixed land fees in one city but paying by square footage usage in another. Such pricing may be more typical with urban street/ highway projects, where lighting is incorporated into the tower. How complete is the paperwork on China s 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. It appears to vary depending on the local government and project. About CITA The China Independent Tower Alliance (CITA) was inaugurated on 30 June, 2017, created under the leadership and guidance of the Communications Network Operation and Maintenance Committee (COMC) and in partnership with private towercos, telecom infrastructure builders, equipment and service providers, design consulting firms, academic and research institutes, and more. Its current membership consists of more than 60 organisations. Membership is voluntary and requires a written application. The applying firm needs to have a certain degree of advancement, influence, and significance within the industry and receive the vote of twothirds of the Alliance council for successful admission. particular case, the land belongs to the government, for public use. The permit follows, No. 40 of the Urban and Rural Planning Act, which grants construction rights. Independent tower market Who are the independent tower companies in China? How much market share do they have? enabling them to build quicker than State-owned CTC. At the end of 2014, China may have had as few as 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 China s new towers in 2015, a proportion which bullish commentators feel could reach 30% in future years. We know of one region where the towerco has a full set of papers stamped by the authorities, from meeting minutes with city planning officials outlining project requirements, to construction permits, construction plans, et cetera. This was described as a tower s most complete legal process and best protection. This also means should the government for whatever reason take down a tower, the towerco would be compensated. In this TowerXchange estimates there are at least ten Chinese independent towercos that have hit the four-digit tower count mark in China. The independent market is highly fragmented and localised, with over 200 independent towercos spread across the country. A lot of the independent towercos thrive on having strong local government and/or operator relations, 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 4% market share. TowerXchange have spoken to a few bullish tower industry leaders who feel the ceiling on the scale of the independent tower sector in China could be as high as 20% within five years that could represent over 400,000 towers, the equivalent scale of the entire tower market in the European Union! 44 TowerXchange Issue 21

45 Independent towercos now have presence all across the country, although they are more prevalent in some regions than others. The independent sector started to feel pressure starting summer of 2016, with CTC s published lease rate formula and its ramp up to fulfill MNO requests. For the second half of 2016, there were some reports of negative consequences for MNO staff that gave contracts to independent towercos, and reports of delays in payments to independent towercos. This led to a consultation with MIIT representatives who eventually came out with document No. 92 in the Spring of 2017, legitimising the status and role of independent towercos. Later on in the summer, the China Independent Tower Alliance (CITA) was formed, creating a platform and community for private towercos to drive standardisation, influence and cooperation. There are also more microcell and small cell opportunities coming online for independent towercos. 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 CNY ,000 each (US$65-70,000 each). Another source put the figure at CNY 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 CNY 700,000 (US$100,000) per tower. Guodong, which TowerXchange believe is China s largest independent tower company, secured a CNY 700mn (US$100mn) investment reportedly at a high teens valuation multiple they were very proud of. The transfer of China Mobile, China Unicom and China Telecom s towers to CTC reportedly yielded an average of just US$22,000 per site, significantly below replacement cost. But an asset transfer between entities all fundamentally State-owned (and owned by each other) is a poor valuation benchmark. The low acquisition cost reflects the depreciation of an inventory of ten plus year old towers, towers which were built to gain market share and with less of a view toward longevity and structural capacity, upon which significant improvement capex may have been required. The low price point also reflects the mixed bag of assets being transferred, inclusive of everything from substantial ground based towers, a great many monopoles, rooftops, and even small Wi-Fi offload sites. Around October 2015, China Daily had reported the transfer of CNY 203.5bn (~US$31.5bn) worth of telecommunication tower assets, while the Wall Street Journal noted analysts valuing the venture at CNY 214bn (~US$33.1bn). An article from the Mobile World Live cited yet another estimate at CNY 230bn (~US$35.6bn). More specifics emerged out of a March article this year in Chinese media Caixin, which noted actual asset transfers taking place on 14 October, 2015, whereby 1.52mn towers changed hands, for a value of CNY 231.4bn. This would translate to ~CNY 152,000/tower or US$23,500/tower, roughly in line with TowerXchange s previous reporting. As part of the carve out, China Telecom (which had the least number of towers out of the three MNOs) received only equity as part of the deal (29.9%), while China Mobile and China Unicom received both equity (40% and 30.1% respectively) and a combined CNY 91.9bn (~US$14.2bn) in cash. The Caixin article also noted that the original agreements required CTC to pay all outstanding payments and interests to China Mobile and China Unicom by the end of To learn more, read China Tower Corporation s valuations from inception to future IPO (TXJ 21). Is China Tower Corporation a potential buyer of independent tower companies towers? At one point CTC were rumored to have made an offer to acquire Chinese towers at ~US$80,000 each. Whether that valuation is still current seems unlikely, and whether such a valuation may be attractive to current owners depends on tenancy ratio, tower cash flow, and uniqueness of location. At this point however, multiple sources have confirmed CTC has not acquired any independent towercos or their assets. There has been much talk of monopoly since the creation of CTC, though our sources believe the Party is keen to encourage competition, and currently CTC and the independent sector co-exist to serve the market place. 45 TowerXchange Issue 21

46 In the past, then chairman of the board at CTC Liu Aili has also publicly acknowledged the presence of independent towercos. CTC is not the exclusive provider of towers in China, there are 200+ thirdparty companies building and operating towers. Therefore CTC will be rejected by the market if it doesn t deliver on low costs, good service, and competitive rental prices, he said. While tower acquisitions are not completely out of the picture, at this time, CTC is wholly focused on integrating assets and new builds to meet the operator s demands while preparing itself for an IPO. At this time, TowerXchange does not anticipate the State-owned entity selectively rolling up China s independent towercos in the near future. Do China s tower companies have much appetite for International opportunities? China s tower sector seems largely preoccupied 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 rms such as the Silk Road Fund and the Asian Infrastructure Investment Bank. What are typical lease rates and terms in China? TowerXchange s calculation of CTC revenue per tower from each MNO in 2016 Lease costs Towers rented $/towers China Mobile CNY 28.1bn 1,110,000 CNY 25,315 China Unicom CNY 19.5bn 690,000 CNY 28,260 China Telecom CNY 14.0bn 610,000 CNY 22,950 have heard of was CNY 3,500 pcm (US$515) in less developed cities, rising to CNY 11,000 pcm in (US$1,625) on high rental cost sites in major cities. However, the creation of CTC and the finalisation of the pricing formula in July 2016 have put downward pressing pressure on the market. On the independent side, rates are reportedly now between CNY 2,300 pcm (US$340) to CNY 5,400 pcm (US$800). Again, desirable and highly coveted sites can still yield good rates. We were also told that the rate could also sometimes be higher if no one responds to an RFP. CTC lease rates are significantly lower than anywhere else in the world. Estimated average per tower leasing fee in 2016 was CNY 2,650 pcm (US$400). CTC also charges different rates on the legacy towers versus the new builds. Like India, when additional tenants are added to Chinese towers, existing tenants leases are discounted. How do the economics of a single tower in China compare to the USA? See U.S. versus China macro tower build economics. Note that when an additional tenant is added, lease rates are discounted for both the new and original tenant in China. This is not the case in the US. We must emphasise that you must treat this table with a pinch of salt China values are a mean based on multiple sources, but all sources are subjective. Who owns China s broadcast towers and are MNOs co-locating on them too? China Broadcasting and Media Group has the 700MHz license and owns most of China s broadcast towers. TowerXchange have not yet been able to ascertain if these towers are offered for co-location to China s MNOs. Investment Data source: Nomura Lease rates are a complicated formula based on height and weight of equipment, desirability of location et cetera. Previously, most interviewees agreed that a range of CNY 4,500-6,000 pcm was common (US$ ). The lowest TowerXchange Lease terms are typically years. Down payments for new sites have been reduced to a single year since the advent of CTC, adversely affecting independent towerco cash ows. How can early stage towercos in China access capital? China offers a challenging path to scale for local tower entrepreneurs. Raising debt from Provincial 46 TowerXchange Issue 21

47 financial institutions is complex, time consuming, and expensive. While private, domestic investment is gradually becoming more available to debtfunded infrastructure firms with contracted long-term cash ows, 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. Some independent towercos have accessed financing from larger-scale domestic and even the odd international towerco; there is also one financial leasing institution that has worked with most of the larger towercos. Please explain the latest rules regarding foreign ownership of, or investment in, communications infrastructure? 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 confirmed reports of one foreign investor acquiring a 51% stake in a towerco. An interested investor called attention to the VIE (Variable Interest Equity) structure, which U.S. versus China macro tower build economics Construction costs Tenant revenue Opex Gross margin Gross margin % ROI Source: US illustration drawn from an American Tower presentation, June 2015; does not reflect any American Tower financial data. China data from TowerXchange, based on our own research and reviewing the models of Goldman Sachs and others 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? One TowerXchange source defined VIE as a 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 first used in Chinese TMT 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 One tenant US Two tenants US One tenant China Two tenants China $275,000 $20,000 $12,000 $8,000 40% 3% - $50,000 $13,000 $37,000 74% 13% $44,000 $4,500 $2,600 $1,900 42% 4.3% - $7,200 $3,000 $4,200 58% 9.5% 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. 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. What would foreign investors options be to repatriate capital? In the event a foreign investor was seeking an 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? As in any market, exit strategies tend to focus on potential IPO or trade sale. 47 TowerXchange Issue 21

48 CTC may be a prospective trade sale counterpart, although management is very much focused on new builds and improving operations in its bid to IPO. There is also limited argument for the Stategiant to acquire towers from independent towercos, especially as parts of the government are seeking to encourage a diverse ecosystem to support the nation s infrastructure build outs. At least one of the Indonesian tower companies is believed to have an appetite to invest in China, as well as several US funds with experience of the tower asset class. There has been some towercoon-towerco consolidation on the independent side, which stalled for a while and seems to be picking up traction again. 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 just hit fivedigit tower count. But if an independent towerco could build or rollup 30,000 to 50,000 towers, they may attract interest from some of the more acquisitive international towercos. 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. Some sources suggested that entities listed on that stock exchange can only accept investment in CNY, 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. There is one listed tower company on the Shenzhen Stock Exchange, Beijing Miteno Communication Technology Company Limited (300038), with at least one planning to list in Shanghai. However, note Miteno is also a tower manufacturer and technology company, so it achieved listing not as a pure-play towerco. There are also other independent towercos in China who are listed either as A-shares or on the NEEQ, who did so as technology or other types of companies, not as towercos. It should be noted that there is approximately a twoyear 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 may be more comfortable. Most of China s 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 exchange. Will it be possible to invest in CTC? Is there a plan to list China Tower Corporation on the stock market in future? CTC s original intent was to IPO by the end of 2017, as a means of repaying China s three MNOs the full value of injected legacy assets. It has chosen to do on the Hong Kong bourse, with the goal to raise US$10bn. The HKSE listing would make it easier for international investors to get involved. The IPO has however, been delayed to 2018, and now seems likely in the first quarter. POWER Are power costs passed through from China Tower Corporation to the MNOs? According to the finalised pricing formula in July 2016, electricity input cost is part of the product price, aka lease rate to the operators. It is to be priced on a lump sum or itemised basis. There has been mentions of exploring an all inclusive approach, where CTC would try to optimise costs through bulk buys. What proportion of the cell sites are on-grid, on unreliable grids or off-grid? Almost all sites are on-grid. Multiple sources confirm China has one of the world s most reliable 48 TowerXchange Issue 21

49 What is the National Equities Exchange and Quotation (NEEQ) The national small-to-medium-sized enterprise share transfer system (commonly known as the New Three Board ) is approved by the State Council and set up as a national securities trading place. The company was incorporated with the State Administration for Industry and Commerce (SAIC) on 20 September, 2012, with a registered capital of CNY 3bn. Shareholders of the company are Shanghai Stock Exchange, Shenzhen Stock Exchange, China Securities Depository and Clearing Corporation Limited, Shanghai Futures Exchange, China Financial Futures Exchange, Zhengzhou Commodity Exchange, and Dalian Commodity Exchange. The scope of business is to organise the public transfer of unlisted shares; to provide services to non-listed companies in the areas of financing, mergers and acquisitions, and to provide information, technology, and training services for market participants. The NEEQ is the only over-the-counter (OTC) exchange regulated by the China Securities Regulatory Commission (CSRC). Investors need at least CNY 5mn to participate. Compared to an IPO on the Shanghai or Shenzhen Stock Exchanges, the NEEQ s listing process is faster, with less stringent requirements and lower costs. Valuations have also been reported to be high with a lower threshold. A little over 700 companies are currently in line for IPO approval in China. There has also been talks of a pilot programme to help qualified NEEQ-listed companies get on Shenzhen s ChiNext board. As of 21 February, 2017, a total of 10,675 companies were listed on the NEEQ, according to an article from China Daily. electricity grids. Unlike most countries, its supply exceeds demand. What backup power solutions are typically on cell sites? Are towercos or MNOs responsible for them? Towercos provide backup battery banks, typically with 4-8 hours oat. Most batteries are lead-acid. There are very few backup DGs. CTC is recycling batteries from electric vehicles for site usage. With large amounts of e-vehicle batteries coming off the market, extensive discussions and research were undertaken to find new uses for them, otherwise the country would be facing a major disposal challenge. CTC recently posted on its procurement platform its intention purchase mass quantities of these soon-to-be-retired e-vehicle batteries for its near 2mn sites which require large battery purchases. Are remote monitoring systems typically deployed on cell sites? Yes, for most new sites, CTC has installed what it refers to as FSUs (field survey/surveillance units). With these units, the towerco is able to monitor and capture data on a tower and site through a centralised command platform, where alerts are issued and task orders activated accordingly. Data capture through the command centre includes things such as generator, battery, power switching, power costs, air conditioning, temperature, humidity, smoke, entry access, et cetera. ZNV Technologies claims to have their equipment on over 700,000 CTC sites, which would make them the market leading RMS solution in China. Who is responsible for site modernisation and air conditioning, towercos or MNOs? CTC is responsible for shelters and air conditioning. While most new sites are built with outdoor equipment, few legacy sites have been modernised with, for example, free cooling. Is there distributed renewable energy in China? In September 2016 CTC reported having 10,177 solar and wind generation sites across the country, with annual capacity of 120mn kwh. There is also news that CTC has plans to deploy solar on a large scale in line with the government s objectives to reduce carbon emissions 49 TowerXchange Issue 21

50 Asia News Summary of tower industry news across Asia Indian news outlets. The fall through of the transaction follows the announcement of the failed merger between Reliance Communication and Aircel. India: Airtel plans 3G network shutdown by 2021 and transfers fibre unit Bharti Airtel will close its 3G network by 2021 as it plans to refarm its spectrum in the 2100MHz band for LTE usage. Additionally, Airtel is transferring its fibre-optic unit to its subsidiary Telesonic Network for an approximate value of US$873mn. India: Vodafone s CEO on Indus Towers stake and Idea s merger India: American Tower seals Idea-Vodafone tower deal Vodafone and Idea Cellular agreed to sell their tower portfolios to American Tower for a combined value of around US$1.2bn. Idea s portfolio include 8,886 sites with a tenancy ratio of 1.7 (or 15,418 tenants) while Vodafone s comprises 10,926 towers with a tenancy ratio of 1.5 (15,846 tenants). However, following the merger around 6,300 co-located tenancies of the two MNOs will become single tenancies over a two-year timeframe, as noted in a statement published by the two operators. The collapse in tenancies won t entail any exit penalty. The transaction should be completed within H India: Reliance Communications to shut down voice services in December Reliance Communications plans to shut down its voice services starting on December 1, 2017 as communicated to the Telecom Regulatory Authority of India (TRAI). RCOM won t shut its 4G mobile data offering as the operator only plans to close down its 2G and 3G networks and to upgrade its CDMA network to LTE. India: Brookfield Reliance Communications deal stalls The deal between the investment firm and the telecom giant for the sale of a 51% stake in Reliance Infratel is not going ahead, according to various Vodafone has valued its 42% stake in Indus Towers at US$5bn, as recently reported by Indian news outlet Economic Times. During a recent analyst call, Vittorio Colao, Vodafone s CEO, reported quickerthan-expected progress on the merger with Idea Cellular, which should close by September Colao added that competition remains intense in India but there are signs of positive developments in the Indian market, with consolidation of smaller operators and recent price increases from the new entrant. Jio has raised its prices in October which is good. India: Bharti Airtel sells stake in Bharti Infratel Bharti Airtel sold 83mn shares of Bharti Infratel via Nettle Infrastructure Investments and raised US$510mn. The secondary share sale is being used 50 TowerXchange Issue 21

51 to reduce the company s debt. Following the sale, Bharti Airtel and its subsidiaries own 53.51% of Bharti Infratel. See you at our future events! Bangladesh: edotco deploying wind and solar at 500 sites in Bangladesh Through its Tower to Power initiative, edotco Bangladesh distributes excess electricity from its tower sites to the community for free. edotco s use of renewable energy and green technology has helped to reduce the carbon footprint of its operations by 20%. China: China Tower Corporation IPO delayed to Q Meetup Asia December, Singapore Meetup Europe April, London Originally hoping for a year-end listing on the Hong Kong Stock Exchange, CTC s IPO process has stalled. With previous GM Liu Aili reassigned to China Mobile in late September (he subsequently resigned and is now at China Telecom), CTC has yet to officially announce its new leadership. Malaysia: edotco Malaysia partners with Telekom Malaysia to expand LTE services Telekom Malaysia (TM) will provide backhaul services for the connectivity between mobile operator s cell sites and their core network at edotco s identified ground-based tower sites in selected areas. TM and edotco Malaysia will also explore opportunities to provide common infrastructure via Smart Centralised Radio Access Network (Smart CRAN) Services Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg 51 TowerXchange Issue 21

52 Featuring TheFutureNetw rk Featuring Investors Club, sponsored by Meetup Asia December, Marina Bay Sands, Singapore The one and only must-attend event for top Asian telecom infrastructure executives To discuss your participation, contact Annabelle on or Diamond Sponsor: GOLD SPONSORS: Silver Sponsors: Bronze Sponsors: 52 TowerXchange Issue 21

53 TowerXchange Meetup Asia preliminary agenda Marina Bay Sands, Singapore December 2017 Monday, 11 December Pre-conference vendor briefing hosted by edotco < Intro to edotco < edotco s requirements and future plans < How vendors can support edotco in terms of innovation RMS vendors Structure vendors Small Cells, DAS, other product vendors Energy vendors Operational support: aviation light, tower preventive maintenance < Q&A session Attendance by invitation only. Contact us if you are interested in joining the briefing Tuesday, 12 December Day One 8:00 Registration and coffee Breakfast sponsored by 8:50 TowerXchange s analysis of the Asian tower and distributed network market < Arianna Neri, Managing Director - Americas and Asia, TowerXchange < Christie Liu, Head of Asia, TowerXchange 9:50 Keynote address < Suresh Sidhu, CEO, edotco Group 10:15 Networking coffee break 10:45 Executive panel: India < Moderator: Jonathan Atkin, Managing Director, RBC Capital Markets < Sudhir Prasad, Chief Operating Officer, Asia, American Tower < DS Rawat, Managing Director & CEO, Bharti Infratel < Tejinder Kalra, COO, Indus Towers < Sushil Kumar Chaturvedi, Director & CEO, Ascend Telecom Infrastructure < Tushar Kapadia, VP Strategic Initiatives, GTL Infrastructure Limited < Vijay Kumar Jain, Chief Operations Officer, TowerVision 11:45 Roundtable session I / Technology working group A (energy) 12:45 Networking lunch sponsored by 2:00 Keynote address < Bimal Dayal, CEO, Indus Towers 2:20 Executive panel: Myanmar < Moderator: Paul Carpenter, Managing Partner Asia, Hardiman Telecommunications < Vijay Watson, Country Managing Director, edotco Myanmar < Patrick Tangney, Co-founder & Director, Irrawaddy Green Towers < Philippe Luxcey, CEO, Apollo Towers < Sunn Aung Naing, Managing Director, National Tower Development 2:20 Streamed TFN content: Defining the business model for neutral host HetNet deployment 3:15 Strategic partner panel: site management and operations best practices < Mervi Hiltunen, Solution Manager, Abloy < David Meganck, Chief Operating Officer, Acsys < Navy Wu, Telecom Energy Towerco Business Director, Huawei < Ankur Lal, CEO, Infozech < Maurice Barnes, Chief Operating Officer, Tarantula 3:40 Networking coffee break sponsored by 4:10 Roundtable session II / Technology working group B (site design) 5:15 Close of day one and drinks reception sponsored by 7:30 Networking dinner (registration required) 53 TowerXchange Issue 21

54 TowerXchange Meetup Asia preliminary agenda Marina Bay Sands, Singapore December 2017 Wednesday, 13 December Day Two 8:30 Registration and morning coffee 8:50 Opening remarks 9:00 Keynote address < DS Rawat, Managing Director & CEO, Bharti Infratel 9:20 Co-creation in the 5G era: Connecting dreams, for a richer future with 5G < Shigeo Nomura, Manager R&D Strategy Department, NTT DoCoMo 9:40 Executive panel: The Future Network: What role will small cells play in the future of cellular networks? /Towerco deployment of small cells and DAS < Moderator: Sue Monaghan, CEO, Small Cell Forum < Manoj Kumar Singh, CTO, Indus Towers < Alka Asthana, CTO, Bharti Infratel < Tom Andrews, Managing Director, Aird Towers < Gayan Koralage, Director of Strategy & Commercial, edotco 10:20 Networking coffee break sponsored by 10:50 Executive panel: Opportunities and investibility of the Asian tower market < Moderator: Brandon Amber, Managing Director, Palladium Partners < Manish Kasliwal, VP and Chief Business Officer, Asia, American Tower < Carson J Wolfer, Director of M&A, edotco Group < Ted Manvitz, CFO, IHS Towers < Tucker Grinnan, Executive Director, Asian TMT Research, J.P. Morgan Asset Management < Sachin Gupta, Managing Director, New Street Capital Asia < Ted Manvitz, EVP & Chief Strategy Officer, IHS Towers 11:45 Strategic partner panel: lessons learned in energy management < Shalini Lagrutta, Sales Director, Flexenclosure < Hirokazu Kimura, Regional Manager - APAC, Industrial Battery Sales Department, GS Yuasa < Boyan Lazarov, Head of Telecom Division, METKA IPS < Khaled Habbal, VP & COO, IPT PowerTech < Andrew Kempster, Global Sales Director, Redflow 12:05 Roundtable session III / Technology working group C (site monitoring) 1:05 Networking lunch 2:00 Keynote address < Masahiko Nanri, Manager and Project Leader of LTE Small Cell, CPE and SON Development, SoftBank 2:20 Executive panel: Indonesia < Moderator: Gulfraz Qayyum, Managing Director, Citigroup < Tomy Sudiwiyono, Tower Management Group, Indosat Ooredoo < Steve Weiss, CFO, Protelindo < HS Lim, CEO, Putra Mulia Telecommunication < Nobel Tanihaha, Director, STP < Nidhi Dhruv, Vice President Senior Analyst, Moody s Investors Service 3:05 Roundtable session IV / Technology working group D (small cells/das) 4:05 Networking coffee break 4:30 Executive panel: Bangladesh and Pakistan < Moderator: Carlos Katsuya, Chief Investment Officer & Head TMT Asia & EMENA, IFC < Md. Mainur Rahman Bhuiyan, Director and Head Infrastructure Business, Grameenphone < Shah Faisal S. Khattak, Head of Infrastructure Development, Telenor Pakistan < Manish Kasliwal, VP and Chief Business Officer, Asia, American Tower < Arif Hussain, Country Managing Director, edotco Pakistan < Gayan Koralage, Director of Strategy & Commercial, edotco Group 4:30 Streamed TFN content: Panel discussion: Bleeding edge heterogeneous network solutions - South Korea, Japan, Singapore, India 5:20 Close of TowerXchange Meetup Asia 2017 More speakers to be joining us in the coming weeks! 54 TowerXchange Issue 21

55 TowerXchange Meetup Asia 2017 Roundtables Confirmed roundtables and moderators: Country focus: Australia & New Zealand < Tom Andrews, Managing Director, Aird Towers Country focus: Cambodia < Phillip Wong, Managing Director, edotco Cambodia Country focus: China #1 < Hu Gang, GM of Finance & Administration, Guodong Networks Country focus: China #2 < Guo Fang, VP of Infrastructure and Development, Miteno Country focus: Indonesia < Kingston Pang, Managing Director, Redpeak Advisers Country focus: Pakistan < Arif Hussain, Country Managing Director, edotco Pakistan < Shah Faisal S. Khattak, Head of Infrastructure Development, Telenor Pakistan Country focus: Myanmar < Patrick Tangney, Co-founder & Director, Irrawaddy Green Towers Country focus: Sri Lanka < Mohan Villavarayan, Country Managing Director, edotco Sri Lanka Country focus: Vietnam < John Seet CEO, SEATH (OCK) In-building solutions (IBS): market evolution and lessons learned from Japan and Vietnam < Atsushi Tanaka, Director Representative, JTOWER CFO Forum < Thivanka Rangala, CFO, edotco Group Tower monetisation: charting your strategic sale and/or IPO path < Kingston Pang, Managing Director, Redpeak Advisers Lessons learned on reducing cost of towerco financing < Sander Hamersma, Managing Director, Head of TMT Asia Pacific, Mizuho Bank Pricing considerations and common pitfalls to avoid with your commercial negotiations < Simon McFadden, GM Sales, Product & Business Development, Broadcast Australia Regulatory challenges in India's tower industry and the ways forward < Tilak Raj (TR) Dua, Director General, TAIPA Building a holistic towerco catalog: RAN sharing and alternative solutions < Subhash Devan, COO, Naza Communications Business diversification: do towercos want to be ESCOs? < Ir Nalini Subramaniam, Director of Engineering, edotco Group < PT Pawar, Head of Energy Management, edotco Group Tower maintenance: standards and best practices in China < Liu Wendong, VP, Beijing Rui Lan Zuo Yue How towercos and MNOs can prepare for 5G < Chuan Wei Lim, Partner, Analysys Mason Operational and management excellence to successful tower monetisation < Charles Green, Executive Chairman, Helios Towers Africa Successful green deployments in the tower sector < Sushil Kumar Chaturvedi, Director & CEO, Ascend Telecom Infrastructure Accelerating build-to-suit, construction and colocation < Spencer Crawford-White, Chief Technical Officer, Delmec Strengthening structures versus optimising equipment < Spencer Crawford-White, Chief Technical Officer, Delmec Case studies on reducing OPEX costs at bad-grid and off-grid sites < Elena Gatcheva, VP Strategic Partnerships, METKA IPS What factors govern the number of towercos a market can sustain? Competition, M&A and consolidation dynamics < Enda Hardiman, Managing Partner, Hardiman Telecommunications In-House Counsel Forum < Robert Dixon, Partner, Vinson & Elkins RLLP Verification and validation of on-site activities leading to quantified time saving, OPEX reduction, asset utilization and accurate billing < Ankur Lal, CEO, Infozech Tips in choosing and deploying a site and portfolio management system < Adhiraj Singh Bisht, Account and Sales Director, Asia Pacific, Tarantula Optimising towerco and MNO workforce management and site access control < V Bhaskar Babu, India Vice President Sales, Business Development Global Accounts, Acsys How rating agencies analyse towercos < Nidhi Dhruv, Vice President Senior Analyst, Moody s Investors Service 55 TowerXchange Issue 21

56 Technology working groups Designed to enable peer-led evaluation of technologies by tower owners themselves, seats at the central table are strictly reserved for executives from MNOs and towercos or invited event sponsors and exhibitors. Our priority for these sessions is to elicit the requirements and experiences of MNOs and towercos to learn from their challenges and successes. If you are an MNO or towerco in attendance we invite you to take part in these highly constructive debates as we map out product limitations, requirements and trials, and act as a focused industry task force. Similarly, if you are in the process of evaluating different suppliers prior to making a procurement decision, the working groups will equip you with vital information and key questions to ask when assessing different vendors. After information gathering from the MNOs and towercos, we invite selected vendors to enter the discussion, succinctly sharing their perspectives and tailored solutions/product developments to address some of the issues raised. All vendors will be notified prior to the event as to their eligibility to join this session. Contact Annabelle Mayhew, Chief Commercial Officer at: amayhew@towerxchange.com to get involved. A: Energy management and optimisation < Moderator: Gordon Porter, Former CEO, American Tower Opco (Nigeria, Uganda and Ghana) < Rajesh Bansal, National Head of Energy, Indus Towers < Alka Asthana, CTO, Bharti Infratel < Steven YuXuan, Head of Collocations & Technical Advisor, Protelindo < Handi Prabowo, Head of O&M, Protelindo < Ir Nalini Subramaniam, Director of Engineering, edotco Group < PT Pawar, Head of Energy Management, edotco Group B: Site design and improvement < Toshiharu Nakamura, Manager, Communication Technology & Engineering Division, MPT Joint Operation < Ir Nalini Subramaniam, Director of Engineering, edotco Group < Sander van Litsenburg, Head of Engineering & Quality, Health, Safety, Protelindo C: Site monitoring, management, and optimisation < Sushil Agarwal, National Head Operations & Deployment, Indus Towers < Ashok Muthu, Head of Service Excellence, edotco Group < Anita Anwar, Head of Property, Protelindo < Handi Prabowo, Head of O&M, Protelindo D: Small cells and DAS < Toshiharu Nakamura, Manager, Communication Technology & Engineering Division, MPT Joint Operation < Steven YuXuan, Head of Collocations & Technical Advisor, Protelindo < Ir Nalini Subramaniam, Director of Engineering, edotco Group More towerco and MNO representatives to join us! 56 TowerXchange Issue 21

57 Regulatory focus group: Characterising and tackling threats to the independent towerco market globally regulatory departments to join a focus group designed to look at some of the emerging threats to the towerco industry and how we can collectively, as industry, look to address them. This is the second in a global series of regulatory working group meetings, aggregating to create a global knowledge and best practice sharing resource for regulatory, legal and government liaison professionals within towercos. Key discussion points: Tuesday 12 December 2017 In order to facilitate open dialogue, this session is for towerco management teams exclusively and will be held under Chatham House rule. Globally, TowerXchange track 275 towercos. It s a small community and a community often poorly understood by third parties it comes into contact with; from landowners and local communities to regulators and government departments. Often incorrectly grouped with spectrum holding operators and increasingly subjected to new taxes and local ownership stipulations, such classification and treatment of the sector presents a threat to the towerco business model. This December we invite towerco management teams and legal and < Regulatory overreach being observed in the towerco sector globally and the perception on how this could evolve < Challenges dealing with multiple federal and local jurisdictions and the taxes and permits imposed < The level and structure of engagement with regulators in participant jurisdictions: is this currently working? < What key issues are keeping regulatory and legal teams up at night? < Experience of working with local telecom associations: How extensively do MNO and towerco needs converge? Is there are a need for multiple local or regional towerco bodies? < What outside support / insight would be useful in tackling some of the challenges raised? < How are towercos licensed / how should they be licensed? Host: Eric Crabtree, Chief Investment Officer, IFC 57 TowerXchange Issue 21

58 TowerXchange s analysis of the independent tower market in Europe Figure one (a): Europe s 18 telecom and broadcast towercos with >1,000 assets Deutsche Funkturm Cellnex First Tower Company National Tower Company Telxius INWIT Global Tower Arqiva TDF MTS Towers CETIN American Tower EI Towers Russian Towers Rai Way Vertical Wireless Infrastructure Group RTRS Open Tower Company Ceske Radiokomunikace Towercom AS 7,423 8,933 14,000 13,000 11,000 2,350 2,804 10,945 8,067 1, ,600 7,728 5,500 4,800 2,206 2,472 3,300 3,100 2,300 2,300 1, , HighTel Towers Axion 34,700 4,100 2, * *30 towers subject to close of Alticom deal Figure one (b): Europe s telecom and broadcast towercos with <1,000 towers Digita Service Telecom Teletower Shared Access Towercom Ltd ESB Telecoms Emitel 200 Sotka Vysotok Office of Public Works Digea RN Cignal Spyder Hibernian / Britannia Towers CIE Logycom Highpoint (Obelisk) Falck 47 Konsing Group Germany Spain Italy UK Turkey Ukraine France Czech Republic Ireland Russia Netherlands Poland Denmark Slovakia Finland Kazakhstan Serbia Austria Greece Lithuania Albania Switzerland Belarus Estonia Latvia Turkish Republic of Northern Cyprus CALA Österreichischer Rundfunk Alticom 30 Telecentras 30 Levira Source: TowerXchange The headline news for European towers in Q417 is Arqiva s ongoing search for a solution to its debt pile. At the time of our last quarterly update, Arqiva was looking close to a sale to a consortium of strategic buyers, but in late October 2017 they announced an IPO and in early November cancelled it again. It s telling that the time from IPO announcement to cancellation was so short, implying that Arqiva s valuation was not closely aligned with the market s. There s no doubt Arqiva s new management team has made great improvements but the cost of debt has swallowed up profit and put them further into the red each year. The markets excitement about telecom towers and small cells has been offset by uncertainty about the debt pile and the longevity of Arqiva s broadcast core. Arqiva isn t the only broadcast asset looking for a new owner at the moment. France s NRJ is hoping to raise as much as 300mn from the sale of Towercast, their 500-tower broadcast asset, and Finnish broadcast towerco Digita is also believed to be in the market. To date there s been a valuation gap between broadcast assets and telecoms towers, but, as Cellnex s acquisition of Alticom proved, broadcast towercos can be a good platform to move into adjacent verticals such as data centres or IoT and may attract higher prices with the right bidders. It s these new verticals, such as data centres, network virtualisation, small cells and fibre which are driving the next big shift in the European 58 TowerXchange Issue 21

59 tower industry, as the most progressive towercos on the continent gear up for a shift from real estate providers to a service model, and prepare to offer services across both passive and active infrastructure for the first time. You can find out more about European tower leaders vision at the 3rd TowerXchange Europe Meetup. Click here for more information. The current state of play in Europe Let s review the current state of the European tower industry country by country. A couple of caveats before you start reading: firstly, TowerXchange includes Russia, the CIS and former CIS States in our definition of Europe. Secondly, our definition of a tower is slightly different in Europe when presenting tower counts, we are always interested in sites and structures that can accommodate multiple tenants, and which towercos might consider investible. While our tower statistics on emerging markets focus on ground based towers, in Europe we are equally interested in counting rooftop sites, but we exclude multi-tenant DAS, microcells and small cells from headline counts, at least until a single small cell can be shared and monetised to multiple tenants. TowerXchange tower counts are the result of qualitative market research and the aggregation of our own and other research firms work as such they should be treated as estimates. We assert copyright over data sourced to TowerXchange you will need to request our permission to quote our data and there may be a charge to do so. Figure two: breakdown of ownership of Europe s ~600,000 telecom tower and rooftop structures as at the end of Q ,706 58,600 72, ,750 CIS Until this point the CIS has been relatively low on tower activity. In 2017 VEON decided to bring over 12,000 towers to market in Ukraine, Kazakhstan, Armenia and Georgia but this deal appears to have been quietly scrapped after the sale of VEON s Russian towers was cancelled in May Ukraine Emerging from recession after political instability, Ukraine is a growth market with 3G yet to be extensively rolled out and 4G still on the horizon, meaning a potential 2,500 PoP could be added in the next three years. In 2016 Turkcell carved out and transferred 811 lifecell towers to UkrTOWER, the local subsidiary of their captive towerco Global Tower. UkrTOWER s current site count is 1,201, including a number of MNO captive JV infraco Operator-led infraco Independent towerco Source: TowerXchange in building solutions, and the company boasts a healthy tenancy ratio. Outside of UkrTOWER, there are multiple structures available for colocation on the market, so there is a significant margin for error in our site counts. While all parties agree VEON has around 3,500 sites, around 60% of which are rooftops and 40% ground based towers, our best estimate is that Kcell owns around 5,500 towers and rooftops, with Altel and Tele2 combining a total of around 4,200 towers and rooftops. Third party structures make up around 30% of Kazakhstan s mobile networks, and total at least 1,500, perhaps significantly more. Georgia and Armenia consist of around 3,000 and 2,200 sites respectively. Around 65% of sites are rooftops, but less alternate site typologies are used than in Kazakhstan: just a handful of broadcast tower co-locations. 59 TowerXchange Issue 21

60 Belarus Global Tower has recently taken control of Turkcell s towers in Belarus, where they have owned subsidiary BeST since Global Tower currently operates 828 towers in the country under the name BelTower. Czech Republic With an ongoing project to decommission 35-40% of the country s parallel infrastructure, TowerXchange estimate there are around 10,200 active cell sites in the Czech Republic s telecom network, of which only around a quarter are ground based towers, with the balance being rooftops and IBS. CETIN (Česká Telekomunikační Infrastruktura), an infraco carved out of O2, has 4,800 towers and 750 micro sites. CETIN s business model includes all the physical assets which used to belong to O2, including active equipment and 38,000km of fibre, the MNO having been acquired by PPF and the infrastructure business spun off. CETIN absorbs O2 s RANsharing venture with T-Mobile, which operates under the MORAN model. Denmark Infrastructure sharing is second nature in Denmark, where Telia and Telenor formed active infrastructure sharing joint venture TT-Network. There are around 4,500 towers in Denmark, with colocation management agreements managed through KPR Consult. Falck operates a small towerco in the country with around 75 towers, while Teracom operates the country s broadcast towers. There is little possibility of sale and leasebacks in Estimated count of owned towers and rooftops 4,000 Kyivstar (VEON) Vodafone (MTS) lifecell (Turkcell) Ukraine 1,000 1,201 2,000 6,000 7,400 TriMob / UkrTelecom UkrTOWER Other third party sites Denmark in the short term, but don t discount the possibility in the medium to long term, with TT Networks working to streamline operations quite possibly in advance of a divestiture. Finland There are around 10,000 towers in Finland, around half of which are owned by incumbent operator Elisa, with the balance distributed across the other MNOs Telia and DNA. An active infrastructure sharing joint venture between Telia and DNA increases the efficiency of providing coverage to the sparsely populated Northeastern region. Digita operates Finland s broadcast network, with 27 high masts and 530 smaller masts and is believed to be gearing up for a sale in late 2017/early Kar-Tel (VEON) Kcell (Fintur) Altel+Tele2 Kazakhstan 1, ,200 3,500 5,500 Kazakhtelecom Other third party sites Source: TowerXchange France There are just over 25,000 ground based towers in France, of which 55% remain operator-captive. The remainder are divided among three independent towercos: broadcast-telecom hybrid TDF has 4,865 telecom towers, ATC Europe (formerly FPS Towers) has 2,482, and Cellnex have bought into the French market with 2,300 existing Bouygues towers and a further 1,200 in the pipeline. In addition to the 25,000 ground base towers, there are a further 7,500 alternative ground based structures and ~15,000 rooftops. TDF and ATC France currently provide 10% of those rooftop sites, but both are positioning themselves to play a larger role in this segment of the ecosystem, and Cellnex s most recent acquisition will make a total of around 1,450 new rooftops available for colocation. 60 TowerXchange Issue 21

61 In December 2016 American Tower announced the acquisition of FPS Towers for 697mn, a deal which closed in February 2017, gaining them a significant foothold in the market and putting them into competition with French incumbent tower owner TDF. FPS s ambitious plans for the French market are expected to be capex-heavy over the next two to three years, and we will watch the dynamic between TDF, Cellnex and American Tower develop with interest over the coming months. Cellnex fairly quietly acquired 500 towers from Bouygues Telecom in two transactions in 2016, the first of which was for 230 towers at a valuation of 80mn and the subsequent tranche for 270 towers for 697mn, and in January 2017 they signed a deal with the aforementioned governing the transfer of 1,800 existing sites and 1,200 new build towers for a total of 354mn, giving them a good foothold in the market and a solid anchor tenant. What is the breakdown of the high sites used by the French telecom industry? And who owns them? There has also been recent activity in the broadcast vertical of the French market. With TDF acquiring ITAS for a reported 100mn (420 towers) and NRJ seeking a buyer willing to part with 300mn for their 500-tower asset Towercast. Germany The German tower market may be characterised by slow growth, but it is entering a period of rapid change. Telefónica transferred 2,350 German towers into their towerco Telxius in a deal valued at 587mn. After pulling their IPO due to low investor interest, Ground based towers 1. Orange 8, SFR 5, TDF 7, ATC France (formerly FPS Towers) 2, Cellnex (acquired from Bouygues) 4, Free Other structures not belonging to towercos or MNOs 2, Other ground based structures 7,500 Rooftops structures with telecom equipment 9. Rooftops sites sourced directly by MNOs 13, Rooftop sites provided by TDF Rooftop sites provided by FPS Towers Rooftop sites sold to Cellnex 1,450 Rooftops without telecom equipment installed, but for which a towerco has a commercialisation agreement: 13. TDF 2, FPS Towers 20,000 Sources: TowerXchange research, ANFR, FPS Towers, TDF 61 TowerXchange Issue 21

62 Estimated breakdown of ground based towers and rooftops in Germany Telefónica has since sold a 40% stake to investor KKR for 1.3bn. Meanwhile, Deutsche Telekom were rumoured to be gearing up to monetise their towerco Deutsche Funkturm, but with enthusiasm for an IPO cooling after the cancellation of similar flotations recently, and no word of a strategic sale, it seems they may hang on to the asset a little longer. Deutsche Funkturm operates over 34,700 sites in Germany, of which around 8,000 are ground based towers with the rest being rooftops. Subsidiary Omega Towers manages 7,700 further sites (mostly rooftops) transferred from Telefónica in July Ground based towers: 1. Deutsche Funkturm 8, Vodafone 4, Telxius 2, American Tower 2,206 Rooftops: 5. Deutsche Funkturm 15, Omega Towers 7, Vodafone 18, Telefónica 11,968 Source: TowerXchange presentation, TowerXchange and RBC Capital Markets data Deutsche Funkturm report that they are building a significant number of new macro locations per year ; with three to four years of LTE rollout still to come, followed by 5G, there are drivers for modest organic growth. We recently discovered that the jump in American Tower s German site count in Q216 was due to the very low profile acquisition of 186 transmission towers from German broadcaster WDR. Although the cost of these towers was not publicised, we estimate that American Tower probably paid around 35-50mn for the towers. Rumours that they were seeking third party investment turned out to be grounded, with Dutch pension fund PGGM paying 250mn for a 49% stake in their German operations, resulting in a joint venture, ATC Europe which has already made an acquisition in the shape of France s FPS Towers. With Deutsche Funkturm cooling on the idea of an IPO, it may be that there is potential for American Tower to consolidate their position in the German. Just 16,542 of Germany s 70,136 cell sites are ground based towers the rest are rooftops. There are a total of around 23,000 co-locations in Germany, most being on Deutsche Funkturm and American Tower s ground based towers, with tenancy ratios estimated at 2.5 and 1.8 respectively. There are few co-locations on German rooftops as demands for supplementary payments from landlords ruin the economics. Greece While there are no independent towercos in the 12,000 site Greek market at present, tough economic conditions and the dominance of market leading Cosmote may prompt a sale and leaseback in the medium term. Cosmote s competitors Wind may have an appetite to monetise their towers, while the other MNO in Greece, Vodafone has less financial incentive. Joint venture infraco VICTUS Networks currently manages Vodafone Greece and Wind Hellas sites. There are around 10,500 tenants on VICTUS Networks 7,000 sites. Decommissioning could see VICTUS Networks site count fall to 6,000 and the tenancy ratio rise accordingly. 62 TowerXchange Issue 21

63 Broadcast towerco Digea owns 156 towers in Greece. Ireland 60% of Ireland s 4,000 cell sites sit in the hands of the country s three MNOs: Vodafone, Meteor and 3. A network sharing partnership between Meteor and O2 (Mosaic) is in place with 3 joining the alliance, putting downward pressure on current and prospective future tenancy ratios. With little prospect of sale and leasebacks in Ireland, the most likely source of tower transactions remains consolidation among the ten independent tower companies, broadcast operators and public sector players. Indeed, Irish towerco Cignal recently added over 30 towers to its portfolio through the acquisition of Cellcom. Who owns Ireland s 4,000 towers? , * *150 owned towers with additional ground lease income on 400 plots of land on which Cignal and 3rd party towers sit Source: TowerXchange 3 + O2 (Hutchison) Vodafone Meteor (Eir) Towercom Shared Access ESB Telecoms 2RN (RTE) Cignal* CIE Highpoint (Obelisk) Hibernian (Britannia) Wireless Infrastructure Group Italy With the merger of 3 and WIND now complete, and Iliad confirmed as a new entrant into the Italian market, all eyes are on how this will play out. Already, Iliad owner Xavier Niel, known as the enfant terrible of the French telecoms sector, is locked in a war of words with the incumbent operators, who fear the introduction of new business models and aggressive price wars. Although no set plan of action is in place for Italy s infrastructure, it s widely believed that Iliad s requirements will free up around 5,000 towers, which may well come to market in the coming months and which will be of interest to several parties. Who owns Italy s 47,218 telecom and broadcast sites? Telecom 2, ,000 INWIT Vodafone Cellnex 8,933 ~7,000 11,400 Hutchison Wind TowerTel Others 8,757 Broadcast 2,300 2,300 EI Towers Rai Way Source: TowerXchange 63 TowerXchange Issue 21

64 Currently, INWIT, Cellnex and EI Towers TowerTel lead the telecom tower market in Italy, where towercos own just under half the total sites, and where decommissioning may outstrip organic growth in the coming years. TIM retains a 60% equity stake in INWIT, with the balance having been floated on the Milan Stock Exchange in June 2015, and had initiated a process to sell some or all of their retained equity, however the process to monetise INWIT further has been halted, ostensibly because the TIM management team believes that several value adds have yet to reach fruition and are not yet reflected in INWIT s valuation. In the last year INWIT has decommissioned around further 200 sites, bringing their Q117 site count to 11,000. By the end of 2018, INWIT forecasts driving tenancy ratios to around 1.9, decommissioning 800-1,000 more sites, and building as many as 500 new sites, primarily for TIM s 4G rollout. The continent s largest pan-european towerco, Cellnex, has rolled up several small towercos in Italy, but the lion s share of their portfolio comes from the acquisition of Wind s towerco Galata, and their 7,377 towers, for 693mn in At the end of Q317, Cellnex operated 8,933 sites in Italy, with build-to-suit slightly outstripping decommissioning. Both INWIT and Cellnex remain bullish about the potential of small cells in Italy, highlighted by Cellnex s acquisition of CommsCon for 18.65mn in June The other key player in the Italian market is EI Towers, whose telecom-focused subsidiary TowerTel has built and acquired a portfolio of 700 telecom towers with an aggregate EV of up to 55mn, ~300 of which have been added through several small acquisitions. EI Towers continues to court a much bigger deal: the acquisition of Italy s other broadcast towerco, RAIWAY, which owns around 2,300 towers, again with some MNO tenancies. Consolidation would represent another opportunity to create significant efficiencies through decommissioning around 60% of Italy s broadcast towers are in overlapping locations. This merger is believed to be back on the cards after positive comments from Italian officials, despite some legal questions being raised when the deal was first mooted in The Netherlands Only 20% of The Netherlands 15,204 cell sites are macro cell sites, with the balance being rooftops, DAS and small cells. Cellnex has acquired Protelindo s 261 Dutch towers for 109mn, (and is now marketing the towers under the name Towerlink Netherlands ), and a further 460 as part of their deal with Shere Group. There is no duplication between the two portfolios. Following the small scale acquisition of local towers, Cellnex now owns 758 towers, or 24% of the macro towers in The Netherlands, where 1,781 (59%) of the country s 3,031 ground based towers are already owned by towercos. In addition, Cellnex s recently announced acquisition of Alticom will give them a further 30 towers in the country, as well as securing them high-quality infrastructure to support 5G rollout in the Netherlands. Open Tower Company has around 850 towers, plus access to over 1,000 electricity pylons and is rumoured to be looking for buyers in UK headquartered Wireless Infrastructure Group is also present in The Netherlands. KPN sold their towers in four tranches between , while Vodafone and T-Mobile retain around 1,250 towers between them. New entrant fourth MNO Tele2 has few if any towers, preferring to rely on co-location and a RANsharing deal with T-Mobile. Poland There are around 22,000 telecom structures in the Polish network, a little under half of which are towers, with the rest being rooftops. Poland has more subscribers per tower than the majority of other countries in Europe, indicating both potential demand for more towers, and indicating the extent of decommissioning that has already taken place in the country. A balanced, competitive MNO market amplifies the attractiveness of the Polish market to towercos. T-Mobile and Orange share passive and active infrastructure in Poland through joint venture NetWorkS! Initiated in 2011, the partnership was intended to last 15 years, but there has been 64 TowerXchange Issue 21

65 Estimated tower ownership and rooftop usage in The Netherlands 12, * 200 Open Tower Company Cellnex acquisitions from Shere Group and Protelindo Other towercos (inc WIG) Vodafone/Liberty Global T-Mobile Rooftops speculation that one or both party might wish to exit the venture and sell towers to a third party. While NetWorkS! operates around 13,000 towers, the assets remain on T-Mobile and Orange s own balance sheets. Outside of the NetWorkS! venture, as little as 2% of Poland s towers are shared between multiple MNOs. Alinda Capital Partners owned Emitel is the Polish broadcast towerco, operating 377 sites and diversifying into telecom. Turnkey infrastructure provider ECS is leveraging new capital from CEE Equity Partners to move into tower ownership and leasing. Mobile tower ownership in Portugal 4,700 1,300 3,000 2,500 *Subject to completion of 30 Alticom towers Source: TowerXchange MEO Vodafone NOS Alternate site typologies Portugal The Portuguese tower market has been dormant since rumors of a prospective sale and leaseback by Portugal Telecom over two years ago. Little has been heard since Altice acquired PT in However, Portugal has started to appear on the radar of one of Europe s largest towercos a market to watch! Romania Romania hosts a competitive four MNO market, with no independent towerco activity to date. Orange and Vodafone Romania operate a joint venture infrastructure sharing company called Netgrid Telecom (formerly Ovidu Telecommunications). Source: TowerXchange Despite being one of the poorest countries in Europe, ARPU is relatively high in Romania at 65 TowerXchange Issue 21

66 Estimated breakdown of ground based towers and rooftops in Russia around 20, which means there is little financial imperative for the country s MNOs to monetise their towers. Russia TowerXchange estimate there are around 58,900 ground based towers and 65,400 rooftop structures across the vast Russian landscape. Each of Russia s four MNOs is utilising tower company business models, but in contrasting ways. Veon s creation of National Tower Company, into which they have injected their ~13,000 Russian towers, was hailed as a precursor to the sale of the assets to an independent towerco. However, 1 2 Ground based towers: 1. First Tower Company (MegaFon) 14, National Tower Company (VEON) 13, MTS Towers 11, MTS retained towers 5, Tele2 Russia 9, Russian Towers 3, Vertical 2, Service-telecom (including acquisition of Link Development) Sotka Vysotok Other towercos Rooftops 65,400 Source: TowerXchange the company decided to pull the plug on the sale process in May 2017, leaving it unclear whether the towers would be reabsorbed into the opco or would continue to operate as a towerco in competition with the independent players in the market. MegaFon has carved out First Tower Company with a possible view to a future sale to a strategic buyer. MTS has injected part of their portfolio, 5,500 towers, into MTS Towers with a view to making the towers available for co-location, but has declared an intent to retain ownership of the venture. Meanwhile, rumors persist that Tele2 Russia are selling their ~9,000 towers. Leading local towercos Russian Towers and Vertical, as well as the Russian Direct Investment Fund, are all expected to be prominent bidders as Russia s towers come to market, with Tele2 s towers the most likely up for grabs. Russian Towers is also undergoing a period of sustained organic growth, growing from ~2,300 towers to ~3,100 over Newcomer Service-Telecom is also keen to expand rapidly and has recently announced the acquisition of Link Development, a Russian towerco with around 200 towers in the St Petersburg region. A new Russian towerco has also recently come onto the TowerXchange radar: Stoka Vysotok. Based in Tatarstan, Sotka Vysotok is believed to have around 200 towers centred mainly around the capital, Kazan. Serbia Managed service provider Konsing Group, which also owns a portfolio of 47 sites, counts all three MNOs among their client base (Telekom Serbia, Telenor and Telekom Austria). Slovakia Broadcast towerco Towercom, which has around 700 sites, was acquired by Macquarie Infrastructure Fund in Towercom turns over in excess of 50mn annually and includes O2, T-Mobile and Orange among their customer base. Towercom completed the roll up of TBDS, RK Tower and Rádiokomunikácie in Spain 39% of the 48,997 broadcast and telecom towers and rooftops in Spain are owned by towercos, led 66 TowerXchange Issue 21

67 Estimated ownership of Spain s 48,997 telecom and broadcast sites Telenor and 3 s 3G network outside of Sweden s largest cities. 7,423 12, ,000 17,500 by Telefónica Telxius and European market-maker Cellnex. One is headquartered in Madrid, the other Barcelona, so the battle for tenancies could be as fierce as any El Classico! Cellnex has seen fast growth in its telecoms arm, deriving 385mn of its 707mn revenue from telecoms, an increase of 27% yoy. In 2016 they expanded from two to five countries, spending 668mn on the acquisition of Commscon in Italy, Protelindo Netherlands, Shere Group in the UK and Netherlands and 500 towers from Bouygues telecom in France. In 2016, Telefónica transferred 11,000 Spanish towers and rooftops to their towerco Telxius for an undisclosed sum ahead of ahead of their planned IPO, however, the IPO was scrapped in October 2016 due to lack of interest in the market. Telefónica has Cellnex Axion Orange Telxius Vodafone Source: TowerXchange since completed the sale of a 40% stake in Telxius to investment firm KKR for 1.3bn. AMP Capital has agreed a deal to acquire 100% of Axion from current owners Antin Infrastructure. Axion operates 584 broadcast towers, with some telecom co-location, 70% of which are in Andalucía. Sweden There are no independent tower companies in Sweden, largely because network sharing is efficiently managed through three network sharing joint ventures. SUNAB is a G joint venture between Tele2 and TeliaSonera which runs the MOCN RANsharing model; Net4Mobility, another joint venture, runs Telenor and Tele2 s combined 2G and 4G network; and 3GIS is a joint venture running Teracom operates Sweden s broadcast tower network. There are a little over 10,000 sites in Sweden. Switzerland Cellnex acquired 2,339 towers from Sunrise in May 2017, creating Switzerland s first fully fledged towerco Swiss Towers AG. Working with partners Swiss Life and Deutsche Telekom Capital Partners, the Cellnex-led consortium paid 430mn for roughly 20% of Switzerland s 11,300 towers, mostly in rooftop locations. With future build to suit as well as 200 DAS nodes agreed in the deal, Cellnex sees a chance for significant growth through data usage and 5G rollout in this central European country. Turkey Turkcell, Turkey s largest mobile network operator, announced plans to list their towers unit, Global Tower, in April However in October 2016 Turkcell decided to postpone the IPO at the eleventh hour, citing global political uncertainty and the possibility of cyber attacks. TowerXchange believes that Turkcell planned to list 25% of the business and was perhaps hoping for a more Cellnex-like valuation multiple than was likely to be achieved. With Turkcell making ambitious plans to support revenue growth through expansion into overseas markets, an IPO or sale is certainly not off the agenda, however, and we believe there may be considerable value in Turkcell identifying a strategic partner who could support their expansion plans. 67 TowerXchange Issue 21

68 Figure four: Estimated tower and rooftop counts for selected markets in Europe Lithuania 1,226 Georgia 3,000 Denmark 4,105 Norway 7,035 Finland 9,576 Estonia 530 Latvia 879 Armenia 2,200 Ireland 4,000 Portugal 6,800 Sweden 8,090 Czech Republic 10,200 Greece 12,000 Netherlands 15,204 Kazakhstan 15,400 Ukraine 21,600 Poland 22,000 UK 38,500 Italy 47,218 France 47,347 Spain 49,000 Russia 58,900 Germany 70,136 Source: TowerXchange Established in 2006, Global Tower has 8,067 ground based towers among a portfolio of over 23,000 sites. Of these macro towers, TowerXchange believes that Global Tower owns around 3,400 and leases around 2,390 from Turkcell, for which they only receive revenue from co-locations. In addition they manage a portfolio of around 2,215 towers on behalf of Turkcell, for which they just receive maintenance fees. Turkey is also home to one of the world s largest government-owned universal service networks, called Universal Services Project and implemented by the Ministry of Communication and Transportation. Phase one of the project was auctioned in 2011, with Turkcell implementing 1,100 rural sites following a successful bid. Phase two was recently auctioned and will see Vodafone and Turk Telekom creating a joint venture to build a further 2,500-3,000 RANsharing sites in rural areas. 68 TowerXchange Issue 21

69 Major European towerco equity deals and listings since 2016 Source: TowerXchange Year Seller Entity and # towers Buyer/Stock Exchange Equity% Deal value in 2017 Telefonica Telxius 16,000 KKR 40% 1,300,000, American Tower American Tower Germany 2,197 PGGM 49% Undisclosed 2016 Antin Infrastructure Partners Axion 584 AMP Capital 100% Undisclosed 2016 New equity investment Wireless Infrastructure Group 2,000 3i Investments Undisclosed 300,000, Telecom Italia INWIT 11,200 MIB 40% 875,300, Abertis Cellnex 15,091 MCE 66% 2,138,000, Coillte Telecoms assets 300 InfraVia Capital Partners 100% 70,000,000 Who owns/operates the UK s 36,000 active cell sites? Co-locations CTIL 12,000 Independent towercos 12, Shared MBNL 12,000 Source: TowerXchange United Kingdom The UK has a tower market structure unlike any other in the world. Independent towercos, headed by Arqiva, Wireless Infrastructure Group and Shere Group (recently acquired by Cellnex), own 38% of the 38,500 active towers in the UK. The balance are contained within two joint venture infracos: CTIL, which operates Vodafone and O2 s network (Telefónica), and MBNL, which performs a similar function for EE (now BT) and 3 (Hutchison). CTIL and MBNL are both the primary clients of the UK s independent towercos, and site sharing businesses in their own right. Their business models differ in that the tower assets are actually on CTIL s balance sheet, while MBNL is a management company with the assets retained by the MNOs. CTIL is a passive infrastructure sharing play, while MBNL s model extends to active infrastructure and transmission sharing. When the merger between O2 and 3 was mooted, it seemed that the realignment of partnerships might create a window to monetise one or both JV infracos, but in the aftermath of the EU vetoing consolidation, it s very much business as usual in the UK tower market. Not that business as usual is uneventful: the UK is home to one of the largest decommissioning programmes on the planet, while CTIL and MBNL are also leading the rollout of 4G. The UK s broadcast tower operator Arqiva has been through many changes of identity and ownership (BBC, Crown Castle, National Grid to name a few), and was initially believed to be close to closing a sale to a consortium of buyers led by Brookfield, before a short-lived attempt at an IPO in Q417. It remains to be seen whether Arqiva will revisit the option of a strategic sale, or give themselves some breathing room to try and show that their improving EBITDA is sustainable in order to close the gap between their expectations and market valuation 69 TowerXchange Issue 21

70 European tower deals since 2008 Year Country Seller Buyer Tower count Deal value Cost per tower Deal structure Netherlands Netherlands Switzerland France France Germany France UK & Netherlands France France Netherlands Germany Ukraine Spain Ireland Germany Italy Italy Italy Spain France Germany Netherlands Netherlands Spain Netherlands Netherlands Mom and Pop Alticom Sunrise Bouygues ITAS TIM WDR Antin/FPS Shere Group Bouygues Telecom Bouygues Telecom Protelindo Telefonica Lifecell Telefonica Coillte Telefonica Tecnorad Wind (VimpelCom) TowerCo Telefonica/Yoigo Bouygues Telecom KPN KPN KPN Telefonica KPN KPN Cellnex Cellnex Cellnex, Swiss Life and DTCP Cellnex TDF American Tower American Tower Cellnex Cellnex Cellnex Cellnex Telxius UkrTower Telxius Cignal Deutsche Telecom/ Omega Towers EI Towers Cellnex Cellnex Cellnex FPS Towers American Tower Protelindo Shere Group Cellnex Open Tower Company Open Tower Company ,339 3, ,482 1, , , , , ,277 2,166 2, ,000, ,000, ,000, ,000, ,000, ,000,000 80,000,000 67,000, ,000, ,000,000 47,820,000 17,000, ,000,000 94,600, ,000, ,000, ,000,000 75,000, ,000,000 45,000, , , , , , , , , , ,787 58, ,866 93, ,226 90, , , , ,000 90,000 Company acquisition Company acquisition SLB SLB Company acquisition Portfolio acquisition Company acquisition Company acquisition SLB SLB Company acquisition SLB SLB SLB Portfolio acquisition Asset Transfer Portfolio acquisition SLB with 10% equity Company acquisition SLB SLB with 15% equity SLB SLB SLB SLB SLB SLB Totals / average 41,178 3,286,420, ,082 Source: TowerXchange 70 TowerXchange Issue 21

71 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 71 TowerXchange Issue 21

72 Europe News A roundup of tower news across Europe CIS: VEON pulls tower sales in CIS Following the cancellation of their Russian process in May, TowerXchange believes that VEON has also abandoned the sale of their passive assets in Georgia, Armenia, Ukraine and Kazakhstan. It is as yet unknown whether the operator has other plans for the infrastructure in these countries. Finland: Broadcast towerco for sale Broadcast towerco Digita, operates 556 towers in Finland and was acquired from France s TDF Group by First State Investments in Digita is believed to be among several European broadcast assets looking for a buyer in Read TowerXchange s interview with Digita CEO, Juha-Pekka Weckström France: Towercast sale could prove influential in the French market French media group NRJ has announced its intention to sell broadcast towerco Towercast, a competitor to TDF, which offers DTT and FM broadcast services via 500 sites across France. Declaring that Towercast isn t a fit with NRJ s core business, it s believed NRJ hopes to raise up to 300mn from the sale. Likely to attract a buyer with broadcast experience, both TDF and Cellnex may well be interested in these assets, which would allow them to consolidate in a very competitive market. Netherlands: Cellnex has acquired Dutch broadcast towerco Alticom for 133mn With just 30 high-rise sites across the country, the valuation for this portfolio has raised eyebrows, but Cellnex claim the long range assets (with good fibre connectivity) will prove critical in delivering low latency 5G networks, as well as consolidating their position in the Dutch market. Alticom s customers include all the telecommunication and broadcast operators in the Netherlands, with whom it has contracts ranging from 5 to 10 years. The deal increases Cellnex s tower count in The Netherlands to 788 and globally to 24,664. Portugal & France: Altice preparing to sell towers Altice, owner of French MNO SFR and Portugal Telecom, has signalled its intention to pay down debt through the sale of assets, including telecoms towers. With Portugal high on Cellnex s target list and Cellnex, TDF and ATC Europe all vying for market share in France, there will undoubtedly be significant interest in these assets. Spain, Germany & Americas: KKR secures full 40% of Telxius Telefonica has announced that private equity firm KKR has increased its 24.8% stake in tower and cable infraco Telxius by 15.2%, exercising the previously agreed call option over 38 million shares of the subsidiary. The sale is expected to close by the end of this year, meaning KKR will hold 40% of Telxius, with Telefonica retaining control. The deal will have no impact on consolidated results as it consists of the sale of a minority interest. Spain: Cellnex posts strong Q317 results Cellnex closed Q317 with revenues up 11% and EBITDA up 25%. The number of sites Cellnex operates grew by 29% yoy following a busy year of acquisitions for the European towerco. They showed strong growth with customer ratio per site increasing 4% like-for-like and the rollout of new DAS nodes growing 15% compared to the first three quarters of Organic growth is due to remain relatively stable with 45% of their 2,000 site decommissioning plan underway and contracted and 91% of their 2,200 new build target already committed. Cellnex have renewed their commitment to growth through acquisition, highlighting Ireland, Belgium, Germany, Portugal, Denmark and Austria as Tier One targets for expansion. UK: Arqiva cancels IPO UK infrastructure giant Arqiva, owned by a consortium including the Australian investment bank Macquarie and the Canada Pension Plan Investment Board, has most recently cancelled their decision to IPO, following the announcement on 23rd October that they planned a flotation on the London Stock Exchange. See TowerXchange analysis for more information 72 TowerXchange Issue 21

73 17-18 April, Business Design Centre, London Featuring New Street Research Tower Conference Meetup Europe 2018 The 3rd Annual retreat for European Tower experts To discuss your participation, contact Annabelle on or Silver Sponsors: Bronze sponsors: Supporting Organisation: 73 TowerXchange Issue 21

74 TowerXchange Meetup Europe 2017 at a glance Industry breakdown Number of towers owned by 2017 attendees in excess of 280, Towerco attendees representing 32 towercos Towerco 59 Investor 60 MNO 26 Energy Equipment 17 Small Cells 9 RMS/Monitoring 8 Managed Services 4 Backhaul 3 Static Assets 2 26 operator attendees from 12 MNOs Advisory/Consultants 18 Law Firm 6 Other 2 A packed out agenda and interactive sessions including: 46 interactive roundtable discussions 39 senior panellists on stage 5 dedicated small cell sessions 3 technology working groups 1 concurrent investor conference hosted by New Street Research 60 investors from 43 investment firms Seniority breakdown of 258 attendees Sponsors and exhibitors benefitted from: Exposure to 35,000+ industry experts through our event publications In depth technology working groups Access to specialist roundtable discussions Branding to over 250 attendees over 2 days CXO 28% SVP, VP, Partner 23% Director 23% Senior Manager 26% 74 TowerXchange Issue 21

75 TowerXchange Meetup Europe Agenda London Day one - April 17, 2018 Time Session Break outs 9:00 TowerXchange analysis of the European Market 9:45 CxO panel: Towers and wireless infrastructure :30 Debate: MNO-led towercos vs independent towercos, which adds more value? 11:00 Fireside chat with Tobias Martinez, CEO, Cellnex 11:20 Networking break 11:50 Roundtable Session 1 Buyer briefing 1 12:50 Lunch 13:50 Roundtable Session 2 Working Group 1 - towercos as a service 14:50 Networking break 15:20 Investor panel Buyer briefing 2 16:00 Landlords and leasing 16:45 Champagne discussion tables: Towers 2030; JV vs independent towercos; Broadcast towercos; Operational structuring; Investment; Tenants perspective; Women in towers; Is the neutral host business model still in vogue?; Is RANsharing feasible?; Is managed services the best solution for network development? 17:45 Informal Drinks reception 19:00 Dinner 75 TowerXchange Issue 21

76 TowerXchange Meetup Europe Agenda London Day two - April 18, 2018 Day and time Session Break outs 9:00 5G and future networks - a summary and a roadmap 9:45 The tenants perspective: MNOs, IoT, emergency services, aviation networks 10:45 Fireside chat with Olivier Huart, CEO TDF and Chair, EWIA 11:05 Networking Break 11:35 Roundtable Session 3 Buyer briefing 3 Rising Stars session 12:35 Lunch 13:35 Roundtable Session 4 Working group 2: Landlords and leasing 14:35 Networking Break 15:05 Broadcast towercos: is the gap between broadcast and mobile assets broadening or narrowing? 15:45 TFN Panel - Who will own and operate the networks of the future? 16:30 End of Meetup 76 TowerXchange Issue 21

77 TowerXchange roundtables Roundtable topics to include: < Company structuring < Asset management platforms < Smart metering < Beyond MNOs: tenant profiles in Europe < Engaging with MNOs < Landlords and leasing < HSE requirements < Drones < Rural connectivity - is there a business model that stacks up? < Where does infrastructure need to be to get to 5G? < How does the tower infrastructure need to adapt to accommodate small cells? < Can existing passive infrastructure cope with the loading needed for densification? < The UK market < France < Russia < Opportunities in CEE < Germany < Spain < Italy < Scandinavia < Exit strategies - IPOs in Europe < Talent management - recruiting and growing talent for towerco needs beyond TowerXchange Issue 21

78 What s new at Meetup Europe 2018? Champagne discussion forums Rather than waiting with your hand in the air at the end of a panel discussion, we re introducing discussion forums at the end of Day One, to allow you to put your questions directly to our panelists in an informal and off the record environment. Featuring the keynote panelists from throughout the event, as well as bringing together focus groups in specialist areas, including Women in Towers, this relaxed format will allow you to put your questions directly to the most senior experts in the industry. Working Groups Working groups are designed to address some of the key operational and strategic questions faced by European tower owners, such as how towercos are making the shift from a real estate to a service model and dealing with land owners and leasing. These in depth sessions will help drill into the opportunities as well as the stumbling blocks presented by these issues and participants will come away with agreed action points as well as insight into how the industry at large is approaching the issues. Rising Stars TowerXchange is committed to encouraging growth and diversity in the tower industry in all forms. With this in mind we re delighted to launch our first ever Rising Stars content in 2018, profiling the next generation of industry leaders in a dedicated editorial feature and inviting them to join the discussion and take part in our networking events at Meetup Europe. In addition to a Rising Stars editorial in Issue 22 of the TowerXchange Journal, we re running a dedicated Rising Stars session at Meetup Europe, led by Chuck Green, Co-Founder of Helios Towers Africa, Director of edotco and formerly of Crown Castle. Nominations are open to up-and-coming execs in towercos and MNOs. To find out more and nominate your Rising Star frose@towerxchange.com Buyer Briefings Introduced at our African event and immensely popular, Buyer Briefings allow tower owners to set out their needs and expectations to the suppliers and solutions providers in the ecosystem. Encompassing everything from power to small cell roll out, asset management to drones; and delving into procurement processes, the buyer briefings give tower owners a platform to challenge the industry to offer the solutions they need. 78 TowerXchange Issue 21

79 The Future TowerXchange Meetup Europe agenda London Day one, April 17, 2018 Time Session 9:00 TowerXchange analysis of the European Market 9:45 Towers and wireless infrastructure :30 Debate - MNO or towerco deployed HetNets? 11:00 Fireside chat with Tobias Martinez, CEO, Cellnex 11:20 Networking break 11:50 TFN roundtables 1 12:50 Lunch 13:50 TFN roundtables 2 14:50 Networking break 15:20 TFN Panel - How will the 5G revenue pie be split? Who will play which role? 16:00 TFN Panel 16:45 Champagne discussion tables: Towers 2030; JV vs independent towercos; Broadcast towercos; Operational structuring; Investment; Tenants perspective; Women in towers; Is the neutral host business model still in vogue?; Is RANsharing feasible?; Is managed services the best solution for network development? 17:45 Informal Drinks reception 19:00 Dinner 79 TowerXchange Issue 21

80 The Future TowerXchange Meetup Europe agenda London Day two, April 18, 2018 Time Session 9:00 5G and future networks - a summary and a roadmap 9:45 The tenants perspective 10:45 Fireside chat with Olivier Huart, CEO TDF and Chair, EWIA 11:05 Networking Break 11:35 TFN roundtable session 3 12:35 Lunch 13:35 TFN Roundtable session 4 14:35 Networking break 15:05 TFN Working Group: Overcoming small cell deployment and siting challenges 15:45 TFN Panel - Who will own and operate the networks of the future? 16:30 End of Meetup 80 TowerXchange Issue 21

81 The Future Network roundtables Roundtable topics to include: < Fibrisation in Europe - where are we now? < Defining the business model for a towerco fibre offering < In-building connectivity solutions < Outdoor small cells / WiFi < Outdoor DAS < Centralising core networks < Is there a role for Wi-Fi alongside cellular networks in the future? < Unlicensed spectrum developments in Europe < Network virtualisation and the use cases of 5G < Is RANsharing feasible? Will the operators agree? < How will private networks integrate with macro cellular networks? And who is the natural owner / operator? < Backhaul < Technical developments in network architecture < Is the neutral host business model still in vogue? < Innovations in active infrastructure sharing < Edge computing < How much will IoT impact cellular network capacity?/ Who will provide the networks for IoT? < What will the role of the fixed line operator be in the networks of the future? < Could connected and autonomous vehicles provide a network densification solution? 81 TowerXchange Issue 21

82 How can I join? 270 passes available for 2018 All previous Meetups have SOLD OUT: Register early to avoid disappointment Pricing Standard pass 2,500 Conditions of entry 1. Attendance is restricted to Director level or higher 2. Vendors (with the exception of MSPs) are restricted to a maximum of two delegates per company in order to balance the ratio of buyers to sellers (to enquire about increasing your presence through sponsorship or exhibition contact Annabelle Mayhew) Register today to guarantee your involvement Towercos 1800* Mobile network operators Free* amayhew@towerxchange.com +44 (0) Sponsorship and exhibition On request *Discount codes to be supplied on application to Annabelle Mayhew at amayhew@towerxchange.com. Please note these will only be supplied to qualified MNOs and independent towercos. 82 TowerXchange Issue 21

83 TowerXchange s analysis of the independent tower market in CALA Estimated number of towers owned or managed by towercos in CALA (4) American Tower Telxius 1, Telesites 14,863 18,807 13,350 1,294 3,765 9,031 SBA Communications 7, Grupo TorreSur 6, ,001 (2) (1) 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Source: TowerXchange research, quarterly filings, site lists Over the past few months, towercos have surpassed the 50% mark in terms of ownership of assets in CALA (towercos now own 86,232 of the 169,432 towers estimated to be in CALA) thanks to the opening of new markets such as Paraguay and the divestment of tower portfolios by Tigo in both Colombia and Paraguay, by Digicel in El Salvador and by Axtel in Mexico is proving a rebound year for CALA towerco inorganic growth. In fact, since the beginning of the year, towercos have acquired 3,119 sites across multiple CALA markets against 1,878 sites that have been transferred in 2016 and 2015 combined (excluding AMT s 1,000 urban sites in Argentina). As the regional market is being hit by a second wave of tower transactions involving new countries as well as players who didn t divest their assets in the golden years of CALA sale and leaseback ( ), TowerXchange offers its readers a deep dive into the unique dynamics of each CALA tower market Mexico (3) (5) Phoenix Tower International Mexico Tower Partners Torres Unidas QMC 1203 CSS 1200 (6) Highline do Brasil Torrecom 750 Brazil Tower Company 700 (7) 690 (8) Innovattel (Torresec) Continental Towers Centennial (9) Andean Tower Partners 450 IIMT Uniti Towers 303 Intelli Site Solutions Torres Andinas 207 AlfaSite BTS Towers TOCSA Aplicanet Torres de Panama Torres Online Skysites Dominican Republic Ecuador Argentina Paraguay Unknown Europe (1) Transaction pending (2) 1,000 urban wireless sites and 2,500km of fibre (3) Owned and operated by Phoenix Tower do Brasil (4) 1,890 third party marketing sites (5) Portfolio across Brazil, Mexico, Colombia and Puerto Rico (6) Currently being acquired by SBA Communications (7) Portfolio across Puerto Rico, Colombia, Ecuador, Argentina, Panama and Peru (8) Portfolio across Mexico, Dominican Republic, Jamaica, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Colombia and Peru (9) Plus 32,290 master sites across the two markets While Mexico has proven itself as a very complex build-to-suit (BTS) market and one where expectations have often surpassed reality, the country is definitely becoming more interesting for larger entities such as American Tower and Telesites, thanks to the Red Compartida s aggressive deployment target. In fact, ALTÁN Redes has been negotiating with several towercos to start colocating on their towers to achieve its first coverage target (30% of Mexico s population by March 31, 2018). 83 TowerXchange Issue 21

84 Selected estimated CALA tower counts 150 rings for new rooftops to be deployed in However, local sources suggest that some aggressive bidders drove prices down considerably in what has been defined as another punch to the BTS business model. Paraguay 4,250 Bolivia 4,600 Chile 8,926 Caribbean 10,550 Peru 10,604 Central America 12,272 Colombia 15,409 Argentina 16,000 Mexico 29,833 Brazil 56,957 One might argue that this is the perfect scenario for towercos to start a consolidation process. But in reality, some of these new firms have built unsellable towers, on discounted lease rates and in remote areas and unlikely to attract multiple tenants or - even worse - unsuitable for being shared from an engineering standpoint. So larger towercos who might have an appetite to consolidate and rationalise the market are left empty-handed Estimated total towers in rest of South America: 4,000 (Venezuela, Ecuador, Uruguay, Surinam, French Guiana and Guyana) ALTÁN Redes has selected Nokia and Huawei to roll-out in five and four regions respectively while Huawei will provide the network backbone and Nokia is rolling out the network core. ALTÁN Redes efforts to achieve its first target also means that Telesites might see accelerated growth of its tenancy figures. Telcel s carve-out towerco hasn t generated much lease-up activity since its creation and has reported a 1.08x tenancy ratio at the end of Q In the meantime, American Tower has sealed an agreement for the acquisition of the Mexican subsidiary of KIO Networks for an approximate US$500mn, which owns over 50,000 concrete poles Source: TowerXchange and over 3,300km of fibre optic lines throughout Mexico s key urban centres. Hal Hess, American Tower s EVP and President for EMEA and Latin America stated We are pleased to close this transaction, which we expect not only to enhance the value of our existing tower portfolio in Mexico, but also to better position American Tower to capture a larger share of future urban 4G network densification efforts and the eventual rollout of 5G. While the BTS front is still slow, with close to zero activity reported by various towercos and most of Telcel s new sites being built by Telesites, Telefónica has recently launched an RFQ for approximately Market highlights American Tower acquires KIO Networks for US$500mn (50,000 concrete poles + 3,300km of fibre) ALTÁN Redes on target to phase 1 and likely to start phase 2 earlier than planned Mexico quick facts Towers 29,833 SIMs per tower 3,553 Mobile connections 103.5mn (Q4 2015) Population 127.8mn (Q4 2015) SIM penetration 81% (Q4 2015) MNOs Telcel, Movistar, AT&T Towercos Telesites, American Tower, Mexico Tower Partners, IIMT, Centennial, Torrecom, Intelli Site Solutions, Conex, MX Towers, Rent-A- Tower, Uniti Towers, Tower One, several other smaller local and new entrant towercos. Source: GSMA Intelligence, TowerXchange 84 TowerXchange Issue 21

85 Major tower transactions in Latin America 2011/2017 Year Country Seller Buyer Tower count * 1,000 urban wireless sites and 2,500km of fibre **American Tower acquisition of 4,630 BR Towers includes 2,530 towers plus 2,100 exclusive rights ***Totals and average exclude the GTP / American Tower deal as it was US-centric Deal value US$ Cost per tower US$ Deal structure Brazil Brazil Mexico Colombia/Peru Colombia Paraguay El Salvador Panama Chile Mexico, Colombia, Nicaragua Argentina Dominican Republic Peru Chile Brazil Ecuador Dominican Republic 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 Highline do Brasil TIM Axtel Undisclosed Millicom/Tigo Millicom/Tigo Digicel CTR NMS Comunicaciones y Consumos Viva Telefónica Telefónica Telefónica Torresec Amzak/Teletower Algar Telecom T4U American Tower BR Towers** Oi Nextel Z-Sites Oi Nextel Nextel Oi GTP*** Oi Oi Telefónica Axtel Sitesharing Telefónica Telefónica Telefónica Oi Telefónica Telefónica Telefónica Telefónica Telefónica Telefónica Telefónica Millicom/Tigo Telefónica Sitesharing SBA Communications American Tower American Tower Phoenix Tower American Tower American Tower Phoenix Tower Torrecom SBA Communications Uniti Towers American Tower Phoenix Tower Telxius Telxius Telxius SBA Communications Phoenix Tower Highline do Brasil Phoenix 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 1,200 5, ,200 1, ,000* $850,000,000 $56,000,000 $147,000,000 $125,000,000 $65,000,000 $11,500,000 $214,000,000 $16,000,000 $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 $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 $144,730 $394,366 $122,500 $89,285 $181,058 $35,061 $129,305 $128,000 $211,231 $ $179,897 $546,610 $321,375 $148,029 $238,896 $162,328 $305,732 $118,788 $138,665 $193,548 $283,126 $222,500 $213,576 $171,875 $131,799 $150,000 $172,043 $207,851 $208,904 $144,000 $85,607 $151,694 $878,378 Company acquisition SLB SLB SLB SLB SLB Portfolio acquisition Company acquisition 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 Special thanks to Jonathan Atkin, Managing Director at RBC Capital Markets for his contribution Totals / average 51,843 $8,331,000,000 $173, TowerXchange Issue 21

86 Who sold their towers in Central and South America? Central America market highlights Millicom s Tigo eyes tower sale in El Salvador Torrecom entered Panama Dominican Republic plans spectrum auction unless willing they are willing to buy bad towers A no-go especially for public entities such as American Tower and Telesites, especially since Carlos Slim is reportedly considering the divestment of a minority portion of his 61% stake in the towerco. It s yet to be seen what the future holds for Mexican towercos. While larger entities such as American Tower and Telesites can leverage their portfolios, focus on co-locations and amendment revenues, the same cannot be said about smaller firms whose health very much depends on the steadiness of its business activities and organic growth. Diligent BTS firms can still work towards an exit by selling to acquisitive towercos at the right time. But the Mexican economy is still shaky and making an exit now might mean not achieving the expected multiples in light of forex and other factors, which is a particularly crucial point especially for PEbacked entities. Central America and the Caribbean Belize has 359.6K connections and 99% penetration rate as of Q according to GSMA Intelligence. With two carriers, DigiCell and Smart, and no active towercos to date, the country is too small to attract much attention from the tower industry, and our estimates suggest there are approximately towers in the national territory. In July Costa Rica finally concluded its 1800MHz Costa Rica quick facts Towers 3,302 SIMs per tower 2,286 Mobile connections 7.4mn (Q4 2015) Population 4.8mn (Q4 2015) SIM penetration 154% (Q4 2015) MNOs Kölbi, Movistar, Claro Towercos SBA Communications, American Tower, Continental Towers, Telesites, Phoenix Tower International, TOCSA Source: GSMA Intelligence, TowerXchange and 1900/2100MHz spectrum auction and the Superintendencia de Telecomunicaciones (SUTEL) has awarded spectrum blocks to América Móvil s Claro and Telefónica s Movistar who were the only bidders in the auction. Millicom, who considered participating in the auction and expanding its footprint in the country beyond cable and TV services (offered under the Tigo Star brand), ended up not bidding. Since telecoms were liberalised in 2008, Costa Rica has proved an increasingly fertile ground for towercos. SBA Communications remains Costa Rica s largest towerco with 667 sites, followed by American Tower and Telesites, which entered the market in 2016 and has already built 214 sites for 86 TowerXchange Issue 21

87 AMT, Centennial, IIMT, Intelli Site, MTP, MX Towers, Uniti Towers, QMC, Rent-A-Tower, Tower One, Telesites, Torrecom Balesia, Continental Continental PTI Balesia, Continental, SBA, Torrecom Balesia, Continental, PTI, SBA Balesia, SBA, Torrecom AMT, Balesia, Catalina, PTI, SBA, TOCSA AMT, AlfaSite, BTC, CSS, Centennial, GTS, Highline*, PTI, QMC, SBA, Skysites Continental, Innovattel, SBA, Torrecom AMT, ATP, Andinas, Centennial, Golden Comunicaciones, Innovattel, PTI, QMC, Telesites, Tower One, Unidas, Uniti Towers American Tower Aplicanet, Balesia, Innovattel AMT, ATP, Andinas, Balesia, Innovattel, BTS Towers, PTI, SBA, Unidas American Tower, Innovattel, Plata Tower Company, SBA, Teletower Argentina, Tower One Legend Towercos have acquired the majority of towers from carriers AMT, Balesia, Unidas, SBA *Highline do Brasil currently being acquired by SBA Communications 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 Source: TowerXchange 87 TowerXchange Issue 21

88 Breakdown of ownership of CALA s 170,493 telecom towers (Q3 2017) 83,200 15,520 36,486* 15,111 10,541 6,500 3,135 Mexico - Estimated tower count 29, ,750 9, ~2,000 14,863 American Tower Telesites SBA Communications Grupo TorreSur Telxius Other independent towercos Operator-captive * Including Tigo s Paraguay sites yet to be transferred Source: TowerXchange Telesites American Tower Mexico Tower Partners IIMT Centennial Torrecom Intelli Site Solutions BTS Towers Other independent towercos including Conex (QMC), and MX Towers Uniti Towers Estimated MNO captive towers Source: TowerXchange Claro. PTI, Continental and a handful of local firms complete the roster of towercos, who own over half the country s towers between them. With a population of over 11mn and 3.3mn mobile connections (Q4 2015), Cuba has one of the lowest mobile penetration levels in the world (29%), growing 6% YOY. Although under the past administration in the United States, diplomatic relations between the U.S. and Cuba have been reinstated and there have been an increased ability to transact between the two countries, its telecom sector remains far from being open to towercos. With only one mobile network operator in the country, ETECSA, who share around towers with radio companies and TV stations, it will take some time for international towercos to be able to enter the island. However, TowerXchange is keeping a close eye on Cuba in light of its untapped market and undisputed potential to become a target of international towercos should the telecom market liberalise. The only towerco active in the Dominican Republic is Phoenix Tower International which has been able to grow its portfolio to close to 600 sites since its entrance in the country. PTI 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. In the meantime, the Instituto Dominicano de las 88 TowerXchange Issue 21

89 Dominican Republic quick facts Mobile connections 8.8mn (Q4 2015) Population 10.6mn (Q4 2015) SIM penetration 83% (Q4 2015) MNOs Claro, Orange, Viva Towercos Phoenix Tower international Source: GSMA Intelligence, TowerXchange Telecomunicaciones (Indotel) is planning an auction of the unsold 1700MHz and 2100MHz spectrum. El Salvador has recently been in the news thanks to the Digicel-Phoenix Tower International deal, which entails the transfer of 202 sites to the towerco. Recent rumours suggest that Millicom s Tigo is looking at a possible sale of its tower portfolio as well. The market is still relatively unexplored with only two other towercos active - SBA Communications and Continental Towers. But with only 1,250 towers El Salvador quick facts Towers 1,267 SIMs per tower 6,946 Mobile connections 8.8mn (Q4 2015) Population 6mn (Q1 2017) SIM penetration 152% (Q1 2017) MNOs Claro, Movistar, Digicel, Red, Tigo Towercos SBA Communications, Phoenix Tower International, Continental Towers Source: GSMA Intelligence, Phoenix Tower International, TowerXchange Costa Rica - Estimated tower count 3, SBA American Tower Continental Towers Telesites 492 PTI ~1000 TOCSA ICE 180 Claro El Salvador - Estimated tower count 1, ~ SBA PTI 300 Continental Towers 202 Tigo Claro Digicel ~25 Telefónica 400 Source: TowerXchange Source: TowerXchange 89 TowerXchange Issue 21

90 Guatemala - Estimated tower count: 3, SBA 244 Torrecom ~100 Continental Towers Tigo Claro Telefónica ~2000 Source: TowerXchange covering a population of 6mn, the growth potential for towercos is high compared to other Central American markets. 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. In spite of these difficulties, Torrecom and SBA Communications have achieved good levels of organic growth in the country and have added a combined 300 towers since Q Honduras - Estimated tower count: 1,200 ~1000 ~200 Operator captive towers Continental Towers 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. Could Tigo consider selling Guatemala quick facts Towers 3,676 SIMs per tower 4,780 Mobile connections 17.5mn (Q4 2015) Population 16.5mn (Q4 2015) SIM penetration 106% (Q4 2015) MNOs Tigo, Claro, Movistar Towercos SBA Communications, Torrecom, Continental Towers Source: TowerXchange Source: GSMA Intelligence, TowerXchange 90 TowerXchange Issue 21

91 any of its assets following the sale and leaseback deals in Colombia and Paraguay? According to TowerXchange s research, Honduras is home to two towercos, Balesia and Continental Towers Corp. For now, there s 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 than the actual risks. 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 acquirable portfolios is scarce. In fact, Telefónica 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 has recently launched operations under the CooTel brand after a delay of more than a year. Nicaragua quick facts Towers 1,155 SIMs per tower 7,444 Mobile connections 8.3mn (Q4 2015) Population 6.1mn (Q4 2015) SIM penetration 135% (Q4 2015) MNOs Claro, Movistar, CooTel Towercos SBA Communications, Torrecom, Uniti Towers, Continental Towers Source: GSMA Intelligence, TowerXchange Nicaragua - Estimated tower count: 1, SBA Torrecom Uniti Towers Claro Telefónica Panama - Estimated tower count: 1, SBA 554 Continental Towers PTI Torres de Panama 550 Torrecom Cable & Wireless 60 ~ Claro Telefónica 26 Source: TowerXchange Source: TowerXchange 91 TowerXchange Issue 21

92 Panama earned an entry in the regional tower transaction report through the acquisition by Phoenix Tower International of 60 sites from American Tower. SBA remain market leaders but lately the country has seen the entrance of another towerco, Torrecom, who has acquired 25 sites and made its debut on the market. Other portfolios are 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. TowerXchange estimates there are around 1,600 towers in Panama. The rest of the Caribbean has been quiet in terms of towerco activity. Cuba and the Dominican Republic could represent interesting starting points for towercos looking at entering this highly fragmented collection of markets, and Phoenix Tower International with its recent acquisitions in the Dominican Republic, and Innovattel with its eye on Cuba seem ahead of the competition. At time of writing, the impact of Hurricane Irma on the Caribbean tower industry remained unclear. Brazil Brazil has faced three tough years as a result of a deep economic recession and political crisis. Nowadays, tower professionals are starting to report initial signs of recovery and MNOs have started to announce new investments. However, many reports suggest that recovery is more perceived than actual. Brazil market highlights Brazil enjoys 2nd quarter out of recession SBA Communications to acquire Highline do Brasil China Telecom eyes acquisition of Oi Brazil quick facts Towers 56,957 SIMs per tower 4,487 Mobile connections 248.3mn (Q4 2015) Population 208.7mn (Q4 2015) SIM penetration 119% (Q4 2015) MNOs TIM Brasil, Vivo, Claro, Oi, Nextel, Algar Telecom, Sercomtel Towercos American Tower, SBA Communications, Grupo TorreSur, Phoenix Tower do Brasil, Highline do Brasil, CSS, Brazil Tower Company, AlfaSite, Centennial, QMC, Skysites Source: GSMA Intelligence, TowerXchange Among the MNOs, two are in the news for the recent investment announcements. TIM Brasil is planning to invest US$3.7bn in the expansion of its 4G LTE network in the biennium Claro s CEO, Paulo Cesar Teixeira, has recently stated that the company s investment plan in its mobile segment is the largest in its history (without disclosing figures). With over 55K creditors, Oi and its bankruptcy proceedings remain the elephant in the room. An interesting twist is now represented by China Telecom, which is looking at a potential partnership with TPG capital to acquire a majority stake in the operator. As part of the acquisition plan, TPG would take over a majority stake and China Telecom, as a smaller equity partner, would build a 2,000 municipalitywide fibre network. The acquirers would also take over US$6.1bn in outstanding regulatory fines. In the meantime, the much awaited wave of consolidation among Brazilian towercos might have just started with SBA Communications sealing a deal for the acquisition of Highline do Brasil and its 1,200 towers. The deal has been approved by the Conselho Administrativo de Defensa Econômica (CADE) in November but no further details have been disclosed. With several PE-backed firms ready to make an exit from Brazil (including the largest private entity Grupo TorreSur with its 6,500+ towers) the market might undergo a considerable reorganisation over the next few months. And one of the consolidating forces in Brazil could definitely be American Tower, who has finalised the sale and leaseback deal initiated in 2014 with TIM Brasil. As a result, the towerco has acquired 5,873 towers for a total approximate value of US$802.6mn. Bolivia Still a virgin market in terms of towerco penetration, Bolivia is a complex country to 92 TowerXchange Issue 21

93 Brazil - Estimated tower count: 56, * do business in. However, local mobile network operator Viva, owned by Trilogy International Partners, recently reported revenue growth of 7% YOY and stated that in the country data revenues outpaced continued declines in voice revenues. With data growth usually comes the need for MNOs to invest in new coverage and added capacity and towercos could help by professionalising the Bolivian telecom infrastructure sector. Furthermore, Trilogy has made no secret over the years that it would happily divest some of its tower assets, which could represent an interesting entry card for towercos looking to scale-up. But can the opportunities outweigh the risks? American Tower SBA Grupo TorreSur Telxius CSS Phoenix Tower do Brasil Brazil Tower Company Highline do Brasil AlfaSite Big 4 MNOs Other operators including Nextel, Sky Brasil, Algar Telecom, Sercomtel and ON Telecom Allowance for other towercos * Currently being acquired by SBA Communications Paraguay Source: TowerXchange Paraguay is one of the newest markets to open its doors to towercos, following the acquisition by American Tower of 1,400 Tigo s towers at a value of US$125mn (of which 863 were transferred in Q3 2017). As anticipated, the valuation per tower in the Tigo/AMT deal is lower than the regional average (US$89,285 vs US$199,966). In fact, valuations are affected by the limitations on the length of land leases, currently capped at five years, as well as the rising real estate costs. Along with Millicom s portfolio, Personal s 1,100 towers could come to market soon and this would surely increase the interest of towercos in this new market. Paraguay market highlights 700MHz spectrum licenses to be awarded in December American Tower closes acquisition of 863 (of the 1,400 agreed) Millicom s towers Paraguay quick facts Towers 4,250 SIMs per tower 1,812 Mobile connections 7.7mn (Q4 2015) Population 6.7mn (Q4 2015) SIM penetration 115% (Q4 2015) MNOs Tigo, Personal, Claro, Vox Towercos American Tower Source: GSMA Intelligence, TowerXchange The Consejo Nacional de Telecomunicaciones (CONATEL) has announced its plans to launch a 700MHz spectrum auction before the year end. Teresita Palacios, President of CONATEL, has been quoted by various local news outlets stating that winning parties will be required to extend coverage to underserved rural areas and that the auction is open to those who want to invest in our country or enter as a new operator. Colombia One of the reasons why the Colombian BTS market has been stagnant is the delay in the much awaited 700MHz and 1900MHz spectrum auction. In fact, the Ministerio de Tecnologías de la Información y las Comunicaciones (MinTIC) has not been able to finalise the auction process. In the meantime though, the country has delivered 93 TowerXchange Issue 21

94 Bolivia - Estimated tower count: 4, Entel Tigo Viva 1500 Paraguay - Estimated tower count: 4, Source: TowerXchange Colombia market highlights Spectrum auction delayed to 2018 PTI seals deals in both Colombia and Peru Wave of rationalisation in tower sector Colombia quick facts Towers 15,409 SIMs per tower 3,310 Mobile connections 50.8mn (Q4 2015) Population 48.4mn (Q4 2015) SIM penetration 105% (Q4 2015) MNOs Claro, Movistar, Tigo, Avantel Towercos American Tower, SBA Communications, Andean Tower Partners, Torres Andinas, Centennial, Golden Comunicaciones, Innovattel, Uniti Towers, PTI, QMC, Telesites, Torres Unidas, Tower One Source: GSMA Intelligence, TowerXchange 600 1,400* 750 1,100 American Tower Personal Claro Tigo Vox * 1,400 announced of which 863 transferred in Q Source: TowerXchange some interesting tower news with various deals having been completed over the past couple of months. Tigo has announced the sale and leaseback of 1,200 sites to American Tower for US$147mn while Phoenix Tower sealed several deals with two Colombian firms (and a Peruvian one) for a total of 150 sites. PTI s deals are under confidentiality agreements and no further details have been disclosed. With tens of towercos operating in the country and not enough business for everyone, Colombia has proved a very tough and competitive tower market. 94 TowerXchange Issue 21

95 Colombia - Estimated tower count: 15, ** * MNOs are currently in between spending cycles and not investing heavily in new deployments, and this might not change until the spectrum auction saga comes to a successful end. Local players report tough pricing and economic conditions which are putting small BTS firms under more pressure they can sometimes handle and TowerXchange expects more consolidation to take place among towercos, especially since some developers might decide to exit the market, exemplified by one of PTI s counterparts in the latest deals. On the MNO front, a recent arbitration court has American Tower Andean Tower Partners Torres Andinas Uniti Towers BTS Towers Centennial PTI SBA Other independent towercos including Innovattel, Continental Towers, Balesia, Torres Unidas, Tower 3 and Golden Comunicaciones América Móvil Telefónica Millicom Excluding approx 1,200 sites from Tigo ** Still including sites pending sale to American Tower Source: TowerXchange, Company reports, RBC Capital Markets estimates fined Claro and Movistar for failing to return installed networks and infrastructure that, according to the original contracts signed in 1994, should have been returned to the state in ten years. In spite of the original contracts having been amended to avoid the penalties, Claro has been fined US$1.02bn while Movistar US$529.1mn. The combined fine is the largest ever in favour of the state of Colombia. Ecuador Ecuador is the quietest of all Andean States especially since its MNO landscape is less attractive for towercos. Claro enjoys a dominant position in Ecuador market highlights A tough tax regime plays against tower investments MNO landscape less attractive than in other Andean countries Active towercos report a relatively stable business environment Ecuador quick facts Mobile connections 13.5mn (Q4 2015) Population 16.3mn (Q4 2015) SIM penetration 83% (Q4 2015) MNOs Claro, Movistar, CNT Towercos SBA Communications, Innovattel, Balesia, Aplicanet Source: GSMA Intelligence, TowerXchange the country, while CNT is the government-owned player holding the third spot after Telefónica s Movistar. On the towerco front, SBA Communications entered the market in 2015 with the acquisition of 130 sites from Innovattel/Torresec but has not made further announcements since. BTS firms Torres Andinas and Andean Tower Partners both studied the market with the idea of possibly entering it but so far, they have not made a move. Peru Peru s regulator Osiptel has called on MNOs to satisfy growing demand by increasing the country s 95 TowerXchange Issue 21

96 Peru - Estimated tower count: 10,604 2,100 2, ,500 Note: tower counts for Continental Towers remain undisclosed Telxius Torres Unidas American Tower SBA Communications Torres Andinas BTS Towers Innovattel Telecommunications Partners Phoenix Tower International Andean Tower Partners Claro Bitel Entel Telefónica DirecTV Source: TowerXchange Peru market highlights Low level of towerco penetration Less crowded than other CALA towerco markets Relatively positive permitting framework Google s Project Loon launched in May Peru quick facts Towers 10,604 SIMs per tower 3,595 Mobile connections 33mn (Q4 2015) Population 31.6mn (Q4 2015) SIM penetration 104% (Q4 2015) MNOs Movistar, Claro, Entel, Bitel Towercos American Tower, Andean Tower Partners, Torres Andinas, Torres Unidas, Innovattel, Balesia, BTS Towers Source: GSMA Intelligence, TowerXchange the remainder to Telxius, Claro and Bitel lack the organisational imperative to sell towers, while Entel appear increasingly content to retain their tower assets. rural coverage sites, often beyond the reach of the grid, or neutral host IBS, most Peruvian towercos seem inclined to stick to their steel and grass macro tower model, which perhaps explains why towercos own only 25% of Peru s towers. With organic towerco growth also slowed by an hospitable yet sow permitting regime, the prospects of inorganic in Peru are receding, Telefónica having sold most their towers and carved out current stock of 18,928 base stations to 36,513 by 2021, which would drive substantial tower and co-location growth. That said, three years ago the regulator s previous calls to more than double tower stock to 22,000 by 2018 fell on deaf ears, with an estimated 10,542 towers in the country today. More than any other market TowerXchange has studied, there seems to be a growing gulf between the infrastructure Peru s MNOs want, and what towercos are prepared to provide. Whether it be For more detail on Peru, read MNOs call on towercos to provide power in Peru, later in this Journal. Chile As previously reported, Chile has seen its attractiveness to towercos considerably reduced as a result of Law No , also known as the Towers Law, which has suppressed the local BTS 96 TowerXchange Issue 21

97 Chile market highlights Challenging competitive and regulatory dynamics Chile - Estimated tower count: 8, SBA new market entrant Could Entel Chile divest its 3,000 towers? Chile quick facts Towers 8,926 SIMs per tower 2, ~120 American Tower Torres Unidas Telxius SBA Other independent towercos Mobile connections 25.9mn (Q4 2015) Estimated MNO captive tower Population 18mn (Q4 2015) SIM penetration 144% (Q4 2015) MNOs Movistar, Entel, Claro, WOM América Móvil Telefónica Entel Chile WOM Towercos American Tower, Torres Unidas, Source: TowerXchange, Company reports, RBC Capital Markets estimates Balesia, SBA Communications, Telxius Source: GSMA Intelligence, TowerXchange market with its onerous restrictions on building in saturated or sensitive areas, its somewhat heavy handed attempt to mandate infrastructure sharing, and its requirements to invest in camouflage, at times compensating local communities. Over the past few months though, SBA Communications has entered the market and reported a tower portfolio of 198 sites as of Q thanks to an initial acquisition from CTR, a local cable and internet provider. In a previous interview with TowerXchange, SBA s CEO Jeffrey Stoops noted that entering Chile isn t easy since companies need to be licensed and approved, and SBA has been through that process, which has been a barrier to entry for other towercos. In Chile, we ll focus on new deployments and we ll keep an eye if any portfolios of existing assets become available. On the MNO front, Entel announced investments up to US$200mn to roll-out 4G across the country. As per its 700MHz license, the MNO is required to install a total of 660 LTE base stations in Chile but is now looking at adding a further 737 to its network, bringing the total number of 4G sites to 1,397. Argentina Argentina remains in the spotlight as the fastest adopter of 4G in Latin America, driven by an expanding middle class eager to spend more in mobile services. Since 2010, MNOs have connected 26m Argentineans (+65% of the total population) but there are as many as 17mn unconnected people in the country. On the infrastructure front, the inventory of towers should at least double to offer adequate coverage 97 TowerXchange Issue 21

98 Argentina market highlights BTS market picks up but permitting remains an issue AMT seals deal with CyCSA and starts BTS activities New telecom law approval delayed till 2018 The evolution of the CALA telecom tower industry (Q2) Year 2013 Est. total towers 140,000 Towers owned by towercos 46,011 Towerco penetration 32% Argentina quick facts Towers 16,000 SIMs per tower 3,919 Mobile connections 62.7mn (Q4 2015) Population 43.6mn (Q4 2015) SIM penetration 144% (Q4 2015) MNOs Claro, Movistar, Personal, Nextel Towercos American Tower, SBA Communications, Atis Group, Innovattel/ Torresec, Plata Tower Company, Teletower Argentina, Tower One, CSS, GME Alliance Source: GSMA Intelligence, TowerXchange and capacity across the country s top cities and towns. But the lack of infrastructure reflects inadequate investments by telecom operators as well as an historical reluctance of subscribers to spend more to improve QoS. In December 2016 American Tower announced the acquisition of a local engineering firm called Comunicaciones y Consumos, SA (CyCSA). The acquisition marked the official entrance of a public , , ,207 Q3 170,493 towerco in the country, an important step toward the advent of an independent tower industry in Argentina. With the deal, American Tower acquired 1,000 urban sites (not necessarily telecom towers), 2,500km of fibre optic network along with the right-of-way to thousands of utility sites and a 60+ local staff. Among its customers, CyCSA enjoys solid relationships with the likes of Movistar, which is a tenant on around 400 of its urban sites. This move is bound to give American Tower an edge in the country and allow the towerco to develop greenfield BTS projects while keeping a close eye on potential M&A opportunities. In the meantime, Telxius has entered Argentina and 61,729 41% 69,850 44% 81,207 49% 87,293 51% Source: TowerXchange are believed to be in the process of acquiring 304 sites from parent company Telefónica. What s clear is that Argentina is already quite crowded, with several towercos eager to provide BTS services to MNOs while waiting for the country s notorious tax and permitting regime to allow sale and leaseback transactions. And if Telefónica might opt to transfer more assets to Telxius, Personal could still decide to release some of its ~4,000 towers should the taxation law change. Tower Company, Teletower Argentina, Tower One and obviously American Tower, MNOs are likely to resort to more outsourcing in the future And TowerXchange bets on new towercos entering Argentina soon! 98 TowerXchange Issue 21

99 CALA news A roundup of tower news across Central and Latin America was known as Zero Rate and will be replaced by new interconnection rates as of January In fact, Telcel will pay a fee of US$0.01 per minute to terminate calls on other operators networks while its competitors will be charged US$0.002 per minute for calls terminating on its network. Brazil: China Telecom in talks with Oi China Telecom is reportedly partnering with TPG Capital to take over a controlling stake in Brazilian Oi. According to Reuters, China Telecom has offered to build a fibre network that will reach more than 2,000 municipalities across Brazil and provide around US$1.6bn to cover the outstanding regulatory fines. Brazil, Peru, Chile and Argentina: Telefónica finalises first tranche of KKR deal Mexico: American Tower seals deal with Mexican fibre firm American Tower signed a deal to acquire KIO Networks Mexican subsidiary for an approximate US$500mn. KIO Networks owns over 50,000 concrete poles and 3,300km of fibre optic lines across Mexico s key cities. Mexico: Canadian Tower One to acquire Mexican infrastructure firm Tower One Wireless has signed a letter of intent for the acquisition of an undisclosed Mexican tower company. According to Tower One s press release the deal is for a Mexican-based tower company, which owns, builds and leases cellular towers to the telecom industry in Mexico, includes a master lease agreement with AT&T. Mexico: IFT revokes Zero Rate ban The Instituto Federal de Telecomunicaciones (IFT) has removed the ban imposed to Telcel back in 2014 with regards to the fees charged to other MNOs for termination services on its network. The initiative Telefónica has finalised the transfer of a 24.8% stake in Telxius to U.S. fund KKR for a total value of 790,5mn. The deal follows the announcement made by Telefónica in February regarding the agreement with KKR for the transfer of a stake up to 40% in Telxius (valued at 1.27bn). The remaining 15.2% should be transferred before the end of Argentina: Tower One invests in Argentine towers Tower One Wireless has put down to a US$315,000 deposit to acquire fifteen towers in Argentina. The sites are expected to cost a total of approximately US$1.05mn 99 TowerXchange Issue 21

100 TowerXchange s analysis of the independent tower market in Africa and the Middle East Figure 1: Estimated number of towers owned or managed by towercos in MEA IHS Towers American Tower Eaton Towers Helios Towers Africa *announced not closed Q saw a major milestone in the region s tower industry, with the announcement of the Middle East s first tower deal. Whilst sub-saharan Africa has seen over 30 tower transactions of scale completed, the announced sale of Zain s 1,600 towers to IHS Towers, in partnership with Towershare, signifies a new dawn in the Middle East. Exclusive talks are also underway between the three parties regarding Zain s 8,000 Saudi Arabian towers, with regional investors expressing an interest in putting capital into the venture. In the Q4 edition of the TowerXchange journal we * 4757 Uganda Tanzania Kenya South Africa Nigeria Ghana Burkina Faso DRC Cote d Ivoire Cameroon Niger Rwanda Source: TowerXchange Zambia Congo B Kuwait Source: TowerXchange take a deep dive into the Kuwaiti deal and what it means for the Middle Eastern tower industry. In sub-saharan Africa, the vast majority of major tower transactions have involved either American Tower, IHS Towers, Helios Towers or Eaton Towers as buyers. The four players now collectively own 36% of SSA s towers across a total of 14 different markets. Whilst American Tower, with a global portfolio of over 150,000 towers are listed on the New York Stock Exchange, Africa s three large privately owned towercos are all understood to be gearing up for IPOs in the first half of 2018 (read our Q4 analysis of the upcoming IPO activity). As the big towercos look to their next liquidity event, new build-to-suit towercos continue to emerge either with alternative value propositions to the big four (for example Pan African Towers proposal to price contracts in local currency in Nigeria), or in markets where the big four are not present (with Angola, Algeria and Namibia just some to mention). In parallel, a range of different companies are starting to offer an ESCO model on the continent in response to MNO appetite to explore alternative outsourcing strategies has seen a host of ESCO agreements signed, with Airtel striking a deal with ENERGY VISION in Gabon, Millicom with Aktivco in Chad and Orange with GreenWish Partners in the DRC; with the latter MNO having several further RFPs issued. If the past few years have been about tower transactions in sub-saharan Africa, 2018 and beyond looks set to see Middle Eastern divestments and African ESCO agreements come to the fore. For sub-saharan Africa s towercos, new build requirements are reportedly picking up in a number of markets and amendment revenue continues to grow as operators upgrade technologies. Bolt on transactions in existing markets (such as Helios 2017 acquisition of Zantel s mainland sites in Tanzania) present further growth opportunities and towercos keep a watchful eye on sale and leaseback opportunities in as yet untouched markets. 100 TowerXchange Issue 21

101 Whilst towercos continue to drive top line growth, significant emphasis is also currently placed on cost control measures to improve overall profitability. Operational efficiency and supply chain optimisation are at the heart of the more sophisticated towerco business models. Such efficiency improvements are further driven by investments in energy upgrades, as hybrid solutions move from pilot studies to widespread deployment. If promising results from lithium ion battery pilots continue to be seen, it won t be long before the technology starts to make it into the mainstream. We were delighted to hold our 5th Meetup Africa & Middle East earlier in the quarter, welcoming well over 300 tower industry leaders to Johannesburg once again. As we enter 2018 we look forward to seeing developments in the Middle Eastern market, towerco IPOs and ESCO business models as the industry continues to mature. Country Overviews Algeria There are 18,000 towers split between the three operators; Djezzy (7,500 sites), Mobilis (6,000) and Ooredoo (4,500). Mobilis have gone to tender to appoint six companies to build 1,400 new sites, Djezzy have a master plan to deploy sites per year having launched a tender in December, and Ooredoo have launched a site builder tender to deploy a modest number of sites. There is little infrastructure sharing in the country with many sites unsuitable for additional tenants and disagreements between operators on what sites are a fair trade. The vast majority of sites are on-grid with very few Figure 2: A comparison of 2016 average revenue per tower of Helios Towers Africa, IHS Towers and American Tower in Africa 50,000 40,000 30,000 20,000 10,000 US$ $42,239 $43,616 American Tower generators and with low diesel costs. Whilst Djezzy had looked at a tower sale, restrictions on foreign direct investment in the country suggest there will be no transactions in the near term. Angola Angola has two MNOs, Unitel and Movicel with Unitel having around about two thirds of the market share in terms of subscribers and Movicel the other third. Unitel has the larger portfolio of towers, possessing 1,700 sites and Movicel is a relatively young network with just 800 sites. In order to reach the level of coverage they are targeting, Unitel needs to add a further 1,000 sites and Movicel a further 2,000. There is a high degree of competition between the two operators and as such, they have been reluctant to share infrastructure in Helios Towers Africa $39,402 IHS Towers* Source: American Tower 2016 results, Helios Towers Africa 2016 results, Wendel 2016 results *Wendel report IHS generating revenues of $904.7mn in 2016; IHS latest site count is 22,961 Data for Eaton Towers unavailable the past, however, in 2016 a new law came into force, prohibiting the construction of new sites in close proximity to existing ones, thus necessitating infrastructure sharing in the country. ANTOSC are Angola s first independent towerco, with plans to add 300 sites in the next three years, whilst TowerXchange has been made aware of at least one other company in the process of registering as a towerco in the market. Burkina Faso Orange have completed the acquisition of Airtel s local opco which had previously agreed the sale of their ~500 tower strong portfolio to Eaton Towers in the country. Orange have recently signed an ESCO agreement with Energy Vision to take over management of energy on 120 of their own towers, 101 TowerXchange Issue 21

102 Figure 3: American Tower s 2015 and 2016 revenue across its African portfolio Africa Ghana Nigeria South Africa Uganda Dec 2016 Dec 2015 Dec 2016 Dec 2015 Dec 2016 Dec 2015 Dec 2016 Dec 2015 Dec 2016 Dec 2015 # Sites 10,642 10,132 2,145 2,097 4,742 4,716 2,362 1,926 1,393 1,393 Revenue (mn) $449,408 $339,127 $116.2 $94.5 $215.4 $109.7mn $80.0 $80.5 $57.7 $54.4 Revenue/ site $42,239 $33,471 $54,181 $45,087 $45,424 $23,261 $33,872 $41,801 $41,541 $39,029 Source: American Tower 2015 and 2016 annual reports Figure 4: Helios Towers Africa s 2015 and 2016 revenue across its four markets Group Tanzania DRC Congo B Ghana Dec 2016 Dec 2015 Dec 2016 Dec 2015 Dec 2016 Dec 2015 Dec 2016 Dec 2015 Dec 2016 Dec 2015 # Sites Revenue (mn) $282.5 $196.6 $122.2 $96.6 $102.2 $61.1 $23.6 $12.4 $34.5 $26.4 Revenue/ site $43,616 $36,246 $35,267 $28,180 $55,786 $75,061 $59,898 $31,552 $43,893 $33,460 EBITDA (mn) $84.5 $35.4 $38.9 $16.9 $41.1 $24.0 $9.4 $2.7 $10.3 $3.7 EBITDA margin 29.9% 18.0% 31.8% 17.5% 40.2% 39.3% 39.8% 21.8% 29.9% 14.0% Source: Helios Towers Africa s 2016 annual report a number which could increase to 200. Airtel was the number two operator in the country with a market share of around 25%. Etisalat s Onatel was the leading operator in the market with Telecel the third operator. 3G was launched in the country in 2013 but mobile broadband penetration sits at just 7% in a country of some 18.4mn. Chad There are an estimated 2,000 towers in Chad, a country where electrification sits at just 4%. To address power issues, Millicom has signed an ESCO contract in the country with Camusat s Aktivco (although neither party is yet to publicly confirm the agreement). Airtel had previously agreed the sale of their towers to Helios prior to the transaction being cancelled because of an unfavorable regulatory environment. Millicom are looking to exit the African market, with Econet reported to have expressed an interest in acquiring their remaining opcos in Chad, Rwanda & Tanzania. Congo Brazzaville Helios Towers Africa is the sole towerco in Congo Brazzaville, having closed a deal to acquire Airtel s 394 towers, representing around 44% of the country s towers. Negotiations to sell Airtel s Congolese opco to Orange lapsed, but MNO consolidation is not a new phenomenon in Congo, Airtel having acquired Warid s operation in the country in 2014 vaulting them over MTN to become market leaders. BinTel s Azur are ranked a distant third. 102 TowerXchange Issue 21

103 Figure 5: MEA s biggest tower transactions to date Year Country Seller Buyer Tower count Deal value US$ Cost per tower US$ Deal structure 2017 Kuwait Zain IHS (& Towershare) ,000, ,125 SLB* 2017 Tanzania Zantel HTA 185 SLB 2016 Nigeria Hotspot Network IHS 85 Portfolio Acquisition 2016 Senegal* Expresso Telecom Al Karama Towers 450 SLB 2016 South Africa Eaton Towers American Tower 300 Portfolio Acquisition 2016 DRC Airtel HTA ,000, ,631 SLB 2016 Tanzania Airtel American Tower 1, ,000, ,593 SLB (Deal announced but not closed before deadline expired) 2016 Nigeria HTN Towers IHS **1211 Company Acquisition 2015 Nigeria Etisalat IHS 555 SLB 2014 Rwanda Airtel IHS 164 SLB 2014 Zambia Airtel IHS ,000, ,061 SLB 2014 Nigeria Airtel American Tower 4, ,060, ,719 SLB 2014 Niger Airtel Eaton 600 SLB 2014 Ghana, Burkina Faso, Kenya & Airtel Eaton 2, ,000, ,417 SLB Uganda 2014 Nigeria MTN IHS 8, ,000, ,911 Joint venture (IHS 49%, MTN 51%) Nigeria Etisalat IHS 2, ,000, ,060 SLB 2014 Congo B Airtel HTA ,000, ,226 SLB 2014 Rwanda MTN IHS ,000,000 87,273 SLB 2014 Zambia MTN IHS ,000,000 76,203 SLB 2013 Tanzania Vodacom HTA 1,149 75,000,000 87,616 SLB with direct investment in HTT Kenya Telkom Kenya Eaton 1,000 MLL (Contract since cancelled) * Deal announced, not closed **Transaction included 368 SWAP site under MLL arrangement; the arrangement has since been cancelled + MTN s equity since restructured for additional shareholding at IHS group level ++ Vodacom sold 100% of equity in towers but subscribed to acquire a 24.5% interest in HTT which Helios has now purchased Source: TowerXchange 103 TowerXchange Issue 21

104 Figure 5: MEA s biggest tower transactions to date Year Country Seller Buyer Tower count Deal value US$ Cost per tower US$ Deal structure 2013 Cameroon & Cote d Ivoire Orange IHS 2,000 MLL 2012 Côte d Ivoire MTN IHS ,000, ,775 SLB 2012 Cameroon MTN IHS ,000, ,390 SLB 2012 Uganda Warid Eaton 400 SLB 2012 Uganda Orange Eaton 300 SLB 2011 Uganda MTN American Tower ,250, ,912 Joint venture (AMT 51%, MTN 49%) 2010 Tanzania Millicom/Tigo HTA 1,020 81,000, ,353 Joint venture (HTA 60%, Millicom 40%) DRC Millicom/Tigo HTA ,500,000 94,878 Joint venture (HTA 60%, Millicom 40%) Ghana MTN American Tower 1, ,500, ,375 Joint venture (AMT 51%, MTN 49%) 2010 South Africa Cell C American Tower 1, ,000, ,857 SLB with BTS 2010 Nigeria Starcomms SWAP ,000, ,017 SLB 2010 Ghana Vodafone Eaton 750 MLL 2010 Nigeria Visafone IHS ,000,000 83,750 SLB 2010 Nigeria Multilinks HTN 400 MLL 2010 Ghana Millicom/Tigo HTA ,000, ,000 Joint venture (HTA 60%, Millicom 40%) Totals / average 46,220 5,205,400, , Millicom s equity since restructured to a 24% stake at group level; a stake which Millicom is now looking to monetise Source: TowerXchange Cote d Ivoire IHS own or manage a portfolio of 2,599 towers, having acquired sites from MTN and entered into an MLL arrangement with Orange. Number three MNO, Moov still retains their tower portfolio which numbers about 1,000 sites. and GreenN in the market before awarding and then subsequently revoking a license from LPTIC (GreenN s backer). There are understood to be about sites which were previously owned by the different parties, with a significant degree of parallel infrastructure. operators within the next three years. With regards to power, Orange stated that diesel accounted for 36% and grid 64% of total energy costs in the country and IHS has invested heavily in upgrading their energy equipment, with over 70% of its sites now equipped with solar hybrid solutions. The regulator had previously revoked the operating licenses of smaller operators Comium, Cafe Mobile Overall estimations suggest that the market needs a further 2,000 towers to be added between all DRC There are five MNOs in the DRC; Vodacom, Airtel, 104 TowerXchange Issue 21

105 MEA towerco footprints Senegal Al Karama Towers* Helios Towers Africa Tanzania Congo Brazzaville DRC Ghana Eaton Towers Niger Burkina Faso Kenya Uganda so SEAL Towers Madagascar TowerCo of Madagascar Namibia PowerCom Iran *Acquisition of towers pending, not yet confirmed Towershare Kuwait* Pan- African Towerco Cote d Ivoire Cameroon Rwanda Zambia BCTek Engineering Hotspot Networks Communications Towers Nigeria IHS Towers Nigeria American Tower South Africa Gyro Towers, Atlas Towers, Coast to Coast, Blue Sky Networks, Sentech, Comco, Eagle Towers, Sky Coverage, International Tower Corporation Fanasia Iranian Towers Egypt Angola Antosc HOI-MEA Algeria Infrashare Source: TowerXchange Orange, Supercell and Africell, with Smile planning to launch 4G services by the end of Helios are the country s only towerco having acquired first Millicom s and then Airtel s towers in the country. The Millicom deal, involved the operator retaining a 40% stake in Helios Tower DRC which they then restructured to a 24% stake at group level (a stake which they are now looking to monetise). Helios acquisition of Airtel s 950 sites spurred a major decommissioning program, involving the removal of 150 duplicated sites. Helios have also built well over 100 new sites in the country. Infratel claims to have built over 800 rural sites for Vodacom DRC. With around 4,350 towers serving 48.75mn connections, DRC has one of the highest number of SIMs per tower in the world at 11,207, illustrating the DRC s huge growth potential. 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 the delivered cost of diesel can be 2.5x more expensive in rural areas, with Helios average cost of diesel per tower over double that in its other markets. The towerco deployed solar at 51 sites in the country at an average cost of $33,900 per site. Since implementation, Helios report that in the DRC the 105 TowerXchange Issue 21

106 Figure 6: Estimated tower counts for selected countries in SSA Botswana Gabon 850 1,000 Rwanda Namibia Madagascar 1,300 2,000 2,203 Angola 2,500 Zimbabwe Senegal 2,700 3,350 Uganda 3,517 Cote d Ivoire 4,049 DRC 4,350 Mozambique 4,400 Ghana 5,983 Ethiopia 6,600 Kenya 6,600 Tanzania 7,394 Nigeria 29,113 South Africa 30,433 Source: TowerXchange sites with installed solar power technologies have averaged a per site decrease in diesel usage of 915 litres per month; at an assumed price of $1.64 per litre in in the DRC, this equates to annual diesel cost savings of $18,000 per site. Helios has identified 400 further sites suitable for solar and play to deploy solar at 150 sites in Orange have recently signed an ESCO contract with Greenwish Partners to take over energy management of 250 sites, deploying solar-hybrid solutions with their partners Sagemcom. Egypt Egypt has over 20,000 towers split fairly evenly between the three MNOs. Infraco licenses have been awarded to Alkan, Mobiserve, EEC and HOI-MEA with only the latter reporting an owned portfolio of sites. In April 2016, Eaton announced a US$131mn acquisition of 2,000 MobiNil towers an estimated third of the total owned by the opco (which was rebranded to Orange following a 99% buyout by the company). The deal however was cancelled with the Orange board failing to extend the long stop date for completion of the deal and with Orange also still missing some approvals from the regulator. Orange have since issued an ESCO RFP in the market, with the operator understood to not currently be considering any further tower deals. Eaton, however, remain committed to opportunities in the Egyptian market should they arise. In a statement to TowerXchange, Eaton s CEO Terry Rhodes said Eaton Towers still regards Egypt as a market ready for independent tower companies. The imminent roll out of 4G, together with the economic and political changes which have made US dollars very scarce mean the operators will be under financial and operational pressure to expand their networks. It would be enormously beneficial for this expansion to share infrastructure. 4G licenses have been awarded to each of the operators with Telecom Egypt having also obtained a license, making it the country s newest mobile operator. With SIM penetration of 101%* and mobile 106 TowerXchange Issue 21

107 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 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. 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. Gabon Airtel s efforts to monetise their towers in Gabon never made much headway, so all the country s towers remain MNO captive for the time being. Airtel is deploying LTE, but mobile broadband penetration was still negligible in Gabon at the end of Whilst the electricity grid in the main cities is okay, the grid is much less extensive in more rural areas leading to 30-35% of the country s ~1,000 sites being off-grid. Energy Vision have signed the first real ESCO contract in Africa with one of Gabon s MNOs, offering power on a fixed monthly price with no upfront capex. The project encompasses a full solar hybrid system with CDC batteries and will cover 150 off-grid sites, with a view to extend this to sites on unreliable grid. The regulator has approved the merger between market leader Gabon Telecom (owned by Maroc Figure 7: Estimated number of towers in MENA Yemen Lebanon 3,900 2,000 Qatar 1,100 Bahrain 1,700 Oman Libya 3,200 5,000 Kuwait 5,100 Tunisia 7,000 Jordan 5,900 UAE 8,500 UAE 8,500 Source: Delta Partners data, TowerXchange presentation Iraq 12,300 Telecom) and number three operator Moov (owned by Maroc Telecom s parent company, Etisalat). The merger will give the new entity 55% of the market share. Azur (BinTel) is the country s fourth MNO. Oil and Gas wealth partly accounts for Gabon s regional high GNI/capita of US$10,000 which has resulted in the country s 162%* SIM penetration rate. Ghana There are three major towercos active in Ghana, which have been snapping up tenancies for over three years. Back in 2010, Helios Towers Africa set up 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. The latest Morocco 17,000 Algeria 18,000 Egypt 19,000 Saudi Arabia 34,000 Iran 38,000 transaction in the market was the sale of Airtel s towers to Eaton which was finalised in Whilst grid coverage and availability is good by African standards (with one towerco reporting over 95% of sites to be on-grid and availability trending towards 20 hours a day), electricity prices have skyrocketed in the past year meaning that the business case for solar and hybrid is strengthened and the use of deep cycle batteries is growing. With strict permitting and environmental policies in Ghana, it s tough to get new towers built with fewer than 100 new structures likely to go up in the next 12 months; this does however amplify appetite for co-location with towerco tenancy ratios in the country already around two. Airtel and Tigo have just recently merged in the 107 TowerXchange Issue 21

108 Figure 8: Ownership of Algeria s ~18,000 towers 4,500 7,500 Djezzy Mobilis Ooredoo 6,000 Source: TowerXchange market, leapfrogging them ahead of Vodafone but still in second place behind MTN. Smaller players, Glo and Expresso have less than 3% market share, with Expresso likely to rebrand to Celltel by the end of the year. In addition, there are three LTE only players - Surfline, Blu and Busy- in the market. The devaluation of the Cedi hit all in the market hard and whilst it was the world s worst performing currency a couple of years ago, it has begun to stabilise and economic conditions in the country are starting to improve. American Tower is partnering with Energize the Chain to provide vaccine refrigeration at a further 50 cell sites, in addition to the 35 at which these lifesaving systems have been installed. Figure 9: Ownership of Cote d Ivoire s 4,049 towers Ghana has a population of 28.0mn people and a mobile penetration rate of 133%, the second highest in ECOWAS and the 8th highest in Africa. 1, ,200 IHS acquired from MTN IHS (under MLL arrangement for Orange) IHS built Moov To be transferred to 4th license holder Source: TowerXchange Iran Iran is the Middle East s largest mobile market with 118mn subscribers. There are three national operators in the country of which MCI (Mobile Communication Company of Iran) is the largest with 61.3mn subscribers and 43% of the market share. MTN-Irancell, a joint venture in which MTN holds a 49% stake, is Iran s second largest operator with 45.5mn subscribers and 40% of the market share; and RighTel, is the third largest operator with 9.5mn subscribers and around 8-9% market share. In addition to this there are a number of FCP players and WiMAX operators who make up the balance of the market share. 108 TowerXchange Issue 21

109 There are currently around 38,000 towers in the Iranian market and with very little infrastructure sharing between the operators there is a significant degree of parallel infrastructure. In 2014, Fanasia, an Iranian company with a background as a turnkey service provider to the country s MNOs, started their own towerco business. Their first project on Kish Island, conducted with the support of the Kish Free Zone Organisation, was to rationalise the number of towers on the island. With 110 sites on the Island, each with a single tenant and unsuitable for the addition of further tenants, Fanasia built 27 new sites which the operators were mandated to use, whilst existing sites were decommissioned. The municipality benefited from a revenue sharing model on top of the land rental fee and further benefited from the freeing up of land under the old towers. Following the success of the Kish Island project, Fanasia reached a similar agreement with the municipality of Mashhad, Iran s second most populous city to develop a core network of 350 sites in March Fanasia currently owns 106 towers. In early 2017, in response to the growing trend towards infrastructure sharing in Iran, a new tower company, Iranian Towers, was formed. The three shareholders in the company are MCI and Rightel, Iran s second and third largest operators and Fanasia, Iran s first towerco. The first phase of Iranian Towers operations will be the construction of approximately 1,000 new sites which are capable of accommodating multiple tenants. These sites will be constructed primarily in the major cities in order to accommodate 4G and 4.5G rollout. The new rollout will include both ground based and rooftop Figure 10: Ownership of Iran s ~38,000 MNO-owned towers 13,000 4,000 21,000 sites and will be conducted with the coordination of municipalities who will benefit from revenue sharing on the sites. Iranian Towers now own 114 sites. Kenya Market leader Safaricom, which has 69% market share, owns 4,100 of Kenya s 6,600 towers. Eaton Towers entered the market following the acquisition of Airtel s sites and currently have a portfolio of 1,200 sites in the country. After having been taken over by Helios Investment Partners in 2016, Telkom Kenya is reportedly examining potential growth strategies including a takeover of rival Airtel Kenya and has also initiated a process to sell its ~1,000 towers in the country, towers which both Eaton and American Tower are competing for. TowerXchange have also been made aware of a new MCI MTN-Irancell RighTel Source: TowerXchange towerco, SEALTowers a start-up focussed on low cost compact tower site solutions and hybrid power innovations which expects to have 500 sites built by Q Extensive new build is required, with Telkom stating their intent to add 500 new sites; towercos have proven the most cost effective way to add new sites for all MNOs. Safaricom plan to double the number of 4G base stations by the end of 2017 whilst Airtel and Telkom Kenya are in the pilot phase. Telkom s sites may require significant upgrade work.. Around 500 buildings are suitable for DAS with a hundred or so covered already; Safaricom are currently operating shared DAS networks. The grid is relatively robust in Kenya however Safaricom s internal towerco, which offers co-location on around 800 of the MNO s sites, 109 TowerXchange Issue 21

110 is starting to offer power as a service, creating opportunities for energy companies to work with the market leader. Kuwait Market leaders Zain, have agreed the sale of their 1,600 towers to IHS in partnership with Towershare for $165mn. Ooredoo and STC s Viva are Zain s competitors in the market and with little infrastructure sharing between the MNOs, significant parallel infrastructure exists. With population coverage at 100%, any organic growth for towercos entering Kuwait must be driven by network densification rather than extension, and decommissioning must also be part of the business plan. Zain are currently exploring 5G in the market, with Kuwait positioned to be one of the MEA pioneers in this field SIM penetration was at 192%* with mobile broadband penetration at 81%* in Q Figure 11: Ownership of Kenya s 6,600 towers 300 1,000 Safaricom Eaton Towers 1,200 4,100 Telkom Kenya Other Figure 12: Estimated tower ownership in Madagascar Source: TowerXchange Madagascar TELMA, Orange and Airtel operate in the Madagascan market with ISP Gulfsat Madagascar (operating as Blueline) having become the country s newest MNO. In spite of tough economic conditions, the government has a key focus on improving connectivity in the country, with SIM penetration standing at just 31%* and mobile broadband penetration 19%* at the end of ,003 Towerco of Madagascar Orange Airtel TELMA is in the process of rolling out 4G and optical fibre in the country, with Orange also having also launched 4G operations in the capital, Antananarivo in March Source: TowerXchange 110 TowerXchange Issue 21

111 Figure 13: Tower ownership by Mozambique s MNOs of 15%*. The end of 2015 saw a third MNO, Lacell, being awarded a license in the country which is hoped to increase competition, lowering prices and increase service quality mcel Vodacom Movitel Source: TowerXchange Mozambique The entrance of a third MNO Movitel back in 2012 caused a radical shakeup of the telecoms sector with the operator rapidly deploying their network and securing 49% of the mobile subscriber market share by the end of The country has an estimated 3,000 foundationbased towers, supplemented by an additional 1,800 guyed masts (primarily owned by Movitel). Fibre rollout to the tower has been relatively extensive, resulting in microwave backhaul dishes being removed from sites, thus freeing them up for further active equipment. Towerco of Madagascar (TOM), initially spun out of TELMA but now an independent towerco in it s own right and operates a portfolio of 1003 sites in the country, just under half of Madagascar s total towers. Madagascar represents one of the few markets where Airtel still retains its towers, with the MNO owning a portfolio of 500 site sin the country. There had been rumoured interest in an acquisition of Airtel s towers, followed by reports that the MNO had signed an ESCO contract although TowerXchange understands that the opco has decided not to pursue this, instead favouring a review of its managed services contract to bring down costs. The operational challenge of operating a distributed tower network, particularly during the rainy season is not for the feint hearted, and with significant energy challenges in the country, (Airtel report that 50% of its sites are off-grid) TOM has been extensively evaluating a number of different energy options including a pilot of a wind project in the country. Malawi Eaton s deal to acquire Airtel s towers in Malawi was cancelled in late 2015, and at present it doesn t look like the towers will 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 Infrastructure sharing in the country has been limited, with a just an estimated 50 towers being shared between mcel and Vodacom. The government passed a first reading of a bill mandating infrastructure sharing in November 2015, however talks appear of have stalled. The government has however been putting pressure on operators to share infrastructure in rural areas to meet the country s universal service access goals, a country where 68% of the population lives in rural areas. State-owned mcel has long standing debts and has appointed Barclays to oversee the sale of its ~1,000 towers in order to reduce leverage. In July 2016, it was announced that mcel would be merged with 111 TowerXchange Issue 21

112 fixed line incumbent TDM to create a single more sustainable entity. In addition to their own towers, mcel use TDM s network and it is not yet clear how the sale of mcel s towers will be affected by the merger. There has also been speculation of a potential tower sale at Movitel although a formal process has not been announced. Rumour has it that the entrance of Movitel into the market was part of a government plan to expand network infrastructure and then sell the assets. If this were the case, the decision to sell may be more likely to come from FRELIMO than Viettel. As to who the likely bidders would be in a Mozambique tower sale from either mcel or Movitel, it is not yet clear - the talks don t appear to have attracted the interest of the continent s leading towercos. In late 2013, a domestic company, TowerCo Mozambique, tried and failed to set up towerco operations in the country. It is thought that the company was unable to reach an agreement on lease rates with mcel and Vodacom and as such, talks were disbanded. We have yet to hear rumours of any other domestic players forming in Mozambique. There are 19.2mn* mobile connections in Mozambique with SIM penetration sitting at 68% and mobile broadband penetration at 34%*. by two government owned MNOs: MTC and Telecom Namibia, although the entrance of privately held Paratus following an overhaul of the country s telecoms regulation has introduced a new level of competition. PowerCom, owned by MNO Telecom Namibia, is Namibia s first dedicated infrastructure player. Managing a portfolio of 300 towers, the company has ambitions to integrate further assets into its portfolio and in the long term plans to bring solar to its sites to make use of the country s abundant sunshine. The company has tenancies from all three operators in the market as well as a number of nontraditional tenants. The Communications Regulatory Authority of Namibia has proposed a new regulation pertaining to mandatory infrastructure sharing where operators will no longer be allowed to set up new infrastructure where there are existing sites. An announcement from the regulator is expected imminently regarding the legislation. The government have also introduced a network facility license category to regulate a designated infrastructure provider in the country. Whilst the country s electricity grid is extensive, the power crisis hitting Southern Africa has had a knock on effect on Namibia and as such, the operators are exploring alternative energy strategies as a means as protecting against risk to the site uptime. Niger There are four MNOs in Niger; Airtel, Moov, Orange and Sahelcom. After Airtel agreed the sale and leaseback of 600 sites to Eaton, the transaction is now closed and Eaton is in the process of integrating the sites into its portfolio. Over 50% of the country s towers are off-grid with Eaton examining renewable energy options (including the repair/ replacement of 200 solar sites the company has inherited) and Orange issuing an RFP for an ESCO. New build requirement in the market is thought to be relatively conservative although Eaton is undertaking some for Airtel. Nigeria Nigeria is a benchmark tower market for many reasons. It s the largest mobile market in SSA, with 154.3mn* connections among a population of 184.6mn*. It s the oldest growth independent towerco market in Africa; towercos have been building towers in Nigeria since Almost half of SSA s towerco-owned towers are in Nigeria, and over US$2.5bn has been spent by towercos to acquire 79% of Nigeria s 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, it s proof of the efficacy of the independent towerco model in any emerging market. Namibia The Namibian mobile market has been dominated Namibia has 2.8mn* mobile subscriptions and SIM penetration rate of 114%* American Tower entered the Nigerian market in 2014 following an acquisition of Airtel s 4, TowerXchange Issue 21

113 Figure 14: Estimated tower ownership in Nigeria , ,757 15,629 IHS Towers American Tower BCTek Engineering Communication Towers Nigeria Hotspot Network Other small Nigerian towercos Globacom NATCOM SWAP technologies Such spend covers an extensive network rollout which includes the addition of 3G and 4G infrastructure to 7,345 existing towers as well as the addition of 3,904 new sites by the end of As part of this, IHS are known to have been awarded a build-to-suit program involving the addition of 1,650 new towers as well as the addition of approximately 2,000 tenancies to existing sites. In order to fund the build to suit program and refinance the debt taken on following the acquisition of HTN towers completed last year, IHS Nigerian subsidiary has issued a US$800mn high yield corporate bond which was listed on the Irish Stock Exchange with a high level of appetite from investors. towers, whilst IHS acquired the portfolios of Etisalat and MTN in the same year marked a challenging year for the Nigerian economy, with the country shrinking into recession, devaluation of the Naira and dollar shortages in the country. As a result of the economic downturn, EMTS (Etisalat s opco in the country) defaulted on loan repayments. With debt restructuring talks with its lenders failing, investor Mubdala exited its 40% stake in the country and Etisalat Group was ordered to transfer its 45% stake to United Capital Trustees, the security trustee of the opco s consortium of lenders. Etisalat Group terminated their management and support agreements with EMTS and ordered the business to rebrand, with the Source: TowerXchange company now operating under the name 9mobile. Barclays had been appointed to oversee the sale of 9mobile, with the bank reportedly receiving 16 expressions before 10 bidders made it through prequalification. At the time of going to press, Barclays were reported to have pulled out of its role after questioning by the Central Bank of Nigeria over the transparency of the bidding process. Competition for BTS opportunities is increasing among Nigeria s towercos. Most commentators agree Nigeria needs to double the country s current stock of towers and despite market leader MTN s financial challenges as a result of the NCC s fine, MTN have announced ambitious rollout plans for Nigerian cell site energy efficiency programmes 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. IHS Big Five project in the country is one major initiative designed to replace power generation systems on 15,000 sites with cleaner, more efficient solutions. IHS have selected five companies to each upgrade a portfolio of 2,500-3,000 sites, thus enabling the towerco to benchmark different technologies and identify the most efficient and effective energy solution for its largest market. Read our latest detailed study of the Nigerian market The health of the Nigerian tower industry at the end of TowerXchange Issue 21

114 Rwanda IHS has acquired both Airtel s and MTN s Rwandan towers and, after having added build-to-suit towers and undertaking decommissioning work, now owns a portfolio of 786 sites. As a small market, new build is limited and decommissioning is still required. 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. IHS have announced that they are assessing solar farm opportunities in Rwanda that could potentially supply power to the national grid in the first energy swap model to be used in Africa. Of all the SSA regions, Rwanda is showing some of the strongest promise in small cells and DAS making it a key target for such companies looking to enter Africa; IHS have explored shared DAS. SIM penetration sites at 75%* with mobile broadband at 35%* Saudi Arabia There are over 34,000 towers in Saudi and whilst population coverage is complete, an additional 3,500 4,000 new macro sites need to be added in order to bring >10MB broadband coverage to rural areas by In addition to this, a further 1,000-2,000 new sites are estimated to be required to meet growing data usage in urban areas. Saudi s three operators, Saudi Telecom Company, Mobily and Zain are all in the process of considering their tower strategies. Having initially entered into exclusive negotiations with TASC Towers to sell their towers, Zain are now in exclusive negotiations with a consortium involving Towershare and IHS Towers to sell their 8,000 Saudi sites (having already entered in exclusive negotiations to sell their Kuwaiti sites to the latter). Both Mobily and STC (owning 9,600 and 16,400 sites respectively) had also considered tower sales before abandoning the processes and announcing their intent to form a joint venture towerco. Whilst the two had issued a RFP to appoint an advisor for the joint venture, and it emerging that they were looking for a third party to get involved, plans for the JV appear to be on hold whilst they reconsider all their options. Senegal Expresso Telecom has agreed the sale of their 450 towers to newly formed towerco, Al Karama Towers. The sale and leaseback transaction also includes first right of refusal on new build for Expresso, with the operator planning to add an additional sites in the next twelve months as part of the regulatory mandate for MNOs to increase coverage to underserved areas of the country. There is a high level of parallel infrastructure in Senegal as infrastructure sharing in the country has been limited, things have however started to change. Tigo and Expresso currently share 45 sites in the country and there is strong expectation that this will increase with the formation of the new towerco. Sonatel (in which Orange has a controlling stake) had reportedly looked into a sale of its 2,100 towers previously but talks failed. Millicom is selling its opco to a consortium involving NJJ, Sofiman and Teyliom Group after having abandoned the sale to Wari. Tigo currently has 800 sites in the country; should the eventual new owners look to divest their towers, they would make an interesting acquisition target for Senegal s new towerco. Sonatel is the only operator to possess a 4G license in the country but Tigo and Expresso have expressed a strong interest in securing licenses, with the sale of Expresso s towers designed to raise capital for such a license. In February 2017, the Senegalese regulator, ARTP granted three new ISP licenses to locally owned entities, following in the footsteps of Hayo which is providing coverage in the Matam region. The introduction of the new ISPs is hoped to reduce consumer prices and improve the quality of service; it also presents additional tenants for the towerco. There have been reports that a joint venture between South Korea s SK Telecom and Middle Eastern firm CKG Group has applied for a fourth MNO license in the country, in a bid to access Senegal s nascent LTE market. There are 14.6mn* mobile subscriptions in Senegal 114 TowerXchange Issue 21

115 Figure 15: Estimated tower ownership of Saudi Arabia s 34,000 towers and a SIM penetration rate of 96%*. Mobile broadband penetration has increased 64% YoY to 14%*. 8,000 South Africa Towercos have struggled to get a foothold in STC the South African market since Cell C sold their portfolio to American Tower back in 2010 and the 16,400 Mobily Zain MNO has recently announced that they plan to build approximately towers each year for the next four to five years, in order to develop their own 9,600 portfolio once again with a view to commercialising its sites. Figure 16: Ownership of Senegal s 3,350 towers 450 Sonatel Source: TowerXchange Telkom, who s towers had previously been the subject of speculation, have similarly developed a passive infrastructure team to actively pursue co-locations on their sites, recently carving out of its tower assets into a separate entity, Gyro Towers. Active in both the fixed line and wireless sector, Telkom has one of the largest real estate portfolios in South Africa which executives believe should be contributing more earnings to the business. The currently have a portfolio consisting of around 3,500 sites ,100 Tigo Expresso / AKT Vodacom has developed a successful commercial towerco business model in house, including a platform on which other frequency holders can view available space on Vodacom sites. Source: TowerXchange After a turbulent year for MTN following their record fine from the Nigerian Communications Commission (reduced from $5.2bn to $1.7bn), the 115 TowerXchange Issue 21

116 Figure 17: Ownership of South Africa s 30,433 towers ,492 7,160 3,500 9,000 7,000 South African company have appointed a new senior management team with a new CEO and new head and deputy head of M&A appointed. The operator are yet to give any clues as to whether a sale of their 9,000 tower strong South African portfolio could be back on the cards to offset the fine but with their CEO hailing from Vodafone (who have traditionally chosen to retain their passive infrastructure) we don t expect any quick decisions, with the listing of MTN Nigeria on the stock exchange being the first step to raise the necessary $1.7bn. In terms of towerco activity, the biggest news in recent years was American Tower s acquisition of Eaton Towers portfolio of 300 towers. Eaton MTN Vodacom Telkom American Tower Cell C SENTECH Atlas Tower Smaller independent towercos including Eagle Towers, Blue Sky Towers, Comco and Pro High Site Communications Others including broadcast and web industries Source: TowerXchange Towers strategy in South Africa was to establish a build-to-suit presence and then scale up by buying a substantial portfolio of towers from one of the operators, said Eaton Towers CEO Terry Rhodes in an exclusive TowerXchange interview. However, the operators in South Africa have not given this opportunity, and they still own over 90% of the total towers. We have outperformed American Tower in South Africa over the last few years but our operation is about 1% of the total South African market, so when American Tower approached us it made sense to sell, added Eaton s Rhodes. Atlas Tower is South Africa s fastest growing towerco, having increased their site count to 422 sites, a number which is expected to hit 435 by the end of Sentech promotes 340 broadcast towers for co-location, while there is a long tail of smaller towercos in the South African market, including Eagle Towers, Coast to Coast, Blue Sky Towers, Comco and Pro High Site Communications. Sierra Leone Orange has completed the takeover of Airtel s opco in Sierra Leone in partnership with its Senegal based subsidiary, Sontel. Significant investment is underway in the 3G infrastructure in the country, providing an attractive growth opportunity. With four MNOs, the country has a 4.5mn* mobile subscribers and a SIM penetration rate of 76%*. Mobile broadband penetration sits at 23%, up 36% YoY.* The market represents an attractive growth opportunity with significant investments in rolling out 3G infrastructure in the country. Tanzania Helios own 3,475 towers in Tanzania having acquired both Vodacom and Millicom s portfolios in the country as well as Zantel s sites on the mainland. In the Vodacom transaction, Vodacom sold 100% equity in the towers but obtained a 24% stake in Helios Towers Tanzania, a stake which Helios has since purchased. In the Millicom deal, Millicom and Helios formed a joint venture in which, Millicom held a 40% stake, the 40% stake was then restructured into a shareholding at Helios group level, a stake which the operator is now looking to monetise. 116 TowerXchange Issue 21

117 In 2016, Airtel agreed the sale of the 1,350 sites to American Tower, but the deal was cancelled. One of the biggest contributing factors to the calling off of the deal was the introduction of a new legal requirement for telecoms companies to list a 25% stake on the Dar Es Salaam stock exchange; a ruling which was introduced after the deal was announced and a ruling which applies to towercos as well as operators. Vodacom have been the first company to issue their IPO prospectus but with limited liquidity in the local market, the process has had to be opened up to international investors. In addition to Tigo, Vodacom, Airtel and Zantel, Smart, Halotel and TTCL are present in the market, with each of the main MNOs dominant in a different part of the country. Figure 18: Ownership of Tanzania s 7,394 towers Helios Towers Africa Airtel 3,475 Halotel 1500 Zantel Millicom Smart Other 1,350 In July 2016, it was announced that each of the three main MNOs have entered into a RANsharing agreement to improve coverage in rural areas. Uganda Eaton Towers has added Airtel s Ugandan towers to the 700 towers they acquired from Orange and Warid back in 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 which owns 1,393 towers. There are still around an additional 3,500 towers to be added to Uganda s total of 3,485; growth rate was 17% between 2012 and 2014 but has since slowed to 10% as MNOs opt for co-location on existing sites. Eaton Towers and American Tower are handling the majority of new build. Around 27% of sites are off-grid, with about half of new build being off-grid, grid outages are common, even in Kampala, meaning that lots of investment is going into hybrid solutions. Eaton currently have a pilot study underway to assess hybrid solutions under both capex and opex models, SIM penetration is just 72%* in Uganda, with multi- SIMing meaning actual penetration is under 50%*. Source: TowerXchange Mobile broadband penetration is low with only 13% of the population having a smartphone. Zambia IHS acquired the towers of market leaders Airtel Zambia to supplement their 2014 acquisition of MTN s Zambian 719 towers which bolstered by new build, gives them 1,960 towers in this this ~2,300 tower market. The Zambia Information and Communications Technology Authority has announced that it in the process of revising the telecoms licensing framework in the country. Under the new structure, 117 TowerXchange Issue 21

118 Figure 19: Ownership of Uganda s 3,520 towers 792 Eaton Towers 1,300 American Tower MNOs 1,428 Figure 20: Ownership of Zimbabwe s 2,700 towers 600 Econet 1,500 NetOne Telecel 600 Source: TowerXchange any operator of data services will be allowed to apply for a permit to provide VoIP enabling the country s ISPs to extend their services. The news has been welcomed by Vodafone Zambia who currently holds a license restricted to offering internet services only. On successful obtaining a permit, Vodafone would be able to provide voice over their LTE network, thus introducing competition for the MTN, Airtel and Zamtel in the market. Zimbabwe There are an estimated 2,700 towers in Zimbabwe, of which Econet Wireless own 1,500 with NetOne and Telecel splitting the balance between them. New legislation mandating infrastructure sharing is shaking up the Zimbabwean market with frictions between privately owned Econet and state owned NetOne and Telecel. The government had been keen to promote infrastructure sharing in a bid to reduce costs, however with Econet having invested more heavily in their infrastructure rollout than its two competitors, there had been some concerns voiced from the operator. The Zimbabwean government s Universal Service Fund will invest $250mn in the deployment of 600 towers in rural areas. The deployment will be managed by the country s regulator, POTRAZ and will be coordinated with the country s three MNOs with the three operators set to use the towers under a network sharing agreement Source: TowerXchange (*Source: GSMA Intelligence, Q4, 2015) 118 TowerXchange Issue 21

119 TowerXchange MEA tower transaction heat map BAHRAIN Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Legend Towerco activity but no further deals expected Unconfirmed rumours of a potential tower deal in the last 3 years Confirmed potential tower deal At least one tower deal has closed but no more expected At least one tower deal has closed and more expected Source: TowerXchange Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

120 MEA News A roundup of tower news across SSA and MENA which operated under the Vodafone brand. The operator stated that it was no longer commercially viable to run operations in the country where active MNOs include CamTel, MTN, Orange and Nexttel. Ghana: Millicom and Airtel launch AirtelTigo brand Kuwait: IHS Towers and Towershare reach an agreement to acquire Zain s 1600 towers On 10 October it was announced that Zain had entered into an agreement to sell and leaseback its 1,600 Kuwaiti towers to IHS Towers, in partnership with Towershare, for US$165mn. The transaction is expected to close in the first quarter of 2018 and upon completion will mark the Middle East s first tower transaction of scale. Zain has retained a noncontrolling minority stake in the venture. Nigeria: Barclays pulls out of 9mobile sale process Angola: Angola Telecom searches for mobile partner According to reports, Angola Telecom is poised to become the third operator in the Angolan market, joining Unitel and Movicel. The country s fixed line incumbent is reportedly looking for a partner to launch mobile services, with Vodacom being linked with the country. Cameroon: Afrimax closes Vodafone-branded group Following the revocation of its license in September, Afrimax has closed down its Cameroon operations, On Tuesday 14 November it was announced that Millicom and Airtel s newly merged entity had been rebranded AirtelTigo. AirtelTigo becomes Ghana s second largest operator, behind MTN. The company will serve around 10 million subscribers with revenues close to $300 million, it said in a statement. Kenya: Market awaits news of Telkom Kenya tower sale After having launched a process earlier this year to sell their portfolio of ~1,000 sites in the country, Telkom Kenya are in the process of evaluating bids with both Eaton Towers and American Tower thought to still be in the running. Eaton has a portfolio of 1200 sites in the country after having acquired Airtel s portfolio. Dominant market player, Safaricom, have the country s largest tower portfolio. After having been appointed as financial advisor to run the sale of 9mobile, Barclays has reportedly stood down from its position after questioning from the Central Bank of Nigeria on the transparency of the bidding process. 16 expressions of interest had been received by the bank, with 10 parties reported to have been progressed through the the prequalified bidder phase. Barclays withdrawal would require the sale process to be restarted from scratch Nigeria: MTN expects a local listing in H In their Q3 earnings call, MTN stated that they expect to list their Nigerian opco on the local stock exchange in the first half of 2018, should market conditions be favourable. The listing is part of MTN s settlement deal with the Nigerian government after it was fined NGN330 for a failure to disconnect unregistered SIMs. 120 TowerXchange Issue 21

121 Oman: Third Omani MNO license to go to a local consortium After having received bids from Etisalat, Saudi Telecom Company and Zain, Oman s Telecom Regulatory Authority has rejected such bids in favour of awarding the the Sultanate s third mobile license to an as yet unnamed local consortium. The decision is understood to be part of a move to enhance the role of local investment funds and enable them to contribute to the growth of the national economy. The new operator will compete with Omantel and Ooredoo in the country. Looking for an international partner Saudi Arabia: Regional funds plan to co-invest with IHS in Zain tower purchase Having reached an agreement earlier in the month to sell their Kuwaiti sites to IHS and Towershare for $165mn, talks are reportedly close to reaching a conclusion between the parties regarding Zain s 8,000 Saudi Arabian sites. Several regional funds have been linked as potential co-investors, with each readying proposals of US$100mn upwards for the tower purchase. The portfolio is expected to fetch a valuation of around $750mn with the MNO expected to sell 100% equity in the towers. Citi is running the process. Saudi Arabia: Rural broadband project phase I completed ahead of schedule The first phase of Saudi Arabia s rural broadband project has been completed ahead of schedule. The project, part of Saudi Arabia s National Transformation Plan, is designed to bring >10Mb broadband coverage to sparsely populated areas with estimates suggesting that it would require the construction of new macro-towers before South Africa: Government identifies potential Telkom buyers The South African government has identified potential buyers for its 39.3% sake in Telkom. The sale is part of a move to ensure the country does not exceed its fiscal expenditure as it looks to bail out SOEs South African Airways and the SA Post Office. Earlier this year, Telkom created a new infrastructure unit, Gyro Towers, through which they planned to better monetise their tower portfolio. Tanzania: Vodacom Tanzania sells its stake in Helios Towers Tanzania Vodacom Tanzania has sold its 24.06% equity stake in Helios Towers Tanzania to HTT s parent company, Helios Towers Africa. The stake, valued at $85.5mn was acquired during Vodacom s sale of its tower portfolio to Helios back in Vodacom had previously sold 100% equity in its 1,149 towers to Helios for $75mn, but as part of the terms of the transaction, acquired a 24.06% stake in the company s Tanzanian opco. According to Vodacom Tanzania s Managing Director, Ian Ferrao, the transaction will up capital to further enhance Vodacom s Tanzania s balance sheet and strategic operations. Vodacom s relationship with Helios will be unaffected by the sale. The acquisition of the stake by Helios Towers Africa further simplifies the towercos ownership structure as they head towards a likely IPO in early Regional: Millicom s plans to exit Africa advance as Ghana merger completes and sale discussions with Econet Wireless progress In Ghana, Millicom has completed the merger of its local business with Airtel, whilst the company has entered into advanced discussions with Econet Wireless regarding the sale of its remaining opcos in Tanzania, Rwanda and Chad, with the sale expected to raise close to $1bn. Millicom had previously sold its DRC operations to Orange and has reached an agreement to sell its Senegalese opco to a consortium involving NJJ, Sofiman and Teyliom Group. Millicom has had a challenging time in the African market and with the region s revenue representing less than 10% of total group revenues, the exit from Africa will enable the operator to focus on its more successful Latin American markets. Regional: African towerco IPO speculation steps up It has been reported that Africa s three largest privately held towercos, Eaton Towers, Helios Towers Africa and IHS Towers have appointed banks to run their respective IPO processes. Whilst the towercos have shied away from confirming such developments, a H listing is widely expected, with Eaton Towers being tipped as the first expected to IPO, followed by Helios. Whilst IPOs look like the likely route, a strategic acquisition could represent an alternative exit for the towercos investors, with American Tower the most likely acquirer 121 TowerXchange Issue 21

122 Tower Xchange TowerXchange brings the tower industry to you! Connect with us today and discuss available opportunities for our Meetups across Africa, Asia, Europe, Americas and China! Exhibiting or sponsoring at TowerXchange Meetups is the best investment you can make to showcase your products and expertise in front of the global telecom tower industry. Annabelle Mayhew, CCO, at today to find out more. 122 TowerXchange Issue 21 TowerXchange Meetup calendar TowerXchange Meetup Asia 2017, December 12-13, Marina Bay Sands, Singapore TowerXchange Meetup Europe 2018, April 17-18, Business Design Centre, London TowerXchange Meetup Americas 2018, June 20-21, Boca Raton Resort & Club, Florida TowerXchange Meetup Africa & ME 2018, October 9-10, Sandton Convention Centre, Johannesburg Visit our website at

123 Global coverage: Global features This quarter TowerXchange has been busy laying the foundations for some activities which will really move the bar in the tower industry. Firstly, the The Communications Infrastructure Regulatory Working Group aims to create a peer network wherein towercos can share questions, problems and solutions, ultimately building up a resource library of best practices, guidelines and templates global exemplars to illustrate how Communications Infrastructure companies should be regulated. Secondly, the European chapter of Women in Towers promotes diversity in the sector as well as giving fascinating insights into the careers and ambitions of some of Europe s most senior execs. We ve also been lucky enough to speak to the CEO of Indus Towers who have outlined their plans for smart cities in India, which sees Indus at the forefront of a revolution in the way that towercos operate within distributed network deployment. Finally we pay tribute to some of the best performing towercos, MNOs and service providers in Africa with a summary of the TowerXchnage Meetup MEA 2017 Awards winners. Don t miss: 131 Women in Towers: European chapter 140 Communications Infrastructure Regulatory Working Group 144 Indus Towers interview 149 TowerXchange MEA 2017 Awards winners 123 TowerXchange Issue 21

124 TowerXchange now tracks 275 towercos and infracos who between them own 2.838mn of the world s 4.3mn towers (66%) Rank Towerco Count Countries Updated 1 China Tower Corporation 2 American Tower 149,720 1,900,000 China Q317 Argentina, Brazil, Chile, Colombia, Costa Rica, Germany, Ghana, India, Mexico, Nigeria, Peru, South Africa, Uganda, USA, France Q317 3 Indus Towers 122,920 India Q217 4 Towercom (formerly Reliance Infratel) 45,000 India Q416 5 Crown Castle 40,127 USA Q217 6 Bharti Infratel 39,211 India Q217 7 Deutsche Funkturm 34,700 Germany Q317 8 edotco 31,600 Bangladesh, Cambodia, Malaysia, Myanmar, Pakistan, Sri Lanka Q317 9 GTL Infrastructure 28,000 India Q SBA Communications 26, Cellnex 24, IHS Towers 23,328 Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua, Panama, Peru, USA France, Italy, Netherlands, Spain, UK, Switzerland Cameroon, Ivory Coast, Nigeria, Rwanda, Zambia Q317 Q317 Q217 Rank Towerco Count Countries Updated 13 Telxius 16,245 Brazil, Chile, Germany, Peru, Spain, Argentina Q Telesites 15,111 Costa Rica, Mexico Q Guodong 15,000 China Q Protelindo 14,614 Indonesia Q First Tower Company 14,000 Russia Q Tower Bersama Indonesia Q Mitratel 13,113 Indonesia Q National Tower Company 13,000 Russia Q NetWorkS! 13,000 Poland Q DIF (formerly TRUEGIF) 12,183 Thailand Q CTIL 12,000 UK Q MBNL 12,000 UK Q INWIT 10,945 Italy Q Global Tower 10, Idea Cellular Infrastructure Services Turkey, Ukraine, Belarus, Northern Cyprus Q117 8,886 India Q TowerXchange Issue 21

125 Rank Towerco Count Countries Updated 26 Arqiva 8,600 UK Q Tower Vision 8,400 India Q TDF 7,398 France Q STP 7,000 Indonesia Q Victus Networks 7,000 Greece Q Helios Towers Africa 6,501 Congo B, DRC, Ghana, Tanzania Q Grupo TorreSur 6,500 Brazil Q Ascend Telecom 5,645 India Q MTS Towers 5,500 Russia Q AT&T Towers 5,281 USA Q Eaton Towers 5,000 Burkina Faso, Ghana, Kenya, Niger, Uganda Q CETIN 4,800 Czech Republic Q Miteno 4,500 China Q US Cellular Towers 4,207 USA Q Vertical Bridge 3,700 USA Q IBS Tower 3,677 Indonesia Q EI Towers 3,300 Italy Q Phoenix Tower International 3,278 Brazil, Colombia, Costa Rica, Dominican Republic, El Salvador, Panama, Peru, USA Q217 Rank Towerco Count Countries Updated 43 Russian Towers 3,100 Russia Q ASEAN Towers (IGT + Golden Towers) 45 OCK Group 2,802 2,850 Myanmar, Vietnam Q117 Malaysia, Myanmar, Vietnam Q Norkring 2,747 Norway Q Rai Way 2,300 Italy Q Vertical 2,300 Russia Q Wireless Infrastructure Group 2,000 Ireland, Netherlands, UK Q Axicom 1,900 Australia Q T-Mobile Towers 1,823 USA Q Apollo Towers 1,800 Myanmar Q Sinonetstone 1,800 China Q TT-Network 1,800 Denmark Q Mexico Tower Partners Frontier Tower Solutions InSite Wireless Group 1,750 Mexico Q217 1,500 Afghanistan Q216 1,500 Australia, Canada, Puerto Rico, US Virgin Islands, USA Q Torres Unidas 1,500 Chile, Colombia, Peru Q RTRS 1,400 Russia Q Varsity Wireless 1,303 USA Q TowerXchange Issue 21

126 Rank Towerco Count Countries Updated Komet Infra Nusantara (KIN) Pan Asia Majestic Eagle 60 QMC Telecom 1, Beijing RLZY Technology 1,300 Indonesia Q317 1,250 Myanmar Q117 Brazil, Colombia, Mexico, Puerto Rico Q117 1,214 China Q Cell Site Solutions 1,203 Brazil Q Balitower 1,040 Indonesia Q Persada Sokka Tama 1,012 Indonesia Q TowerCo of Madagascar 1,003 Madagascar Q Sacofa 1,000 Malaysia Q414 Rank Towerco Count Countries Updated 72 Innovattel (Torresec) 700 Argentina, Colombia, Ecuador, Panama, Peru, Puerto Rico Q Towercom (Slovakia) 700 Slovakia Q Continental Towers Diamond Communications Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Peru Q USA Q Broadcast Australia 620 Australia Q HighTel Towers 600 Albania, Italy Q Axion 586 Spain Q Centennial Towers 565 Brazil, Colombia, Mexico Q Service Telecom 1,000 Russia Q Centratama Menara Indonesia (formerly Retower) Open Tower Company České Radiokomunikace 70 Torrecom Brazil Tower Company 968 Indonesia Q Netherlands Q Czech Republic Q414 Guatemala, Mexico, Nicaragua, Panama Q Brazil Q BCTek 700 Nigeria Q Digita 556 Finland Q Eco-Friendly Towers 550 Myanmar Q Tower Ventures 548 USA Q Industrial Communications 513 USA Q Atlas Tower 501 South Africa, USA Q Gihon 500 Indonesia Q Highline do Brasil 500 Brazil Q CTI Towers 493 USA Q TowerXchange Issue 21

127 Rank Towerco Count Countries Updated 96 Grain Management 487 USA Q Teletower 485 Latvia Q317 Rank Towerco Count Countries Updated 112 Intelli Site Solutions 313 Mexico Q KJS 309 Malaysia Q Andean Tower Partners 476 Colombia, Peru Q Naza Communications 300 Malaysia Q Touch Matrix 460 Malaysia Q Al Karama Towers 450 Senegal Q IIMT 450 Mexico Q ORS Austria 450 Austria 101 Sprint Sites USA 420 USA Q Towercom (Ireland) 400 Ireland Q Shared Access 394 Ireland, UK Q Emitel 377 Poland Q ESB Telecoms 377 Ireland Q SWAP Telecoms and Technologies Uniti Towers (formerly Summit LatAm) 368 Nigeria Q Colombia, Mexico, Nicaragua Q D'harmoni 346 Malaysia Q PEKAPE 300 Indonesia Q PowerCom 300 Namibia Q Torres Andinas 300 Colombia, Peru Q Common Tower 260 Malaysia Q Hovarth Communications 254 USA Q OIV 250 Croatia Q K2 Towers 227 USA Q AlfaSite 201 Brazil Q Infra Quest 201 Malaysia Q Branch Communication 200 USA Q Senno Telecom 200 China Q Sotka Vysotok 200 Russia Q Subcarrier Communications 346 USA Q Vertel 200 Australia Q Sentech 340 South Africa Q Central States Tower 318 USA Q Yiked Bina 200 Malaysia Q TowerCo 187 USA Q TowerXchange Issue 21

128 Rank Towerco Count Countries Updated 123 Pegasus Tower 173 USA Q Digea 156 Greece Q RN 150 Ireland Q Perak Integrated Networks 150 Malaysia Q Omnix Malaysia 148 Malaysia Q Skyway Towers 147 USA Q Cignal 145 Ireland Q Day Wireless Systems 143 USA Q Spyder 142 UK Q Communication Enhancement Hibernian / Britannia Towers 140 USA Q Ireland, UK Q Asia Space 137 Malaysia Q Q Towers 120 China Q Desabina 118 Malaysia Q Iranian Towers 114 Iran 136 Fanasia 106 Iran Q TOCSA 105 Costa Rica Q Municipal Communications 102 USA Q216 Rank Towerco Count Countries Updated 139 BTS Towers 100 Colombia, Mexico, Peru Q CIE 100 Ireland Q Myanmar Infrastructure Group (MIG) 100 Myanmar Q Melaka ICT Holdings 95 Malaysia Q Rangkaian Minang 90 Malaysia Q CS&L 86 Mexico, USA Q Badger Towers 84 USA Q Performance Development Group 82 USA Q Falck 75 Denmark Q Hotspot Network 75 Nigeria Q Clearview Tower Company 67 USA Q Aplicanet 63 Ecuador Q International Tower Corporation 61 South Africa Q Torres de Panama 60 Panama Q ComSites West 56 USA Q Saurava Towers 55 India Q Logycom Group 53 Kazakhstan Q Torre Online 51 Brazil Q HIGHPOINT (Obelisk) 50 Ireland Q Sanyuan Tec 50 China Q TowerXchange Issue 21

129 Rank Towerco Count Countries Updated 155 Tower Sites Inc 49 USA Q Questar InfoComm 48 USA Q Konsing Group 47 Serbia Q Wireless Asset Group 47 USA Q Eagle Towers 45 South Africa Q ERS Tower Services 45 USA Q Mauna Towers 44 USA Q Bay Communications 43 USA Q PDC Telecommunications 43 Malaysia Q Radio Putki 40 Finland Q Skysites 40 Brazil Q Telecom Torres 40 Brazil Q RG Towers 39 USA Q HOI-MEA 38 Egypt Q Stout & Company 38 USA Q Telava Wireless 38 USA Q TowerKing 38 USA Q Dogwood Towers 37 USA Q Telecom Tower Group 36 USA Q MidAtlantic Tower 34 USA Q216 Rank Towerco Count Countries Updated 166 St. Charles Tower 34 USA Q Alticom 33 Netherlands Q AB Telecenters 30 Lithuania Q MidAmerica Towers 29 USA Q TowerCom (USA) 27 USA Q Coast to Coast 25 South Africa Q Highpoint Tower Technology 25 USA Q Blue Sky Towers 24 South Africa Q Prime Tower Development 24 USA Q Wireless Properties 24 USA Q Perlis Comm 23 Malaysia Q Levira 22 Estonia Q Arcadia Towers 21 USA Q Hayes Towers 21 USA Q ForeSite 20 USA Q Shared Towers LLC 19 USA Q Clear Signal Towers 15 USA Q Datapath Tower 14 USA Q Pro High Site Communication 11 South Africa Q Camtowerlink 10 Cambodia Q Horizon Tower 10 USA Q Norkring Belgie 10 Belgium Q TowerXchange Issue 21

130 Newer towercos ACES, Saudi Arabia Aird Towers, Australia, New Zealand Antosc, Angola Astro Tower, China AWAL Telecom, Pakistan Catalina Inc, Costa Rica ComBiz, Myanmar Desarrollos Terrestres Peru, Peru ECS, Poland EuroTower, Pan-European Infrashare, Algeria Infratel, South Africa MENA Towers, Ivory Coast, Pakistan, UAE MNTH, Myanmar MTGDC, Myanmar Towercos with undisclosed counts National Tower Development, Myanmar Pan African Tower Company, Ivory Coast Plata Tower Company, Argentina Pula Towers, Botswana Quippo Telecom, Global (except India) Rent-A-Tower, Mexico SEAL Towers, Kenya Secured Towers, Nigeria Square1 Infrastructure, Chile, Myanmar, Nigeria, South Africa Staghorn Infrastructure, USA Teletower Argentina, Argentina Tower One Wireless, Colombia Uruguay Torres, Uruguay Meet the towerco CXOs, their investors and their partners at your next TowerXchange Meetup! TowerXchange Meetup Asia 2017 December 12-13, Singapore TowerXchange Meetup Europe 2018 April 17-18, London TowerXchange Meetup Americas 2018 June 20-21, Boca Raton, FL TowerXchange Meetup Africa & Middle East 2018 October 9-10, Johannesburg For agenda information and to register, visit: Norkring, Belgium, Norway Netgrid Telecom, Romania Gyro Towers, South Africa 3GIS, Sweden Net4Mobility, Sweden Mosaic, Ireland Antenna Hungaria, Hungary SUNAB, Sweden Undisclosed Mexican Towerco, Mexico Azerconnect Azerbaijan Communication Towers Nigeria, Nigeria CenturyLink, USA Mobilitie, USA 52 Eighty, USA Nova Towers, USA Media Broadcast, Germany MX Towers, Mexico TowerCast, France Heartland Tower, USA Capital Telecom, USA APC Towers, USA Teracom, Denmark, Sweden Balesia, Colombia, Ecuador, El Salvador, Guatemala, Peru Message Center Management, USA RTP, Portugal TASC Towers, Jordan, Lebanon, UAE OiV, Croatia Radiocom, Romania Swisscom, Switzerland ETB, Serbia Tarpon Towers, USA Golden Comunicaciones, Colombia Shared Networks Tanzania, Tanzania Telecommunications Partners, Peru Comco, South Africa Österreichischer Rundfunk, Austria TowerXchange tower count research methodology TowerXchange s famous global towerco league table provides a simple comparison of the scale of towercos by tower count. We have derived tower counts for the category s 21 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 frequently, we offer no guarantee that the counts they provide are accurate: we ask for a count of complete macro and rooftop towers marketed for co-location, but have only recently begun to include DAS and lamp-posts / city poles, while inevitably some towercos inflate their tower count by including works in progress and other special structures. As such, TowerXchange s tower count should be considered estimates. TowerXchange is preparing a digital tower count, back-dated two years to track growth, as a premium business intelligence product. As the product of proprietary market research, TowerXchange asserts copyright over this table and the data listed herein. If you want to use data in your own analysis, you need to request our permission. If you wish to suggest a correction, please Kieron Osmotherly at kosmotherly@towerxchange.com 130 TowerXchange Issue 21

131 Women in Towers: Europe Introducing the leading women in European towers By Frances Rose, Head of Europe, TowerXchange TowerXchange is committed to encouraging and enabling diversity across communications infrastructure. As part of our ongoing work in the tower community, we have spent several months working with some of the most senior women in European towers and profiling them for this new feature. Women in Towers is a live project and we will be updating it regularly, as well as adding in content for the other regions we serve. We have been delighted with the industry response to this project and hope to reflect the seniority and diversity of the experts we work with throughout our Meetups in 2018 as well. If you d like to be considered for this feature, or to nominate a colleague, please me frose@towerxchange.com Keywords: 5G, C-Level Perspective, CTIL, Carve Out, Co-locations, Deutsche Funkturm, Editorial, Europe, Europe Insights, Germany, INWIT, Infrastructure Funds, Italy, MBNL, Operational Excellence, Operator-Led JV, Private Equity, Russia, Russia & CIS, Standard Bank, Tenant s Perspective, Tilman Global Holdings, Towercos, UK, Vertical, Wireless Infrastructure Group, Women in Towers Read this article to learn: < Who are the most senior women in European towers < How they have pursued successful careers in the tower industry < What their greatest achievements have been < Where their future ambitions lie Cellnex: Yvette Meijer, Country Manager, Netherlands I got introduced to the telecoms world a long time ago at Ericsson in the UK back in However I really began my infrastructure career in 1997 working in procurement at EnerTel, the first challenger to KPN for voice in the Netherlands after the liberilisation. At the time, EnerTel had taken the decision not to also go for a mobile license and so I was involved in a project transferring greenfield and rooftop contracts that EnerTel had already acquired in anticipation of the mobile license, to Ben (now T-Mobile Netherlands). I was quite intrigued by how Ben had awarded Nokia a turnkey contract to roll out their whole mobile network from start to finish, and so decided to leave EnerTel 131 TowerXchange Issue 21

132 and join Nokia to be part of this exciting roll out of a new mobile network in the Netherlands. At Nokia I started as Site Acquisition Negotiator and not long after I became Regional Site Acquisition Manager. In 2000 I left to join my partner who had moved to London to set up the InterXion DataCentre. In London I joined Colt (City of London Telecoms/Technology Services), a Europe-wide provider of different of fibre metro networks, initially as a project manager DSL unbundling Local Loop in the UK, later, over a period of over 10 years, followed by various programme management roles in engineering, network operations across Europe and India. An opportunity arose in 2012 when Arcus Infrastructure Partners acquired 461 towers from KPN through a share purchase agreement. Our paths (fortunately) crossed and I was given this amazing opportunity and assignment to launch Shere Netherlands and manage the assets. At that time Shere Ltd had already been in existence as a successful tower and land management company in the UK since I started with the recruitment of the team, finding an office, doing a handover with the former KPN staff and went from there. At the same time the LTE rollout was just beginning in The Netherlands. From that moment on I found myself looking up (spotting the Shere towers) instead of looking down (spotting Colt the manholes) anywhere I went. In July 2016 Cellnex Telecom acquired Shere s competitor in Netherlands, Protelindo with 260 towers. A few months later Cellnex also acquired Shere Masten. This meant the very quick integration of Protelindo (renamed Towerlink Netherlands B.V.) into the Shere Masten team and a joint integration of Cellnex Netherlands as such into the new parent organisation; Cellnex Telecom. A lot of my time over the last year has therefore also been dedicated to organisational matters. Cellnex in Europe is much more than just a tower company. In addition to this, Cellnex recently acquired Alticom in the Netherlands, thus also starting operations in broadcast and data centres. All this means that we are now actively looking for other opportunities that will bring us more in line with the businesses Cellnex is involved with such as DAS and small cells, 5G, Smart Cities and Edge Computing My role has changed from startup, operational to consolidation, followed by integration and now more focusing on business development. And this variation is exactly what makes my job challenging and fulfilling. Just two months after my start date in March 2012, the Shere team was fully up and running and had taken over the responsibility for the KPN towers four months ahead of target. More than anything building an efficient stable team of dedicated professionals and building a trusting relationship with our customers, (not limited to) the four MNO s in The Netherlands, has been my greatest professional achievement. We offer speed and a professional yet personal service to our customers with clear processes and quick response times. All this resulted in an increased value of the company and the acquisition by Cellnex Telecom. Despite of the fact we are now part of a large European and listed company, we remain a hands on and lean team focused on our customers and operational excellence CTIL: Belinda Fawcett, General Counsel and Director of Property & Estates I joined 3UK in 2005 to head up their legal property team, managing the retail property portfolio and the roll out of the 3UK Network. After four years, I moved to MBNL - a Joint Venture between 3 and T-Mobile (now EE). I was one of the founding 132 TowerXchange Issue 21

133 directors and played a key role in developing and delivering the strategy for the consolidation of their 3G networks. We delivered the projected cost savings and other synergies for both shareholders. The MBNL Network was the first consolidated mobile network in the UK. In 2015 I joined CTIL (a JV between Vodafone and Telefonica) as General Counsel and Director of Property. I established the in-house legal team and restructured the Property and Estates Team to support the shareholders ambitious plans for a joint network across the UK. In order to meet the challenging timelines of the shareholders, we reviewed and re-defined the strategy and accelerated the consolidation, recovering missed timelines and implementing new business processes which would enable us to achieve further improvements to the key performance indicators of time, cost and quality. The CTIL Property team is playing a key role in the introduction of the Electronic Communications Code, developing standard documentation and processes for the telecoms industry once the new Code is introduced. We are working closely with the Property industry to drive a culture of change in the relationship between the Landlords and Tenants in the telecoms infrastructure domain with a view to supporting and ultimately delivering the Government s ambition to improve connectivity in the UK. We are pulling down the traditional barriers and addressing key issues raised by the Code in a collaborative and cooperative manner. This is a strong focus area as I firmly believe this to be the way forward if the UK is to compete in the Global marketplace and provide the support to the UK Government s commitment to build world Class infrastructure and improve connectivity Deutsche Funkturm: Dr. Saskia Wagner, Regional Manager Munich I have been working in the telco environment for the past 14 years. After finishing my law studies in Bonn and Lausanne, Switzerland with a doctorate, I started working in the legal department at Deutsche Telekom in The focus of my thesis had been on competition law, therefore I was looking for an employment in a bigger company with their own marketing department that I could advise as a lawyer concerning their advertisements. After different roles in the legal department and later on in the human resources department at Deutsche Telekom I took the opportunity to lead the human resources department at Deutsche Funkturm in After two years developing employees skills and launching an individually designed training to promote aspiring young female employees, I wanted to change into the operational part of the business and I became head of site acquisition in Bavaria, a task that perfectly fitted with my studies in law. These last two years I have been working as branch officer in our regional office in Munich. I could extend my knowledge about technology while being responsible for the realisation of infrastructure for mobile networks in southern Germany. Me and my 40 colleagues are responsible for the rollout of radio network infrastructure in the area between Ingolstadt and the border to Austria. Building infrastructure for mobile network providers means that we support network providers in selecting the suitable site, renting the needed area and providing them with planning sheets and site documentation. Furthermore we organise the construction and maintenance of the infrastructure, get permissions if necessary and stay in contact with the municipalities. Working in a technical environment, almost exclusively male dominated, is very challenging, all the more for me as a non-technician. And of course our operating goals are very ambitious. But I am very happy and thankful to be working together with many competent and supportive colleagues 133 TowerXchange Issue 21

134 INWIT: Gabriella Raffaele, Head of Human Resources After a short but significant experience in Finance Department of Ethicon part of the Johnson & Johnson Group - I began working for TIM in For the first four years I worked as a professional in the Total Quality Department with the objective of improving service levels and customer satisfaction by reengineering some core processes, such as billing, network delivery, complaints and credit management. After this I spent more than 10 years within the HR Department of TI the Italian incumbent - where I was responsible for organisational development leading a turnaround toward a more agile and lean organisation. During this period I was involved in transformation projects related to the infrastructure of both our mobile and fixed networks. In 2014 I served the company as HRBP Manager - Human Resources Business Partner - with the ambitious goal of reskilling and empowering the sales forces, then in 2015 I joined INWIT as HR Director. Within INWIT I was responsible for building team management, core processes, organisation and capabilities from scratch, playing a critical role in building the company, which is now considered one of the best tower operators in Europe. Since 2015 the scope of HR Department has been to transform the tower department of TIM into an independent company with autonomous processes, systems and resources. Moreover, the strategic achievement has been to build a new culture and a new vision in people through strong internal communications. Once we were past the start-up period, HR s role has focused on performance improvement. The HR department is responsible for hiring and firing, training and talent development, performance evaluation, compensation, payroll, administration, organisation and so on. But ultimately the HR department is asked to have a practical understanding of business needs and to reflect that in HR processes. The innovative attitude of the company - which has created new business lines has necessitated the hiring of new strategic skills and the transformation of existing ones from a pure real estate approach to a technological vision. At the same time the HR Department had a key role in boosting operations by improving processes and gaining ISO certification in order to expand business opportunities. I have no doubt that my greatest achievement is the experience I have accrued in INWIT, professional as well as human. It s amazing to contribute to the success of INWIT, to improve the company performance day by day the and to immediately see results the results. Vision, strategy and business objectives are clear throughout the organisation and it is so powerful to see how individual performance acts directly on company performance. In terms of professional results I m proud to say that we have increased the number of personnel by 60%, hiring people with strong competencies which will be useful for the delivery of our small cells plan; we have launched a new variable incentive system focused on business targets and we have deployed a program of continuous learning. My main goal has been to transform the attitude of people in order to make INWIT the best in class company in the tower market in terms of business growth, by a new vision and a strong brand MBNL: Juliette Wallace, Business Planning and Property Director I got into towers right at the beginning of my career: during my undergraduate course in Civil 134 TowerXchange Issue 21

135 Engineering I had the opportunity to take a year out in industry. I ended up in the Site Design Services department of the company which was to become One2One (later T-Mobile and now EE). I spent just over a year undertaking a small amount of site design work and working closely with the CAD department, however, a large percentage of my time was spent in a structural engineering capacity undertaking tower analyses. A large part of which involved working on our large switch towers to ensure we could continue with putting further loading on them in the form of microwave dishes. By the time I graduated the construction market was at a low point, and after about a year I returned to One2One as a Project Co-ordinator, again working predominantly on the towers and focussing on provision of secondary steelwork for microwave dishes to support the new site rollout. I then moved into a role focussing on the management of site share applications, and after a further year or so, I was promoted to the role of Project Manager for new site rollout. This role gave me responsibility for managing the acquisition, design and construction outsourcing for about 1,000 sites. A promotion to Senior Project Manager provided me with line management experience, and it wasn t long before I was managing a full complement of staff in the ADC space as the Build Manager for the South Region. I took a short period away from hard-core site rollout for a while, covering central services which supported the build regions, before once again being promoted to Head of RAN Strategy & Commercial. It was whilst in this role that I became involved in the ground-breaking negotiations between T-Mobile and Three to launch the world s first network sharing arrangement and thus MBNL was born. I joined MBNL in 2008 as Property Director, taking on responsibility for ensuring the legal agreements which govern our use of the land were amended as necessary to enable the RANshare to proceed. It was an amazing journey and by 2010 the project to consolidate the two networks was substantially completed. Since then, we have seen T-Mobile merge with Orange to form EE, the rollout of 4G and many other projects which have kept my role as Property Director at MBNL exciting and current. As Property Director at MBNL, I am responsible for all matters associated with the estate management of the physical infrastructure. The role includes the cost management associated with the rent, rates and also the power costs of the estate. We have in the region of 20,000 cell sites each of which has its own nuances and needs. Our landlords are immensely important to us as they are our gateway to our sites. My greatest professional achievement has been the network sharing agreement between T-Mobile and Three it has stood the test of time and proven its worth time and again. The fact that O2 and Vodafone have tried to copy us is flattering! Russian Towers: Ekaterina Novikova, Director of Organisational Development I always liked to learn new things, get engaged in various projects, to evolve. My first education was technical; however, it did not prevent me from working successfully in PR. Later I became interested in organisational development. I studied and received additional qualifications in Human Resources and Project Management. Prior to joining Russian Towers I worked in NIS ( NIS-GLONASS ), the federal operator in navigation and information systems, where I had real life opportunities to apply and refine all my skills; technical as well as organisational. When I was invited to join the Russian Towers team, I had no doubt that this would be my next challenge and a very interesting experience. Since my joining Russian Towers I ve held the position of Director of organisational development. My areas of responsibility are the company s organisational development, human resources management, PR and administrative matters. 135 TowerXchange Issue 21

136 My greatest professional achievement is being a part of a highly professional and motivated team who focus on continuous improvement. I am very proud to say that five members of our team entered the rankings of the top 1000 managers in Russia this year! It has been a great journey and it has been very gratifying to have participated in it with the rigour, and breadth and depth of achievement. We look forward to the next evolution of the sector including to the future of the existing major players on the continent customers base (dealing with local authorities, equipment vendors, WiMAx carrier, et cetera) before finally becoming Sales Director for the whole Telecom business unit, dealing mainly with MNOs on hosting, roll-out and maintenance activities. After a decade of business development, I pivoted toward operations to enable that side of the business to become more agile for both broadcasting and telecom activities. First I created a cross functional team in charge of resources and performance management which oversaw supply chain, operational capex & opex as well as pre-sales and contract costs and KPI management. After four years, I moved one step further up the organisational chart and took the lead of whole operations in TDF. Standard Bank: Nina Triantis, Managing Director, Global Head of Telecoms and Media I have been involved in the TMT sector for about 25 years and have worked both in the developed world and in EM, with Standard Bank for nearly 13 years. I run the Bank s Telecoms, Media and Technology sector team globally, and have been involved with a wide cross section of clients across a number of Bank products/offerings. Tower infrastructure sharing was well known to myself and the team at SB from prior experience, when we saw companies positioning to do this in Africa, we focused on the sector very early on, since its very beginnings. This of course paid off as the bank ended up arranging finance for the lion share of towerco deals, and we have also been very active on the advisory side and more recently in capital markets transactions. TDF: Tatiana Bergamo, COO I joined TDF in December Before that, I worked in the semiconductor industry in an international company as a product marketing engineer. I seized the opportunity of the new telecom business stream opened by TDF to host MNOs for the roll-out of 2G/3G. It was a very exciting challenge to be part of the mobile telephony adventure and to bring my experience in a competitive environment to the incumbent broadcaster which was used to monopoly. The French towerco leader allowed me to take on a broad range of responsibilities and to enhance my skillset. After joining TDF as pre-sales manager, I quickly took on account management accountabilities in the telecom business, then I dealt with business development to diversify our In my role managing operations, my teams and I are responsible for delivering what is needed to our customers in terms of telecom roll-out, broadcasting activities and all network operations including building new assets and new activities such as fibre. We are the TDF factory! The challenge is to continuously anticipate market requirements and technological evolutions, adapt our processes and skills, manage the change through the whole team and nurture talent. We make the TDF strategy happen in an operational prism and fulfill the customer requirements : Connect faster, further, everywhere! My greatest achievement has been the role I ve played in the growth of TDF and in the transformation of the factory (our operational competencies). I m excited to continue the 136 TowerXchange Issue 21

137 adventure by investing in mutualised and open infrastructures to increase densification and diversify the services we offer in mobile telecom, broadcasting and fibre. I get enormous satisfaction from customer satisfaction feedback that s the best testimony for our assets and service developments. I am also very proud of the way our teams have responded to the changing shape of the business, over the last few years we ve switched from analogue to digital and are now moving into fibre to keep up with customer requirements; throughout these evolutions we ve been able to move flexibly and proactively to anticipate the needs of the market satellite and communications industries. I am currently CFO of Tillman Infrastructure, a tower company currently deploying one of the largest build programs in the US. In addition I am a partner at parent company, Tillman Global Holdings, where I co-lead global business development and mergers & acquisition activities across North America, South America, Europe and Asia. I m deeply involved in every step of the process, identifying greenfield investment opportunities and managing transactions. I m also pioneering TGH s digital cities initiative, which targets redefining the way citizens interact with their broader communities through holistically upgrading urban infrastructure. I m on the board of JCDecaux Link, a joint venture which builds and operates small cell infrastructure globally, and I m also on the New England board for UNICEF the equipment for can making, but that was for a short period of time. Then in 2013 I was invited to the Vertical project to help with operations, because that s what my background was, and my primary task was to help the company build processes. This is my fourth year with Vertical, and I ve seen the company grow from just four employees to more than 60. The first two years were exhilarating but I got very little sleep! In the early days we did a lot of PR work - when the first poles appeared in the city we had calls 24/7 asking what the poles were and whether they were harmful to the local population, with only 10 people in the company by that time it was all down to me to respond to this. So we went to talk to people, organised a lot of meetings, met with lots with different government departments - construction, civil services, public relations. Tillman Infrastructure: Suruchi Ahuja, CFO I studied at the School of Engineering and Applied Sciences at Columbia University and completed my MBA at INSEAD before beginning my career as an analyst in Citigroup s Hedge Fund Services Business. Prior to joining Tillman Global Holdings (TGH), I worked as an investment analyst at MAST Capital Management, a credit-focussed hedge fund, covering the telecom, telecom infrastructure and Vertical: Valerie Buriachko, Client Relations Executor This was my first role in telecoms. Before, I worked in the metal industry for 10 years, for a company that produced metal sheets for canned food. After that, I worked for a Swiss company that provided It s more routine now, and our focus is on expanding the business. The type of work has changed. We have built strong relations but industry rivalry has grown very much, which means you have to be tough and quick as our competitors also want to be first and you can t allow them to be a step ahead. Our expansion plans mean we need to make sure our company is well organised to roll out to the regions. It s hard work as there will be a different approach in each area. We have different legal requirements regarding property and land leases, which varies greatly from region to region. Sometimes our legal staff even need to give 137 TowerXchange Issue 21

138 recommendations to local government on which part of their laws they should change to facilitate infrastructure builds. We need to explain how it will help their economy and bring money to local coffers. Then comes a lot of legal work where you have to work on the mistakes in legislation and contracts until you can go away and dig the soil to put in the light pole or tower. Maintaining good relationships with our customers is a critical part of what I do. I need to know each MNO, their KPIs, how they grow, what new technologies they re using. We work very closely together, with daily calls and s, and weekly visits. We also work together with the operators to help extend their radio frequency. Some regions are not covered by their mobile network and they don t have the capacity to meet the requirements of their subscribers. In big cities where tech grows faster and people have 4G they need to provide fast internet. We have to build the infrastructure for them to improve their networks. We must follow every step they make, and even be one step ahead to know their plans and be ready to deploy in areas they are going to grow in. At the same time, I m also responsible for our work with local government, authorities and municipal services as well as some legal preparation, lots of negotiations and meetings. Everything starts with a base: how we will build this infrastructure and I m responsible for all this. My greatest achievement is the fact I ve grown personally as well as professionally. Being in a position to build a business from the ground up, and step back from what I m doing to see a situation from all sides has been very enriching. I sell our services, so I m a salesperson and I push my team to hit targets, but I also have to understand the bigger picture in the context of the company or the economy as a whole. Next year we will expand and will have to perform in other big cities across Russia. It s a very important part of our strategy. Once this is completed I d like to move towards our technology development and work with MNOs on ideas to hide their equipment and be invisible in the urban environment. Our government pays a lot of attention to the appearance of the city and is nervous about the look of the equipment put on the poles. They don t want to ruin the architectural views of the city. They have tasked us with working out how to hide the equipment and I have a technical education so this is a good fit for me. For the operators, doing small projects isn t easy but for us it s easier to build into the design process. We re creating urban poles which will provide the capacity of a full size base station hidden inside poles or tanks. We are also looking forward to the appearance of 5G, which will require even more attention to the placement of the equipment. My staff who work day to day with the MNOs have got good enough not to need my input all the time, so working on the technical progress and ideas is what I m looking for. Baring Vostok Capital Partners Fund V has joined us this year. We believe that their unique experience and knowledge of the market will take us to a whole new level and help us reach new heights Wireless Infrastructure Group: Angela McLean, Senior Commercial Manager I have been working within the telecommunications sector for nearly 20 years. Soon after graduating with a property degree, I joined a network rollout supplier initially focusing on the identification and site acquisition for a number of the UK Mobile networks. The experience gained, then led me to move Network Operator side, managing the infrastructure portfolio of the UK s Tetra Network, supporting the UK blue light sector. When the opportunity arose to join the commercial function of an infrastructure company such as Wireless Infrastructure Group (WIG), I jumped at the chance to use my experience and move to the other side of the fence to work in this fast paced, innovative and expanding company. My role is wide ranging supporting both the commercial, delivery and business development functions of the business. Primarily, I manage the day to day relationships with our non-mobile customers which include Airwave, BT, Arqiva and hundreds of small operators using our infrastructure to support their networks. 138 TowerXchange Issue 21

139 Wireless Infrastructure Group is an independent infrastructure company working behind the scenes to enable better connectivity across the UK. We build and operate communication towers in rural and suburban areas together with fibre-based networks to improve mobile coverage in buildings and on city streets. We invest in higher capacity infrastructure that can support multiple networks and new technologies. There are a large number of projects I am proud to have been either involved with or led in the facilitation of the network deployment for WIG s non-mno customer base. Very recently I have led WIG s support to the roll-out of a regional transportation network in the West of Scotland and the UK element of a European Aviation Network across both WIG and WIG s partners infrastructure. My leadership ensured WIG s involvement in both projects was delivered on budget and on-time. I was also directly involved in facilitating the utilisation of WIG s infrastructure to support the role out of the SWAN led by Capita and their partners. Outside of the commercial networks, I look for opportunities to engage in more localised projects, for example, working with smaller organisations to help facilitate the provision of rural broadband for the benefit of small communities working with local individuals to help identify and utilise our existing infrastructure. Every day is unique in the UK towers sector. I relish the challenge professionally, to keep abreast of the ever changing demands of our customer requirements, technological advances and the ever changing landscape of the telecommunications sector See you at our future events! Meetup Asia December, Singapore Meetup Americas June, Boca Raton Meetup Europe April, London Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

140 Call for towercos to join Communications Infrastructure Regulatory Working Group New informal peer-network inaugurated to share best practices, guidelines and templates Read this article to learn: At the recent TowerXchange Meetup Africa 2017, ten legal and regulatory affairs decision makers, representing some of the world s largest and most influential tower companies, resolved to create a new informal Communications Infrastructure Regulatory Working Group to share experiences and best practices in the management of dialogues with regulators, ministers and other State and Federal government stakeholders. Keywords: Bankability, Country Risk, Decommissioning, Leasing & Permitting, Multi-Region, Regulation, Towercos < Why an informal body was preferred to a formal, Global Communications Infrastructure Association < An initial 10 key objectives for the working group < A proposal to broaden the scope of the Working Group beyond towers < How your towerco can contribute to, and access, this pool of expertise All towercos worldwide are urged to nominate one individual as their point of contact to enable them to contribute to, and access, the pool of expertise within this new Communications Infrastructure Regulatory Working Group. The Working Group will initially meet quarterly at each of four TowerXchange Meetups, held in Singapore, London, Florida and Johannesburg. While in-person attendance is ideal, international dial-in facilities will be provided to join each meeting. The Communications Infrastructure Regulatory Working Group aims to create a peer network wherein towercos can share questions, problems and solutions, ultimately building up a resource library of best practices, guidelines and templates global exemplars to illustrate how Communications Infrastructure companies should be regulated. Informal working group preferred to a formal, global trade association The tower industry has already coalesced into formal, regional trade associations, exemplified by the Wireless Infrastructure Association in the US, European Wireless Infrastructure Association, Chinese Independent Tower Association, and India s Tower And Infrastructure Providers Association. While the idea of creating a formal Global Communications Infrastructure Association was discussed, the majority of participants felt that their requirements were too localised for a formal 140 TowerXchange Issue 21

141 entity to be effective enough to justify resourcing. Indeed, it was felt that the creation of a formal Association might risk attracting unwelcome attention from regulators and taxation authorities. However, it was unanimously agreed to create an informal knowledge sharing forum, from which might eventually be derived the future specifications of a more formal body. In the immediate term, towercos should continue to lead their own regulatory dialogues at a local level, engaging with the Communications Infrastructure Regulatory Working Group as a peer-network with which to share regional benchmarks, experiences, questions and answers. As governments and regulators awareness of the tower industry increases, so it becomes increasingly important for our industry to manage their perceptions, encouraging a light touch, enabling regulatory environment, and discouraging licensing and taxation regimes that could disincentivise investment. At the inaugural meeting of the Communications Infrastructure Regulatory Working Group, 10 key objectives were identified: 1. Education of stakeholders Many regulators have misconceptions about the tower industry and how it relates to MNOs. It can be important to simply re-emphasise that towercos do not own finite resources like spectrum. Indeed, given regulators preoccupation with spectrum, towers can almost be an afterthought. While most regulators are keen to promote passive infrastructure sharing, the emergence of the Tower Industry to professionalise and commercialise infrastructure sharing has caught many regulators off-guard. Many regulatory stakeholders don t understand the pressure on some MNO balance sheets, the urgency to monetise assets, and the potential to release capital to be reinvested in spectrum, network extension and enhancement. It was also acknowledged that many members of the tower fraternity would also be keen to be educated on best practices in regulatory liaison and compliance. 2. Fair, predictable taxation Towercos do not utilise finite national resources like spectrum, so they should not be subject to the same levies as MNOs. The Communications Infrastructure industry calls for taxation to be both fair and, crucially, predictable. Changing, multiple layers of taxation inhibit investment. Some towercos report instances where four or more Federal, State, Municipal or Ministerial Authorities all seek levies and fees for similar activities. Tax authorities need to understand the capex intensity of the towerco business model, and resultant implications for corporate taxation liabilities, which might best be set out under the towerco s license. 10 key objectives of the Communications Infrastructure Regulatory Working Group 1. Education of stakeholders 2. Fair, predictable taxation 3. Where licensing is necessary, the regime should be fair and clear 4. Ease rights of way and accelerating permitting 5. Encourage, rather than mandate, infrastructure sharing 6. Ease concerns about competition 7. Encourage foreign direct investment 8. Help deploy and secure critical national infrastructure 9. Seek access to government land and structures 10. Facilitate universal service 141 TowerXchange Issue 21

142 3. Where licensing is necessary, the regime should be fair and clear While a good example of a less formally regulated tower market comes from India, where towercos are registered as IP1s, most (but not all) industry participants feel towercos should be formally licensed. Holding a license exposes towercos to less capriciousness, while investors like the certainty of regulated businesses. The preference that towercos be licensed assumed that the licensing regime was fair, clearly understood, and restricted regulators commercial interventions to dispute resolution, as opposed to having direct influence on lease rates. It was also noted that a robust licensing regime would function to qualify the financial and technical credentials of towercos. The prevailing view was that every country would eventually have a towerco licensing regime, so it would be better to get out ahead of the creation of that regime and lobby for it to take a form the industry recognises. Another critical regulatory dialogue concerning licensing is the call to futureproof the regime, enabling towercos to move beyond the efficient sharing of passive infrastructure to provide similar efficiencies in the deployment and sharing of microcells, small cells and other alternate site typologies. 4. Ease rights of way and accelerating permitting A key goal of the Communications Infrastructure Regulatory Working Group will be to ease rights of way for all communications infrastructure, and to accelerate permitting. Such easements should apply as much to the deployment of fibre and small cells as to macro towers and rooftops. The optimal regime may be a time bound strategy, such as the shot clock exemplified in the US and Brazilian tower markets, mirrored in India. 5. Encourage, rather than mandate, infrastructure sharing In general, infrastructure sharing has been a subject for positive dialogue with regulators, as it s something most want to see happen. The prevailing view remains that infrastructure sharing is best encouraged rather than mandated. In many cases, infrastructure sharing regulations are drafted, but not enforced until towercos enter a market. 6. Ease concerns about competition The requirement to engender competition between multiple towercos seems to depend very much on market circumstances. Governments can become concerned competition, particularly in markets where one towerco owns the majority of towers, or where consolidation among towercos could have the same result. It should be noted that regulators in many countries recognise the merits of a regulated monopoly, appreciating the inherent efficiency of shared rather than parallel infrastructure. 7. Encourage foreign direct investment Towercos report that local ownership requirements, often designed for MNOs but cut and paste to apply to towercos, can be a serious impediment to investment indeed a 51% local ownership requirement is a red flag for most international towercos. 8. Help deploy and secure critical national infrastructure There is increasing concern about the security of critical national infrastructure towercos are ideally placed to guarantee the cost-effective and speedy rollout and reliability of security and public safety networks, without need to access the active networks themselves. 9. Seek access to government land and structures In an effort to accelerate the deployment of critical national infrastructure, several countries have made available government portfolios of land and structures, including for example post offices, the rooftops of Federal and State government buildings, National electricity transmission and transport sites and structures, even defence land and selected military structures. Expediting the availability of such sites, at a fair prescribed rate, can create a new 142 TowerXchange Issue 21

143 revenue stream for government, while accelerating communications infrastructure rollout and improving quality of service both for government employees and citizens living nearby. 10. Facilitate universal service Where towercos are required to contribute to Universal Service Funds, they should be allowed to access those funds, and due consideration should be given to subsidising cell site opex, not just capex, in certain scenarios. Preliminary resolutions of the Communications Infrastructure Working Group In addition to highlighting the aforementioned ten key objectives, the conclusions of the inaugural meeting of the Communications Infrastructure Working Group were that: < The Communications Infrastructure Working Group remain an informal knowledge forum, as opposed to a formal, Global Association < The Working Group meet quarterly at each regional TowerXchange Meetup, with international dial in facilities for representatives unable to travel < The Working Group shall continue to leverage TowerXchange as a central repository and mechanism for the dissemination of resolutions < Every towerco should be invited to nominate a point of contact for the Working Group To nominate your representative for the Communications Infrastructure Working Group, please kosmotherly@towerxchange.com. The next meeting of the Communications Infrastructure Working Group will take place on December 12 at the 4th Annual TowerXchange Meetup Asia, hosted at the Marina Bay Sands, Singapore. International dial in facilities will be made available to Communications Infrastructure Working Group members, although in-person attendance is recommended Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Proposal to broaden scope beyond towers Subsequent to the inaugural meeting of the Communications Infrastructure Working Group, we have been approached by representatives of the Small Cell Forum, indicating that their members share many common regulatory and deployment challenges with the tower industry. An agenda item at our next working group meeting will be whether to gradually open the Communications Infrastructure Regulatory Working Group beyond towercos to include other neutral host network providers, such as distributed (or small cell) network operator and fibrecos Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

144 How smart city infrastructure is being implemented by towercos Indus Towers CEO explains the roadmap for distributed networks and smart cities in India Bimal Dayal, CEO, Indus Towers Bimal Dayal is the Chief Executive Officer of Indus Towers. He joined Indus as the Chief Operating Officer in February 2010 and since then has led the company to achieve many milestones. In the past, Bimal has worked with Tata Telecom which gave him exposure of Business Enterprise across geographies. He then joined Ericsson in Sweden & Sri Lanka overseeing the entire range of functions, including planning, O&M, Rollout/ Deployment and Network Assurance. In Sri Lanka, as Country Manager and Managing Director of Ericsson Telecommunications Lanka (Pvt) Ltd, he successfully steered the company to become the country s number one player in telecom infrastructure. Prior to his current assignment, Bimal was with Qualcomm India & South Asia as Country Manager and Vice President - Business Development. Keywords: 3G, 4G, 5G, Acquisition, Active Equipment, Active Infrasharing, Asia, Asia Insights, Backhaul & FTTT, Build-to-Suit, Business Case, Business Model, Camouflage, Capacity Enhancements, Capex, Colocations, Consolidation, Core Network, DAS, Deal Structure, Densification, Fibre, IBS, India, Indus Towers, Infill, Infraco, Infrastructure Sharing, Insights, Installation, IoT, LTE, Leasing & Permitting, Loading, MNOs, Managed Services, Market Overview, Meetup Preview, Multi-Operator, Network Rollout, Opex Reduction, Opex Sharing, Outdoor Equipment, Passive Equipment, Regulation, SLA, Single RAN, Small Cells, Smart Cities, TFN, The Future Network, Towercos, Wi-Fi Read this article to learn: < What the Digital India initiative involves and progress to date < How new business models are accelerating project roll out < How regulation is restricting towerco ability to own active infrastructure < Additional services being offered through smart cities - surveillance, fibrisation, digital advertising and sensors < Towerco requirements from service providers and equipment manufacturers The Future Network: Could you please explain both the Digital India vision and Indus Towers complementary vision for smart cities in India? In case our readers aren t familiar, perhaps you could remind them which cities you are involved in projects in? Bimal Dayal, CEO, Indus Towers: The Digital India story began in July 2015 with the initiative being announced by the Prime Minister. Digital India initiative has three large ambitions: firstly, it is about securing digital infrastructure for India, secondly, and very importantly, it is about delivering all the central and state government services through digital media, and thirdly it is about digital inclusion which is getting more people onto digital platforms with the help of internet access. The announcement on Digital India has triggered many subsequent initiatives which are helping the cause. Digital payment applications have increased data consumption, and many emerging applications are a result of the success of the Digital India programme. It is reassuring that there is constant evolution and improvement in the pace of adoption, despite occasional concerns from the government about the success of the programme in some areas. As far as we are concerned, the provision of infrastructure has accelerated in the last year. The smart city initiative is gaining traction, which is very exciting, and having taken a year to get going, we are now gaining ground. We have two very 144 TowerXchange Issue 21

145 progressive smart city contracts on the table, of which phase one is already launched. Though the smart city drive is being taken up by multiple cities, until we have one or two robust rollouts, phase two will remain in the planning phase. The Future Network: Are you able to tell us any more about these projects? Bimal Dayal, CEO, Indus Towers: There have been initial smart city rollouts in Gujarat and Delhi. So far there have been different approaches to smart city rollouts, with many cities looking at engineering, procurement and construction (EPC) model contracts, but these have not progressed very far. Then there are instances which use the public-private partnership (PPP) model in which the state governments seek to monetise the locations and revenue can be generated by towercos. Such business models have struck a chord with the municipalities because there is not enough money for EPC contracts. Under the PPP model the towerco can install the infrastructure, and the street furniture, they can also provide Wi-Fi, smart lighting, and in some cases, city surveillance too the towercos are even running the surveillance centre at the backend if the city requires it. The towercos get the locations, which is our core business, and this enables shared cost savings from smart lighting and revenue shares from billboards (which is now allowed). We are also able to lay fibre at discounted rates and for a limited period, we can rollout free Wi-Fi. These business models offer opportunities for future revenue sources and we are considering them all from the towerco perspective. For us the model that is working more effectively is the PPP model between the city and the infrastructure provider. It is important to understand how the Digital India initiative is being handled by the local authorities. Most of the state governments do not have adequate funds to implement the smart city programme, so there is a capital gap which needs to be filled. This is most likely to come from a combination of different approaches and business models, and the debate is around which comes first, the digital infrastructure, or the use case for it. I think there is an opportunity for the state government to allow a third party to monetise the locations by providing the required digital infrastructure. This would begin the process of running the initiatives and provide a revenue generating opportunity, rather than attempting to recover capital from the third parties after it has been deployed by the government. When Indus Towers started to consider the smart city initiative, we always knew that a towerco is the best suited enterprise to work with the municipalities and solve the problem of how to begin the process. The Future Network: Beyond mobile connectivity, which services are at the heart of the smart city proposition? Bimal Dayal, CEO, Indus Towers: Not every smart city is the same, and every municipality has its own priorities, but if you go back to the original Digital India initiative, one of the primary objectives was to deliver the government services digitally. While we monetise our capex through the provision of 3G, 4G and 5G services, which our operator partners roll out on our towers, the government s push is to provide Wi-Fi as well. So that it becomes an additional service that needs to be rolled out through the infrastructure. So, in addition to the traditional cellular services, we are now providing Wi-Fi, initially for free, but it will become chargeable in the future. Then comes smart lighting, which comprises of a multi-purpose pole and LED lights with sensors to control the luminosity, but in many cases, the lights being used are not yet LED, which needs to be changed. When you change the lights to LEDs, there is a significant cost and power saving, and in some contracts the model is such that the infraco invests the initial capex to change the lights and once those costs are recouped, the remaining saving is then shared between the government and the infraco. Then you have the issue of surveillance cameras, which can be mounted on the infrastructure, but the cameras need to be connected to the fibre network. There are three aspects to be considered in surveillance, firstly, there is the camera itself, then there is the back end, and finally the connectivity element. The camera is the easy part, but the capex is not monetizable because it is solely being used by the security agencies, so the towercos have no role to play. In some cases, the state government has stipulated that the towercos need 145 TowerXchange Issue 21

146 to run the surveillance aspect end-to-end, but more reasonably, and in most cases, the towercos provide just the camera. In most cities, purchasing right of way (ROW) is expensive, and one of the new, creative approaches to revenue generation and service level for the towercos is to roll out fibre along the street infrastructure, and the ROW for this fibre is almost free of charge. The main opportunity in this model is to provide connected sites and consider future applications, for example, all the sites could be linked and connected to a common control centre which could then be connected to any operator. This would then become a captive network and could be altered by all operators from the common control centre. Some state governments are asking for fibre to be provided for surveillance on a trial basis and the same fibre is being used for the Wi-Fi roll out too. The next possibility is to connect the fibre to sensors, for example, parking sensors and environmental sensors - there are a wide variety of use cases which will offer another aspect to services which we are considering, but there is a very different business model regarding sensors, something which is beyond the scope of this discussion. One of the most interesting use cases is the monetisation of digital billboards. Every pole has the capability to be a digital pole, and as a general trend, street advertising is changing from static to digital billboards with primetime and off-peak timeslots. It causes a positive disruption, and the kind of capex that is required to roll this out and monetise, is an opportunity for towercos. Ultimately in the future, we will need to understand the digital advertising monetisation business model because the laying of fibre will allow the control of the content on the billboards, some of which could be allocated to the municipalities for public messages or emergency announcements, which would fit with their agendas. As the value of a prime slot begins to be understood by the wider business community, the municipalities will also recognise the benefits and will be happy for the monetisation of this opportunity to be driven by the towercos. Ultimately, we need to understand this ecosystem, irrespective of whether we try and enter the market alone, or whether we look to partner with someone else. Advertising is all about location, and so is our business, so there is likely to be a positive conflict which will either result in collaboration or competition. The Future Network: How do site topologies need to change for the smart city era? What are the implications for skillsets for towercos? Bimal Dayal, CEO, Indus Towers: Infra roll out and maintenance until now and how it will be done in the future will differ greatly. When we talk about smart city street furniture, we are talking about 9 to 12 metre poles with minimum footprint and you can literally put them on the footpath. This new smart city topology will be based around aesthetics, safety, and how innovation can handle the loading of multiple tenants on these new, super light structures. If we give up the multi-tenancy model, then we give up our future revenues. Our focus should be more on how we can put safe, multi-tenant, aesthetic, remotely controlled equipment onto poles. We also need to figure out how to install these poles on streets and highways without disrupting the city and be aware that no one will allow us to park a vehicle to access the site for maintenance, so this must be done remotely. The Future Network: You ve touched on a critical issue from an equipment provision point of view - how would you characterise the status of multi-tenant solutions for street furniture deployments? Bimal Dayal, CEO, Indus Towers: I believe that we will have to design the solutions ourselves. We could collaborate, but we don t have enough attention from the people who look at form factors, so we will have to involve ourselves in the innovation in this area. We must impress upon the equipment manufacturers that they cannot design a pole and monopolise the outcome. Just because a towerco buys your poles, does not mean that they will buy your equipment as well. The Future Network: When you roll out these poles and small cell / other equipment solutions, are you anticipating that you are going to own the antenna or just the passive equipment? Bimal Dayal, CEO, Indus Towers: We intend to own 146 TowerXchange Issue 21

147 the cables and antennas, but this is currently not allowed. We can really change the game if we are allowed to own this active equipment because not only this would allow us to change the way we work, we d also be able to change the way the operators work, by taking a lot of the inefficient load on a single tower which most of the operators do, for example, there are multiple lengths of cable and multiple antennas which could be consolidated to bring the loading of the towers / poles down, and a good portion of the active equipment maintenance could then be taken on by us. There is tremendous potential in this and I firmly believe that the towercos will do much more in the future than they have ever done previously. This would not only create a bigger role for the towercos but would also generate a new revenue source by being able to provide the active equipment to the operators. When we talk about small cells, this is a very different animal. In terms of how small cells are connected, they are mostly done in cities and along fibre routes, but they are still being tried out in India. The market is currently not big enough for a company like ours. So far, we don t own anything which radiates nor, will we consider that business where there is competition with our operators nor will we look to change the existing business model. Our intention is to maintain a traditional infraco-like approach whereby we focus on site acquisition and hosting services, but the operator would retain ownership of the small cell. The Future Network: Aside from the enhanced rights of way that you can achieve in partnership with local government, what has been your experience of partnering with municipal authorities to provide access to prospective sites, including street furniture? Do we still need to evangelise and promote the efficiencies that an IP1 can play in the deployment of infrastructure? Bimal Dayal, CEO, Indus Towers: For the most part, it s still a mixed a bag. I d certainly say that the municipalities are familiar with the capabilities of the towercos, however, there are some that truly see the potential of partnership opportunities. I am confident that we are not far away from getting our message across to them. We welcome collaboration from local authorities and government bodies to build on the Union Government s Vision of Digital India. The Future Network: What have been the critical success factors of the successful municipality partnerships that you have experienced? What are the key value-adds you ve been able to offer and achieve? Bimal Dayal, CEO, Indus Towers: If I were the Commissioner in one of the cities, I d be asking what are my ambitions for Digital India and other services and what revenue do I have? I d be asking how I can fill the capital gap between what I have and what I need to spend. I don t see that there are any companies, other than towercos, that can come in and fulfil a portion of that ambition, at either no charge, or offering a revenue share which will enable the delivery of the necessary additional services. This is needed to kick start all the political ambitions from waste management to e-government, e-education, and e-health. If you start to increase Wi-Fi penetration in a city, you kickstart a very different economy: the digital economy. The Future Network: Who are you partnering with to deliver this vision? Beyond the IP1 and municipal government, are there any other critical partners that we should talk about? Bimal Dayal, CEO, Indus Towers: As a towerco we don t believe we have all the competencies to deliver the expectations of smart cities. There are companies that are running the Wi-Fi networks, for example router companies who can design the IP network infrastructure, there are system integrators, and the surveillance companies that we need to work with. Smart city initiatives must be fronted by one company, and back ended by multiple companies. If we front end it and foot the bill, we are then the spiders in a web of partners needed to deliver diverse solutions. This must be the model. No one company can be vertically aligned and do everything. Such projects and models can only materialise if multiple partners collaborate. The Future Network: How do you see smart cities contributing to the future of cellular networks in India? 147 TowerXchange Issue 21

148 Bimal Dayal, CEO, Indus Towers: If you look at how networks were rolled out in India, we started with 2G macro coverage, then we peppered it with 3G, and now we are in the process of rolling out 4G. Most of these current 2G, 3G and 4G are co-located sites, and it was the first endeavour of the MNOs to have co-located sites because new site costs were prohibitively expensive. One of the lessons learned from the roll out of 3G in Europe was that standalone 3G sites don t make commercial sense. Will that be the case in the future? I don t think so. This is where the smart cities can create value in providing a street layer of the next generation technologies and provide the last layer of 4G technology, and even 5G when it comes. In the context of 5G, street furniture becomes one of the most valuable assets because it gets you close to the point of consumption, and latency is taken care of. When we look at where we are going with rollouts, it will be necessary to have street furniture carrying base stations for us to be able to deliver the use cases of the future. The Future Network: Leaving the topic of smart cities for a moment, can you please share your thoughts with regards to the impact of the planned mergers among MNOs on the health and profitability of the Indian tower sector? Bimal Dayal, CEO, Indus Towers: I can t comment on other towercos, so I will restrict my answer to Indus experience. I m a strong believer that M&As for the right reasons bring the right results. In this case the right result from a towerco perspective - with data consumption going through the roof, the radiating points that will be needed by India, will be far higher than we ve ever seen. Initially with Vodafone and Idea coming together there will be tenancy loss, but this is covered by exit charges which will mitigate revenue loss, and by the time we come out of this, we ll see uptake from a newly competitive market. As far as I m concerned, there could be a near term blip, but this really won t affect anything. On a technology consumption side and on the operator requirement side I don t see any problems. The Future Network: Do you think we ll see large, acquisitive towercos playing a role in consolidating the tower sector and acquiring smaller firms in the near future? Bimal Dayal, CEO, Indus Towers: When this consolidation takes place, a lot of focus is placed onto towercos, particularly Indus. While there are a lot of revenue comparisons that happen at times like these, fundamentally, in good times we grow, and in bad times we grow faster, and people understand this and look at towercos favourably. The way the towercos are being run, and the models they use is very efficient. I think this is the first time that the true value of towercos is being understood and this will positively affect capital market valuations. I don t know what will happen, but the fact that there are people looking at consolidating and investing in this area, can only be good news Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

149 Tower Xchange Industry Awards 2017 Winners Winners of the 2nd TowerXchange Industry Awards were announced at the TowerXchange Meetup Africa & Middle East, held in Johannesburg last month. Recognising excellence in the management of the region s telecom towers, nominations were reviewed in five different categories, with a special lifetime achievement award being awarded to IHS Towers Executive Vice Chairman and Group CEO, Sam Darwish. This years winners: CSR initiative of the year: Econet Wireless and Energize the Chain Operational efficiency initiative of the year: Helios Towers Awarded in recognition of the fantastic work that the two entities are doing in delivering over half a million vaccines to refrigeration units at over 300 cell sites in Zimbabwe. Helios Towers One Site Visit per Month program has reduced the total number of site visits in Tanzania from 21,581 to 8,614 leading to a 61% reduction in kilometers driven and far fewer corrective maintenance call outs. Dr Harvey Rubin, Founder & Director, Energize the Chain Kash Pandya, CEO, Helios Towers 149 TowerXchange Issue 21

150 Infrastructure sharing company of the year: Atlas Tower Energy efficiency project of the year (two way tie): Infozech and ZTE Nate Foster, CEO & Randi Clendennan, CSO, Atlas Tower Atlas Tower has demonstrated impressive organic growth, more than doubling its site count in the past twelve months through its dynamic approach whilst maintaining exceptional customer service. Ankur Lal, CEO & Vishal Gajjar, Business Development Manager - Africa, Infozech Infozech s ibill software has been deployed by a global towerco with a portfolio of over 100,000 cell sites leading to better accuracy and turnaround times in billing. Deploying solutions across 2,000 sites, ZTE have helped MPT/KSGM improve power uptime by 5.8%, reduce TCO by 24% and increase energy efficiency by 44%. Colin Gaston, Director of Operations & Technology, Helios Towers & Jean Farhat, Group CEO, NETIS Group Workforce training and upskilling initiative of the year (two way tie): NETIS Group and Helios Towers Both NETIS Group and Helios Towers have demonstrated exemplary training and upskilling initiatives across their entire operations leading to dramatic improvements in cell site operations and contributing to skills development across the continent. ZTE Melissa Trovoada-Darko, IHS Towers, collecting the award on behalf of Sam Darwish Lifetime achievement award: Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers The drive and passion of Sam Darwish has seen IHS Towers rise from being a pioneering telecom builder and service provider, to today being Africa s largest towerco with over 23,300 towers in five countries. Our congratulations to all of the winners and shortlisted entries in the 2017 TowerXchange Industry Awards. The calibre of the entrants speaks volumes as to all the hard work that operators, towercos and the supply chain are doing to improve the management of passive infrastructure in an industry whose margins are being increasingly squeezed. 150 TowerXchange Issue 21

151 Regional coverage: Asia features With the fourth annual TowerXchange Meetup Asia taking place on December 12 and 13, we offer the latest who s who in Asian towers, a substantial update to the last edition including 29 new entries. At the same time, we have also refreshed our renowned demand forecasts for the region, highlighting 15 of the active markets and the countryby-country opportunities for passive infrastructure equipment and services. We also revisit Indonesia, providing an updated market analysis on the mature, yet evolving tower market. Don t miss exclusive details on the current structure of towerco players, lease rates, energy management and growth opportunities. Plus we help you make sense of the non-stop news and headlines coming out of India, where unprecedented market restructuring is taking place as MNO consolidation and asset monetisation strategies are played out. Don t miss: 152 Who s who in Asia, featuring 120 key MNOs, towercos, investors and advisors 166 Vendor matrix for passive infrastructure equipment and services in Asia 175 Revisiting Indonesia: updated market analysis 184 Will consolidation move the India market closer to a pure-play towerco model? 151 TowerXchange Issue 21

152 TowerXchange s who s who in Asian towers TowerXchange presents an updated A to Z of MNOs, towercos, investors and advisors who are key stakeholders in the Asian tower industry TowerXchange takes a deep dive into the Asian tower industry, providing an updated (October 2017) edition of its comprehensive directory of the key MNOs, towercos, investors and advisory firms active in the market. Note that stakeholders in the Russian and Central Asian tower markets are covered in the TowerXchange s European who s who. Keywords: Aird Towers, Alcazar Capital, Altman Vilandrie & Co, American Tower Corporation, Analysys Mason, Apollo Towers, Ascend Telecom, Asia, Axiata Group, Axicom, BSNL, BTRC, Balitower, Bangladesh, Bangladesh Telecommunication Regulatory Commission, Barclays, Beijing RLZY, Berkshire Partners, Bharti Airtel, Bharti Infratel, Broadcast Australia, CAT Telecom, CITA, CPPIB, Cam Towerlink, Cambodia, Canada Pension Plan Investment Board, Carlyle Group, Centratama, China Independent Tower Alliance, China Mobile, China Reform Corporation, China Telecom, China Unicom, Citi, Common Tower, DIF, Delta Partners, Deutsche Bank, edotco, EY, Eco-Friendly Towers (EFT), FMO, Frontier Tower Solutions, GTL Infrastructure, Golden Towers, Hardiman, Telecommunications, Herbert Smith Freehills, Hutchison, IBS Tower, IDFC Alternatives, IFC, IGT, INCJ, ING, India, Indonesia, Indus Towers, Innovation Network Corporation of Japan, Irrawaddy Green Towers, JP Morgan, JTOWER, Jazz, KIN, KJS, KKR, KPR Consult, KWAP, Kazanah, MIG, MNTC, MPT Myanmar, Macquarie Group, Malaysia, Mitratel, Myanmar, Myanmar Investments International Limited, Myanmar National Tele & Communications, National Tower Development, Naza Communications, Nepal, New Silk Route, Nordic Teleservices, North & East Asia, OCK Group, OPIC, Omnix, Ooredoo, Overseas Private Investment Corporation, PAMEL, PEKAPE, PT Wellington Capital Advisory, Pakistan, Persada Sokka Tama, Protelindo, Providence Equity, Redpeak Advisers, Reliance Communications, Reliance Infratel, Reliance Jio, SACOFA, SEATH, SREI Infrastructure Finance, STP, Saurava Towers, Singapore, Southeast Asia, Southern Asia, TOT, Tata DOCOMO, Telenor, Telkomsel, Thailand, Tower Bersama, Tower Vision, Towershare, TrueMove, Ufone, Veon, Vietnam, Vimpelcom, Vodafone, Warid, Who s Who, XL Axiata, Yiked Bina, Zong Read this article to learn: < Who s who of the top towercos active in China, Southern and Southeast Asia < The history of MNOs tower transactions across the region < An introduction to some of the most credible current and prospective investors into Asia towers < Profiles of the TMT advisory firms with experience of Asian tower transactions Aird Towers: Towerco established in 2016 with a formal launch in early 2017 to serve the Australian and New Zealand markets. It is looking beyond ground-based towers and rooftops to consider small cell and other RAN solutions to support the rollout of 4G and, in future, 5G. Alcazar Capital: Alcazar Capital Limited (ACL) is an investment advisory firm based in Dubai and focused on private investments advisory and asset management; Alcazar s current portfolio of investments and assets under management exceeds US$1bn. ACL advised on several projects in the tower industry including Irrawaddy Green Towers in Myanmar and Golden Towers in Vietnam. Altman Vilandrie & Co: AV&Co. has extensive tower industry experience spanning tens of engagements (including Latin America, Africa, Asia, North America, Europe) over ten years, including tower operator strategies as well as tower transaction due diligences. Their recent work has addressed a number of relevant topics such as the impact of small cells, the future opportunity for DAS and the changing role of rooftops. American Tower: The world s largest independent commercial towerco, American Tower need no introduction within this publication. With its headquarters in the U.S., American Tower operates a global portfolio of ~150,000 sites composed of towers in advanced, evolving and developing wireless markets, in the U.S., Central and South America, Africa, Europe, and Asia with its growing presence in India. 152 TowerXchange Issue 21

153 American Tower has combined organic with selective inorganic growth in Asia, where to date they have focused on India. The company s M&A activity in India began with the acquisition of 1,730 towers from XCEL Telecom for US$170mn in 2009, continued with the acquisition of 4,450 towers from Essar Telecom for US$432mn in 2010, and culminated in the acquisition of Viom Networks and their 42,200 towers, announced in October 2015, for US$1.17bn, taking a 51% stake in the company. The deal provided American Tower Corporation an all- India footprint and a portfolio of over 57,000 towers, to which they have just added a further 19,812 as a result of the agreement reached with Vodafone India and Idea Cellular for an approximate value of US$1,2bn. American Tower employs a three-pronged approach to evaluating potential international acquisitions: identifying relatively stable political and macroeconomic environments, seeking markets with robust wireless sectors, and finally pinpointing compelling transactions opportunities including a high quality counter-party, good location, sound assets, and an attractive valuation. Analysys Mason: Marco Cordoni and his team at Analysys Mason are among the go-to-guys for tower market analysis and due diligence on a global basis. Apollo Towers Myanmar: Apollo Towers runs a portfolio of 1,800 sites in Myanmar. Apollo Towers is chaired by serial towerco entrepreneur Sanjiv Ahuja, who was the original Chairman of Eaton Towers in Africa and who is a former CEO of Orange. Ahuja s Tillman Global Holdings and Texas Pacific Group are the majority shareholders of Apollo Towers Myanmar, while OPIC (the Overseas Private Investment Corporation) undertook the single largest U.S. direct investment in Myanmar when they invested US$250mn in Apollo. Apollo provides a full service tower and power offering. Ascend Telecom: Incorporated in 2002, Ascend Telecom is an independent Indian towerco providing world-class passive telecom infrastructure on a shared, multi-tenancy basis for the mobile services and wireless sector. Ascend Telecom provides site location, design, execution and maintenance of infrastructure for telecom network operators, and is the first Indian company to offer sites with complete passive infrastructure to MNOs, on build-own-lease model (BOL) basis. As at 30 August 2017, Ascend s portfolio included 5,645 towers at a tenancy ratio of Axiata Group: Axiata is a leading telecommunications group in Asia and has controlling interests in six mobile operators under the brand names of Celcom in Malaysia, XL in Indonesia, Dialog in Sri Lanka, Robi in Bangladesh, Smart in Cambodia and Ncell in Nepal. Axiata also has strategic interests in Indian s Idea and M1 in Singapore. Axiata carved out the first pan-regional towerco, edotco, which operates in six countries to provide optimised, shared telecoms infrastructure, amassing a portfolio of over 31,000 towers and 12,000 km of fibre. Axicom: Axicom is Australia s leading provider of independently owned wireless infrastructure. The company owns, operates and manages a portfolio of approximately 1,900 towers in Australia. Crown Castle s Australian subsidiary was renamed Axicom following the U.S. towerco s sale of the business for US$1.6bn to a consortium including Macquarie Infrastructure and Real Assets, UniSuper and UBS Global Asset Management. In early 2017 Axicom acquired 56 communications towers from broadcaster Southern Cross Austereo for A$12.6mn (US$9.25mn) to expand its footprint. Bangladesh Telecommunication Regulatory Commission: BTRC was formed on 31st January of 2002, under the Bangladesh Telecommunication Regulatory Act Its vision is to facilitate connecting the unconnected through quality telecommunication services at an affordable price by introducing new technologies. BTRC has been working on tower sharing guidelines (including a licensing regime), with a draft submitted for final government approval. Additional guidelines in the works include 4G rollout and associated fees. Barclays: Barclays global investment banking division offers a leading Technology, Media and Telecoms (TMT) franchise. The TMT team has significant experience representing leading tower operators as well as telecom service providers around the globe on buy and sell side assignments. In this capacity, Barclays has supported its clients in the valuation and/or marketing of tower portfolios as well as the negotiation of various agreements associated with these transactions. 153 TowerXchange Issue 21

154 Balitower: Founded in 2006, PT Bali Towerindo Sentra Tbk is a telecommunication tower company that originated in the Indonesian province of Bali. Balitower was listed on the stock market in 2013, and in 2015 began to expand its footprint outside of Bali, mostly through its partnership with the government of Jakarta, managing the CCTV system in return for rights to exploit the poles as small cell locations. Through year end 2016, its portfolio consisted of 856 light poles (MCPs), 72 monopoles and 112 self-supporting towers (SSTs). Beijing Miteno Communication Technology: One of China s leading independent towercos with an estimated 4,500 towers. Miteno also has international ambitions and is an active bidder on tower transactions in Southeast Asia. The company is also a leading tower designer and manufacturer. Beijing RLZY: Beijing Rui Lan Zuo Yue Technology began operations as a service provider to the three MNOs in China back in the early 2000s, before expanding its business to include tower leasing. It currently has assets in its portfolio, which includes a mix of monopoles/towers, rooftops and streetlights. Berkshire Partners: Berkshire was an early investor in Crown Castle, and currently has active investments in Protelindo (the largest towerco in Indonesia), Torres Unidas (in the Andean region of CALA) and Tower Development Corporation in the U.S. and Puerto Rico. Bharti Airtel: Bharti Airtel is an Indian mobile network operator, and ranks as one of the top four MNOs globally with operations across 20 countries in Africa and Asia. In India, Bharti Airtel carved out its own towerco, Bharti Infratel, and is a partner in the Indus Towers joint venture towerco. Bharti Airtel initially followed a similar strategy in Africa, creating Africa Towers subsidiaries in several countries, before subsequently selling towers in the majority of countries to a variety of African towercos. Over the summer, Airtel received approval to purchase the assets of Telenor India, then in Q announced it will pick up Tata s mobile business, leading to a merger of three MNOs, allowing Airtel to consolidate a strong number two position when the Vodafone-Idea megamerger concludes. Bharti Infratel: One of the pioneers of shared telecoms infrastructure, Bharti Infratel was created in 2007 as an independent tower company to provide compelling capex saving opportunities to telecom service providers, while optimally utilising Bharti Airtel s large tower base in India. Infratel has 39,000+ towers, across eighteen states, and eleven telecom circles, and is still growing. Bharti Infratel also manages Bharti Airtel s 42% stake in Indus Towers which was created as a joint venture between Bharti Airtel, Vodafone and Aditya Birla Telecom to hive off the towers business in fifteen telecom circles. Bharti Infratel s goal is the disarmament of MNOs ; the creation of end-to-end tower solutions including fibre, small cells and active equipment, and supporting the continued development of telecoms across India, including the creation of smart cities. There are currently rumors of a proposed major investment in a combined Bharti Infratel-Indus Towers entity by a KKR-led consortium, with the transaction believed to require Bharti Infratel to first buy out the 58% of Indus Towers held by others (Idea, Providence Equity Partners and Vodafone) and then KKR to increase its interest in Bharti Infratel from 10% to around 45%. Broadcast Australia: Broadcast Australia owns and operates one of the most extensive terrestrial broadcast transmission networks in the world. With a diverse portfolio of structures ranging from 30m to over 230m masts, and as one of the most mature portfolios, it has the best regional and rural penetration among Australian tower companies across its 600+ sites. Servicing not just broadcasters, it provides infrastructure leasing and related services to the majority of the MNOs, NBN Co., as well as other telecommunications players. It is part of BAI Communications, which provides connectivity solutions in various metropolises in North and South America. BSNL: BSNL is the State-owned telecommunications provider in India. It is the largest provider of fixed telephony and broadband services with more than 60% market share and fourth largest mobile network operator in India. BSNL has begun the process of carving out its own towerco, and 154 TowerXchange Issue 21

155 has received in-principle approval from the Department of Telecommunications which will establish an inter-ministerial group to work out the capital and organisational structure of the new company, once a market valuation of BSNL s 65,000+ tower assets is carried out. Its merger with the other State-run operator MTNL has long been mooted. Canada Pension Plan Investment Board: CPPIB is the professional investment management organisation that invests the funds of the Canada Pension Plan on behalf of its 20mn contributors and beneficiaries. CPP s tower investments include 10.3% stakes in Bharti Infratel with KKR, bought at US$951.6mn. It is also part of the consortium led by KKR in talks to buy a significant stake in a combined Bharti Infratel and Indus Towers. Carlyle Group: Founded in 1987 in Washington, DC, the Carlyle Group is a global alternative asset manager with US$170bn of assets under management across 299 investment vehicles. In 2012 it acquired ~25% stake in Indonesian towerco PT Solusi Tunas Pratama TBK (STP) for a reported US$100mn, but is now in the process of selling its shares. Cam Towerlink: Established in 2013 in Cambodia by a group of three Malaysian shareholders, Cam Towerlink provides turnkey telecommunications infrastructure solutions for operators, including designing, constructing and operating telecoms towers and small cell sites. One of Cam Towerlink s first projects is to deploy telecoms coverage for the first time around the Angkor Wat temple complex. The company plans to expand its footprint into neighbouring municipalities. CAT Telecom: CAT Telecom is a Thai fixed and mobile network operator, and one of three Statebacked companies operating a nationwide network. Thailand s leading MNOs operate their networks under build-operate-transfer (BOT) partnerships with both CAT and their counterpart TOT, which has led to disputes about tower ownership as the BOT relationships conclude. CAT Telecom and DTAC have been in ongoing discussions to create a joint venture towerco, and transfer 9,000 disputed concession towers into it. Centratama: PT Centratama Telecommunication Indonesia TBK is a listed towerco providing passive telecoms infrastructure for service providers, along with its subsidiary PT Centratama Menara Indonesia, formerly known as PT Retower Asia. As of June 2017, the company owned 968 towers with an additional 805 DAS. China Independent Tower Alliance (CITA): The China Independent Tower Alliance was inaugurated on 30 June, 2017, created under the leadership and guidance of the Communications Network Operation and Maintenance Committee (COMC) and in partnership with private towercos, telecom infrastructure builders, equipment and service providers, design consulting firms, academic and research institutes, and more. Its current membership consists of more than 60+ organisations. It also established a provincial presence in Zhejiang this October. China Mobile: Leading State-owned telecommunications services provider in Mainland China with the world s largest mobile network and mobile customer base. The MNO reported total customer base of 877mn+ ending September 2017, with 621mn+ being 4G customers. It is listed on both the Hong Kong and New York Stock Exchange (HKEX and NYSE). China Mobile owns 38% of China Tower Corporation, to which all its towers have been transferred. China Reform Corporation: State-owned fund and asset manager. In October 2015 it injected CNY 7.7bn (~US$1.2bn) in cash for a 6% stake in China Tower Corporation. China Telecom: State-owned telecommunications services provider in Mainland China with the largest fixed-line service. Of the three MNOs in the country, China Telecom is third-ranked, with 240mn+ mobile subscribers ending third quarter 2017, of which 167mn+ are 4G users. All China Telecom s towers have been transferred to China Tower Corporation, in which China Telecom owns a 27.9% stake. China Tower Corporation: Established in July 2014, China Tower Corporation is the largest towerco in the world with 1.9mn towers. It is owned by China Mobile (38%), China Unicom (28.1%), China Telecom (27.9%) and China Reform Corporation (6%). It is expected to IPO on the Hong Kong Stock Exchange in the first quarter of 2018, with the goal to raise US$5-10bn through a % stake sale. China International Capital Corp Ltd 155 TowerXchange Issue 21

156 (CICC) and Goldman Sachs are to lead the IPO, with more expected to join the final sponsorship team. China Unicom: State-owned telecommunications services provider in Mainland China, ranked second behind China Mobile and ranked fourth globally by subscriber base. For the first nine months of 2017, it boasted ~277mn subscribers with ~58% as 4G customers (160mn+). All of China Unicom s towers have been transferred to China Tower Corporation, in which China Unicom owns a 28.1% stake in. Of the three State-owned MNOs in the country, China Unicom was selected along with other SOEs to take part in the mixed ownership reform, to bring in additional investments (and potential resources) from private investors such as tech giants Alibaba, Tencent and Baidu. Citi: One of the world s leading tower transaction advisory groups can be found within the TMT team at Citi. Common Tower: Common Tower Technologies Sdn. Bhd is an independent tower owner and operator in Malaysia, and is also one of the nation s largest providers of professional site development services to companies in the telecommunications industry. CTTSB owns, operates and manages over 260 tower sites in Sabah following its appointment as the State Backed Company to undertake the TIME2 Project in Sabah since 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. Delta Partners: Delta Partners expertise in tower transactions includes M&As, capital raising, due diligence and strategy support to towercos, telecom operators and investors on network sharing, tower monetisation, transaction execution, structuring and operational streamlining. Most recently, it acted as the sole strategic and financial advisor to edotco on its acquisition of the Towershare portfolio in Pakistan (Tanzanite). Deutsche Bank: Deutsche Bank provides M&A advisory services as well as financing services in the tower space, including both equity and debt products. Deutsche Bank has been involved in the tower sector on a global basis, successfully executing transactions in North America, South America, Europe, Africa and Asia. DIF: The Digital Telecommunications Infrastructure Fund, formerly known as TRUEGIF or TRUEIF, is a towerco solution created by Thai MNO True. It is Thailand s first telecommunication infrastructure fund which invests in telecommunication infrastructure assets such as telecommunication towers, fibre optic cable system, transmission equipment, broadband system and/or revenue incurred from the assets, with extensive coverage nationwide. The purpose is to support the sharing use of telecommunications infrastructure, reduce investment redundancy in telecommunication infrastructure and enhance competitions among operators to help increase efficiency of network services. The fund was listed in late True has injected 6,000 of their own towers into the infrastructure fund/towerco which for year-end 2016 totalled 12,138 tower assets and 60,343km of fibre. DIF could see inorganic growth in the coming months as True is reportedly looking to inject more tower and optical fibre assets into the fund. Eco-Friendly Towers (EFT): EFT is a subsidiary of diversified Myanmar conglomerate Young Investment Group. EFT secured an order for roughly 700 phase-three towers from Telenor, with ~550 sites built to date. EFT was initially the only towerco able to deploy and manage towers in several Northern Myanmar states, where security can be challenging, but TowerXchange sources have confirmed that EFT s phase three contract is nationwide. edotco: edotco is the first pan-regional tower services provider in Asia, and is committed to deploying cost-efficient telecommunications infrastructure across the region by enabling competitive access for the industry and connectivity for communities. edotco is a subsidiary of Malaysia s Axiata Group. Through private placements totalling US$700mn with INCJ, Khazanah and KWAP, Axiata s share is now 62.4%. With a regional portfolio that includes 31,600 towers in Malaysia, Sri Lanka, Bangladesh, Cambodia, Pakistan and Myanmar, edotco strives to deliver outstanding operational efficiency 156 TowerXchange Issue 21

157 in telecommunications infrastructure services and solutions. edotco s tower portfolios in all six countries are managed in real-time at their headquarters in Kuala Lumpur by the state-of-theart echo monitoring service. edotco has been growing steadily since its founding in 2012, both organically through tower rollouts across its footprint, and inorganically through acquisitions, and continues to evaluate new opportunities for growth in Asia based on their merits. In 2017, it acquired ~700 towers from Towershare in Pakistan, shortly followed by a landmark buy and leaseback of 13,000 towers with MNO Jazz, in transactions totalling US$1.0289bn. Etisalat: Emirates Telecommunications Corporation operates in 16 countries across Asia, the Middle East and Africa. The telecommunications service provider has three opcos in Asia. Pakistani subsidiary Ufone has been exploring the sale and leaseback of its towers for a while now; while there may also be appetite to monetise, carve out or outsource their towers in Afghanistan. Etisalat s Sri Lankan subsidiary retains their towers. EY: TMT strategy and corporate finance advisory team with extensive experience of advising on tower transactions. FMO: Dutch development bank 51% government owned, 49% by commercial banks and financial institutions. FMO arranged a subordinated loan of US$13mn to Irrawaddy Green Towers in Myanmar via its Infrastructure Development Fund. Frontier Tower Solutions: Founded as an independent tower company by the corporate parent of Afghan Wireless Communications Company (AWCC) in At last count it operated 1,500 towers in Afghanistan, and also has operations in Iraq. Gihon: PT. Gihon Telekomunikasi Indonesia (Gihon) was established in Jakarta in 2001, and currently has around 700 tenants on ~500 towers. Golden Towers: Golden Towers is an independent tower company incorporated in Vietnam focused on acquiring existing telecommunications tower assets in the Vietnamese market. As of December 2015 Golden Towers owned and operated approximately 340 towers. Golden Towers plans to build its telecommunications tower portfolio mostly through acquisition of existing towers and limited construction of new towers is envisaged, not exceeding 10% of the total portfolio. GTL Infrastructure: GTL Infrastructure is a publicly-listed tower company in India with a portfolio of ~28,000 towers across the country, serving all major telecoms service providers. Founded in 2004 and listed in 2006, GTL Infrastructure began expanding its portfolio in 2008 and acquired 17,500 towers from Aircel. However, the cancellation of 122 operator licenses by the government, slow uptake of 3G and price wars between service providers have left GTL Infrastructure with a heavy debt burden. The towerco is currently refinancing its residual debt (approximately US$721mn) and plans to switch ownership around March Guodong Network: The largest independent towerco in China with a tower count of ~15,000, all through organic growth. Headquartered in Shanghai, it has nationwide presence in the country. Hardiman Telecommunications: A unique consultancy equally capable advising on engineering and operational issues as they are on commercial strategy and corporate finance. Extensive experience advising on both the buy-side and sell-side in tower transactions. Herbert Smith Freehills: International law firm that advised edotco on its transactions with Towershare and Jazz in Pakistan. Hutchison: Hutchison 3G is an MNO with a presence in multiple countries across Europe and Asia. In recent years, it has been involved in tower transactions in Australia, where some of its assets were sold to Crown Castle Australia (now Axicom), and in Indonesia where it negotiated a sale and leaseback deal of 3,692 towers with Protelindo. IBS Tower: Founded in 2006 and listed in August 2012, PT Inti Bangun Sejahtera Tbk (IBS) is one of Indonesia s big four publicly traded independent tower companies. Starting as an in-building system solution provider, IBS has since focussed its resources on ground based towers, earning it a significant presence in the market. At end of 2016, IBS had 3,677 towers. Idea Cellular: India s third ranked MNO is in the midst of a high profile merger with #2 MNO Vodafone India. The transaction has resulted 157 TowerXchange Issue 21

158 in the sale of Idea s 8,886 towers to American Tower and could also push Idea to divest its stake in Indus Towers. IDFC Alternatives: Private equity arm of IDFC group that manages over US$3.4bn on behalf of leading institutional investors from across the world. In April 2017 it purchased a 33% stake in Ascend Telecom for US$91.2mn. The deal involved Rs 365 crore of shares and Rs 220 crore of convertible debentures, as well as IDFC Bank refinancing Ascend Telecom s loans of Rs 620 crore. Jio: Reliance Jio Infocomm Limited is the brainchild of billionaire Mukesh Ambani, which launched in the fall of 2016 as a 4G LTE mobile network operator in India. Its entry into the marketplace has created severe disruptions due to its aggressive pricing and marketing strategies, leading to mergers between Vodafone and Idea Cellular, as well as Bharti Airtel with Telenor India and Tata. While Jio has leveraged substantial co-location on towerco sites, around half the ~100,000 towers in their network are self-deployed city poles. Indus Towers: Incorporated in 2007, Indus Towers is a joint venture towerco founded by Bharti Infratel, Vodafone India, Aditya Birla Telecom (Idea) with a portfolio of ~123,000 towers. Its mission is to provide passive infrastructure services to telecom service providers in India on a non-discriminatory basis, delivering best-of-class operational efficiency and opex reduction. Indus Towers has won awards for its approach to supply-chain management and operational excellence, its drive to reduce the carbon footprint of its tower portfolio, and is also playing a part in helping the government reach its goals for nationwide coverage, small cell deployment, and the creation of smart cities in India. A consortium led by KKR is rumored to be seeking to buyout the towerco and merge it with Bharti Infratel, a transaction valued at US$11bn. ING: Leading Dutch bank with considerable experience of providing debt finance to the tower industry. Innovation Network Corporation of Japan: INCJ was launched in July 2009 and is a unique publicprivate partnership aimed at promoting innovation and enhancing the value of businesses in Japan. It has a market cap of JPY300bn, with the Japanese government injecting JPY286bn and 26 private corporations providing a further JPY14bn. The government will also provide guarantees up to a total of JPY1,800bn for INCJ investments, giving it an investment capability of approximately JPY2,000bn. INCJ will be established for a period of 15 years. It was part of edotco s private placement in late 2016, investing US$400mn for a 21.5% stake in edotco. It also invested in IBS firm JTOWER when it first launched. International Finance Corporation (IFC): The IFC is a member of the World Bank Group, the world s leading DFI. The IFC has invested around half a billion dollars in debt and equity into eight towercos across emerging markets, with an objective to double that total investment by In June 2017, it closed its investment in Myanmar towerco Irrawaddy Green Towers (IGT) of US$95mn (including a parallel loan of US$42.5mn). IPT Powertech: IPT PowerTech Group delivers specialised solutions to the power, industrial and telecom sectors in Africa, Middle East and Southeast Asia. The group is recognised as a global leader in the provision of Guaranteed Savings and T-ESCO models, including operating the energy equipment across the footprint of Ooredoo Myanmar. Irrawaddy Green Towers: IGT had an order of 2,000 towers in phases one and two for Telenor in Myanmar; it then reportedly secured an order for a further 1,000 phase-three towers, this time from Ooredoo. To date it is the largest towerco in Myanmar with 2,500 towers. IGT provides a full service tower+power offering. The principal shareholders of Irrawaddy Green Towers parent company Irrawaddy Towers Asset Holdings are affiliates of Blu Stone Management and M1 Group. Local Myanmar company Barons Telelink owns a stake in the operating subsidiary. Jazz: Created from the merger of War id and Mobilink in early 2017, it is the largest MNO in Pakistan by subscribers. In late August, Jazz entered a sale and leaseback of its 13,000+ towerco subsidiary, Deodar, with edotco, who partnered with local firm Dawood Hercules for the deal. The transaction is valued at US$940mn. The portfolio was established over 20+ years of operations, featuring a balanced urban-rural mix, and mainly 158 TowerXchange Issue 21

159 tracks with the population concentration of Pakistan along the Indus valley with greater concentration of sites in the Central region, followed by the South and Baluchistan and KPK and North regions. About 80% are ground-based as opposed to rooftop structures. JTOWER: Founded in 2012, JTOWER is the sole provider of in-building telecom infrastructure sharing solutions in Japan. Its proprietary inbuilding Distributed Antenna Systems (DAS) are used in prominent establishments across Japan, including commercial complexes and office buildings, by all three major mobile network operators (NTT DOCOMO, KDDI and Softbank). The system is MIMO-ready active DAS and covers six bands used by the Japanese MNOs. In late July 2017, JTOWER purchased the IBS component of the SEATH portfolio (120+ IBS in Vietnam) for US$10.2mn, marking its first expansion outside of Japan; it is also exploring other regional opportunities. JP Morgan: Leading TMT advisory team with extensive experience in towers, including some of the landmark transactions. It was the sole placement agent for edotco s transaction with Khazanah, INCJ and KWAP. Khazanah Nasional Berhad: It is the strategic investment fund of the Government of Malaysia. Khazanah holds and manages selected commercial assets of the Government and undertakes strategic investments on behalf of the nation. It is involved in sectors such as power, telecommunications, finance, healthcare, aviation, infrastructure, leisure and tourism, and property. In December 2016 the fund invested US$200mn in exchange for a 10.7% stake in edotco. KJS: KJS is a State-backed towerco created in partnership with the Malaysian state of Selangor. KJS processes all applications related to telecoms in Selangor, and builds and leases telecoms infrastructure to service providers. KJS has built towers, monopoles and lamp poles on private and state agency land in Selangor and owned and operated approximately 300 structures as of Q Kohlberg Kravis & Roberts (KKR): Kohlberg Kravis & Roberts is a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit and, through its strategic partners, hedge funds. In March 2017, KKR and Canada Pension Plan Investment Board (CPPIB) bought a 10.3% stake in Bharti Infratel for Rs 6,193 crore (US$951.6mn). KKR previously invested in the Indian towerco between 2008 and Right now KKR is believed to be in talks to lead a consortium of buyers including CPPIB, Abu Dhabi Investment Authority and GIC Singapore to buy a significant stake in a merged Bharti Infratel and Indus Towers deal, valued at ~US$11bn. Komet Infra Nusantara (KIN): KIN is a rollup towerco trading solely in Indonesia, having consolidated the assets of Tara, Komet, Corona, Telematika, and Ida Lombok since To date, KIN has a portfolio of ~1,300 towers, a product of both organic and inorganic growth. KIN is owned by Indonesian infrastructure giant PT Nusantara Infrastructure and management, with IDR460bn injected by Providence Equity, who is now looking to exit Indonesia (and Asia in general, having shut down operations in India and Singapore). KPR Consult: Renowned tower doctors go-to guys for structural and technical due diligence, improvement capex planning, decommissioning and just about anything to do with tower design and maintenance. KWAP: Kumpulan Wang Persaraan is the second largest pension fund in Malaysia. KWAP took part in edotco s private placement exercise, investing US$100mn for 5.4% stake in the towerco. Macquarie Group: Serial towerco investors, with capital at work in Europe within Arqiva and Russian Towers, and farther afield with Axicom (formerly Crown Castle Australia), Mexico Tower Partners and Viom Networks (being integrated into ATC India). Macquarie Capital also has an excellent TMT advisory practice with experience of advising on tower transactions, however, it has recently shifted to focus on its main investments in Asia, rather than advisory. Myanmar Infrastructure Group (MIG): MIG is a joint venture between majority shareholder Singapore Myanmar Investco (SMI) and Golden Infrastructure Group (GIG). MIG had proved 159 TowerXchange Issue 21

160 themselves building rooftops and poles for both Telenor and Ooredoo in Yangon, as well as executing a substantial DAS project within Yangon s airport, off the back of which they secured a contract to build 503 towers in phase three of Ooredoo s rollout. MIG had access to the capital markets via SMI s Singapore stock exchange listing. MIG provides a full service tower+power proposition. In October 2016 the sale of MIG to Shining Star International (headquartered in Kunming) for US$12.7mn was announced; unfortunately a few months later, the deal collapsed with the towerco now being run in maintenance mode. Mitratel: Founded in 1995, PT. Dayamitra Telecommunications (Mitratel) is a wholly-owned subsidiary of PT. Telekomunikasi Indonesia, Tbk (Telkom). The company was to be transferred to Tower Bersama Group under an innovative shareswap structure, but the deal was overruled by the Indonesian government in Q Mitratel s current tower count is ~13,000+. Mitratel is said to receive approximately 50% of Telkomsel s BTS orders. MPT Myanmar: Myanmar Post and Telecommunications (MPT) is the State-backed incumbent operator in Myanmar, and is also backed by the KDDI-Sumitomo joint venture KGSM. MPT remains the market leader, although its market share declined from 66.6% to 44% from Q to now. In the first half of 2016, MPT started to share its infrastructure with the other MNOs. It has also changed its capex model, shifting to build-to-suit (BTS) with the towercos rather than building through turnkey providers such as Huawei and ZTE. As it awards BTS contracts to various towercos as a test, awarding more orders subject to proven success, MPT was also described as likely to do more co-locations down the road. Since the MPT-KSGM partnership in 2014, MPT has built approximately 1,200 to 1,300 new towers. MTNL: Indian State-owned operator currently considering the divestment of its 10,000 tower portfolio as well as a merger with the other Stateowned MNO BSNL. Myanmar Investments International Limited: (AIM: MIL) The first Myanmar-focused investment company to be admitted to trading on the AIM market of the London Stock Exchange. MIL was established in Its largest investment (US$21mn cost for a 9.3% shareholding) is in Apollo Towers. Myanmar National Tele & Communications (Mytel): The recently licensed fourth operator in Myanmar is a joint venture between Vietnam s Viettel and a consortium of 11 local companies (Myanmar National Telecom Holding Public Limited). Mytel received its license in January 2017 and will operate under the brand name Mytel, effective early Mytel has announced it will invest US$1.3bn and focus more on rural coverage. The license is for 15 years and the MNO will operate in the 900MHz and 2.1GHz bands. Mytel requires approximately 2,500 co-locations plus up to 2,500 to 3,000 new builds to launch its network. Mytel is believed to have contracted with a number of new local towercos. National Tower Development (NTD): NTD is a new towerco in Myanmar, launching in 2017 to take advantage of the new fourth operator Mytel s network rollout in the country. It also has exclusive rights to build monopoles and lamp posts in the Mandalay region. Naza Communications: Formerly known as Premium Radius, Naza Communications is part of privately-held Naza Group in Malaysia. Started in 2014, the towerco is positioning itself to be more than just a site-based asset provider to the mobile network operators in the country, investing in RAN sharing solutions on top of tower leasing. New Silk Route: New Silk Route is a US$1.4bn private equity firm that invests in private companies in India, Asia, and the Middle East. Its investments in the telecommunications infrastructure industry include Ascend Telecom in India. Nordic Teleservices: Founded in 2014, NTS has grown to become of of the leading companies in Myanmar to provide green technology solutions at the lowest carbon footprint in the market for both telecom operators and towercos. NTS specialises in hybrid power solutions, site management and maintenance services for the telecom industry, and are believed to be one of the country s two largest T-ESCOs. Norton Rose Fulbright: Norton Rose Fulbright is a global law firm with more than 4,000 lawyers in 160 TowerXchange Issue 21

161 59 offices across, Asia, Australia, Africa, Canada, Europe, Latin America, the Middle East and the United States. Out of Singapore, the firm acts for state-owned enterprises, local corporates, multinational conglomerates and global financial institutions. The firm has advised the lenders in the financing of Tower Bersama in Indonesia and separately on financing deals for Pan Asia Majestic Eagle and Irrawaddy Towers, in Myanmar. Norton Rose Fulbright s other clients in the financing space include various DFIs and commercial lenders. OCK Group: Founded in 2000 in Malaysia, OCK Group s telecommunication network service provides end-to-end full-turnkey service that includes the designing, building and maintenance of telecommunications infrastructure. It was listed on the ACE MARKET of Bursa Malaysia Securities Berhad in July Since then it has expanded into new markets, including Cambodia, Indonesia, Myanmar and Vietnam. OCK operates as a towerco in Malaysia, Myanmar and Vietnam. In Myanmar it won a contract with Telenor in 2015 to deploy 920 towers, of which ~620 have been built to-date. In April 2017 it secured ~90 co-locations with MPT and in July ~70 co-locations and 300+ new BTS with new operator Mytel, with delivery for end of year. First announced in August 2016 and finalised in January 2017, OCK purchased the largest towerco SEATH in Vietnam for US$50mn. The portfolio was made up of 1,972 towers. Moving forward, OCK is said to have allocated US$5mn to US$8mn for its growth in Vietnam, targeting 200 to 250 tower builds per year. It also seeks to increase tenancy ratio from 1.26 to 1.3 by the end of Omnix: Omnix was established in 2011 as an independent towerco to meet the operator demand for mobile coverage in urban and suburban areas of peninsula Malaysia. One of its main value propositions is the land bank it secured through government and private site ground tenancy agreements with the Islamic Council in Malaysia, giving it access to highly coveted but difficult to acquire sites. Over the summer it also secured an agreement with the Ministry of Education. Ooredoo: Ooredoo, formerly known as Qtel, is the incumbent mobile network operator in Qatar, and also has extensive international operations in Indonesia (Indosat) and Myanmar, where it was one of the original two international operators to receive a license to build telecommunications infrastructure. Ooredoo had 9.9mn subscribers in Myanmar at the end of Q3 2017, good for 19% market share. It has ~300 tower assets on its own balance sheets (mostly roof tops and RDUs), with a total of ~4,500 sites including co-locations. Like MPT and Telenor, Ooredoo also picked up the 1800MHz spectrum this year to expand its 4G network. Overseas Private Investment Corporation (OPIC): The U.S. Government s development finance institution. It mobilises private capital to help address critical development challenges and in doing so, advances U.S. foreign policy and national security priorities. In June 2016, OPIC provided a US $250mn debt facility to Apollo Towers. PAMEL: Pan Asia Majestic Eagle Limited (PAMEL, sometimes referred to as Pan Asia Towers or PAT) built 1,250 towers for Ooredoo in Myanmar in phases one and two. Along with Michael Gearon, PAMEL has management DNA in common with Indonesia s Protelindo, but remains a distinct entity. In 2014 PAMEL secured US$85mn in financing from a consortium of five banks: DBS, ING, OCBC, Standard Chartered and Sumitomo Mitsui. PAMEL has not built any towers in phase three of the Myanmar rollout, and has been subject to consolidation speculation. PEKAPE: PT. PERMATA KARYA PERDANA was founded in 2013, beginning operations in mid-2014, with the vision to be a premier telecommunications infrastructure provider in Indonesia. Its mission is to facilitate faster and more economic roll-out of wireless operations throughout Indonesia including countryside and remote areas, as well as urban city centres. Through its partnership with Alfa Mart, one of the leading retailers in the country, PEKAPE is uniquely positioned to offer some of the best locations desired by MNOs for coverage, infill and capacity. Persada Sokka Tama: Established in 2006, PT. Persada Sokka Tama started off with build-to-suit activities before becoming a tower provider in 2008 and offering co-locations for telecoms service providers in Indonesia. The company has ~1, TowerXchange Issue 21

162 towers mostly concentrated in Java and Nusa Tenggara. Protelindo: Brainchild of Michael Gearon and his loyal management team, Protelindo is the largest towerco in Indonesia where they own ~14,600 towers after their most recent acquisition of 2,500 towers from XL Axiata in Q Over the last two years, Protelindo has significantly improved its scale and credit profile. Its leverage has strengthened through EBITDA growth, enabled by a significant increase in the number of tenancies on its towers. Protelindo has also begun to diversify into microcell assets and fibre to support the continued organic and inorganic growth of its portfolio. The company acquired iforte in June 2015 along with its 450 microcell towers, seven hotel BTS and 700km of fibre with over 180 PoPs in the city centre and business districts in Jakarta and Surabaya. Providence Equity Partners: A global private equity and credit investment firm with more than US$50bn in capital under management; Providence are communications and media investment specialists. Providence announced it was existing the Asian market in 2017, which may affect its 4.8% stake in Indus Towers. Over the summer Providence s KIN portfolio in Indonesia was also put on the block; while Indonesia does have foreign direct investment restrictions, through an innovative investment structure, Providence effectively owns a substantial stake in the portfolio. Providence also has capital at work in Brazil with Grupo TorreSur. PT Wellington Capital Advisory: PT Wellington Capital Advisory (WCA) is a privately-held, fullyindependent professional services firm, with offices in Jakarta and Singapore. They assist clients to develop and leverage significant investments in the TMT space within Indonesia and throughout Southeast Asia, with particular emphasis on opportunities in the rapidly-evolving tower industry. Q Towers: Independent towerco with ~120 towers and an impressive tenancy ratio of 2.8 in China; one of its backers is a Texas-based hedge fund. Redpeak Advisers: Based in Singapore with a core team of ex-macquarie Capital staff, including Anupam Garg and Kingston Pang, Redpeak is a boutique corporate finance adviser focused on the TMT sector in the ASEAN region. Reliance Communications: Reliance Communications (RCOM) is currently the sixth largest telecommunications provider in India, and part of the Reliance Anil Dhirubhai Ambani Group. However, the wireless business unit of RCOM seems increasingly likely to cease trading, potentially leaving their carve out towerco, Reliance Infratel (which was to be rebranded Towercom), in limbo without an anchor tenant. Reliance Infratel (aka Towercom): In an effort to reduce debt, RCOM has been trying to sell its ~45,000 towers since late 2015; a period of exclusive negotiations with TPG Capital and Tillman Global Holdings fell through due to a dispute over the valuation of assets; more recent dialogue has been with Brookfield Asset Management. SACOFA: SACOFA is a State-backed towerco providing BTS services and is based in the Malaysian state of Sarawak. SACOFA has over 700 towers across Sarawak, and has signed an agreement with Malaysian MNO U Mobile to expand their network coverage in this state. In addition to its tower portfolio, SACOFA also operates a 950km submarine cable between Sarawak and West Malaysia, and a 4,000km fibre optic trunk network between Kuching and Lawas in Sarawak. Saurava Towers: Saurava Towers is an Indian towerco founded in 2008, providing managed services and passive infrastructure for telecoms service providers. Services include site acquisition, tower deployment, and site operation and maintenance. At the end of Q2 2016, Saurava had 55 towers. SEATH: The largest towerco in Vietnam was Southeast Asia Telecommunications Holdings (SEATH), itself the product of rolling up three smaller towercos with a reported book value of US$58.7mn in Q SEATH was a holding company owned by VNI (VinaCapital s Vietnam Infrastructure Limited). According to the company s report from Q1 2015, they had 1,924 towers in Vietnam with a tenancy ratio of 1.2, an EBITDA margin of 54.1% and net margin of 15.2%. In January 2017, the tower portion of the portfolio (1,972) was sold to OCK Group for US$50mn, with Japan-based JTOWER purchasing the IBS portfolio for US$10.2mn over the summer. 162 TowerXchange Issue 21

163 Sino Netstone: Independent towerco in China created in Headquartered in Beijing it has an estimated portfolio of ~1,800 towers. SREI Infrastructure Finance: SREI Infrastructure Finance Limited is a leading infrastructure financing conglomerate in India, and one of the first companies to lay the groundwork for telecoms infrastructure sharing. Prior to the sale to American Tower, SREI was the managing shareholder in Viom Networks, and merged with associate company Quippo in Founded by the Kanoria family, Quippo provides construction equipment rental, energy rental, oil and gas equipment rental and telecom tower infrastructure rentals. Quippo is currently exploring tower and telecom infrastructure opportunities outside India. Solusi Tunas Pratama (STP): Listed on the Indonesian stock exchange in 2011, Solusi Tunas Pratama s (STP) consolidated its position as the third largest independent towerco in Indonesia with its acquisition of 3,500 towers from XL in December This followed the acquisition of existing portfolios from other local operators such as Axis, Bakrie and Hutchison. STP started building its own towers in December 2012 to achieve organic growth in addition to acquiring existing portfolios; it now owns and operates approximately 7,000 sites. Shareholders Carlyle and Southern Capital who collectively own ~69% are currently seeking an exit. Tata DOCOMO: Tata DOCOMO is an Indian cellular service provider and product of a strategic joint venture between Tata Teleservices and NTT Docomo in November Recently Tata Teleservices (Tata) announced its intention to exit the wireless market and close down its mobile service unit. According to American Tower s press release on the matter, Tata accounted for approximately US$80mn, or 5% of the towerco s consolidated property revenue and for approximately US$40mn in gross margins as of the end of Q Tata was the anchor tenant (and a 33% shareholder) on most of Viom Networks sites which were acquired by American Tower in April 2016, which acquired a 51% controlling stake. Most of the non-cancellable contracts between Tata and what was Viom are still valid for a period in excess of six years. Telkomsel: PT Telekomunikasi Indonesia is the incumbent telecommunications provider in Indonesia, and holds the largest share of the market. Telkomsel has Indonesia s largest and most pervasive tower network, some of which remain on its own balance sheet, some of which have been transferred to wholly owned towerco subsidiary Mitratel. Telkom explored the transfer of Mitratel and its assets to Tower Bersama Group in a unique share-swap deal which was ultimately refused by the government in mid Telenor: Telenor is the incumbent telecommunications provider in Norway, and owns networks in twelve countries and has operations in 29 countries including India, Bangladesh, Pakistan, Thailand and Myanmar. Historically, Telenor has tended to partner with towercos rather than sell and leaseback towers. In Thailand, Telenor s subsidiary DTAC is in the process of negotiating a joint venture towerco with State-backed Thai operator CAT Telecom. In Myanmar Telenor was one of the first foreign operators to obtain a license to build and operate telecommunications infrastructure in this greenfield market, and launched 4G services in the nation s capital Nay Pyi Taw in July It has been expanding its 4G services steadily since picking up the 1800MHz spectrum in May 2017 at the price of US$80mn. It currently has a network of ~7,400 towers, the majority of which are tenancies on private towerco towers, and their network covers roughly 90% of the country s population and townships. It also has retained assets of 1,200 sites, which are predominantly rooftops, which are believed to be up for sale. Total investments in the country are said to be over US$1.5bn. Telenor Myanmar s subscriber base has grown to ~19mn for Q317, and it holds 37% market share. Tillman Global Holdings (TGH): Multinational tower and infrastructure investment and operations firm led by Sanjiv Ahuja, former Chairman and cofounder of Eaton Towers and ex-ceo of Orange. TGH has a substantial stake in Apollo Towers Myanmar, which Ahuja chairs, and a joint venture partnership with JC Decaux, giving them the opportunity to locate points of service, particularly small cells, on over 1mn prime locations worldwide. Tillman Global Tower Solutions: Tillman GTS is a joint venture with Global Tower Solutions, created to tackle both utility scale ground mounted solar 163 TowerXchange Issue 21

164 solutions, and also to offer financing to or operate Energy Services Companies (ESCOs). Tillman GTS proposes to take the risk, and invest the capex in telecom ESCO projects in Asia and Africa. Tillman is planning to deploy ~US$700mn of capital for this venture over the next three to five years, either working to finance contracts for existing ESCOs or building and operating the ESCO themselves with O&M partners. TOT: State-backed Thai MNO which has entered into discussions with Thai MNO AIS to create a joint venture towerco, but to date no major announcements have been made. Thailand s leading MNOs operate their networks under buildoperate-transfer (BOT) partnerships with both TOT and their counterpart CAT, which has lead to disputes about tower ownership as the BOT relationships conclude. Tower Bersama: Based in Indonesia, the Tower Bersama Group comprises several rolled up towercos including PT Tower Bersama, PT United Towerindo, PT Telenet Internusa, PT Batavia Towerindo, PT Bali Telekom, PT Prima Media Selaras and PT Triaka Bersama, all operated seamlessly under one management team. The group s infrastructure extends to Java, Bali, Sumatra and Batam and is currently being expanded into Kalimantan and Sulawesi. Tower Bersama has steadily grown its tower portfolio organically, as well as through acquisitions of smaller towercos, and with buy and leasebacks with Indonesia s operators. A share-swap to gain control of Telkom subsidiary Mitratel was planned, but was overruled by the government in Q Tower Bersama currently has a portfolio of 13,000+ towers and plans to roll out ~1,250 new towers for Towershare: Towershare is a leading independent owner and operator of wireless communications infrastructure focusing primarily in the Middle East, North Africa and Southern Asia, or MENASA markets. Towershare generates revenue from three primary businesses: build-to-suit, sale and leaseback and value-added services. Towershare expanded its footprint into Pakistan (local entity knowns as Tanzanite) in 2015, building up to a portfolio of ~700 towers, mostly through acquisitions and with the majority of towers coming from previous WiTribe assets. The portfolio consists of over 70% urban, with 40% being ground based towers, and has a colocation ratio of 1.6x. In June 2017, edotco agreed to purchase 100% of Tanzanite for US$90mn. Tower Vision: Tower Vision is an Indian towerco specialising in the provision of passive infrastructure to the wireless telecommunications industry with expertise in tower roll outs, operation and maintenance. Tower Vision owns and operates ~8,400 sites and offers greenfield towers, rooftops, and in-building distributed antenna systems to MNOs across India. Tower Vision has been rumoured to be a consolidation target for several years. TrueMove: TrueMove is a State-backed Thai MNO, and one of three companies given a concession to build and operate a nationwide 900 MHz band and 1,800 MHz band network in the 1990s. True has created a separate entity for its tower assets in DIF, an infrastructure fund. To date True hasn t engaged in negotiations with other operators to create a joint venture towerco. Ufone: Ufone is the mobile arm of the incumbent telecoms provider in Pakistan, PTCL, and is the fourth largest operator in the country by subscribers. Ufone has been exploring the potential sale and leaseback of its towers in Pakistan for some time. The process was stalled by the de facto merger of PTCL and Ufone, and associated management changes, but Ufone could yet contribute over 6,000 further assets to the pool of commercially shared towers in the country. Veon: Formerly knowns as VimpelCom Ltd., Veon is a leading global provider of connectivity and internet services headquartered in Amsterdam and serving more than 235 million customers. It has operations in Russia, Ukraine, Kazakhstan, Uzbekistan, Kyrgyzstan, Armenia, Tajikistan, Georgia, Algeria, Pakistan, Bangladesh and Italy (as a JV with Hutchison Group). In late August 2017, Veon and Global Telecom Holding announced that their subsidiary in Pakistan, Jazz, has signed an agreement for the sale of its tower business for approximately US$940mn, subject to adjustments. This transaction involved Jazz selling its wholly-owned tower company, 164 TowerXchange Issue 21

165 Deodar, with a portfolio of approximately 13,000 telecommunication towers, to edotco together with partners Tanzanite Tower and Dawood Hercules Corporation. of merging with Idea Cellular and just monetised its tower portfolio as a result of the sale of its 10,926 sites to American Tower. Additionally, Vodafone could divest its shares in Indus Towers. Meanwhile Veon is also preparing its tower portfolio in Bangladesh for sale. Viettel: Vietnamese military-controlled Viettel is one of the world s most expansive MNOs, having recently secured a prominent role in the consortium behind Myanmar s soon-to-be-launched fourth MNO. Viettel seems to be warming to the idea of partnering with towercos but to date retains all their towers in their other Asian opcos; Cambodia and their home market of Vietnam. VimpelCom: See Veon. Vinson & Elkins: Vinson & Elkins is one of the oldest and largest international law firms, with approximately 700 lawyers located in 15 offices around the world. Its global telecommunications team has extensive experience advising on international telecoms and telecoms infrastructure transactions in numerous countries. Vodafone: Vodafone Group plc is an international telecommunications company, with headquarters in London, UK. Vodafone owns and operates networks in 26 countries and has partner networks in over 50 additional countries. Vodafone India is one of the partners in Indus Towers, the world s second largest joint venture towerco; it is currently in the process Warid: Warid Pakistan is owned by Warid Telecom International, an Abu Dhabi-based mobile telecommunication investment firm. Warid Pakistan reportedly entered into a sale and leaseback agreement with Towershare for ~4,500 towers in Q2 2015, although the deal never closed. In early 2017 Warid completed its merger with Mobilink ( a subsidiary of Veon) which now operates as Jazz. XL Axiata: XL is a mobile operator in Indonesia, and a fully owned subsidiary of the Axiata Group. XL has sought to reduce its tower footprint over the past few years, selling 3,500 towers to STP in 2014, and more recently 2,500 towers to Protelindo in XL retains a few thousand strategic sites. Yiked Bina: Yiked Bina Sdn Bhd is a State-backed towerco active in the Malaysian state of Kedah. To date Yiked Bina owns and operates over 200 towers in Kedah, and clients include telecommunications service providers such as Telekom Malaysia, Celcom Axiata, Maxis, DiGi Telecommunication, U-Mobile, Sapura and Wi-MAX operators such as Packet One and YTL Communications. Zong: Formerly knowns as CMPak, Zong is China Mobile s Pakistan opco. It ranks third by subscribers and has around 9,100 sites, of which around 2,000 are co-locations Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

166 Demand forecasts for passive infrastructure equipment and services in Asia update TowerXchange checks in on demand across six different categories of equipment and services in the fifteen most active Asian tower markets New Delhi India Asia remains the largest and fastest growing region in the world both for investment in telecom tower networks, and for the expansion of the independent towerco business model. This article is TowerXchange s third annual market-by-market review, focusing specifically on opportunities for equipment and service providers, as well as updating the current tower and MNO markets in each of the 15 countries. Keywords: Access Control, Afghanistan, Asia, Asset Lifecycle Platform, Australia, Bangladesh, Batteries, Best of TowerXchange, Build-to-Suit, Cambodia, Capex, China, Construction, DAS, Decommissioning, Energy, Energy Storage, Fixed Price, Hybrid Power, IBS, India, Indonesia, Laos, Lawyers & Advisors, MNOs, Malaysia, Managed Services, Market Forecasts, Market Overview, Masts & Towers, Meetup Preview, Monitoring & Management, Myanmar, O&M, On-Grid, Pakistan, Pass-Through, Passive Equipment, Procurement, RMS, Sale & Leaseback, Singapore, Site Management System, Small Cells, Sri Lanka, Steelwork, Strategic Consultancy, Thailand, TowerXchange Research, Towercos, Unreliable Grid, Vietnam, Who s Who, Off-Grid Read this article to learn: < In which Asian countries are a substantial volume of new towers being installed? < What equipment is being installed on those towers in terms of energy, RMS and access control solutions? < What has been the progress of small cell, microcell and DAS deployments? < Who are the leading MNOs and towercos, and what are the prospects for transactions between them? With the fourth annual TowerXchange Meetup Asia coming up on December 12 and 13, featuring four technology evaluation working groups, giving participants a chance to understand the requirements and experiences of towerco and MNO procurement leaders, we thought it would be a good time to update TowerXchange s renowned matrix of vendor demand in Asia. As well as updating the state of the markets in our original 12 markets (Australia, Bangladesh, Cambodia, China, India, Indonesia, Malaysia, Myanmar, Pakistan, Thailand, Sri Lanka and Vietnam), TowerXchange has added snapshots of equipment and service demand in Afghanistan, Laos and Singapore. We re keeping the categories we re reviewing the same as last year, so you can make a like-for-like comparison: < Energy: our focus in this category is on primary and backup power solutions, energy storage and alternate energy solutions for unreliable grid and off-grid. < RMS, ILM and access control: is there need for remote monitoring and access control systems on most towers? Are they connecting to a NOC and to a Site Management or Infrastructure Lifecycle Management platform such as those provided by Accruent, Tarantula or Nexsysone? 166 TowerXchange Issue 21

167 < As a function of the volume of new build, is there much requirement for towers and accessories? Or demand for the services of turnkey infrastructure providers in building new towers, decommissioning parallel infrastructure or upgrading existing sites? < How much demand is there to date for small cells, microcells, DAS and IBS? < And finally, is there much prospect for sale and leaseback or towerco consolidation to keep the consultants, lawyers and other advisors busy? TowerXchange examines the 15 most active Asian tower markets, predicts demand for passive infrastructure equipment and services, and lists the largest towercos and MNOs active in each country. The following matrix is compiled based on hundreds of research calls and meetings with Asia s leading towercos and MNOs in which we ve diagnosed their procurement and capex priorities Meet the key stakeholders at this year s TowerXchange Meetup Asia, taking place on December 12 and 13 at the Marina Bay Sands, Singapore! Brief commentary on Asia s less active tower markets: < East Timor: Too small to provide the necessary < North Korea: Impenetrable to a Western economies of scale to towercos, therefore research firm like TowerXchange, and probably TowerXchange has yet to study the market in impenetrable to foreign investors! detail. < Philippines: Substantial network, and network < Japan: Towers are still seen as strategic assets efficiency investments are in progress in the by mobile network operators, hence no tower Philippines. Moves from SMC Corporation to sharing. Currently JTOWER is the only known create a third operator appear to have faltered, infra-sharing entity serving Japan s MNOs, and so towers remain operator-captive and seldom its focus is on IBS. Until the market opens up, shared, hence the lack of dedicated study of this TowerXchange has no impetus to study the market by TowerXchange. market in detail. < PNG: Digicel seem disinclined to share attractive < Mongolia: In 2013 the government separated urban locations, restricting sharing to rural sites telecom service providers from infrastructure in PNG. With no towercos present, there is no providers in the challenging 3mn population, impetus for TowerXchange to study the market in 1.5mn sq km Mongolian market. The detail. infrastructure providers, including State-owned ICNC, Mobi Network and Sky Network, run < South Korea: No immediate opportunities for towers, active equipment, fibre and microwave tower industry growth, therefore TowerXchange backhaul. More than half Mongolia s ~1,000 has yet to study the market in detail. towers are shared. TowerXchange has yet to study the market in detail. If you have passive infrastructure equipment or services, or small cell solutions, to sell to < Nepal: Axiata s acquisition of Ncell from Asia, then don t miss the technology evaluation TeliaSonera may herald the entry of edotco into working groups led by the region s leading Nepal. The government is looking to implement towercos and MNOs and hosted at the 4th Annual a telecoms infrastructure provider regime, TowerXchange Meetup Asia on December currently underway and drawing interest from at the Marina Bay Sands, Singapore! Visit our international players. TowerXchange expects to website at: study the market in detail in the coming months TowerXchange Issue 21

168 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs Afghanistan High High High High Low Medium FTS AWCC Afghanistan s four principal MNOs and single towerco continue to build around 500 towers per annum, with a total of 5,897 towers live in Local stakeholders report solid ongoing growth of the network; TowerXchange would estimate the total to be approaching 7,000 now. The vast majority of Afghanistan s rural towers are off-grid, with 50-75% of urban and sub-urban sites on unreliable grid connections, with DGs relied upon for backup. RMS and site security are widely used. Very little small cell or DAS deployments, even in large landmark venue. While AWCC has already carved out their ~1,500 towers into subsidiary Frontier Tower Solutions (FTS), Etisalat, MTN and Roshan have all been contemplating their own tower carve-out/monetisation strategies. Etisalat MTN Roshan Wasel Afghan Telecom Australia Low Medium Medium Medium High Medium Axicom There are two larger towercos in the Australian market; the first is Axicom with ~1,900 towers (formerly Crown Castle Australia), while Broadcast Australia is the other towerco of scale with some MNO tenants on their ~600 towers. A few smaller tower transactions are anticipated to rollup small towercos, but it seems unlikely that market leaders Telstra and Optus would sell their tower assets.. Competition is also heating up as the fourth operator TPG Telecom enters the market. TPG spent A$1.26bn for two blocks of 700MHz spectrum and will spend A$600mn to build out its network, with an initial 2,400 sites to start. There will likely be some colocation opportunities for independent towercos. For now the regulator ACCC has decided against mandatory infrastructure sharing in rural areas, which would ve allowed TPG to access Telstra or Optus networks. There are around 9,000 towers in Australia, but many more may be required by the rollout of the National Broadband Network (NBN), a shared LTE network, which means it s a good time for tower manufacturers and builders. RMS adoption will evolve over time. With grid power widely available and backup power sources not often used, Australia is not a priority for tower power vendors. Power is typically a pass through so MNOs retain responsibility for power. The MNOs are also said to have a keen interest in small cells and related investments. Broadcast Australia Vertel Aird Towers InSite Wireless Group Telstra Optus Vodafone TPG (entering) 168 TowerXchange Issue 21

169 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs Bangladesh High High High High Unknown High edotco Grameenphone Bangalink The telecom regulator BTRC gave its final approval to the Robi and Airtel merger over the summer of 2017, Robi+Airtel with the merged entity being Robi Axiata. Estimates vary between there being just under 30,000 and 35,000 Teletalk towers in Bangladesh, of which 6,500+ have been shared amongst the operators. Grameenphone s network covers 99%+ of the population, with 12,000+ 2G sites and 10,000+ 3G sites, while Banglalink has a portfolio of 5,890 assets, excluding in- building solutions (IBS), which it may add to its planned tower sale process, bringing it up to about 6,000 total. edotco owns and manages a combined 9,800+ towers in the country. The much anticipated tower licensing regime is still pending final government approval at time of writing. The towerco regime and potential deals make Bangladesh a priority for tower transaction advisors and strategic consultants ,000 new towers are going up per year, making Bangladesh attractive for tower manufacturers and turnkey infrastructure firms. The rainy season demands exceptional cell site autonomy which makes Bangladesh a key market for energy, particularly energy storage. edotco has connected over 2,000 of its Bangladeshi sites with its echo monitoring service. Cambodia Medium Medium Low Low Medium Low edotco Cam Towerlink edotco owns 2,100 and manages 1,000 towers in Cambodia, where CamGSM and MobiTel have both been rumored to be considering tower sales in the past, but not recently. RMS is not yet widely deployed in Cambodia, but in 2016 edotco invested in remote tower operations. Cam Towerlink is a new towerco in this market, and its first project is to build towers in and around Angkor Wat. 20% of sites are off-grid in Cambodia. The grid sites are provided both by SOE Electricité du Cambodge and by a range of private microgrids and distributed generation projects. Battery backups are typically installed on all sites, with DG on off-grid, MSC, BSC and hub sites. Power is a pass through, so MNOs and not towercos remain the buyers of energy equipment. IBS are starting to be deployed in airports, malls, hotels and condos. With the top three MNOs boasting 90%+ coverage and new entrants increasingly colocating rather than building, there is limited demand for tower manufacturers and TI firms. Cellcard/MobiTel Metfone (Viettel) Smart Axiata SEATEL Qb (CADCOMMS) 169 TowerXchange Issue 21

170 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs China Medium Medium High High High High CTC Around 225,000 new towers were added to China s telecoms infrastructure in 2016, the majority of which were built and are owned by China Tower Corporation (CTC) and its provincial subsidiaries. CTC currently owns 1.9mn towers, with another 45,000+ in the hands of a fragmented ecosystem of over 200 local, private towercos. The creation of the China Independent Tower Alliance (CITA) over the summer of 2017 is helping to unite independent toweros, paving the way for consolidation and access to additional financing. CTC s targeted 2017 IPO has been delayed to 2018 (likely Q1) and is drawing interest from advisory firms and major international banks. While grid power is ubiquitous and abundant, CTC has been initiating more green powered sites in China (wind and solar), but probably nowhere near the 30,000 the GSMA Green Power for Mobile once suggested were in the country. RMS is widely deployed in China, with ZNV Technology being the market leader. Small cells, DAS and IBS are increasingly used to supplement the macro network, and especially as China races to be a leader in 5G rollout. Guodong Sino Netstone Miteno Bright Financial Leasing Beijing RLZY Q Towers Astro Towers 200+ other independents India High High High High High High Indus Towers Bharti Infratel India is in the midst of a new wave of market restructuring and TowerXchange estimates that around 130,000 towers are likely to come to market in the near future. This includes the green light for the carve out of BSNL s Reliance Infratel 65,000 towers into a separate infrastructure unit while the other State- run MNO, MTNL, is considering divesting American its 10,000 tower portfolio in an attempt to reduce its debts. American Tower recently reached agreement to Tower purchase 20,000 towers from the balance sheets of Vodafone and Idea Cellular. In the meantime, Brookfield s GTL deal with RCom s 45,000 towers faltered as RCOM s wireless business will cease trading. GTL Infrastructure had Infrastructure five suitors at time of press. As MNO consolidation and tower asset monetisation continues, towerco transactions have also been plentiful, a phase initiated by American Tower s integration of Viom Networks. India s towercos TowerVision are on a mission to reduce their carbon footprint and as of April 2017, have deployed 90,000 diesel-free mobile Ascend sites. Indus Towers has converted as many as 40%, or 50,461 mobile sites, to zero diesel, and has converted Saurava Towers 13,991 sites from indoor to outdoor, reducing power consumption by nearly 30%. Investment in energy efficiency has been largely confined to lead-acid and lithium-ion batteries, plus free cooling and the conversion of indoor to outdoor sites; deployment of renewables and partnerships with ESCOs remain at an early stage, but the sheer scale of India still makes the country #1 in the world for both segments. RMS is widely used in India, as are ILM systems. The rollout of 4G is proceeding apace, driving new tower build and new tenancies; Reliance Jio built around 25,000 new sites in 2015 alone, and added tens of thousands more sites through colocation. Meanwhile, the first tenders for Smart Cities projects have been issued, with dozens more in the pipeline, the fulfillment of which will drive demand for thousands of small cell, IBS and microcell solutions. China Mobile China Unicom China Telecom China Broadcasting Network Bharti Airtel+Tata Vodafone+Idea Reliance Jio Aircel BSNL MTNL Several small players with <4% 170 TowerXchange Issue 21

171 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs Indonesia Medium Medium High High High High Protelindo Tower Bersama 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 (14,614 towers), Tower Bersama (13,375) and STP (7,000). IBS Tower, KIN, Centratama (formerly known as Retower), Persada Sokka Tama and Balitower also have some scale in Indonesia. Towercos build 3,000-5,000 towers, rooftops and infill STP Mitratel IBS Tower KIN Centratama sites per year. Tenancy ratio growth compares favourably to many other global tower markets, with around Persada Sokka 0.13 tenants added per tower per year. Telkom-owned Mitratel has scaled to 13,113 towers. Indosat Ooredoo Tama is exploring options for its tower portfolio. One of the big news over the summer was the refinancing of STP and KIN. With the last operator towers to be bought and towerco consolidation continuing, Indonesia is a fertile market for advisors. The reliability of the grid in the dense urban areas means the opportunity Balitower PEKAPE Others for energy equipment vendors is finite, but there are remote sites requiring good autonomy. MNOs are responsible for energy at the macro sites, though end-to-end service is typically outsourced to the likes of Huawei and ZTE, who manage procurement, design, planning, implementation and servicing. We ve spoken to RMS and access control vendors with substantial Indonesian contracts. Protelindo, STP and Balitower are leading substantial rollouts of microcells and other street furniture. Telkomsel Indosat XL (Axiata) Smartfren Hutchison Bolt Laos Medium Unknown Low Low Low Low None LTC Unitel The State has 51% stakes in both mobile market leaders LTC and Unitel, which are both listed, with heavilyindebted #3 MNO ETL, itself controlled by the Ministry of Defence, also potentially headed for an IPO. With ETL Beeline VEON contemplating an exit from Beeline and Laos and sub US$5 ARPU, there is finite capital available for network investment, with most capital going into the 4G overlay rather than new site build. 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. 171 TowerXchange Issue 21

172 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs Malaysia Medium Medium High High Medium Medium edotco Omnix Towercos own 63.8% of Malaysia s towers. edotco has a portfolio of over 3,900 towers, 3,500 of which were carved out from Celcom. edotco also has a collaboration agreement with DiGi to expand its network coverage. A further 3,200 towers are owned and operated by a diverse group of State-backed independent towercos. There is plenty of demand for new structures for 4G, but much of the regional work is undertaken by the aforementioned State-backed towercos who have a dominant position in terms of permitting in half the States, so turnkey infrastructure firms and tower manufacturers need to develop relationships with Malaysia s towercos. While only 5% of Malaysia s cell sites are off-grid, data demand has driven the load on some sites beyond capacity, so battery banks are widely used. Demand for infill sites makes Malaysia ripe for the exploitation of street furniture, with DAS and IBS starting to be deployed by edotco and MNOs. edotco has already selected its RMS and site management system, consolidated in their echo service, which is provided to over 3,000 of their Malaysian sites. Myanmar High High High High Medium High IGT Currently 60% of the cell sites in the country are owned by towercos. The 13,620 sites in Myanmar are unequally spread across seven towercos and three MNOs. State-owned MPT owns 3,500 sites, while Telenor and Ooredoo have about 1,500 between them, though mostly rooftops. The fourth operator consortium, led by Viettel may utilise consortium partner Star Holdings Corporation s ~400 captive towers (up to 1,000 including colocation with MPT), which were previously utilised by MECtel. The new MNO will operate under the Mytel brand with formal launch in 2018, and it will use a combination of colocation with towercos and MNOs, as well as BTS and own build in order to rollout its network. The split between colocations and new builds will be around 50/50, approximately 2,500 each. Triggered by Mytel s rollout, several new towercos have entered the market, with BTS orders between 75 to 100 sites to start, with potentially 300 for the next round. While build has slowed, the number of required sites will continue to see demand for steel imports from India and China. Consultants, advisors and lawyers should standby as the portfolios of PAMEL (1,250 towers) and Telenor (1,200 rooftops) have been subject to sale rumors for quite a while now, while the future of MIG remains unclear as the deal with Shining Star fell through and the towerco is being run in maintenance mode. Ooredoo s initial foray into retaining power asset ownership is behind them, so the towercos will provide power at all future sites for both Telenor and Ooredoo. As the tenancy ratios and cash flows improve, towercos are slowly becoming less dependent on vendor finance, but preferred suppliers have been selected for power equipment, RMS, civil works and O&M. ESCOs are also starting to enter the fray. Naza Communications YTL Sacofa Touch Matrix D harmoni KJS Common Tower Infra Quest Yikedbina Perak Asia Space Desabina Others Apollo edotco PAMEL EFT MIG OCK NTD Myanmar Technology Gateway (MTG) MNTH DLRE CommBiz ITMB MAPCO KBZ (rooft top only) Celcom (Axiata) DiGi Maxis U Mobile Yes 4G Webe ALTEL Redtone MPT Telenor Ooredoo Mytel 172 TowerXchange Issue 21

173 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs Pakistan High High Medium High Medium Medium edotco AWAL Telecom Roughly 40% of Pakistan s towers will soon be owned and operated by edotco, which is consolidating 13,000 towers from Jazz (Mobilink+Warid) together with Tanzanite Towers 700 sites, with the acquisitions coming at an aggregate cost a little over US$1bn. edotco s acquisition of Pakistan s largest and most pervasive tower network, securing the market leading MNO as their anchor tenant, is a milestone in the country s increasing adoption of infrastructure sharing. With over 10,000 colocations on Pakistan s ~36,300 towers, tenancy ratios are already over 1.25, and growing at around 0.06 per year, driven by 3G and more recently 4G rollout. While #2 and #3 MNOs Telenor Pakistan and Zong (CMPak) have been pioneers in RANsharing, neither is under pressure to divest their towers. However, Telenor has colocations on over 1,500 towers. #4 MNO Ufone may be more inclined to monetise their 6,100 sites. With local towerco AWAL Telecom having secured a build-to-suit contract, expect towercos to play a prominent role in the future of Pakistan s telecom infrastructure. That future is likely to see local contractors kept busy more with decommissioning than with new build as the country s parallel infrastructure is gradually consolidated. Expect towercos to invest in hybridisation to mitigate the effects of Pakistan s unreliable grid. Security and theft concerns mean RMS is a priority in Pakistan. It s early days for in-building coverage, with a handful of over 100 sites suited to IBS already having covered. Jazz Telenor Zong (CM Pak) Ufone Thailand Medium Medium Medium Medium Medium Medium DIF AIS Most of Thailand s 52,000+ towers remain operator-captive, but the tower market is hampered by longrunning ownership disputes which relate to lapsing build-operate-transfer (BOT) regimes. True created and successfully IPO ed TRUEGIF, later renamed DIF, in late 2013, a fund to which 12,138 towers and over a million kilometres of fibre have been transferred. Discussions to resolve BOT disputes by creating a joint venture towerco between DTAC and CAT have been unsuccessful; the same is true of the similar venture planned by AIS and TOT which was cancelled in late ,000 AIS and 800 DTAC towers built outside the BOT concession are set to remain operator-captive. Thailand has a degree of parallel infrastructure, suggesting a few decommissioning opportunities, but delayed spectrum auctions for a 4G rollout are limiting demand for colocations and new builds. Once the concession and spectrum issues are resolved, anticipate Thailand s tower stock increasing 50% in the next ten years with 3G and 4G demand increasing. While grid power is widely available, electricity continues to become more expensive, fueling appetite for renewables and energy efficiency. If the mooted joint venture towercos are ever created, energy assets are likely to be owned by the towercos, but utility costs will be a pass through. DTAC (Telenor) True MY(CAT) TOT 173 TowerXchange Issue 21

174 Vendor opportunity matrix Energy RMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos MNOs Singapore Low Unknown Low Medium High Medium None SingTel There are no towercos and there is hardly any infrastructure sharing in the mature Singaporean mobile market, but the imminent entry of a fourth MNO may change that and create opportunities for some, although not all, vendor segments. Grid power is reliable in Singapore so energy equipment is limited to simple battery backups. Most of the new sites in Singapore will be IBS, DAS and small cells for infill and indoor coverage. If the fourth MNO is not permitted to share the incumbents ~1,000 GBTs and ~5,750 rooftop and lamppost sites, then expect some new build, but more likely the new entrant will stimulate infrastructure sharing, and perhaps an opportunity for an independent infraco. StaHub M1 TPG Telecom Sri Lanka Medium Medium Low Medium Medium Low edotco Airtel Dialog (Axiata) edotco owns and manages a combined 3,400 towers, representing 40+% of the country s 7,500 to 8,000 Etisalat towers. edotco monitors selected Sri Lankan sites with its echo RMS service. Sri Lanka is reaching the Hutchison saturation point for the number of towers required to provide coverage. 4G spectrum is available only to Mobitel Dialog and Mobitel; the remaining operators will need to engage in RANsharing to provide these services. An estimated 1,500 to 2,000 towers or special structures will be required for infill. Grid is at acceptable levels and improving. Vietnam Low Medium Medium High Medium Medium OCK Group Golden Towers Malaysia-based OCK Group completed its acquisition of Vietnam s largest independent towerco Southeast Dozens of small Asia Telecommunications Holdings Pte. Ltd. (SEATH) in January 2017 for US$50mn. SEATH has 1,983 towers local towercos in the country. OCK has allocated US$5-8mn for its expansion, with plans to build 200 to 250 sites per year in the country. OCK may seek to consolidate other members of a fragmented group of around 30 local towercos who between them own ~10,000 towers. Golden Towers has around 350 towers in the country. JTOWER, an in-building solution (IBS) specialist recently expanded beyond its home market in Japan to Vietnam as it acquired the IBS portion of SEATH for US$10.2mn. This is said to be the largest IBS portfolio in the country, which included over 120 systems. The prospects of buy and leaseback deals with Vietnam s crowded MNO market looks as far away as ever, with GTEL struggling, Hutchison embroiled in an ownership battle with Hanoi Telecom for Vietnamobile, and MobiFone s mooted IPO stalled. Organic growth is limited by the degree of parallel infrastructure, but 4G rollout should ensure some new sites are added, but construction firms may get as much decommissioning as new build work. Grid power is reliable and widespread, so Vietnam is a low priority for distributed generation. MNOs remain the targets for battery manufacturers with power passed through. Viettel MobiFone VinaPhone Vietnamobile Gmobile 174 TowerXchange Issue 21

175 Revisiting Indonesia: a mature tower industry with an evolving landscape Indonesian towercos go beyond steel and grass to offer city poles, fibre and more to customers TowerXchange paid a visit to Indonesia over the summer and met with several industry stakeholders to find out what is changing in the country s mature and yet evolving telecom infrastructure industry. With infra-sharing well entrenched, towercos play a key role in supporting MNOs with their network coverage and capacity requirements. And while they enjoy a healthy mobile market context and solid tenancy ratios, towercos are increasingly diversifying into the provision of additional products and services. With a unique geographical blend of dense urban and remote islands, Indonesian towercos deploy everything from ground-based towers (GBTs), microcell poles (MCPs) and rooftops, to IBS, DAS and fibre. Let s take a closer look at the changing dynamics of this benchmark Asian market. Keywords: Asia, Backhaul & FTTT, Berca Hardayaperkasa, Best of TowerXchange, Build-to-Suit, Business Model, Carlyle, Centratama, Co-locations, Construction, DAS,Energy, GIHON, Huawei, Hutchison 3G, IBS, Indonesia, Indosat Ooredoo, Infrastructure Sharing, Internux, Investors, KIN, Lease Rates, Leasing & Permitting, Market Overview, Meetup Preview, Mitratel, PEKAPE, Pass-Through, Persada Sokka Tama, Private Equity, Protelindo, Providence Equity Partners, STP, Sampoerna, Smartfren Telecom, Southeast Asia, Southern Capital, TBIG, TOWR, Telekomunikasi, Telkomsel, Tenancy Ratios, Tower Bersama, Towercos, Valuation, XL Axiata, ZTE The Indonesian MNO landscape There are currently eight MNOs in Indonesia, who are a mix of local (Telkomsel, Internux, Sampoerna Telekomunikasi, Smartfren Telecom and Berca Hardayaperkasa) and foreign-backed companies (Indosat, XL Axiata and Hutchison 3 Indonesia). Telkomsel remains the market leader, claiming ~45% market share, with an even greater lead on a share of revenue basis. The Indonesian tower market Towercos in Indonesia are divided into three categories by size: big entities with 2,000+ sites, medium-sized entities with portfolios between 500 and 2,000 sites and small firms with less than 500 sites. Five to six years ago, there were an estimated 80+ towercos but the market has since consolidated to companies. The four big players are Protelindo, Tower Bersama, Mitratel and STP, while players in the middle market include Centratama, Persada Sokka, KIN, and GIHON. There are believed to be at least 40 niche towercos with portfolios between 50 and 100 sites. Read this article to learn: < Current structure of the towerco market in Indonesia < Exclusive insights on historical and current tower lease rates < The shift towards value-added products and services in the towerco business model < How the telecom industry manages energy requirements and what could change Mitratel has been growing steadily with an estimated tower count of 13,000+ and is starting to be a force in the Indonesian tower market. According to one source, Telkomsel awards approximately 50% of its orders to Mitratel, 40% to Tower Bersama, then 10% to the rest of the towercos. 175 TowerXchange Issue 21

176 Indonesia sees waves of new towercos emerging but large players are also driving consolidation. For example STP has acquired over ten smaller towercos over the years as part of its growth strategy, on top of organic growth. Some of the new players were civil contractors that have taken on build-to-suit (BTS) to evolve into towercos, in some cases leveraging relationships with local network planners at MNOs, in other cases simply identifying a new opportunity in the space. While the barrier to entry in the tower market was described by one source as access to the operators, there is a considerable opportunity to operate in local markets, just focusing on a few islands, especially in light of Indonesia s distinctive geography. In fact, while main cities and islands such as Jakarta might be a crowded and competitive market, new towercos can secure BTS in other parts of the country where coverage might be limited, especially if they are able to offer low prices. Another source also noted that MNOs proactively encourage the creation of new towercos. How do towercos operate in Indonesia? Replicating the gold standard of the U.S. market, towercos in Indonesia operate under a grass and steel model, owning and operating only the vertical real estate to the exclusion of energy equipment, which makes the business model relatively low on risk and complexity. Building a tower in Indonesia costs between Estimated tower count for Indonesia 13,375 13,113 14,614 8,600 7,000 4,000 3,677 1,300 1, ,510 18,000 3, US$70,000 and US$100,000, with an average around US$80,000. Land rental agreements tend to be for ten-year terms. Site acquisition, like in most markets is challenging, and can take up to 40 days of the typical days required to deploy a new site, including securing permits and negotiating with landlords. The tower construction portion is described as the easy component, taking roughly two to three weeks. The full process, from order of BTS to delivery tends to be in the day range, going up to 150 days in some cases. Over the years, towerco portfolios in Indonesia have Towerco-owned Mitratel Tower Bersama Protelindo STP IBS Tower KIN Persadasokka Tama Centratama Menara Balitower Gihon PEKAPE Others Operator-captive Telkom + Telkomsel XL Indosat Source: TowerXchange grown to include rooftops, microcells poles (MCPs), IBS and DAS, especially for densely populated areas where there is simply no land available for traditional ground-based towers (GBTs). One example is Balitower s collaboration and partnership with the Jakarta government, for which it received the rights in 2015 to provide microcellular pole infrastructure. Starting with 2,500 poles equipped with CCTV cameras, Balitower continues to seek opportunities to expand its network through similar procurements. Areas that have been installed with CCTV include DKI Jakarta, Pekalongan, Sukabumi, Surakarta, Sleman and Bantul. 176 TowerXchange Issue 21

177 How do telecom players manage their energy requirements? For macro sites, MNOs are responsible for managing their own energy services. However, this tends to be outsourced to the big OEMs. For the last three years, XL has outsourced all operations to Huawei, which provides end-to-end services, including planning, design, optimisation and operation. Hutchison is also said to be a client of Huawei, which is responsible for most of the maintenance. Indosat handed its end-to-end power management over to ZTE, which handles most operational aspects from planning to design and implementation. Where necessary, they will also take care of the dismantling. ZTE supplies the battery, rectifier, diesel genset and power monitoring system. Vendors also generally take care of the electricity payments (pass-through with a fee). Historically the MNOs simply paid the bills that came from PLN, the national grid company. However, the bills needed to be verified and validated, and the scrutinising work of Huawei and ZTE over the accuracy of electricity bills has generated considerable cost savings. For micro sites, towercos tend to procure, set up and maintain everything to minimise need for site visits, which in densely populated Jakarta (and Java in general) can be an issue. Around 10-15% of the country is off-grid and sites on remote islands are usually powered with gensets and batteries. MNOs have been trialing renewables Inorganic growth opportunities: which towers could come to market? Indosat Ooredoo is currently assessing options with its tower portfolio, with potential plans for a sale. Having sold 2,500 towers to Protelindo in 2016, XL Axiata is said to have the core towers remaining on its balance sheet. No movement is expected here unless XL comes under balance sheet pressure. Not much is expected to happen now with the Telkomsel/Mitratel towers after the 2015 discussions with Tower Bersama collapsed due to lack of approval by the government. However, this is considered the most lucrative/attractive portfolio in the market, and it could eventually be monetised. Telkomsel and Mitratel s estimated tenancy ratio right now is , indicating plenty of headroom for growth, while the combined portfolios represent the largest and most pervasive network in the country to build green sites, reportedly with the support of government-linked initiatives and incentives. Indonesia s fibreisation MNOs as well as major towercos have all been investing in fibre, including Protelindo s acquisition of iforte back in Fibreisation has been key especially as operators transition their networks from 3G to 4G and data consumption grows exponentially. As of H1 2017, STP reported 2,823km of fibre optics backbone in its network to support aggressive urban 3G and 4G LTE rollout by mobile telecommunication operators. It also noted potential new business opportunities for providing wholesale fibre connection to broadband and pay TV operators in its second quarter investor presentation. For the same period, Protelindo reported 2,386km of installed fibre, with another 1,357km under-construction. The activity of towercos is collateral to that of pureplay fibrecos that serve the market place, such as FiberStar and Moratel. Downward pressure on lease rates Tower lease agreements are typically for ten years, however MNOs have started requesting new BTS orders with a 5+5 model. Most contracts are denominated in local currency. The contracts now do not offer discounts to the anchor tenant as additional tenants onboard, which used to be a trend seven to eight years back when lease pricing was higher. The contracts also typically do not include escalators on the lease rate, but rather on 177 TowerXchange Issue 21

178 Indonesia s tower association Unbeknownst to most, Indonesia does have a local industry body that goes by the Association of Tower Infrastructure Telecommunication Developer, or Asosiasi Pengembang Infrastruktur Menara Telekomunikasi (ASPIMTEL). Membership is restricted to only independent tower companies who currently own ~50,000 towers all over the country. Note this does not include all the towercos that exist in the country. Members include Protelindo, Tower Bersama, STP and KIN the maintenance portion, which is between 25-35% One source noted the MNOs in Indonesia use India of the total. as a benchmark, which has one of the lowest lease rates in the world at approximately US$600 per Over the last eight to nine years, some towercos tower. On the other hand, MNOs are also sharing have seen lease rates per month drop from the their own towers on a commercial basis and often highs of IDR18mn (US$1,325) per month to as low as charge each other more than the towerco market IDR10mn (US$735) per month now. rates. As MNOs continue to put downward pressure on Consolidation among towercos in the cards pricing, some of the larger towercos have been able to hold firm, however smaller towercos struggle. One of the big news over the summer was the MNOs prefer to pay the same price across the board, refinancing of STP and KIN, who retained Morgan but the scale of larger towercos allow them to hold Stanley and HSBC respectively for the process. rates steady. Estimated monthly rates charged by large towercos range between IDR13.6mn (US Carlyle and Southern Capital who together hold $1,000) and IDR16.3mn (US$1,200). ~69% stake in STP are looking to exit, while Providence Equity Partners who effectively owns The squeeze is not only coming from MNOs almost all of KIN (through a unique structural setup) is exiting the Asian market, having shut down and tower lease rates, but also ground rental agreements, which like most other markets, its operations in Singapore and India. have seen increases over the years. One midsized towerco estimated an increase of % in Carlyle entered the Indonesian market in 2012 the last ten years, though in general land lease rates acquiring ~25% stake in STP for a reported are not increasing faster than cumulative inflation. US$100mn. In early 2015, there were reports STP was looking to raise up to US$400mn from a further share sale, which might be what Southern Capital paid for its shares. Protelindo and Tower Bersama are said to have expressed interest in the STP portfolio valued at US$1bn, with the former better positioned financially to undertake the transaction; Mitratel was also mentioned as a potential buyer. Regional towercos and global pension and infrastructure funds are also part of the pool of potential buyers. At the time of writing, the first round of bids has been submitted. Where is the growth in Indonesian towers? There is still demand for both coverage and capacity in Indonesia. Two or three MNOs still have coverage requirements to meet, with focus likely outside of Java. Organic growth prospects are generally positive, with Tower Bersama Telkomsel s preferred towerco targeting as many as 600 new towers in the second half of the year, and a yearly target of ~1,250 organic additions. As smartphone penetration continues to grow, so will data consumption. The big three operators Telkomsel, Indosat and XL Axiata have all experienced significant and accelerated data growth year-on-year and this trend isn t likely to stop. This translates to tenancy ratio growth due to densification. 178 TowerXchange Issue 21

179 Given the number of smaller towercos that exist in the country, larger players always have the option to entertain inorganic growth by acquisition. However, towercos in this mature market increasingly focus more on increasing their tenancy ratio rather than their tower counts. In fact, adding a new tower is a step forward in their portfolio and one back in terms of their tenancy ratio, until additional tenants are secured. In terms of the value add to an Indonesian towerco offering, the last frontier would be energy management, as prominent players are already involved in IBS, DAS and micro-poles, as well as fibre as required by MNOs. When it comes to the energy side of things however, there are two major challenges. The first being Huawei and ZTE who already control and own a large portion of the energy ecosystem and have found ways to make the financials work, thus are not likely to relinquish it. The second is that the towercos in Indonesia typically do not have experience with energy management and would need to partner with major vendors to define a viable business model to serve the market place. And as local towercos are used to keeping things pretty simple with their steel and grass business model, the energy management business might be too much of a step outside of their comfort zone. The discussions around small cells is much like the other markets in Asia: who will do it and how, and what business model will satisfy all the stakeholders Towerco lessons learned from Indonesia 1. Tap into organic growth (BTS) 2. Rollup smaller towercos 3. Engage in buy-and-leasebacks 4. Diversify product catalogue involved? For the time being, this is a topic of (~US$2.3bn) respectively, with the latter enjoying interest for towercos in Indonesia, but with more a higher earnings multiple (P/E ratio) at to questions than answers. Protelindo s Without a doubt, Mitratel, Protelindo, Tower Indonesian towercos also exemplify the Bersama and STP will continue to remain the key diversification of infrastructure typologies beyond towerco players in Indonesia, though new entrants GBTs, pioneering the incorporation of fibre, MCPs, such as PEKAPE through its partnership with IBS, DAS and small cells into their portfolios. Alfamart could scale quickly while smaller, more nimble towercos could innovate on service offerings Despite the maturity of the tower market, growth potentially swifter than the big players. and consolidation is far from finished in Indonesia. And while the country s largest towercos may Lessons for other towerco markets claim a lack of interest in expanding beyond the local market if and when they see opportunities As one of Asia s, and the world s, largest and most to create a tower market as healthy as they have penetrated tower markets, Indonesia provides a cultivated in Indonesia, we re confident we ll see valuable benchmark. them invest elsewhere in Asia. But seeking a tower market as good as Indonesia sets the bar pretty Indonesian towercos have leveraged a no-nonsense, high! relatively simple business model to scale organically and inorganically, rolling up local towercos and If you are interested in learning more about engaging in buy-and-leasebacks with MNOs, to the Indonesian tower market and exploring the the point that the largest towercos in the country investment and business opportunities, don t are among the world s largest and most valuable. miss this year s TowerXchange Meetup Asia, Protelindo and Tower Bersama have market caps to be held December in Singapore at the at IDR T (~US $3.2bn) and IDR T Marina Bay Sands. 179 TowerXchange Issue 21

180 Towerco CFOs: the anchor to the vision and shepherd of growth Managing the cost of capital, debt levels and internal rate of return critical to success By Christie Liu, Head of Asia, Towerxchange The Chief Financial Officer (CFO) is critical to a company having the financial means to achieve its vision and plan. Working alongside the CEO, a towerco CFO is the main link to investors, banks, lenders, credit rating agencies, and shareholders, and the one in charge of accessing and retaining capital with the ultimate goal of optimising the cost of capital. Naturally, the role of the CFO as well as the options available to ensure financial stability varies depending on the country of operations, geographical risk, regulatory environment, scale and future plans of the towerco, ownership structure, current liquidity, and more. With Asia being one of the most active regions for towerco start-ups, growth and deals, TowerXchange connected with multiple industry stakeholders to shine a light on the role of the CFO. Keywords: Apollo Towers, Asia,Build-to-Suit, CIMB Securities, CTC, Capex, Cashflow Finance, China, China Merchants Bank, China Tower Corporation, DBS Vickers, Debt Finance, Due Diligence, edotco, Exit Strategy, Indo Premier, Indonesia, Infrastructure Funds, Innovation Network Corporation of Japan, Investment, Investors, Khazanah Nasional Berhad, Kumpulan Wang Persaraan, Leasing & Permitting, MLA, Malaysia, Meetup Preview, Myanmar, NCIJ, OPIC, Overseas Private Investment Corporation, Private Equity, Protelindo, Sale & Leaseback, TBIG, TOWR, Tower Bersama, Towercos Read this article to learn: < The role of the CFO through different stages of towerco growth < What are some of the financial instruments available to towercos < What are some of the key challenges of a towerco CFO < Regional examples of financing done by towercos Role of towerco CFO Compared to other industries, the towerco business is less about working capital and capex cycles, and more about the cost of capital. Towercos are highly leveraged companies who act as providers of capital to operators through build-to-suit (BTS) programmes. This means towerco CFOs need to have a strong understanding of how to optimise the cost of capital, debt levels and internal rate of returns (IRRs), and continually look at managing the balance sheet to minimise costs and operating expenses. This is perhaps best exemplified by what one industry source pointed out, that unbeknownst to most, the biggest cost for Indonesia s Tower Bersama is actually interest costs. Optimal balance sheet and capital structure management are required due to the long-term nature of investments and contracts that towercos undertake. Once contracts are locked in for five to ten years, there is limited opportunity to change; towero CFOs have little room for error from the outset. The CFO shepherds the financial management of the company, with a key role in coordinating capital raising and with credit rating agencies. They need to be good at working with investment banks, coordinating investors and shareholders and have a strong understanding of corporate finance and the financial instruments available to them. The team under the CFO can then support him/ her with respect to accounting and reporting. CFOs keeps the management team grounded, 180 TowerXchange Issue 21

181 ensure procedures are followed and investment assumptions are well supported and tested. It goes without saying that the CFO s partnership with the CEO is critical to the success of both. At the same time, outside of their company, the CFO can be instrumental in mitigating the concerns of a customer s CFO and determining which is the best course of action to take. Having the support of the right, best qualified team matters, but also ensuring that the right systems and procedures are in place to manage the asset register, documentation and reporting; this is critical to the CFO having the appropriate conversations with stakeholders and getting good terms when they are fundraising. What has changed for the towerco CFO in recent years? With the conversion to REIT status of the US-listed towercos, the CFO role has expanded to include outreach to REIT investors and conversion, where necessary, of internal and external reporting systems to conform to REIT standards. Senior analyst The stages of financing Much like companies in other industries, towercos in their initial phases of growth raise capital privately, usually through angel investors, private equity (PE) or venture capital (VC). When they reach scale and have the balance sheet to support it, they can start to engage with the banks to provide or underwrite capital, perhaps first on a bilateral basis and then through a club deal or syndicated loan if 181 TowerXchange Issue 21 What is a REIT? Definition by the National Association of Real Estate Investment Trusts A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types with regular income streams, diversification and long-term capital appreciation. REITs typically pay out all of their taxable income as dividends to shareholders. In turn, shareholders pay the income taxes on those dividends. The REIT is the most common structure for a towerco to take and was instigated by Crown Castle and American Tower. The model is now being emulated all over the world Countries in Asia that have adopted the US REIT approach Australia India Japan Hong Kong Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Source: Countries in Asia considering REITs Cambodia China Indonesia Source:

182 they require debt financing. They may also have the option to access the local or US dollar bond markets before or after they go public, such that they are not dependent only on bank debt, and sometimes they do this to achieve longer tenor debt. Eventually they could IPO and raise equity capital from institutional investors and the public markets. The role of the CFO through the different stages When a towerco is starting up and raising capital, the CEO at this point is typically the visionary, while the CFO needs to be practical, conservative, and rooted in current reality. Typically they tend to work very closely at this stage of capital raising and may well attend every meeting together. As the company progresses to access financing from banks and lenders, the CFO is now the person who is dispatched to liaise with the financiers and promote the company s best interests, whereas the CEO becomes more of a figurehead. One of the first ways a towerco raises capital is often through private equity or venture capital, and when the time comes time for these investors to exit, the CFO must decide whether they will refinance or IPO and take responsibility for the marketing of the company to the potential new PE / VC investors, or the capital markets. Some regional examples of debt financing for towercos In December 2016, China Tower Corporation (CTC) issued its first asset-backed note (ABN) with China Merchants Bank as the lead underwriter. The 1-year ABN at 2.86% per year allowed CTC to raise CNY 5bn on the back of its receivables from the three operators. CTC is also looking to IPO on the Hong Kong Stock Exchange, originally with a desired 2017 year-end listing, but increasingly more likely in Q1 of next year (2018). Some of the Independent towercos in China are accessing financial leasing at rates of 6.5 to 8.0%, with an average of 3-5 years on the projects according to one of our sources. In April 2017 Tower Bersama secured IDR700bn in bonds and then followed up in August with threeyear bonds at 8.4% interest rate, worth IDR500bn; this was led by Indo Premier, DBS Vickers and CIMB Securities. The towerco also secured a US$300mn loan facility extension to June 2022 this year. In May, Fitch Ratings affirmed the Long-Term Foreignand Local-Currency Issuer Default Ratings (IDR) for Tower Bersama at BB-. At the same time, Fitch Ratings Indonesia had affirmed the National Long- Term Rating and national senior unsecured rating at AA- (idn). In November 2016, Protelindo executed a bond issuance of IDR800bn, with tenor of 3.5 and 7 years, which partly helped to lower its foreign currency debt exposure. Malaysia-based edotco raised US$700mn in late December 2016 through to early 2017 with Khazanah Nasional Berhad, Innovation Network Corporation of Japan and Kumpulan Wang Persaraan. This was a private placement and totaled 37.6% in equity for the three funds. When does a towerco decide to buy versus sell? It really depends on a towerco s shareholders whether they are buyers or sellers. With private equity firms you know that they need to monetise one day. Strategic investors typically are committed to their towerco for a long time, but sometimes the synergies can be very compelling or they need the cash, so they sell out. Senior banking executive #1 What might be some of the markets in Asia of interest to investors? It depends on a number of factors, but some of the core ones are regulatory, tele-density and which phase of technology evolution the country is in, i.e. 3G, 4G, and of course the competition. Whilst competition is healthy, irrational players can significantly impact the market dynamics. MNO consolidation could also cause concern in terms of market growth as there is usually a pause to ensure integration is done first. Markets in which there is growth in terms of both penetration and technology would be of high interest. Established towerco CFO #1 What is the biggest gratification for a towerco CFO? Helping the company expand in a financially sustainable manner that ensures we can keep our commitments to our customers and employees. Established towerco CFO #2 Apollo Towers Myanmar secured a US$250mn loan facility from US government agency Overseas Private Investment Corporation in mid-2016, while private equity firm TPG invested close to US$200mn. 182 TowerXchange Issue 21

183 What might be some of the markets in Asia of interest to investors? It partly depends on market dynamics, the stability of cash flows, etcetera. A market with competition in pricing, more towerco players, and unclear direction of consolidation means investors may be more reluctant to deploy capital. If the market is more stable and with clear commitment by operators to expand their networks, then investors are interested. Senior banking executive #2 Challenges and opportunities for the towerco CFO Towerco CFOs often struggle with getting local banks to understand the tower model. These banks may see new tower builds as capex for example. Or they look at the last full year audited EBITDA (earnings before interest, tax, depreciation and amortisation) rather than taking LQA (last quarter annualised). As a result, towercos may start with international banks who have experience in other markets. The good news for towerco CFOs is that over the past few years, the finance community has grown in its familiarity and comfort with the sector, resulting in more financial institutions entering the market with dry powder. The current favourable financial environment also means more competition among capital providers, more financial instruments and more availability for towercos. For example, a larger towerco with scale could tap into the bond market (public debt finance), where the lender is not a bank but debt investors. International institutional investors are also starting to express interest in Asia, having become familiar with the tower sector in the US and Europe. The geographical / political risk profile of Asia is relatively low too, which bodes well. Another challenge is around the management of currency exposure, and hedging becomes critical if the towerco has foreign debt. One source noted that CFOs can struggle to get hedging right, and the existing advice from banks may not be sufficient to optimise their strategies. When it comes to acquisitions, towercos that are involved with sale and leasebacks (SLBs) have much more complexity to deal with than a towerco-ontowerco transaction. With SLBs, there is not only the valuation of the assets, but other factors such as escalators, inflation, and the macro environment to consider. Whether towercos are raising equity or debt, due diligence will be required, at which point the CFO and towerco team often struggle to get all the documentation in place, especially when going from being privately held to publicly listed. This includes MLAs with operator clients, ground lease contracts, environment licenses, and more. The gaps could impact not only the funding or financing process, but also the towerco s credit rating. Due to varying levels of public administration around land ownership compared to markets like the US or Europe, towercos of all sizes in Asia face significantly more hurdles on securing documentation For more in-depth discussions on the role of the CFO and towerco funding and financing, join us at the TowerXchange 4th Annual Meetup Asia, to be held December, 2017 in Singapore at Marina Bay Sands. Meetup Asia December, Marina Bay Sands, Singapore Featuring TheFutureNetw rk The one and only must-attend event for top Asian telecom infrastructure executives TowerXchange Issue 21

184 Will consolidation move the Indian market closer to a pureplay towerco model? An updated guide to the changing structure of the Indian MNO and towerco ecosystems While in the short term consolidation and capitulation of India s myriad of minority market share carriers to perhaps five all-india carriers will prompt negotiations to cancel the leases of parallel infrastructure and lower the glass ceiling on tenancy ratios, the truth is that the perceptions of that glass ceiling had been artificially high; India s deeply indebted carriers were never likely to survive in the long term. By Kieron Osmotherly, CEO, TowerXchange Read this article to learn: The Indian mobile industry, and its closely tied tower industry, is going through a period of unprecedented market restructuring which merits close analysis both by local market participants and by the international tower industry, seeking benchmarks to understand the prospective impact of consolidation. In this editorial, TowerXchange summarises the specifics of both the MNO and towerco consolidation, reviews the tower assets coming to market, and forecasts the future of the Indian tower landscape. Keywords: 4G, Aircel, American Tower, Asia, BSNL, Bharti Airtel, Brookfield, Consolidation, Deal Structure, Editorial, GTL Infrastructure, Idea Cellular, India, Investment, LTE, MTNL, Market Forecast, Market Overview, New Market Entrant, Reliance Communications, Reliance Infratel, Reliance Jio, Research, South Asia, Tata Teleservices, TowerXchange Research, Viom Networks, Vodafone < How is MNO consolidation affecting India s towercos? < What are the remaining investment opportunities in Indian towers? < Will Bharti Infratel and Indus Towers merge? < What will be the implications of market restructuring for India s prevailing towerco business model? < What will be the shape of the Indian tower market in 2020? Concentrating spectrum in the hands of less carriers, carriers less burdened by debt, and better able to deploy network capex, will result in more sustainable long term growth for India s towercos, even though they will likely have to absorb a short term slowdown in growth. Once upon a time, India hosted well over 100 carriers, with licenses scattered across the country s 19 telecom circles and four metro services. Even today, India hosts 43 licensed broadband service providers, yet the powerful top four providers (Bharti Airtel, Vodafone, IDEA and Reliance Jio), plus government operators BSNL and MTNL, share over 75% of subscribers between them, and with voice revenues slashed by Reliance Jio s disruptive pricing model, there simply are neither enough subscribers nor ARPU to sustain more than the market leaders plus one or two niche challenger players. Against this backdrop, the disarmament of India s carriers passive infrastructure continues. The majority of carriers had already carved out or monetised their passive infrastructure. Most remaining operator-captive towers, and the majority of operator-owned towercos, have been sold or are 184 TowerXchange Issue 21

185 now coming to market. The question TowerXchange wish to pose is; if India is to evolve into a pureplay independent towerco model, where control passes from carriers to the investment community, is a fundamental change in business model afoot? MNO consolidation: 2+3, 1+9, 5+10, no that one s off! Millions of words have been written about the consolidation of India s MNOs, an ongoing process destined to reshape India s mobile market and tower cash flows. When the dust settles, second and third ranked operators Vodafone and IDEA s combined entity may have stolen market leadership from Bharti Airtel, which itself is defending its position by scooping up the distressed assets of deposed former #2 operator Tata Teleservices. Despite refutation, rumours of a BSNL+MTNL merger refuse to go away. Meanwhile the rollup of Sistema and Aircel by Reliance Communications (RCOM) was only half finished when RCOM admitted that it would have to shut down its voice services and seek to reinvent itself as a pure 4G play. Amid all this turbulence, indeed the source of much of these troubles, Reliance Jio navigates swiftly onward, its sails swollen by double digit market growth, primarily at the expense of the faltering marginal players, most of whom are closing or consolidating. When the storm clouds clear, what will be left standing? Bharti Airtel will ride the storm, Vodafone and IDEA will emerge as one entity, as may BSNL and MTNL. But eventually, none of these entities will own, or control, their own towers. Only Reliance MNOs in India by subscribers (end of Q2 2017) Company Subscribers (mn) Rate of growth Market share (%) Bharti Vodafone IDEA Reliance Jio BSNL Aircel Reliance Communications Telenor Tata MTNL Sistema Quadrant Jio will retain that privilege although even they have leased around half their macro sites from third parties, with most of the balance being city pole sites for infill capacity. Implications for India s towercos Instead of a dozen customers, many struggling to pay their bills, India s towercos will be left serving five stronger customers, better able to deploy network capex. While one of the pillars of justification for MNO consolidation has been the efficiencies of network rationalisation, the carriers will find that it is not easy to extricate themselves from year leases, while 4G rollout requires densification what Source: Telecom Regulatory Authority of India (TRAI) look like overlapping sites today could be welcome capacity tomorrow. But where leases are reaching term, or deals can be struck, expect some equipment to come off towers in the short term. India s towercos may not have been able to predict the exact shape of carrier consolidation, but they knew it was coming in one form or another, and they are not as exposed as one might fear. For example, American Tower spent US$1.18bn acquiring a majority stake in Viom Networks, which itself had acquired Tata Teleservices towers seven years previously. But American Tower knew they could pull the trigger on the deal precisely because Viom had limited their exposure to Tata Teleservices, 185 TowerXchange Issue 21

186 which now represents 5% of American Tower s consolidated property revenue in India, and the towerco has stated that they expect to fully enforce the average non-cancellable remaining contract terms on the leases with Tata Teleservices. While there is increased uncertainty around the merging carriers tenancies, Reliance Jio s continuing rollout will offset any losses, and Bharti Airtel and Vodafone+IDEA will continue to compete with their own 4G programme, to the extent that some tenancy ratio growth may be sustained, particularly since the future of Jio s third party partner of choice RCOM remains uncertain. Granted exclusive periods of negotiation to evaluate the acquisition of their towers, both Tillman Global Holdings and Brookfield had ample time to review the financial status of RCOM, and both foresaw the carrier s uncertain future with sufficient clarity to hold off executing the acquisition of their 45,000 tower carve out Reliance Infratel (aka Towercom). RCOM s creditors are now faced with the unenviable task of sifting the wreckage of a tower portfolio lacking an anchor tenant. The ~30,000 sites leased to Reliance Jio undoubtedly have value, and there are some other tenants on the towers too, but the zero tenant towers may be worth less than nothing. If the investible towers, particularly those that are fiberised, can be peeled out of the portfolio, they could yet be sold, and could be packaged with the less attractive sites if the price were right. But the formerly mooted US$1.7bn valuation will have to be downwardly recalibrated. Towers with creditworthy tenants retain significant value in India, as exemplified by American Tower agreeing the acquisition of Vodafone and IDEA s 19,812 captive towers for US$1.2bn US$60,500 per tower, which is well above replacement cost in India. The big prize for investors with an appetite for Indian towers remains the potential merger and balance sheet re-engineering of Bharti Infratel and Indus Towers. Vodafone has openly discussed the prospective sale of their 42% stake in Indus Towers, suggesting a US$5bn valuation. TowerXchange see the merger of Bharti Infratel and Indus Towers, which operate largely in different circles, as increasingly inevitable, creating a 162,131-tower supergiant into whose gravitational field remaining independent tower portfolios, such as Tower Vision and Ascend, could be drawn. With Bharti Airtel continuing to monetise their own stake in Bharti Infratel, the merger of Infratel and Indus would likely be bankrolled by a consortium of private investors or infrastructure funds, which could ultimately see carrier stakes in the combined entity dropping below an aggregate total of 50%, which would in turn see the company reclassified as a pureplay independent rather than operatorled towerco, perhaps triggering a gradual change in organisational philosophy, of which more in our conclusion A close second on Indian tower investors shopping list would be the ~65,000 towers on BSNL s and the ~10,000 towers on MTNL s balance sheets, many of which are in unique and highly desirable locations, and which have been minimally leased up to date. If investors don t want to pay the premium buying into Infratel-Indus or BSNL-MTNL towers may require, India also offers turnaround plays to get one s teeth into. GTL Infrastructure is seeking to enter its next, most important, phase of turnaround by refinancing, easing debts and perhaps in the process settling the issue of Aircel s unfulfilled network investment obligations (Aircel sold 17,500 towers to GTL Infrastructure back in 2010, but then had many of its licenses cancelled amid the license scandal of 2012, and was unable to fulfil contractual network investment commitments). Indeed the GTL Infrastructure refinancing could include a world s first - an MNO buying back its towers as Aircel seeks to release itself from the aforementioned obligation. Turnaround-oriented investors notwithstanding (and any such investors are likely to prefer a roadmap wherein distressed portfolios are cleaned up with a view to a sale), TowerXchange sees two, maybe three primary prospective consolidators in India, thus we foresee a consolidation of India s towers into two to three huge portfolios in the mid term. The most obvious and active consolidator is American Tower, which has already rolled up Essar Telecom Infrastructure, Viom Networks and the aforementioned Vodafone and IDEA towers. Could an investor like Brookfield or Tillman Global Holdings yet directly acquire a substantial Indian tower portfolio? The challenge is finding an opportunity that is both investible, and for which they won t simply be outbid by American Tower. Perhaps the most likely tower portfolio within which the big funds could put their money to work is the Infratel- Indus combine. 186 TowerXchange Issue 21

187 Tower ownership in India today 10, ,000 15,000 10,926 14,421 25,000 65, ,222 28,000 8,400 8,886 39, ,730 45,000 57,963 Forecast tower ownership in India in ,000 Indus Towers American Tower Reliance Infratel Bharti Infratel GTL Infrastructure IDEA Cellular Infrastructure Services Tower Vision Ascend Saurava Towers BSNL Reliance Jio Reliance Vodafone India Bharti Airtel MTNL MTS Others Sources: TowerXchange Research, TAIPA, PwC Conclusion: evolving toward a pureplay independent towerco model If operator stakes in the Bharti Infratel-Indus Towers axis are so diluted that the MNOs relinquish control, and if American Tower continues to roll up operatorcaptive towers and towercos in which operators retain a stake, will India s operator-favourable pricing and contract structure endure? Outside of China, India offers the lowest tower lease prices in the world. Lease rates are discounted when additional tenants are added to towers. Amendment revenue (fees for overlaying a new network technology onto an existing tower) are effectively non-existent. This all adds up to an operator-friendly business model. If the operators relinquish their stakes in their towers and towercos to investment funds, there may be nothing to stop the new owners from gradually evolving India toward a more typical, commercial, pureplay towerco business model. 70,000 80,000 25, , ,000 Bharti Infratel+Indus Towers American Tower BSNL+MTNL towerco Remaining independent towercos Reliance / Reliance Jio (towerco?) Remaining operator-captive Source: TowerXchange TowerXchange see two parallel themes emerging in Indian towers: the continued consolidation of investible towers into two large portfolios (American Tower and an increasingly investor-led Infratel- Indus combine); juxtaposed with a number of tower turnaround plays continuing the recovery of GTL Infrastructure and cleaning up the residual tower portfolios of RCOM and other faltering carriers. Once those turnarounds are complete, expect to see that they also succumb to the gravitational fields of India s emerging pureplay independent towerco duopoly 187 TowerXchange Issue 21

188 Regional coverage: Europe features As towercos increasingly assess their position in the future network, and position themselves to capitalise on the new opportunities which present themselves as 5G rolls out, we ve interviewed senior leaders in some of Europe s leading towercos about their long term vision for growth. Take a look through interviews with Cellnex, Wireless Infrastructure Group and INWIT to find out how they re preparing for new network architecture. These interviews will be discussed in further detail at Meetup Europe in London next April. This issue we re also sharing some in-depth industry reports, including the European tower power report, which looks at grid power, backup and off grid solutions being used across the continent. There s also a comprehensive procurement matrix detailing market needs country by country. Finally, with a flurry of activity around broadcast towers ongoing, we re sharing editorials on the Towercast and Arqiva processes and a deep dive analysis of the broadcast market in Europe. Contents: 189 Europe Procurement Matrix 197 European tower power report 205 Turkey market study 213 Sunny forecast for the future of infrastructure sharing: Cellnex 216 The edge of tomorrow: Wireless Infrastructure Group 219 INWIT s vision for the future of towers 223 Towercast sale could prove influential in French market 228 Arqiva IPO cancelled 231 Broadcast towers: profiting from adjacency 188 TowerXchange Issue 21

189 Demand forecasts for telecom infrastructure equipment and services in Europe Your comprehensive guide to expected procurement activities in 20 markets Read this article to learn: < Where the volume of new build will be highest across Europe < Countries, MNOs and towercos requiring significant investment in cell site rollout and upgrades < Country-by-country requirements for small cells and DAS < Where the most imminent opportunities exist for consultancy and legal advice < Who are the leading MNOs and towercos in each country Keywords: 5G, Austria, Baltics, Batteries, Belgium, Build-to- Suit, CIS, Country Risk, DAS, Decommissioning, Energy Storage, Europe, Europe Research, Fencing, France, Germany, Greece, Hybrid Power, Ireland, Italy, Masts & Towers, Netherlands, Nordics, Off-Grid, On-Grid, Pass- Through, Procurement, RF Design, Renewables, Russia, Russia & CIS, Shelters, Small Cells, Solar, Switzerland, TowerXchange Research, UK, Unreliable Grid, Wind From macro tower decommissioning to urban densification, significant investment is going into European communications infrastructure. Ahead of the 3rd annual TowerXchange Meetup Europe coming up on April 2018 in London, TowerXchange takes a deep dive into the European region, exploring the current appetite for passive infrastructure equipment and services in 20 countries and regions. Our detailed guide condenses months of interviews and market studies to provide you with the most comprehensive overview of where the key opportunities lie for the supplier ecosystem. To connect with MNOs, towercos and I&C rms leading procurement activities, join us next April at the 3rd Annual TowerXchange Meetup Europe; Europe s most concentrated audience of buyers of passive infrastructure and equipment < 49% attending companies procure infrastructure equipment and services < Invite-only, buyer-led technology working groups to inform product development and sales forecasts < Europe s only dedicated telecom passive infrastructure exhibition < Exposure to a database of 35,000 tower industry professionals Contact Annabelle Mayhew, Chief Commercial Officer to learn more about how to get involved 189 TowerXchange Issue 21

190 Demand forecasts: telecom infrastructure in Europe Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs Austria Low Low Medium High Low Low Österrei -chischer The Austrian market has seen very little tower activity. The only towerco in the country is Rundfunk ORS (Österreichischer Rundfunk), the incumbent broadcast towerco with around 450 towers available for colocations. While new build in the market is believed to be fairly low, operational management tends to be outsourced and towers are well maintained. With 4G close to 100% and 5G rollout on the near horizon, the need for small cell and DAS solutions is growing. Beligum Low Low Low Medium High Low Norkring Belgie As with Austria, there is very little towerco activity in Belgium, and what there is is driven by broadcast infrastructure. As an established mobile market, very little new build is required but the country is a leader in the European drive towards 5G meaning small cells, DAS and other future network solutions are increasingly important. A1 3 T-Mobile Proximus Orange BASE Baltics (Estonia, Latvia, Lithuania) Medium Low Low Medium Medium Medium Telecentras Teletower Levira The Baltics are one of the most active regions in terms of tower sharing, with two small towercos Telecentras and Levira (with 30 and 22 towers respectively) offering mobile services from a background in broadcasting and Latvia s Teletower managing 180 towers spun out of MNO Bite in 2009, after the same towers were unsuccessfully brought to market. The Baltic economies are fairly bouyant, and although 4G rollout is not complete, they re starting to look at 5G rollout and offerings in the small cell and IoT space. With some newbuild and consolidation in the market, there is a need for tower manufacture, but nowhere near as much as the need for MSPs and turnkey management of the infrastructure. Energy is mainly on grid, but networks are being hardened and some backup power provision is increasingly necessary. Telia (Estonia), Elisa (Estonia), Tele2 (Estonia, Latvia and Lithuania), LMT (Latvia), BITE (Latvia and Lithuania), Omnitel (Lithuania) 190 TowerXchange Issue 21

191 Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs CIS Medium Low Medium High Low Medium Logycom, UKRTower, It s hard to typify a CIS market, as the CIS is made up from a diverse collection of countries. Certainly, there is need for further new build to cover countries with vast territories, and maintence and upgrades of the existing towers is still a tough task in many areas. With the Eurasia Telecom, BelTower Veon towers in four key CIS markets (Ukraine, Kazakhstan, Armenia and Georgia) still on the market, and Telia assessing their options ahead of a planned focus on their core markets, there may well be transactions of scale happening in the market in the next months. Power is an important part of the tower offering in these markets, with a higher percentage of off-grid sites than in Western Europe. Small cell and future network infrastructure is not something on the short term horizon in most CIS markets, therefore need for solutions in this areas has been classified as low. Kyivstar, Vodafone, lifecell (Ukraine) KCell France Low Medium Medium Medium High High Cellnex, FPS (American Generally seen as a testbed for the European market, France has many of the key factors Tower), TDF which drive an active tower market: a relatively new MNO (Iliad s Free Mobile) with a need to grow their network (particularly in light of their entry agreement with Orange to share towers coming to an end); two highly ambitious and international towercos in Cellnex and ATC Europe; a successful and well established broadcast towerco which has a significant offering in the telecoms market (TDF); an MNO (Bouygues) which has bought into the idea of the sale and leaseback of their existing infrastructure; and finally a good economy and data-hungry population driving the need for accelerated urban infill ahead of 5G rollout. Orange, SFR, Bouygues, Free Mobile 191 TowerXchange Issue 21

192 Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs Germany Low Medium Low Medium High High Deutsche Funkturm, With three towercos and three operators in Germany, the market is well established in terms American of tower numbers and we foresee relatively little new build of macro towers over the next Tower, Telxius few years. However, there is still scope for towers to change hands and with the Deutche Funkturm towers reportedly coming to market, plus the 7,000 rooftops which O2 transferred to Deutsche Funkturm in 2016, there is plenty of demand for advisory and consultancy services, with likely reviews of suppliers in terms of MSPs and site management over the subsequent months. In addition, there is scope for further rationalisation of the German network if efficiencies increase, meaning ongoing decomissioning projects over the next few years. As Europe s leading economy, Germany is committed to pursuing a 5G vision, and small cells are already rolling out across the country. Need for further densification will no doubt be critical as data demand accelerates, and we therefore predict that demand for small cell and DAS solutions, as well as associated infrastructure such as fibre, will remain high for the foreseeable future. O2, Telekom, Vodafone Greece Medium Medium Medium High Medium Medium Digea Victus Networks The Greek market has seen a small amount of infraco activity, including the JV between WIND Hellas and Vodafone (Victus Networks) and small towerco Digea. With some very remote sites, power and maintenance can be tricky, and strong partners are needed in these areas. Small cells and DAS are rolling out in urban areas and there is opportunity for growth here, as in the rest of the continent. The market has not yet seen any tower deals take place, but as towercos search for the next opportunity, there is a growing possiblity of a tower acquisition in Greece. Cosmote, Vodafone, WIND 192 TowerXchange Issue 21

193 Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs Ireland Low Medium Low Medium High Medium Cignal, ESB Telecoms, There are a large number of towercos in the Irish market, as well as infrastructure sharing Hibernian/ ventures. As with most Western European towercos, most of the players in the market prefer Britannia Towers, CIE, a hands off approach to operations, and most O&M functions are outsourced to partners. Towercom, There is little new build of marco towers, apart from some rural initiatives, but small cells Shared and urban densification solutions are growing rapidly. Cignal have acquired two portfolios of Access, 2RN, towers to date, but there have been no large scale acquisitions in the market as yet. However, HighPoint, Wireless TowerXchange sees the Irish market as a strong contender for acquisitions and there may Infrastructure well be a rolling up of Irish towercos in the next months. Group NetShare, Mosaic Vodafone, 3/O2, Meteor Italy Low High Low Medium High Medium INWIT, Cellnex, Italy is one of the most active tower markets in Europe, and towercos Cellnex and INWIT are highly proactive in pursuing new technologies to support impending 5G rollout. There is some new build in the market, but decomissioning is also gathering pace as the market consolidates. Italy s high proportion of mature towercos also drives a higher incidence of EI Towers, RaiWay, HighTel Towers backup power provision than other parts of the continent. In terms of deals, there may be some remaining deals to be done, but these will be largely in the small cell and DAS space. Telecom Italia, Vodafone, WIND/3, Free Mobile (Iliad) Netherlands Low Medium Low Medium High Medium Cellnex, NOVEC/ Cellnex has recently acquired the majority of the independent towers in the Netherlands, through the acquisitions of Protelindo s opco, Shere Group and Alticom. With little new build underway and excellent grid access, operationally the needs of the Dutch market are very stable. There remains persistent rumours in the market about the potential for further tower acquisitions, however, and the MNOs in the market are planning their 5G strategies. Cellnex s Open Tower Company, Wireless Infrastructure Group committment to future networks in all the countries in which it operates means there is ongoing opportunity in the small cell and DAS arena. KPN, Vodafone, T-Mobile 193 TowerXchange Issue 21

194 Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs Poland Low Medium Medium High Medium Medium Emitel, ECS NetworkS! Orange, There have been ongoing rumours of tower sales in Poland for years, but as yet no deals have taken place. Emitel is the national broadcaster and ECS are looking to move up the value chain from managed service provider to towerco over the coming months. Some ongoing new site build is taking place, but the majority of infrastructure growth is focussed on the need for urban infill. Play, Plus, T-Mobile Portugal Medium Low Low Medium Medium Low MEA With no towercos active in the Portuguese market and the chances of a sale and leaseback looking fairly slim, there s little need for advisors in the market currently. Vodafone s presence in the market, and their forward-looking attitude to their networks drives innovation around power, both in terms of hybrids and backup, and in terms of smart metering. For a Western European country, 4G rollout and imminent 5G rollout is not accelerating particularly quickly, so although there is growth in this area, demand for small cells etc is not the same as in neighbouring Spain. The need for turnkey tower management is slightly higher as in all markets where towercos are not present, but a lack of new build and projects keeps this country from promising major growth in the area. (Portugal Telecom, NOS, Vodafone Russia Medium High Medium High Medium High RTRS (State owned), The Russian market has blown hot and cold for years, with Veon (formerly VimpelCom) First Tower, most recently deciding against a deal to sell their towers at the 11th hour in May With National Tower, MTS ambitious new towercos emerging, led by young entrepreneurs, and almost all of the MNOs Towers, spinning out their towers into stand alone entities, it seems like a deal must still take place Russian in this market, but the key players and timescales in any future deal are hard to define. With Towers, excellent grid access throughout the country, power is low on the agenda, but management of towers over a huge area is vital and there is some new build in rural areas. Although the Vertical, Link Development, Russian market may be behind Western Europe in terms of 4G rollout and 5G preperations, it Service Telecom is most certainly on the agenda and is growing in importance. Vimpelcom, MTS, Megafon, Tele2 194 TowerXchange Issue 21

195 Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs Spain Medium Medium Low Medium High Medium Cellnex, Telxius, Axion With the towerco market dominated by Cellnex, Spain currently seems quite settled in terms of tower activity. Cellnex s provision of power as a service in Spain means backup needs are slightly higher here than in other markets, and their needs for site monitoring and security remain at a decent level. New build is low, with decomissioning taking place across the country, but Spain has high investment in small cells and urban solutions and this is a potential area of growth in the country. Orange, Vodafone, Yoigo, Telefonica Scandinavia (Sweden, Norway, Finland and Denmark) Medium Medium Low High High Medium Falck, Teracom, Digita The four markets we count as scandinavia have some critical similarities but also their own idiosyncracies. There are several joint ventres across the region, all of which mange operational challenges in their own way, and many of which are reviewing the efficiency of their operational systems and processes. Site monitoring is critical and experiences of sabotage in the region make security an important factor. With a higher percentage of offgrid sites than further south in Europe, power is also an important area of interest. New build is not particularly active, but city infrastructure and 5G networks are being rolled out, providing more opportunity here. SUNAB (Sweden) Net4Mobility (Sweden) 3GIS (Sweden), TT Networks (Denmark) Telia (Sweden, Finland, Norway and Denmark), Tele2 (Sweden), Telenor (Sweden, Norway and Denmark, 3 (Sweden and Denmark), TDC (Denmark), Elisa (Finland), DNA (Finland) 195 TowerXchange Issue 21

196 Vendor opportunity matrix Energy RMS, SMS, ILM and access control Tower manufacture Turnkey infrastructure Small cells, microcells, DAS and IBS Advisors Towercos Joint Ventures MNOs Switzerland Low Medium Low Low High Medium Swiss Towers (Cellnex) The Swiss tower market has been brought to Europe s attention with Cellnex s acquisition of the Sunrise towers in However the market remains fairly stable. Unsurprisingly, TowerXchange predicts the biggest opportunities here are in turnkey solutions as the networks are refined and in small cell technology and laying the foundations for 5G rollout. Swisscom, Sunrise, Salt Turkey Medium Medium High Medium Medium High Global Tower Vodafone The MNO and tower markets are largely dominated by Turkcell and their towerco arm, Global Tower, with over 8,000 towers in the country. However, recent government legislation will see a joint venture betweek Vodafone and Turk Telecom build in excess of 2,000 towers in rural areas, considerably boosting need in the country for tower manufacture, SMS and turnkey services. Although Turkey is not as close to 5G rollout as western Europe, small cells are being rolled out and DAS solutions are needed in urban areas, making Turkey attaractive market for tower growth over the next few years. + Turk Telecom rural tower project Turkcell, Vodafone, Turk Telecom United Kingdom (UK) Medium High Low Medium High High Arqiva, Wireless Infrastructure The UK ecosystem of towercos and JVs has functioned adequately to date, but the impending Arqiva IPO may well see the status quo shift. As with all of the more affluent western European countries, power and new build demands are reasonably low, but there is ground to be gained in future networks, as well as advisory and managed services. Group, Cellnex, Hibernian/ Britannia Towers, Spyder, Shared Access CTIL, MBNL Vodafone, O2, EE, TowerXchange Issue 21

197 The TowerXchange European tower power report Tracking power and backup usage across the continent By Frances Rose, Head of Europe, TowerXchange Read this article to learn: < Statistics and critical information about how European power is consumed < Backup strategies and distribution < The role of Critical National Infrastructure in mobile networks < How towercos prefer to deal with power provision < Purchasing plans and strategies for power and backup across Europe Over the last three months, TowerXchange has conducted an extensive survey, having in-depth conversations with independent towercos, JV infracos, MNO-owned towercos and MNOs themselves across Europe to build a picture of how tower power is managed across the continent. We ve uncovered unique insights not just into current power requirements, but also how shifting economic, environmental and political environments will affect how power is consumed and provided. Keywords: 5G, Cellnex, EI Towers, Energy, Europe, Europe Insights, France, Fuel Cell, Germany, Hybrid Power, Italy, Market Overview, Masts & Towers, Off-Grid, On-Grid, Procurement, ROI, Regulation, Renewables, Russia, Russia & CIS, Scandianvia, Small Cells, Solar, Tax, TowerTel, TowerXchange Research, United Kingdom, Uptime, Urban vs Rural, Wind, Wireless Infrastructure Group The involvement of towercos in power in Europe The European tower market is unique in many ways: from the high incidence of shared infrastructure between broadcast and telecoms to the need for extensive decommissioning across many markets; these idiosyncrasies all contribute to a unique power footprint across the continent. With grid power available across most of the region, and excellent coverage across population masses, power needs differ dramatically to markets in Africa or Asia (see the sidebar). In some African markets, power provision can account for as much as 60% of OPEX, by comparison European towercos are reporting at most 12% of their OPEX spend going on power provision as the majority is passed through. The operational demands of managing telecoms infrastructure in Europe are much more straightforward than in emerging markets. To date, much of the role of the towerco has been financial - allowing MNOs to shift towers off their balance sheet and release capital. Indeed, many towercos have felt thus far that there is little competitive advantage to be had in operational aptitude and thus they outsource much of this on a large scale. By offering a purely grass and steel solution, towercos have traditionally expected their tenants to manage their own backup power solutions, although negotiating with utility companies and passing through power has become the norm. Grid access In terms of grid connectivity, Europe enjoys high 197 TowerXchange Issue 21

198 coverage, with the majority of our respondents stating that their network enjoyed almost 100% grid access. These numbers were attenuated slightly by responses from Scandinavia and Central and Eastern Europe, where some countries have lower grid access due to geography or for environmental reasons. Marius Pilinka, CEO of Teletower, which owns 485 towers across Lativa and Lithuania, explained that 10% of our sites are off grid mainly because it is not physically possible to provide a connection to on-grid power; more than a third of Lithuania s territory is covered by forests. TowerXchange Survey result: How much of your network is off grid? 16% Less than 1% off grid 22% 1-5% off grid 6-10% off grid 75% Negotiating power prices Respondents to TowerXchange s survey reported negotiating rates for electricity in Europe to be very straightforward, with most buyers comparing their purchasing process to that of any other product with 6-12 monthly price reviews according to the duration of their contracts. In countries like Russia, for example, where the market is dominated by one player and prices are considerably lower than elsewhere on the continent, there is little to no price comparison and assessment needed. The issue for tower owners in Europe is that they are comparatively small-scale customers for electricity suppliers, and the fact that their needs are disparate and spread over a large geographical area means their attractiveness as customers is limited. Some respondents in Scandinavian countries reported that their membership in buying coalitions gave them a stronger hand in negotiations with electricity suppliers, while others find that hedging allows them to mitigate price fluctuations in purchasing electricity. Vodafone, who are often leading the pack in terms of innovation, are taking part in trials of the SmartNet Project, which allows towers to use their battery backup to support the grid during peak times - a reciprocal agreement which could reduce costs and help to stabilise fluctuations. EI Towers also pointed out to us that it s not just about how you buy power, but when, with a tender at the right time saving 10-15% over other times of year. Buyers need to look carefully at the fluctuation of power prices across the year depending on oil costs, supply forecasts and consumption. An example of this includes when French power prices increased sharply at the end of 2016 due to overrunning works on one of the country s key nuclear plants. Some tower owners are thinking more creatively in order to reduce energy costs. Juha-Pekka Weckström, CEO of Digita in Finland, explained that Digita is part of a coalition of big electricity buyers called Voiman Ostajat which negotiates electricity prices as a block he added that Along with this we use hedging, which gives a protection against the variation of electricity prices. Power provision Source: TowerXchange European power is almost 100% pass through on third party towers, with every towerco respondent we spoke to offering pass through power on the majority of their structures, although around 25% of those asked did either have a mixture of pass through power and MNO-controlled power on their sites, and/or offered a fuller power solution to their tenants. Where a mix of models is used, the 198 TowerXchange Issue 21

199 TowerXchange Survey Result: How is power provided on your sites? rates agreed with utility providers), backup power, equipment and monitoring. 11% 20% 69% 100% pass through Mixed pass through and MNO provision Power as a service Source: TowerXchange Cellnex are keen to leverage greater transparency to improve efficiency across sites, with Mirko Masi, Director Technology - Global Operation, saying: Where we provide passive infrastructure services to telecom operators we are providing power supply based either on a simple pass-through model or a power as a service model. The trend now is to migrate to a pay-per-use power supply model, where all the associated costs are passed-through to customers in a simple and transparent way. This model is also better to promote joint initiatives to improve power efficiency. TowerXchange Survey Result: Do you currently use smart meters? Yes 84% No 16% situation often stems from legacy infrastructure and relationships, meaning that we would expect the number of towers operating on a pass through basis to increase as towercos standardise across their portfolio. Metering and billing is a low-opex model for towercos, and not geared to generate much profit, but efficiency and transparency are nevertheless critical for infrastructure owners to maintain a good tenant relationship, and tenders are conducted Source: TowerXchange on a regular basis. Metering and billing can prove costly for towercos, however, given their often light operational staffing levels and the vast amount of data which needs to be collected and interpreted. For broadcast and other clients where third party providers also operate active equipment, power is a part of the package and there s no direct transfer of power costs but a fixed fee for power provision, allowing a small profit to be made. This fee will include grid power (calculated based on current Backup power requirements Backup power on sites is still split between MNO and towerco ownership, varying not just by tower ownership but even from site to site dependent on legacy provision. Unsurprisingly, towercos carved out of MNOs and joint ventures such as INWIT or CTIL tend to take ownership of backup supply for their towers. In addition, broadcast providers like Arqiva or TDF tend to back up their infrastructure due to its role as critical national infrastructure. Increasingly, as independent towercos look to consolidate their position in the market, many of them are moving from a steel and grass model towards a service offering in order to differentiate themselves and increase tenancy ratios, and this includes consolidating backup power as well as offering grid power through a pass through or payper-use model. 199 TowerXchange Issue 21

200 We know that the large telecommunications companies are looking to use renewable energy to reduce fuel consumption and help contribute to a more sustainable world. However, generator sets remain and will continue to be a fundamental part of any BTS, as they are the only way of guaranteeing reliable backup power and providing an immediate response in the absence of any other energy source. Levels of solar radiation are not stable, winds are variable and battery running times only guarantee supply for as long as they are designed to last, meaning they won t be able to deal with any problems lasting longer than this period. Therefore, any energy model would include an electrical generator in the backup system for the BTS, especially at the most critical stations. Guillermo Elum, EMEA Regional Sales Head, Himoinsa Backup power provision Batteries are the most common form of backup, with an average of around two hours of backup power available, where backup is deemed necessary. Lithium ion batteries are seen as the most desirable batteries for European telecoms, but most tower owners still have questions around ROI in the field. Gensets are reserved for the most important sites; those with more tenants, which serve a larger than average population or which form part of critical national infrastructure such as broadcast services or emergency communications. Additionally, we noted the importance of temporary Europe, unlike other continents such as Africa and Asia-Pacific, has a stable electricity network. However, large demands can cause unexpected outages, which telecom companies must be prepared for, especially at the most critical sites. Countries such as the United Kingdom are developing Capacity Market projects (some of which have been completed by HIMOINSA): generation plants that cover peak demand by supplying energy to the national grid at certain time slots. Telecommunication companies could assess the value of offering such systems and supplying power to the public grid as a way of more efficiently managing the energy generated generator hire in the European market, a solution which is not generally observed in emerging markets. Rather than own, maintain and secure fuel for their own generators, MNOs and towercos will use contractors to bring in generators on the backs of lorries for the duration of an outage. Two key factors mean this model works well in the European market; firstly, power outages are infrequent, short lived and usually confined to a small geographical area and secondly, the size of most European countries means that generators can be stored and deployed to most regions with relative ease. Most respondents have a list of local portable generator suppliers which they can call on in an emergency, with towercos often taking responsibility for this. Increasingly the towercos we spoke to said that they were assessing the possibility of coordinating backup power on site themselves. In part to create a fuller service offering to their tenants, and also in order to optimise the space used at the bottom of each tower and maximise the amount of equipment which can be placed on them. According to Nigel Moss, COO at Wireless Infrastructure Group We re deploying our own containerised, tamper-proof diesel generators to around 10% of our facilities where resilience is particularly key, for example at remote locations or at hub sites. Typically we re deploying permanent 25 KVA generators that can provide resilience to several customers. We see this as a value added service proposition: it s about enabling shared economics for our customers, saving space and avoiding duplicative generators. 200 TowerXchange Issue 21

201 TowerXchange Survey Result: Type of backup solution used Batteries only Batteries and generators 17% 36% 13% 13% 19% Batteries and generator hire Renewables and generators Three or more types used Source: TowerXchange increasing strain; as European networks become increasingly reliant on power sources with variable capacity, such as wind and solar, and power consumption continues to increase (in particular through household and electric vehicle usage), security of electricity supply is becoming harder and harder to manage. Winter 2016/2017 saw electricity deficits in both the UK and France, with both countries relying heavily on imports to meet demand. As grids are put under increasing pressure, backing up power is going to become more and more critical for telecoms infrastructure. Renewable and hybrid solutions are not widely used in Europe, although grid power from green sources is preferred in some markets, such as Germany, where incentives are in place. As a rule, renewable and hybrid backup solutions are used by the larger and more innovative players in the market, both in terms of towercos and MNOs, meaning that as their use in the field is proven, there s a good chance that renewable solutions will become more prevalent on the continent. The role of government and CSR There is currently very little government incentive for using renewable power, with respondents claiming that tax breaks for sustainable electricity either don t apply to telecoms infrastructure or are so small as to make no material impact on their balance sheet. Some respondents stated that, although power prices haven t gone up significantly, the percentage of the power bill allocated to supporting renewable power has gone up, making tower owners supporters of renewable power by default. Power as a commodity may have gone from 80% to 30% of the bill, but the cost of the full package in absolute terms didn t change much. Moves towards more sustainable sources of power are driven in some cases by corporate social responsibility policies, either their own initiatives or as part of the value chain of customers who are adopting best practices in the sector. Drivers for change in Europe Although it s unlikely that European tower power will ever shift off-grid, there are a number of economic, political and commercial factors which are driving the market towards a hardening of power networks and backup power is becoming increasingly important across the continent. European power networks are coming under Critical National Infrastructure In the UK, emergency services communications have shifted from the TETRA system to EE s network, meaning the towers from which they operate have become a part of critical national infrastructure, and outages are not an option. For those towers which form part of a broadcast network, such as those belonging to Arqiva in the UK, TDF in France and Cellnex in Spain, their position as critical national infrastructure is well established and their networks are well backed up. With threats from cyber attacks and terrorism upping the ante, both battery and genset backup is moving up the agenda. Powering small cells and future networks We see clearly the connection to the urban grid as the main source of supply, even if distributed generation and local distribution points will help in the challenge. Where backup batteries will 201 TowerXchange Issue 21

202 TowerXchange Survey Result: Is part or all of your network considered Critical National Infrastructure? Yes 49% No 51% Source: TowerXchange TowerXchange Survey Result: What % of opex does power account for for you right now? 18% 40% 0% 1-10% 11-20% Source: TowerXchange TowerXchange Survey Result: What % of capex spend is planned for power purposes over the next year? 83% 17% 42% 0% 1-5% Source: TowerXchange be required for small cells, in our view Lithium batteries will help due to reduced volume and weight of the equipment. Mirko Masi, Director Technology - Global Operation, Cellnex Towercos and MNOs seem to be split on the small cells issue. There are those who are aggressively pursuing opportunities in order to secure market share, and those who are waiting to see how the drivers for this section of the market develop. Those who are working on small cells see that they will have a new set of energy requirements in the near future for this type of asset. With solutions such as picosolar already in place for some street furniture, this may be an opportunity for renewable or hybrid energy models to break into the European telecoms infrastructure market in a more widespread way. On the other hand, proximity to the grid for urban infrastructure means that batteries may become an important part of the power cycle as street lamps are switched on and off according to time and season. Most of the tower owners who are developing small cell solutions are in the process of exploring their power needs and trialling solutions at the moment. One complication towercos and MNOs are wrestling with is the low consumption of each small cell - well below the minimum power requirements which utilities need for connection, meaning small cell owners pay for more power than they use as there are no low consumption deals in the market. The challenge will be to have national regulators and authorities provide very low power points of presence. Currently other similar low-consumption 202 TowerXchange Issue 21

203 street furniture, such as parking meters, are powered through local municipal power networks, but it s not clear to date if they can provide power for third parties. Solar and battery solutions, which have been used widely for other street furniture, are an option for small cell owners, but keeping the small cell network invisible becomes trickier as power sources are attached. Low impact solutions which can power small cells will be sought after as they proliferate across Europe. Outages in the UK Source: Eaton Annual Blackout Tracker 640 What next for European tower power? European tower owners have benefitted from near-universal grid access and very low outages since their infrastructure was put in place. This has allowed them to focus their energy elsewhere as they can simply plug and play in most locations. However, a number of factors, including the shifting of critical national infrastructure onto telecoms infrastructure, the roll out of small cells and alternative infrastructure and the shift of towercos from seeing themselves as real estate owners to focus on service offerings means many towercos are seeking to harden at least part of their network. According to Heavy Reading s Mobile network outages and service degradations report of February 2016, they estimate that mobile operators are spending 18% more on network outages and service degreadations than they did in a total of around $20 billion globally on an annual basis In addition, we foresee some major external factors which may well affect tower owners abilities to rely on the grid. Power generation capacity is struggling to meet demand in many part of Europe, and while renewables are growing; over- and under- supply due to fluctuations in weather are becoming more common. National power grids ability to deal with this varies across the continent but many countries are issuing warnings about a power crunch in the next few years, particularly as electric vehicles begin to become more popular and represent both a huge new drain on the network and a shift in the peak times when power will be needed. Already, power management firm Eaton s most recent Annual Blackout Tracker saw the number of grid outages in the UK more than double between 2010 and Tower owners may need to think more creatively about how and when they consume power from the grid, and even leverage their position to become a part of the solution, as explained by Eric Estrade of Vodafone in his recent interview with TowerXchange. In the short term, TowerXchange hopes to open up the dialogue between MNOs, towercos, suppliers and regulators in order to allow European tower owners to access best practice solutions from around the globe, not just in terms of power generation and backup, but also to enhance efficiency and think creatively about their opportunities and responsibilities over the next years 203 TowerXchange Issue 21

204 Global infrastructure: power comparison Africa: Power is the biggest single operational challenge for tower owners in Africa. An estimated 60% of opex is spent on powering cell sites in the region as grid provision is scarce and inconsistent. Theft of diesel and batteries is also a huge problem, contributing to complex logistical and security requirements as well as climate and geographical issues. Hybrid and renewable solutions are becoming more prevalent as they eliminate or reduce the need for a diesel supply chain, but there is no one solution which is currently proving infallible in the current circumstances. Asia: Power provision in Asia varies dramatically from country to country. With over 30 countries in the region, from Singapore to Myanmar, there is no one size fits all in terms of geography or infrastructure. In countries like Myanmar or Laos, as in many parts of Africa only the major cities benefit from grid connection, and the remainder of the country remains off grid. Renewables and hybrid solutions are becoming more popular in Asia, with India recently launching a huge initiative to push green power which is driving change across the country. Responsibility for power varies as much as everything else on the continent - generally towercos will pass through when on grid, and in off-grid cases they will provide a power solution to their tenants, but the measuring and billing of power is not consistent from one country to the next. Meetup Europe April, Business Design Centre, London Featuring TheFutureNetw rk Latin America: In LatAm power provision is still managed by the MNOs, even when they are using a third party tower, and even pass through power is almost unheard of. The grid works across the board, with only a few spots with very low population density (such as the Amazon) off-grid. Those sites which are off-grid tend to be powered by diesel generators, with renewables still hardly used in the region. However, auctions for new spectrum are coming hand in hand with targets for increased rural coverage, meaning off-grid provision will need to improve in the CALA region. The 3rd Annual retreat for European Tower experts TowerXchange Issue 21

205 Talking Turkey: an overview of telecoms infrastructure in the Turkish market Where does the opportunity lie in this changing country? Read this article to learn: < How the current political situation is affecting the Turkish economy < The background on Turkish MNOs and their market share < The current status of 4G and 5G rollout plans < Who owns what telecoms infrastructure in Turkey < A summary of Global Tower s activity over the last 24 months Turkey has had its fair share of disruption over the last few years, but beyond that is a young and data-hungry population, committed and ambitious MNOs and Europe s fifth-largest towerco. In this article, we assess how the market has responded to both positive and negative developments and assess the state of telecoms infrastructure in Turkey as a whole. Keywords: 4G, 5G, Carve Out, Central Asia, Co-locations, Country Risk, EBITDA, Editorial, Europe, Fibre, IPO, Infrastructure Sharing, LTE, MNOs, Market Overview, RANsharing, Rooftop, TowerXchange Research, Turk Telekom, Turkcell, Turkey, Urban vs Rural, Vodafone The political and economic situation in Turkey Straddling the Bosphorous between Europe and Asia, Turkey looks both to the west and the east for its heritage, and for its future. Between 2005 and 2016, Turkey was in ongoing accession talks with the European Union, however as the country has slipped towards more autocratic rule, those talks have effectively come to a halt. Ratings agency Moody s cut Turkey s long-term issuer and senior unsecured bond ratings by one notch to Ba1 with a stable outlook in September 2016, and again to negative in March 2017 placing the country s credit rating in junk territory and saying weaker growth is negatively impacting Turkey s key credit anchor - its healthy public finances and low government debt. The government has taken a range of measures to mitigate the domestic impact of the sluggish economy, including providing wage subsidies to firms and postponing the due dates for their tax and social security payments. Stopping such support will be difficult since the factors weighing on consumption and investment, such as higher inflation and interest rates and declining productivity, are structural rather than cyclical. But it s not just domestic political instability in Turkey contributing to economic troubles. The ongoing uncertainty around US relationships with the rest of the world, Brexit causing instability in Europe, increasing tensions between Russia and the West, and the migrant crisis in Syria, 205 TowerXchange Issue 21

206 Turkish MNO market share by subscriptions 25% Turkcell 44% Vodafone Avea 31% Vodafone Vodafone, the fourth-largest global mobile network operator, entered the Turkish market in 2005 through the acquisition of Telsim, with the Vodafone brand launching in Vodafone is the second biggest direct international investor in Turkey and sits comfortably in second place in subscriber numbers. Turk Telekom Türk Telekom is the formerly state-owned Turkish telecommunications company, privatised in The company listed in 2008 on the Borsa Istanbul with 15% of the company now listed on the stock exchange and the remaining equity split between Oger Telekom (55%) and the Turkish Treasury (30%). which has affected Turkey more heavily than any European country, are all unbalancing markets and economies, both on a local and global level. Turkish MNOs There are three mobile network operators in Turkey; Turkcell, Vodafone and Turk Telekom (Avea). Turkcell Turkcell has been listed on the NYSE and the BIST since July 2000 and is the only NYSE-listed company in Turkey. Turkcell Holding retains 51% of shares in the company, with Çukurova Holding owning a Source: TowerXchange further 0.05% direct share. Teliasonera had owned a 14% direct stake in Turkcell, but this was sold in two tranches over the course of 2017 for a total of ~$1.2bn for various reasons, including Telia s commitment to focussing on home markets in the Nordics and Baltics and a long term spat between Telia and board members Mikhail Fridman s and Mehmet Emin Karamehmet, both of whom have been trying to take control of Turkcell Holding for the last decade. The company s indirect stake of 24% through Turkcell Holdings remains unchanged, with Fridman s Alpha Group and Karamehmet s Çukurova making up the remaining shareholders through Turkcell Holding, with 13.2% and 13.8% respectively. Turk Telecom offers a full quad-play service to customers and the MNO arm, Avea, was founded in As the newest operator in Turkey, Avea has a 25% share of the country s subscribers, but reaching 95.4% of Turkey s population through a well built out network. Avea is growing fast both in corporate and individual services. Skipping 4G President Ergodan famously declared in 2015 that It is not necessary to waste time with 4G., preferring instead to leapfrog 4G technology and roll out an extensive 5G network in order to place Turkey ahead of the rest of Europe. This assertion did not, of course, hold much sway 206 TowerXchange Issue 21

207 Fibre rolled out in Turkey (km) Turk Telekom 213,000 Turkcell 35,000 Vodafone 6,100 Still needed 213,000 Source: TowerXchange with the data-hungry Turkish population, whose median age is around 30, meaning Turkey has the youngest population in Europe. It also did not wash with the MNOs, given the fact that two years later 5G has still yet to be defined. Luckily for everyone concerned, the auction for 4G licences took place in summer 2015, and 4G began to be rolled out in However, this rollout is not going as smoothly as could be hoped, primarily due to rows about the ownership and use of Turkey s fibre network. Towers managed or owned in the Turkish market 6,300 5,400 25,465 1,100 2,500 8,067 1,100 Global Tower Turkcell (Universal Services Project) Vodafone & Turk Telekom (Universal Services Project)* Turk Telekom Vodafone TRT (Turkish Broadcaster) Rooftops *New build, scheduled to begin in 2017 Source: TowerXchange Partially state-owned Turk Telekom has thus far invested most heavily in fibre, spending $7bn over the last 10 years and laying 213,000km of fibre across the country. Currently Turk Telekom is able to set its own commercial prices for use of this network, meaning Turkcell and Vodafone feel they are losing out and paying over the odds in a market where increasingly mobile is bundled together with broadband and fixed line offerings. With another 250,000km of fibre still needed to cover the Turkish market, Turkcell Chief Executive Kaan Terzioglu estimates that by working together, rather than investing separately, the Turkish operators could save $12.5bn. However Turk Telekom CEO Rami Aslan has thus far been uninterested in the idea of collaboration, particularly in urban areas, claiming Turk Telekom plans to invest another $2.8bn in the next three years. This stalemate between the key players is hampering the rollout of 4G and could have a 207 TowerXchange Issue 21

208 serious impact on getting 5G networks off the ground when the time comes. Telecoms infrastructure in Turkey project, meaning there is a significant amount of pressure to deliver results. Global Tower to be around TRY$200mn (around US$60mn) and Global Tower posting an EBITDA of around TRY100mn (US$30mn) in 2015, the asset was already market-ready. The biggest operator of ground based towers in Turkey is Global Tower, owned 100% by Turkcell. Global Tower owns or manages almost all of Turkcell s macro infrastructure, with TowerXchange estimating that around 3,500 of the towers are owned by Global Tower, 2,500 of their towers are leased directly from Turkcell and another 2,000 are managed by Global Tower on Turkcell s behalf. We estimate Vodafone to own around 6,300 GBTs and Turk Telekom a further 5,400, as well as using Global Tower sites across the country. Global Tower s consolidated tenancy ratio across their international portfolio is 1.4x, demonstrating that the Turkish market is already comfortable with the idea of colocating on passive infrastructure. The Universal Services Project is run by the Turkish Ministry of Communication and Transportation and aims to improve coverage to 99.99% of the country by The project has been implemented in two stages so far: phase one, for 1,100 RANshared sites, was auctioned in 2011 and won by Turkcell, who continue to operate them today. Phase two was auctioned in 2017 and was awarded to a joint venture between Vodafone and Turk Telekom, for a further 2,500-3,000 RANshared sites in rural areas. All three MNOs contractual and license requirements are predicated on the success of this Founded in 2006 by Turkcell, Global Tower manages 10,241 towers in total: 8,067 towers in Turkey, 1,201 towers in Ukraine under subsidiary UKR Tower, plus a further 828 towers in Belarus and 115 in Northern Cyprus. In April 2015, Turkcell appointed a new CEO, Kaan Terzioğlu, whose background working for Cisco in the US and Europe is believed to make him more inclined towards outsourcing and lighter operations across the organisation. Turkcell also announced in June 2016 its plans to refocus away from declining Turkish revenue and to grow international revenues from 7% of total revenue to almost 40% by expanding into North Africa, Eastern Europe, the Middle East and Central Asia. This appears to have had a knock-on effect for Global Tower, who were believed to have been exploring options for an equity sale as far back as 2015, then announced an IPO in Q216 which was postponed in October of that year. Despite Turkish MNOs traditionally being keen to hang on to their infrastructure as a competitive differentiator, Turkcell clearly saw potential in their Global Tower asset and was investigating ways to maximise this. As the towers are already carved out and managed as a separate entity, with many supporting multiple tenants and already generating revenues estimated Following the success of the Cellnex and INWIT IPOs in 2015, interest in raising funds through the IPO of tower assets was high in the tower industry. However, unlike Cellnex, whose business revolves around maximising tenancies and profits, operator captive towercos such as Global Tower have additional hurdles to overcome to demonstrate their value in the market. Questions abound around operators ability to deliver the best of both worlds and reserve space for their parent company and anchor tenant, safeguard their competitive position, while also extracting the maximum potential value from leasing up the tower network. It seems likely that, if Turkcell were expecting to achieve Cellnex-like multiples of 16/17x EBITDA from the IPO, then the reality of a potentially significantly lower valuation may well have given them cause to reconsider the move. Although at the time, Global Tower stated that the IPO was firmly postponed, there has been no further mention of floating the asset, and indeed, Global Tower seem to have turned their attentions to further international growth, particularly in Eastern Europe, the CIS and the Middle East. Whether this is a short term plan to build value before another IPO attempt or a change in strategy remains to be seen, but it would appear that all options remain on the table for this ambitious towerco. 208 TowerXchange Issue 21

209 What next for Turkey? There s no doubt that Turkey has the elements of an attractive market, with a young, urban, datahungry population and state-mandated investment in coverage. However, the current political situation means that any foreign investors will need a high tolerance for risk to get involved. If the Turkish Universal Services project succeeds in its mission to achieve 99.99% coverage by 2023, Turkey become one of the most comprehensively covered countries in the world, and plans to build thousands of new towers create opportunities in the market. However, rivalries and stalemates over other critical infrastructure, as well as Turkey s unfavourable political and economic situation mean that completing 4G rollout and beginning to put 5G infrastructure in place is not going to be plain sailing. It s possibly for these reasons that Global Tower appears to be looking to weight its portfolio more heavily towards non-turkish assets, and is seeking out opportunities in neighbouring and nearby countries. This strategy may well deliver solid results for them, as their perspective on risk will undoubtedly be very different from the other large European towercos whose experience is drawn entirely from stable Western European markets. See you at our future events! Meetup Asia December, Singapore Meetup Americas June, Boca Raton Meetup Europe April, London Meetup Africa & ME October, Johannesburg TowerXchange continues to follow both the Turkish market and Global Tower with interest, although we believe that it will be Global Tower s activity outside of Turkey which will bear fruit in the shorter term TowerXchange Issue 21

210 Deeper data - a new report on the Russian tower market A new report by Advanced Communications and Media provides more information on the Russian market than ever before Michael Alexeyev, Managing Partner, Advanced Communications & Media Consulting Read this article to learn: < Who AC&M are and their experience in the Russian telecoms market < Key facts and revelations from the report < An analysis of how Russian towers could evolve based on new evidence < Links and access to the full report Despite the world still waiting for a deal of scale in the Russian market, rumours, M&A and strategic moves still abound. For the first time, a Russian consultancy, Advanced Communications and Media Consulting, has produced a in-depth report on the market, complete with new data points and insights. We spoke with Managing Partner, Michael Alexeyev, about their experience of the market and what the report means for the future of the Russian tower market. Keywords: 5G, Acquisition, Carve Out, Colocations, Country Risk, Deal Structure, Editorial, Europe, Europe Research, Infrastructure Sharing, Market Overview, Multi-Operator, Russia, Russia & CIS, Russian Towers, Sale & Leaseback, Tenancy Ratios, Third Party Reports, Urban vs Rural, Vertical TowerXchange: Please introduce AC&M Consulting, your footprint and how the company was formed? Michael Alexeyev, Managing Partner, Advanced Communications & Media Consulting: We are a small group of people; just seven professionals in all, who have been focussing on the telecoms and media industry for the last 20 years. We grab people from the industry whenever we need to cover a specific area. Russians have a very unorthodox idea of conflict of interest so you can hire person for a couple of weeks to build a picture of a market, or hire in an expert when you need a specific skill set. As a management consultancy we focus on telecoms and media, but telecoms has been our biggest area recently. There are three arms to our business: the first is proprietary market research. We physically manage the quantitative research and have an army of researchers who can go out and do focus groups, mass polls etc. We train, certify and manage all of our team in this area, plus we have been consolidating public and non public data on the Russian market over the last 20 years, so we can build extrapolations and create all kinds of forecasts. Secondly, we have an investment banking branch. Banks often won t touch smallish deals as it s not worth the effort to do thorough research on the subject matter, so often we mandate, and one successful transaction can bring in a fee comparable to our annual turnover. Thirdly we do everything associated with due diligence and second opinion, and are often employed by the Big Four consultancies, who seek our expertise to provide services to their clientele. 210 TowerXchange Issue 21

211 TowerXchange: What made you decide to produce a report on towers? Michael Alexeyev, Managing Partner, Advanced Communications & Media Consulting: Passive infrastructure is a reasonably new area for us but we can see that the market is being shaken up at the moment and we decided we should initiate coverage with our first report. We do know the sector and were involved in it previously as we represented an interested party in negotiations when Vimpelcom brought 7,500 towers to market a few years ago. You can see from this that the purchase of a tower can only be justified if it s under 2mn roubles (around 30,000); over this number you d never be able to break even on the investment TowerXchange: Tell us about the most interesting findings from your report. Michael Alexeyev, Managing Partner, Advanced Communications & Media Consulting: One of the most interesting things is how keen the operators were to share their data with us, and to contribute to an important hub of data exchange. We asked them to disclose as much information as possible on their passive infrastructure, and we didn t have a hard time persuading them to release into the public domain. Although we have to put in place the usual provisos, the fact we obtained our data directly from the operators means it s as close to accurate as you can find. I feel the most important element of the report is the average revenue per tower per month figure. You can see from this that the purchase of a tower can only be justified if it s under 2mn roubles (around 30,000); over this number you d never be able to break even on the investment unless you got to an average tenancy ratio of 2x. Even if you hit 1.8x, which is the standard for independent towercos such as Russian Tower, you can only achieve around 50,000 roubles (around 730) per month, you end up at 600,000 roubles (~ 8750) annual revenue per site, which I estimate caps the most you can pay for a tower in relative terms at about this 2mn roubles ( 30,000 euros) number. TowerXchange: What do you think that means for the Russian tower industry? Michael Alexeyev, Managing Partner, Advanced Communications & Media Consulting: Hopefully operators will manage to depreciate most of their passive infrastructure but in reality on the balance sheet it might well be a transaction which is value diluting for the them. Building a 30m pole will cost them about 40,000 euros, so they have to sell at a price lower than cost of replacement. Because of this, I think that all this talk about major transactions is not for Russia. The very high interest rate and cost of capital is one of the key reasons for this. The evolution of the market elsewhere was down to independent investors with a very low cost of capital, and obviously then you can justify massive investment in passive infrastructure as you can have guaranteed income for decades, and if you can increase the tenancy ratio then you re made. MNOs are keen to part with their towers but the economics are such that in Russia it s just not viable. We think the Russian market will take a totally different curve. We think the independent towercos will try to out-build the operators and achieve critical mass through consolidation. Recent news of the consolidation between Link Development and Service Telecom is a part of this. We could also foresee a dialogue between Russian Towers and Vertical, which could put them up to 6,000 sites total by the end of the year. This number is comparable to the entire network of Tele2 already, 211 TowerXchange Issue 21

212 An 11m pole in Moscow is worth much more than a 55m tower on the outskirts of a small town, although the actual initial build investment in the passive infrastructure was several times higher Meetup Asia December, Singapore and the value of the Russian Towers and Vertical towers is higher than MNO towers, so evaluating those sites is another important thing. TowerXchange: How would you evaluate the sites? Michael Alexeyev, Managing Partner, Advanced Communications & Media Consulting: If you look at the average portfolio managed by an MNO it includes everything: street furniture, towers in god knows where in the Taiga, towers that are built to provide a footprint along major highways, where no one needs more capacity there where traffic is thinner and thinner. The likelihood for independent towercos to get an additional tenant on one of their street poles in Moscow is several times higher than getting an additional tenant in Ulyanovsk or Kamchatka. When you consider this, an 11m pole in Moscow is worth much more than a 55m tower on the outskirts of a small town, although the actual initial build investment in the passive infrastructure was several times higher. Ironically, this means that the assets operated by independent companies may already have a significantly higher value than some MNO portfolios, although in sheer numbers their portfolios aren t as big. If you take this figure of 6,000 sites owned jointly by Vertical and Russian Towers together, and assume it could have a tenancy ratio of x, which is much higher than the Russian average of barely 1.3x. By multiplying the average tenancy ratio by the combined portfolio of the independent market players, these assets would generate more cash than the operator-captive towers. For me, that realisation came as a shock at first, I didn t realise that before I did the maths. It gives a lot of hope to the independent players in the market. Of course, a lot depends on the international investment companies and if they come with more cash; if they stop investing for whatever reason then nothing will happen. Right now the name of the game is about who secures more deals with authorities in large cities Download the full report now at: Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

213 A sunny forecast for the future of infrastructure sharing Cellnex sees huge leaps in connectivity driving opportunity for those who commit to it Oscar Pallarols, Innovation and Product Strategy Director, Cellnex Cellnex s Oscar Pallarols, Director of Innovation and Product Strategy, predicts that increases in both connectivity and mobility will create a huge opportunity for the right players to offer infrastructure services well beyond simple grass and steel models. We discussed Cellnex s plans for capturing this market, timescales for realistic rollout and the factors which will see macro infrastructure remain relevant for years to come, albeit with new models for sharing and ownership. Keywords: 5G, Active Infrasharing, Cellnex, Co-locations, Consolidation, DAS, Data Centre, Densification, Editorial, Energy Efficiency, Ericsson, Europe, Fibre, France, Greece, Huawei, Infill, Infrastructure Sharing, IoT, Italy, Multi-Country Partner, Multi-Operator, New License, Nokia, O&M, Opex Sharing, RMS, Sale & Leaseback, Small Cells, Smart Cities, Spain, TowerXchange Research, Towercos, UK, Urban vs Rural Read this article to learn: < What has shaped current European infrastructure < How Cellnex is preparing for 5G rollout < Timescales and drivers for infrastructure change < Cellnex s 5 and 10 year forecasts for European communications infrastructure TowerXchange: Let s start with the current situation - what are the main drivers which have got European infrastructure to where it is today? Oscar Pallarols, Innovation and Product Strategy Director, Cellnex: MNOs trying to spin off their tower assets as they look for growth and to free up cash flows is not something new, it s been happening for some time, but it s an important part of the tower industry today. There s a flexibility in Europe in that they can spin out their infrastructure, sell it to a third party, or even create a joint venture sharing infrastructure with another MNO - network infrastructure demands high investment and there are many ways to mitigate this. I think rural coverage is another key factor in rollout to date. Obligations for mobile broadband coverage are harder to meet when looking at very rural spaces. I don t see it as a driving force for towerco growth, it s largely driven by government funding in order to invest in rural areas and provide what s meant to be a universal service. Elements of this still need to be clarified and what can really be shared needs to be identified. Globally speaking I see two big trends. The first is operational excellence. The P&L of any tower portfolio is looking at energy efficiency, operations and maintenance, tracking the sites remotely as much as possible and obtaining (and using) data to address problems, not just reactively but proactively and preventatively. The second trend is new business models. This is related to the sharing and management of active equipment. Towercos 213 TowerXchange Issue 21

214 are looking increasingly to small cells and DAS; it s not consolidated yet but it will become an important part of growth for any towercos in the next future.. We keep a proactive approach on this and are taking strong steps in this direction. TowerXchange: What do you see as Cellnex s strengths in the current market? Oscar Pallarols, Innovation and Product Strategy Director, Cellnex: I think one of the first things is our investment capacity. We are willing to increase our footprint but we also have a huge plan to reduce overlapping by rationalising sites, and become more efficient from a resource point of view. We re also evolving beyond the traditional towerco business as we re taking a very strong position in the DAS and small cell world. In terms of roll out, we think it will take longer than predicted as MNOs try to leverage as much as possible from their existing macro infrastructure based on technologies like M-MIMO beamforming, which can multiply data throughput by 4-5 times thanks to spectrum efficiency; or LTE Carrier Aggregation that allows to combine multiple carriers with maximums of throughput of 600Mbps; as well as Massive IoT, which allows coverage improvements, with for example +50k simultaneous connections per base station. All of these technologies or a combination of them will allow them to squeeze more from the current deployed infrastructure. Small cells are efficient for crowded areas and in-building solutions, but they re part of the marketing for a new wave of technology, and we re hearing huge numbers, talk of smart cities and new deployments. That doesn t mean the hype isn t true, but we expect rollout to take longer than predicted. We re a company with the investment capacity to grow and expand our European footprint, and that allows us to work with the same customers across boundaries, and in several countries we can create common strategies. This cross border experience will be a big driver for growth in the coming months and years. Densification is another growth vector, although it will massively happen from 2020 onwards. Most probably this will require and determine a higher sharing ratio. It does not seem realistic that each MNO will be deploying their own proprietary infrastructure as they did with macro cells. The sharing concept will have a much more prominent role in the market, and there will be a role for neutral infrastructure operators. Thus, we believe that rationalisation and densification will be driving forces for Europe. We re leveraging our scale and interest from vendors to start creating a new products and services roadmap. OEMs such as Ericsson, Huawei and Nokia want to team up to test new operational procedures and equipment, which is working well for all parties. TowerXchange: What does Cellnex believe the timescale will be for 5G rollout, which markets will embrace it first and what will drive it? Oscar Pallarols, Innovation and Product Strategy Director, Cellnex: I think we should make sure we re differentiating between 5G deployment in the largest cities in certain countries and 5G deployment at scale. That will be determined by really interesting use cases from the 5G point of view which don t originate from mobile; things such as health, vehicles, augmented reality or virtual reality. As yet there aren t any robust use cases massive enough to foresee when a 5G deployment at scale will happen. One of the sectors which is looking most likely to drive this forward is the automobile industry. Autonomous vehicles will demand resilient connectivity able to guarantee massive coverage without white spaces as well as latency and suitable speed ratios. Video will also be a big use case as it needs a lot of bandwidth. Sure, it will happen but I have doubts about the rollout timeline.. There is nowhere currently with a clear plan for 5G involving a set of shareholders like MNOs, towercos, et cetera. As such there is no reference from which you can understand what will happen worldwide. There are lab tests to validate low latency or bandwidth but there s nothing which has been proven on a functional scale. If you look at the investment required, there are four big pieces. Number one is fibre; if you look at Spain there s a lot of fibre connectivity. Telefonica, for example, have invested heavily in fibre in the country, Spanish fibre addresses 70% of the population already, whereas in the UK it s less than 50% of the population. Secondly, we need to look at what the spectrum fees will be in different countries and if the amount of spectrum increases will the price we re paying for it remain the same? Thirdly, 214 TowerXchange Issue 21

215 in terms of the price of equipment, if it s all shared there ll be a lower TCO as one box will serve three or more operators but it needs to be complemented with a fully operational platform. Finally, the investment to provide the service to 5G is based on use cases which have not yet been identified. TowerXchange: Talk us through how Cellnex is preparing for 5G rollout and how your existing competencies can support that. Oscar Pallarols, Innovation and Product Strategy Director, Cellnex: We acquired Commscon 18 months ago, a small cell and DAS company which was a functioning business we could build on top of. We recently leveraged their expertise to deploy a DAS network in the Atletico de Madrid Stadium as a neutral host. The acquisition of Alticom in The Netherlands brought us broadcasting as well as telecom services provisioned from high towers, but the reason we liked the asset was because their know how on data centre location as well as edge computing as this will play a critical role in keeping latencies lower in 5G infrastructure. Thus, storage and computation will move closer to end-users to enable new services and applications that will live and grow within the 5G ecosystem. We have other work streams in the pre stages, plus innovation and research activities. One example would the 5GCity project, a 2020 Horizon Programme project funded by the EU.. It involves three major cities - Barcelona, Luca and Bristol - aiming to deploy a distributed cloud and radio platform for 5G neutral hosts. the reason we liked [Alticom] was because their know how on data centre location as well as edge computing as this will play a critical role in keeping latencies lower in 5G infrastructure In terms of multi operator and multi band small cells, we will be managing the site as a service and based on the demands of the MNO. We re testing this out at the moment but we have a good asset in house as we manage end to end networking in Barcelona already, and we have the expertise to manage the network from one end to another (with the exception of owning the license). We have the engineers, control rooms and the understanding of different technologies. TowerXchange: Looking ahead to five years from now, what do you envisage the major changes in communications infrastructure being? Will things have changed dramatically? Oscar Pallarols, Innovation and Product Strategy Director, Cellnex: There will definitely be changes. Densification will happen. For instance, if we talk about the Mediterranean coastal resorts in France, Italy, Spain and Greece, tourism will be a driver to deploy a second level network for capacity hotspots. Secondly, there will be more sharing scenarios as services will converge, reducing investment in opex. There will also be a change to the towerco s need for fibre, all the traffic needs to have high speeds at the core of the network which will only happen with fibre rollout as it s much more complicated. TowerXchange: Skipping ahead to 2030, what is Cellnex s vision for your role in the market? Do you think towercos as they exist today will have a role to play? What competencies will be needed? Oscar Pallarols, Innovation and Product Strategy Director, Cellnex: The role of towercos in 2030 is hard to assess. Maybe in 13 years all this will be more or less a commodity, MNOs will converge on third party networks and maybe also spectrum. They ll become more focused on content and solutions for specific verticals and use cases. There will be a huge amount of devices connected, the popular figure is that there will be 50bn people and things connected in we have no doubt the figure will be hit, but perhaps not as soon as The level of connectivity and mobile connectivity will increase dramatically - both the amount of connectivity and how many moving parts there are. Networks will be more dense and infrastructure will need need to be more dense. Macro cells (if they still exist) will be shared more, whoever manages and operates them - we can be sure that sharing ratios will increase 215 TowerXchange Issue 21

216 The edge of tomorrow: WIG s vision for future infrastructure Embracing the opportunity to create infrastructure on the edge of the network Small cells in Aberdeen As traditional telecom architecture continues its evolution towards IT architecture, and network priorities shift towards the increased speeds and reduced latency required to meet 5G demands, towercos must also evolve and be ready to capture the infrastructure opportunities which will come with enabling this shift. TowerXchange spoke to Scott Coates, CEO of Wireless Infrastructure Group, about his vision for independent wireless infrastructure at the network edge and how WIG is preparing for new opportunities both through building skill sets and new, collaborative relationships. Keywords: 4G, 5G, C-Level Perspective, C-RAN, Centralised RAN, Co-locations, DAS, Data Centre, Enterprise, Europe, Europe Research, Fibre, Multi- Operator, Network Rollout, RAN sharing, Rooftop, Sale & Leaseback, Small Cells, Towercos, United Kingdom, Urban vs Rural, Wireless Infrastructure Group Read this article to learn: < An overview of the current infrastructure market < Why towercos are well placed to roll out small cells < Whether small cells could be seen as a threat to towercos < Five and 10 year visions for communications infrastructure, and where the opportunity lies TowerXchange: How would you characterise the current telecom infrastructure market? Scott Coates, CEO, Wireless Infrastructure Group: What s interesting is that when mobile networks first rolled out, towers were the primary infrastructure asset, but the independent wireless infrastructure or towerco sector didn t exist, it came along later. Most of the towercos built their portfolios through sale and leaseback processes. There was some build to suit, but most of our sector s growth has been through purchasing towers, upgrading them and opening them up for other networks. What s exciting about small cell rollout is that it s a whole new layer of infrastructure which needs to be built and independent infrastructure operators will be there from the beginning. If we can deliver solutions and lower TCO for our customers then our sector should be set to play a significant role in the deployment of small cells. The potential requirement of 10 small cells for every one existing macro could create a market opportunity as large as towers over the next years. If you listen to some of the commentary out of Crown Castle it certainly chimes with this view. I d characterise the current market for small cells here in the Europe as established and growing rapidly for indoor and early stage or emerging for outdoor. We launched our indoor business five years ago and it has fantastic momentum across a range of verticals. Our customers have really responded to the business model and our 216 TowerXchange Issue 21

217 commercial approach. We don t expect to see the outdoor market gather real momentum for another two to three years and certainly by the time we see 5G. However, work is happening now to prepare for this - we are doing smaller scale deployments and using these opportunities to get the relevant building blocks in place (such as the people, skills, assets and relationships) in preparation for wider rollout. TowerXchange: Tell us about the value you re adding for your customers and why you re best placed to roll out small cells. Scott Coates, CEO, Wireless Infrastructure Group: Deploying outdoor small cells efficiently involves managing a lot of moving parts. When we were appointed wireless infrastructure partner to the city of Aberdeen for example, we formed a steering group involving several key city departments such as planning, traffic and streetlight management. We worked though as many what-if scenarios as possible and shaped new processes for the deployment and operation of our infrastructure that could survive the challenges we might encounter such as pole swap-outs, installations on traffic lights and routine or reactive maintenance. We took time to create a rule book that we could use in Aberdeen and carry into other cities and this approach paid off, with the construction of the network completing in under two months. Experience of handling assets in this type of busy environment with multiple stakeholders is a key value we can now bring to our customers but we also need to do this in a way that lowers TCO. We don t consider small cells a real estate play - agreeing to pay a city or the asset owner a fixed amount to use their lampposts and then recharging this at a margin to MNOs is not a model we think has much of a future. Instead we believe that our role is to create the underlying infrastructure solutions and for us that means owning fibre and aggregating MNO demand onto our fibre assets. I think there is real opportunity to lower TCO by deploying the same commercial philosophy that we have for DAS and build to suit towers. TowerXchange: Can you go into a little more detail about the network you have recently activated in Aberdeen? Scott Coates, CEO, Wireless Infrastructure Group: WIG has constructed a fibre connected network of multi operator small cell nodes. It s a contiguous network across the city centre and also passes high footfall areas around the central railway station, university and football stadium. WIG designed and constructed the network and deployed multiple 217 TowerXchange Issue 21

218 fibres to each node which all connect back to a central hub. Telefonica are the first MNO to launch on our network and are utilising C-RAN architecture which is a first in the UK market. We are delighted with the performance of the network and we plan to expand it. More generally, we see some small cells being deployed using wireless backhaul but we are focused on creating long-term infrastructure that can support C-RAN and other fibre-hungry architectures. Supporting more processing at the edge of the network is key to lowering latency and using network resources more efficiently. It is interesting to see towercos announcing plans for mini data centres on tower sites, further addressing this need for local processing capability. Networks of old were based on telecoms architecture but new networks will have a stronger IT feel to them. The opportunity we see is to create the independent wireless infrastructure at the edge of networks. TowerXchange: Tell us more about your fibre rollout plans Scott Coates, CEO, Wireless Infrastructure Group: We believe there is a demand and an opportunity to deliver bespoke fibre networks that support existing mobile backhaul in a particular city but crucially, also deliver the platform to add smalls cells as they are required. This will need us to deploy our own fibre and we are expanding our team to do that. There s lots of duct already out there, meaning we can avoid major digs if we can get access. From a regulatory point of view, there needs to be access to BT Openreach s duct in the UK and this is already available to the national telcos in other European markets. There is also a need to expand our relationships from the tower space as we did with our indoor small cells business five years ago. This means a broader set of relationships with cities and local authorities. There are a few challenges in this area as some local authorities are placing their street assets out for tender and taking a very short-term view, focusing on maximising revenue rather than unlocking significant long-term investment in their city. We think this is a missed opportunity, particularly outside of London. TowerXchange: Do you think the new network architecture could be seen as a threat to towercos? Scott Coates, CEO, Wireless Infrastructure Group: We expect to see two main trends in network activity over the next few years more capacity in urban and indoor locations and a journey towards ubiquitous coverage in rural areas. More towers will be needed in rural areas and elsewhere outside of urban centres but in cities we expect to see the capacity expansion addressed through small cells. TowerXchange: What s your prediction for towers five years from now? Scott Coates, CEO, Wireless Infrastructure Group: In five years we will be in full scale deployment of small cells. There will be continued demand for indoor systems, in both bigger and smaller buildings, and also strong demand for outdoor small cells. The question is who will be investing to deliver the infrastructure? I think it s worth looking to the US for a good forward view as they re well ahead of Europe in the deployment of fibre connected small cells. Crown Castle and Extenet are involved, as well as fibre-only players like Zayo and carriers ATT and Verizon are also doing it for themselves. It s a big enough space to support and require all of these players to be investing and Europe will need similar engagement from across the sector. We certainly see small cells as an attractive and additive space to be investing. TowerXchange: What about 10 years from now? Will we still have towercos? Scott Coates, CEO, Wireless Infrastructure Group: We ll have independent wireless infrastructure companies which is what we call ourselves already. Some of those will address customer needs with a mix of tower, fibre and other wireless infrastructure assets and some players will probably remain pure towercos, there s still room for both models. If you look at DAS, five years ago people thought it was an odd thing to be doing in Europe, with just WIG and Commscon rolling out neutral host solutions in any meaningful way, but now it s much more mainstream. Small cells will get that way as well, now it looks a bit R&D but it will move to the top of the strategic debate as the scale of demand emerges 218 TowerXchange Issue 21

219 INWIT s vision for the future of towers How 5G, faster speeds and lower latency will change telecoms infrastructure Oscar Cicchetti, CEO, INWIT Read this article to learn: < How INWIT thinks 5G will roll out in Europe < Where 5G will drive the biggest shifts in telecoms infrastructure < How INWIT is currently preparing for 5G rollout < Predictions on how the industry will change in five and ten years < Threats to towercos posed by 5G and how they can be mitigated INWIT are leveraging their close MNO relationships to accelerate small cell rollout in Italy. But between their current deployment plans and the infrastructure needed by 2030 is a significant gap. TowerXchange spoke with INWIT CEO, Oscar Cicchetti about his vision for the future of towercos, INWIT s plans and how quickly he anticipates infrastructure players will need to change to meet market demands. Keywords: 4G, 5G, Co-locations, DAS, Data Centre, Decommissioning, Europe, Europe Insights, Europe Research, Fibre, INWIT, Infrastructure Sharing, IoT, Italy, LTE, Multi-Operator, Operator-Led JV, RANsharing, Small Cells, Smart Cities, Towercos TowerXchange: How does INWIT think 5G will roll out in Europe? Oscar Cicchetti, CEO, INWIT: 5G is coming. MNOs and vendors are working on the standard and on the key technologies needed for the new network features. Several trials are up and running in order to better understand and shape the potential business models, the risks and opportunities. I ll start by focusing on the two main features promised by the new standard: speed and latency. In terms of speed, the expectation is to go from 100MB for 4G to 10GB delivered by 5G. In terms of latency, the new technology should allow to move from milliseconds to just one millisecond. Even if we just consider these two key features, it s immediately clear that 5G will not be just smartphones. Smartphones, even with an intensive use of video, don t need these extreme features. That is to say that we have incredible capabilities ahead of us, but it s not yet known what the customers and players will do with it. The whole industry is looking to 5G rollout to see what kind of use cases will be made possible by the new promised features. Moving to actual 5G deployment, it s clear that between now and 2020, 5G is expected to be deployed in the Far East and the US. The first use case in the US seems to be using 5G to provide ultra-fast broadband in areas where fibre is not available, while in Korea MNOs will probably start 219 TowerXchange Issue 21

220 with the next wave of services, as there are many areas where 5G seems to be very promising, in particular robotics and smart production, augmented reality for professional and consumer applications, low latency connections for connected cars and platforms for connected objects. Again, the main issue our industry has to address is a better understanding of use cases. TowerXchange: 5G could be a game changer for players across the mobile value chain, where do you think the biggest changes or relationship shifts will take place? Oscar Cicchetti, CEO, INWIT: If you look at what s going on now, I think that the separation between infrastructure based business models and service based business models starts to become very clear. What happened in the US, where over 80% of wireless infrastructures are now managed by towercos, is taking place everywhere in the world. If we try to understand the European route to consolidation, it s clear that there is a delay, because the tower industry is only taking off now. But, on the other hand, the towers have already been built up. The difference between Europe and the US is that there s no big room for new BTS projects. Consolidation in Europe is and will be more focused on decommissioning than BTS. I expect Europe s consolidation will come in the form of MNOs undertaking sale and leasebacks transactions or consolidation among existing towercos. TowerXchange: How will infrastructure change over time? Oscar Cicchetti, CEO, INWIT: The current situation is very clear: the infrastructure business models of towercos are real estate business models. Operators and investors look at towercos as real estate providers but they are something more than that. In the path from 4G towards 4.5G and 5G, MNOs will be called to heavily invest in spectrum and new network technologies, but it is not yet clear where and how they can get an adequate return. As a result they re increasingly willing to share, in order to reduce the total cost of ownership of their networks. If the operators decide to not only share towers, but also additional infrastructures, the towercos can fruitfully expand on those new services. Let s consider one of the most likely new sharing area: small cells. In the new network architectures, for several reasons, many more antennas than now will be needed. In a 5G fully deployed scenario, a single operator will need at least 10 small cells for each macro cell, so we re talking about hundreds of thousands of small cells in single European country. It s likely that MNOs will be willing to share among them a relevant part of this new assets and to use a third party as a provider. This translates into an opportunity for neutral host players able to offer small cells as a service and towercos are very well positioned to play this role. What s happening in the US confirms this trend. TowerXchange: What is INWIT currently doing to prepare for 5G rollout? Oscar Cicchetti, CEO, INWIT: First of all, it s worth mentioning that we are the leader in Italy for traditional towers. With our 11,000 high quality towers and special relationship with TIM, as well as the with other MNOs, mainly Vodafone, we are often chosen to provide the new macro towers which MNOs might need in densification projects. Secondly, we believe that small cells will have a significant role, not only in 5G deployment but also in the path from 4G to 5G. We want to position INWIT as the main neutral host in this transition. We re at a very early stage of the process, and are currently trying to pinpoint areas where shared micro-coverage is or will be needed in the near future. In addition to that, we have noticed that operators at this stage are looking also for single operator small cells. They believe that in some cases having single operator micro-coverage can be a competitive advantage. We don t want to lose this opportunity, so we include this offering in our portfolio. We now offer two services: coverage as a multi-operator neutral host and single operator solutions. We have included 4,000 small cells in our plans 220 TowerXchange Issue 21

221 to the end of This number for this stage of deployment is relevant but is in line with the market s needs. Just a couple of years ago MNOs were planning hundreds, not thousands, of small cells but now the demand is taking off and we see in this a potential exponential growth. Our goal is to become the neutral host of choice by quickly reaching an appropriate scale through agreement with the owners of the most relevant locations and in tune with the plans of our customers. TowerXchange: Can you talk us through how you see your role in 5 years? Do you think it will change significantly? Oscar Cicchetti, CEO, INWIT: We believe that we could move from a real estate business profile to something else. If towercos want to fully value the relationship with MNOs, they have to deal with a next generation infrastructure business model. I do believe that in this second wave of shared infrastructures there will be many opportunities for towercos. I ve already cited the first that is on the radar screen: small cells. Small cells are an infrastructure business, being characterized by long term contracts with landlords and MNOs. In term of numbers, we have two dots to be connected, the first is the few thousand small cells of today, the second is the hundreds of thousands in the longer term. The line between those two dots could take any shape and will be driven by the market. In five years it s impossible to tell if we ll be at 20,000 or 40,000 or even 80,000 small cells. There are several different players who could get a slice of the small cells pie, such as facility management providers in buildings, but we believe towercos have a competitive edge as they know the MNOs and there are many commonalities between tower workflow and small cells workflow, such as dealing with landlords, providing energy and civil infrastructures, managing the relationship with MNOs. TowerXchange: Are there other infrastructure elements to be considered in five years time? Oscar Cicchetti, CEO, INWIT: I d like to mention two opportunities that could materialize in the next five years or more: tower data centres and 2G refarming. Let me start with tower data centres. As mentioned previously, one of the two relevant figures for 5G is the low latency, with robotics and self-driving cars as services that will need it. But the real latency that the user is interested in is the application latency. We experience how much time we need to get a video or a webpage, not the latency of the radio subsystem. If we consider this, to obtain an end-to-end low latency the content should be closer to the users, as it could take one millisecond to reach the antenna, but then nine or ten milliseconds to reach the app in the cloud. One solution is mobile edge computing, which takes the content closer to the customer. And it s reasonable to expect that this higher proximity to the customer should be at the tower base. In the future, towers should include a new structure called a tower data centre where MNOs can put a cache or protocol acceleration server to deliver end to end low latency. Also for tower data centres we have a relevant advantage as towercos as we have the towers and space around, so if someone wants to build a distributed data centre there s no better place. As far as the refarming is concerned, we have seen the rollout of 2G, 3G and 4G and we are now implementing 5G; some of these technologies could be switched off sooner or later. There are differing points of view. 3G seems to be the most likely to be switched off because it was deployed to provide data services, but 4G and 5G can do that better than 3G. On the other hand 2G could have a longer life, as it will continue to be used by the visitors coming from less developed countries and by the first generation of IoT implemented on GPRS which will make it very hard to be switched off. But, on the other hand, 2G is on frequencies that could be better used in the more remunerative 4G/5G services. It seems reasonable to guess that in the future operators 221 TowerXchange Issue 21

222 could agree to have just one 2G network using a limited shared spectrum such as 5MHz to free up more spectrum for 4G or 5G. Should this happen a third reliable party like a towerco can manage the shared network. TowerXchange: We are at the beginning of a huge evolution for the mobile industry. We ve talked about opportunities, but what does INWIT see as the biggest threats for towercos over the coming years? Oscar Cicchetti, CEO, INWIT: In terms of threats I think first of all it s about the health of our customers. The mobile industry needs to grow and if the operators stopped investing in and growing their businesses, we would fail with them. We need the mobile industry to continue to be relevant, but there s no indication this could be a real threat. Another threat we need to consider in our business model is RAN sharing. An operator could decide not to have its own nodes on the towers, but to use nodes of other operators. This issue can be easily addressed through appropriate contractual provisions. RAN sharing should be either forbidden or towercos can charge more for it. Currently, there are very few cases where RAN sharing is taking place in Europe. TowerXchange: What are your thoughts on network virtualisation? Do you see this as an opportunity to extend your offering? Oscar Cicchetti, CEO, INWIT: Network virtualisation is something that is happening now. In general, we could say that the network intelligence will move towards two opposite trends: virtualization will move network features from the borders (Radio Access Nodes) to the core while the mobile edge computing will move contents from the core to the borders (tower data centers). In concrete terms, we are already seeing the operators implementing cloud RAN architectures where, among other features, a single baseband module will be serving several radio modules. So there would be one master node with baseband and some other satellites without it. This can translate into an opportunity for the existing tower contracts because no changes are expected in the towers without baseband modules as they will maintain radio unit and antennas, while in the master towers MNOs could require more space and consequent price uplift could be asked. TowerXchange: What willl telecoms infrastructure look like in 2030 and what role do you expect INWIT to play? Oscar Cicchetti, CEO, INWIT: I d like to quote a GSMA white paper on 5G that says it will be likely that in the future the operators will agree to operate just one network and transform themselves into service providers. This was written by the operators themselves. Whatever date in the future we choose for this, the trend is that the operators will be pushed to share more. This could be the final twist in the story and it s likely that towercos are well positioned to partner with operators Meetup Europe April, Business Design Centre, London Featuring TheFutureNetw rk The 3rd Annual retreat for European Tower experts TowerXchange Issue 21

223 Towercast sale could prove influential in French market The news that France s only remaining broadcast towerco is on the market has garnered interest Read this article to learn: < Background on the French tower market < What is for sale < This deal in the context of other French tower deals < Who will bid French media group NRJ has announced its intention to sell broadcast towerco Towercast, a competitor to TDF, which offers DTT and FM broadcast services via 500 sites across France. Declaring that Towercast isn t a fit with NRJ s core business, it s believed NRJ hopes to raise up to 300mn from the sale. TowerXchange takes a look at what s on offer, how this sale could affect market dynamics and who the leading bidders are likely to be. Keywords: Acquisition, American Tower, Arcus, Brookfield, Cellnex, Consolidation, EBITDA, Europe, Europe News, France, Infrastructure Funds, Infrastructure Sharing, PSP, RANsharing, Roaming, Sale & Leaseback, TDF, Tenancy Ratios, TowerXchange Research, Towercast, Towercos, Valuation France is one of Europe s most investible tower markets, and the aggressive market entry of Iliad s Free Mobile in 2012 has shaken up incumbent MNOs Orange, SFR and Bouygues Telecom, driving down tariffs and ARPU amidst the huge capital expense of spectrum and network densification for 4G. The French market is host to a diverse array of established independent infrastructure owners in Cellnex, ATC Europe and TDF. Operator Bouygues has embraced the sale and leaseback model and Free Mobile, which is looking for growth without heavy infrastructure investment and is coming to the end of a roaming agreement with Orange, are both very open to third party towers. Added to this is a good amount of M&A, particularly of smaller, entrepreneurial towercos such as FPS or ITAS, meaning whole European ecosystem seems distilled into the French market. Key players in the French market TowerXchange has closely followed tower deals in France over the last few years. On 19 December 2016 American Tower announced the acquisition of French FPS Towers for 697mn. The sale of Antin s FPS Towers - around 2,500 towers acquired from Bouygues in 2012 and grown into a towerco with an impressive track record - garnered plenty of interest in the tower industry, and saw American Tower make a significant step in terms of their commitment to the European market. Cellnex have gained their foothold in the French 223 TowerXchange Issue 21

224 market in three tranches: in 2016, they acquired 230 and 270 towers from Bougyues, across two transactions. Their third deal, in 2017, was split into two phases: the first or 1,800 existing and operational sites for 500mn. Cellnex stated that this portfolio was for urban sites, which TowerXchange believes consists primarily of rooftop sites. The second part of the deal provides for the construction of 1,200 new towers , in a deal worth 354mn. TDF, Towercast s direct competitor in the broadcast market, has undergone some significant restructuring over the last five years, with an increased focus on the French market. In 2016 they acquired broadcast towercos ITAS for an undisclosed amount in excess of 100mn. Communications infrastructure in France While Bouygues Telecom has divested the majority of their towers, Free Mobile has few of their own towers as a function of a roaming agreement with Orange which had been due to run through 2020, but which will now be phased out from 2017, meaning they will need to leverage independent towers even more. There is a good culture of infrastructure sharing in France, where many network planners seem inclined to buy rather than build towers. There are a total of 62,794 points of service spread across 47,347 telecom structures, including ground based towers, rooftops and other structures, giving a prevailing tenancy ratio of However, the Tower deals in France since 2012 Year Buyer Seller # Sites Deal value Cost per site 2012 Antin/FPS Bouygues 2, ,000, , Cellnex Bouygues ,000, , Cellnex Bouygues ,000, , TDF TAS ,000,000* 238, ATC Europe Antin (FPS Towers) *The full amount has not been disclosed. It is believed to be in excess of 100,000,000 tenancy ratio on ground based towers is around 1.5, and even higher on sites proactively marketed for co-location: France s oldest towerco, broadcasttelecom hybrid TDF has a tenancy ratio of 1.8 on their 4,865 telecom towers. The value of assets in the French tower market is particularly sensitive to the governance of RANsharing, given the propensity of French MNOs to enter such partnerships. The 4G RANsharing partnership between Bouygues Telecom and SFR 2, ,000, , * Cellnex Bouygues 1, ,000, ,778 Source: TowerXchange is due to end in late 2018, ending concerns about a possible knock on effect on French tenancy ratios. Broadcast towers in Europe Towercast isn t the only broadcast asset up for sale in Europe at the moment. The UK s broadcast behemoth Arqiva is currently exploring options, with a bidding process reaching the final stages as of September While Arqiva s bread and butter lies in broadcasting, the company has maximised its assets to accelerate growth in its telecoms unit, 224 TowerXchange Issue 21

225 What is the breakdown of the high sites used by the French telecom industry? And who owns them? which grew 9% in FY16, accounting for 36% of Arqiva s revenue. Cellnex, who (as Abertis) began their journey in communications infrastructure as broadcast tower owners, now generate 55% of their annual revenue from their telecoms business unit and just 33% from broadcast. In addition they acquired Dutch broadcast towerco Alticom in 2017 for 133mn. In Italy, broadcast towerco EI Towers spun out their telecoms arm into the highly successful TowerTel, and Spain s second broadcast towerco, Axion, was recently acquired by AMP Capital. Broadcast assets are used (and monetised) for telecoms purposes right across Europe, including of course, TDF, who generated 43% of revenues from telecoms in Ground based towers 1. Orange 8, SFR 5, TDF 7, ATC France (formerly FPS Towers) 2, Cellnex (acquired from Bouygues) 4, Free Towercast Other structures not belonging to towercos or MNOs 2, Other ground based structures 7,500 Rooftops structures with telecom equipment 10. Rooftops sites sourced directly by MNOs 13, Rooftop sites provided by TDF Rooftop sites provided by FPS Towers Rooftop sites sold to Cellnex 1,450 Rooftops without telecom equipment installed, but for which a towerco has a commercialisation agreement: 14. TDF 2, FPS Towers 20,000 Sources: TowerXchange research, ANFR, FPS Towers, TDF What s for sale? Towercast owns around 500 towers across France, with a focus on DTT and FM transmission. The broadcast towerco is owned by media group NRJ, a one-time pirate radio operation which now owns five radio networks. NRJ has been close to a sale before, most notably in 2014 when the process was whittled down to two bidders and the sale was believed to be a done deal, only to fall at the final hurdle, reportedly on price. This time around, CEO Jean-Paul Baudecroux told Le Figaro Towercast is very profitable and could be worth more than 300mn. Tower cast is not in our core business and its membership of our NRJ Group is even today a handicap to attract new customers 225 TowerXchange Issue 21

226 An independent buyer could diversify customers in the audiovisual sector and also in telecoms, where Towercast offer some solutions, but does not have a comprehensive offering. Last year, Towercast generated sales of 55 million and EBITDA of 27 million, but Baudecroux believes revenue could grow by as much as 20-25% by acquiring a more diverse client base across both broadcast and telecoms. The figure of at least 300mn reflects NRJ s ambitions to raise 11 to 13x Towercast s EBITDA of 27mn, which would not seem an unrealistic goal, given recent valuations in communications infrastructure. However, Towercast s revenues were down by 12.8% and operating income down 24% last year, much of which was related to the French government s decision to sell the 700MHz band range to telecom companies, resulting in the loss of two multiplexes and seeing a sharp drop in profit. Although Towercast received compensation of 18.2mn, it seems that re-grouping and driving the business in a new direction is not something for which NRJ has the appetite, and this need for a new strategy may well knock on to the valuation of the business. Potential buyers NRJ claims to have received interest from both investment funds and industry buyers, and if the company s valuation is hampered by a recent drop in profit, it certainly won t be impeded by investors appetite for French towers, with several parties very likely to want to add to their French portfolio. Cellnex It s highly likely Cellnex will be interested in this asset. Given their growth strategy is to enter a market, establish themselves and then consolidate, this opportunity to gain a further 500 high towers with ready-made broadcast and telecoms tenants seems a good fit. Cellnex also have a proven track record in both telecoms and broadcasting, giving them the skills and relationships needed to really maximise the opportunity. American Tower American Tower s partnership with PGGM and subsequent acquisition of FPS towers at the end of 2016 did not open the floodgates to an increase in European acquisitions, however their acquisition of FPS shows their commitment to the French market, and that they see growth as an important part of their strategy in the country. This opportunity to grow their French portfolio by 20% and diversify may well encourage them to enter the bidding process with increased alacrity. TDF/Brookfield/Arcus/PSP For TDF this could be a triple win - both extending their coverage, acquiring new clients and removing their last competitor from the broadcast market. The fact that their main investor, Brookfield, is believed to be leading the pack in the bidding process for Arqiva in the UK, shows that they have plenty of appetite for broadcast assets with telecom co-location potential. Some industry experts have been questioning whether the French government would allow TDF to gain a monopoly over broadcasting infrastructure, given the fact that they acquired the other French broadcast towerco, ITAS, in A deal like this would certainly be subject to scrutiny, whoever the buyer, and the French regulator is certainly keen to discourage consolidation on the operator side. Whether this would extend to infrastructure remains to be seen. First State Investments Owners of Finnish broadcasting asset Digita since 2012, Australian First State Investments has seen the company grow and flourish in both tower numbers (from under 100 to 556 towers), diversification of clients and diversification of offering. Although they haven t been linked to any other tower deals in Europe this year, it s worth considering them as potential bidders for this smaller broadcast towerco which falls firmly within their field of experience. AMP Capital AMP Capital acquired Spain s second broadcast towerco Axion in With 582 towers, Axion is similar to Towercast in both size and market position. AMP also own Towercom, Ireland s largest towerco, and may well be looking to grow their presence in the sector. GIC The sovereign wealth fund of Singapore, GIC bid (unsuccessfully) for a stake in Telefónica s infraco Telxius when it was available earlier in 2017, but lost out to KKR. As investors in Africa s 226 TowerXchange Issue 21

227 largest towerco IHS Towers, they also have solid credentials in telecoms infrastructure. Digital Bridge This US based towerco platform was founded by Marc Ganzi and Ben Jenkins, who have invested heavily in telecoms infrastructure since the company s inception in With tower assets in the US, Mexico, Colombia and Peru and neutral host asset Extenet Systems, they ve been looking for the right foot in the door of European towers for some time, and will be considering opportunities in France. KKR Linked to European tower acquisitions including Oi s potential sale of Portugal Telecom s towers in 2014 (which didn t materialise as the whole organisation was sold to Altice) and most recently successful bidders for the 40% stake in Telxius. KKR is a global alternative asset manager focusing on private equity, fixed income, and capital markets. Competitive process Industry speculation is naturally focussing mainly on the three competing towercos already in the French market: TDF, Cellnex and American Tower. Current market conditions, including Free Mobile s need for more coverage and the end of Bouygues and SFR s RANsharing deal, are allowing the three large towercos to grow but the finite nature of the current growth means any chance to get ahead in France will be highly valuable to the key players. We expect to see the bidding for this asset to be hotly contested See you at our future events! Meetup Asia December, Singapore Meetup Americas June, Boca Raton Meetup Europe April, London Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

228 Arqiva IPO cancelled The latest news and opinion on Arqiva UK infrastructure giant Arqiva, owned by a consortium including the Australian investment bank Macquarie and the Canada Pension Plan Investment Board, has most recently cancelled their decision to IPO, following the announcement on 23rd October that they planned a flotation on the London Stock Exchange. Keywords: 4M Investments, 5G, Acquisition, Allianz, American Tower, Arcus, Arqiva, Borealis Infrastructure, Brookfield, CKI, Crown Castle International, DAS, Digital Bridge, Editorials, Europe, Europe Research, Exit Strategy, GIC, Global Tower, IPO, Infrastructure Funds, Investment, IoT, KKR, PSP, Private Equity, Research, Small Cells, Smart Cities, Towercos, Valuation Read this article to learn: < Insight into Arqiva s telecoms assets < How Arqiva s telecoms and small cells units fit into the wider business < What the cancellation of the IPO means for Arqiva < What this means for the future of European towercos Complications surrounding Arqiva s 3bn debt pile were thought to have made a sale look more appealing, and bids and negotiations were ongoing over the summer, but its believed that talks with the last remaining bidder, a consortium led by investor Brookfield, ended without an agreement and an IPO bid was announced then swiftly cancelled. Despite some political and economic instability in the UK caused by the Brexit vote, Arqiva remains an attractive asset in an attractive market, and interested parties may come back to the table. TowerXchange digs deeper into Arqiva s background and takes a look at the potential outcomes of this process. Arqiva history and background With over 60 years history in broadcast infrastructure, Arqiva is one of a uniquely European breed of towerco which has grown up from a solid history in television broadcasting and now owns a large chunk of both broadcast and telecommunications infrastructure in their home country. The company has a long history in the UK starting at the beginning of the 20th century with roots going back to the ITA (Independent Television Authority) in the 1950s. Through a series of mergers and acquisitions, mainly in the early 2000s, Arqiva now consists of those ITA assets, as well as former BBC broadcast towers and National Grid Wireless infrastructure. Arqiva in its current iteration is responsible for all 228 TowerXchange Issue 21

229 UK television broadcasting and was responsible for implementing the digital switchover which occurred in the UK in They also do most of the radio broadcasting in the UK and buy wholesale satellite capacity to resell all over the world. The company has recently invested heavily in an M2M division, winning the UK government s smart meter tender for the north of the UK and Scotland, making them one of the biggest players in the UK, while Arqiva also has exclusive rights of the SIGFOX technology in the UK. In terms of telecom infrastructure they own roughly 25% market share in UK macro tower sites. Arqiva services all of the four MNOs and has around 8,600 active towers for these mobile operators. Their tenancy ratio is around 2.5x. Although they have 8,600 active towers, the total portfolio consists of over 16,500 towers (the remaining ~8,000 towers are not active due to MNO rollout plans, rural locations where demand is low or deployment complexities as many of them are not dedicated telecoms infrastructure, such as electricity pylons) In the past, Arqiva s reputation has dipped in terms of delivery to clients, but the organisation has been working hard to turn around client relationships, and the appointments of CEO Simon Beresford- Wylie in June 2015 and subsequently of CFO Liliana Soloman in 2016, have been integral to this, with impressive growth across the business in Beresford- Wylie s first year at the helm. The company has long term and secure contracts Over the last few years Arqiva has aggressively pursued a leading position in the UK s growing small cells market, tendering for (and winning) street infrastructure in several London and Manchester boroughs as well as working with Virgin Media Business on assets in other major UK cities with both MBNL (an infrastructure sharing joint venture between EE/BT and 3) and CTIL (a similar joint venture between Vodafone and O2) and grew the M2M and telecoms business unit by 6.4% in FY Over the last few years Arqiva has aggressively pursued a leading position in the UK s growing small cells market, tendering for and winning street infrastructure in several London and Manchester boroughs as well as working with Virgin Media Business on assets in other major UK cities. Although Arqiva s focus on small cells and future networks sets them up for potential future growth, investors close to the process lead us to believe that the bulk of Arqiva s valuation is predicated on their core revenues in broadcasting and macro infrastructure for telecoms. With this in mind the lifespan of DTT is considered possibly the most critical factor in deciding the value of the asset. And to Arqiva s credit, growth came from the more traditional parts of the business as well, as Arqiva s broadcast business grew 4.6% in the last financial year following significant new contract wins and renewals. All in all, Arqiva represents a significant asset with 79% of the UK s independent towers, improving relationships with clients, solid broadcast assets and a good foothold in the growing UK future networks. With a valuation of 6bn, there has been plenty of interest from investors keen to acquire a slice of UK infrastructure. 229 TowerXchange Issue 21

230 Figure one: Who owns the UK s 37,282 telecom towers? was sold to KKR for 1.275bn, whereas Global Tower s need for capital appears less acute. 12,000 16,500 12, Cellnex CTIL MBNL Arqiva Wireless Infrastructure Group Shared Access Spyder Hibernian/Britannia Towers What next? Having explored their options in terms of both a strategic sale and a public offering, Arqiva may well choose to wait and allow the dust to settle. Holding off and giving their accomplished management team time to prove their turnaround is sustainable will give Arqiva breathing room to close the gap between their own valuation and what strategic buyers will pay, however without significant restructuring Arqiva s debt will continue to have an impact on its valuation. Why the U-turn? It s telling that the time from IPO announcement to cancellation was so short, implying that Arqiva s valuation was not closely aligned with the market s. There s no doubt Arqiva s new management team has made great improvements but the cost of debt has swallowed up profit and put them further into the red each year. The markets excitement about telecom towers and small cells has been offset by uncertainty about the debt pile and the longevity of Arqiva s broadcast core, which accounted for 47% of revenues in the year to June, compared to just 33% of Cellnex s revenues for FY Commentators have been speculating about the longevity of Digital Television Transmission (DTT), which itself replaced Source: TowerXchange analogue transmission in 2014, although Arqiva has refuted these comments, saying hybrid platforms such as Now TV will maintain the relevance of digital broadcasting. Arqiva is far from the first tower company to change their mind about an IPO over the last few years. In September 2016, Telefonica scrapped a planned 1.2bn flotation of their Telxius infrastructure arm (which had also been planned to reduce debt), after failing to attract sufficient demand from the market. In the following month, October 2016, Turkish Global Tower postponed their IPO citing market instability caused by the US elections. In the following 12 months, a 40% stake in Telxius On the other hand, just about every major (and proven) tower investor in the world has been connected with Arqiva over the course of There s no shortage of appetite for what remains an attractive asset, just a valuation gap. Arqiva either needs to improve the confidence of their potential investors or to recalibrate their valuation. That said, the UK and other developed markets are in something of a hiatus at the moment, with most of the 4G rollout on the order books, and very little visibility over what will come next. Once we have visibility of 5G infrastructure requirements and the implications for tower load and small cell rollout, Arqiva may well look even more attractive. With the government committing hundreds of millions to making the UK a global leader and spectrum auctions scheduled for later in 2017, that visibility might come earlier than sceptics think 230 TowerXchange Issue 21

231 Broadcast towers: profiting from adjacency Where the opportunities lie in European broadcast assets Broadcast towers in Europe Broadcast towers have a much longer and more varied history that telecoms towers. Radio broadcasting began around 100 years ago, and by the 1950s most governments in Europe had established (and owned) a radio network. By Frances Rose, Head of Europe, TowerXchange In 2016 and 2017 we have seen an acceleration in the number of broadcast assets coming to market in Europe. Once seen as more complicated and less dynamic than telecoms towers, increasingly towercos and investors are reviewing their strategy on broadcast towers and becoming more open to adding this adjacent asset class to their portfolios. TowerXchange takes a look at how these portfolios have grown, the current opportunities in the market and who is investing in European broadcast towers. In the 1960s and 70s some of the world s largest towers were built across Europe, to allow radio and television transmission to millions of homes across the continent. Towers such as the 646m Warsaw radio mast in Poland, the Ostankino Tower in Moscow, Russia and the Emley Moor mast in the UK are testament to governmental commitment to getting broadcast signal to every home across the country. By the 1990s, broadcast networks covered almost 100% of European populations, and many of the publicly owned towers were privatised in huge deals. Keywords: 5G, Active Infrasharing, American Tower, Arqiva, Brookfield, Cellnex, Co-locations, Consolidation, DAS, Data Centre, Digita, Digital Bridge, Editorials, Europe, Exit Strategy, Finland, France, Germany, IPO, Infrastructure Sharing, IoT, O&M, Private Equity, Small Cells, Spain, TDF, TowerXchange Research, Towercos, UK Read this article to learn: < Where broadcast towercos operate in Europe < Which deals have taken place recently and what s on the market < Valuations of European broadcast towers < Who is investing in broadcast towers < Further opportunities which can be leveraged from broadcast towerco competencies Synergies between broadcast and telecoms towers By fortunate coincidence, as European operators began to build their networks, many of the national broadcast towers were being privatised and looking for alternative revenue streams. Although the higher frequencies used in telecoms communications meant base station networks needed to be denser, there was a clear synergy with the high broadcast towers, which were already optimally positioned and had power and access routes in place. 231 TowerXchange Issue 21

232 In a recent interview with TowerXchange (see Towerxchange interview View from the top Journal issue 12) Nicolas Ott, Arqiva s Telecoms Managing Director, explained why there s such an extensive crossover between broadcast and telecom towers, explaining that it s a three layer answer, incorporating infrastructure, sourcing and skills. In terms of infrastructure, if you look at a broadcast tower it s always a relevant structure for MNOs. These broadcast towers are so big and strong, adding a few antennas for MNOs is easy. The majority of our broadcast towers have antennae for MNOs as well. There s no need to duplicate assets and investment with these towers. In terms of sourcing, for both telcos and TV we outsource a lot to third party suppliers for maintenance and other easy work, although we do keep the sophisticated stuff in house. We use the same suppliers for all parts of the business, so when we issue a tender we can propose a bigger scope, which means the bidder can offer us a more competitive price and service. The same applies for electricity as we buy electricity on our sites for both our MNO and broadcast customers, and by combining we get a better service and price, so our customers all benefit. When it comes to skills, we keep the most value-add functions in house. When someone wants to put an antenna on a mast you need to do fairly technical drawings, we do a lot of that in house as we have to be sure it s done well and you need huge project management capabilities. For European infrastructure owners, these Figure 1 - Broadcast towercos in Europe Country Towerco Austria Österreichischer Rundfunk Belgium Norkring Belgie Croatia OIV Czech Republic Ceske Radiokomunikace Denmark Teracom Denmark Estonia Levira Finland Digita France TDF France Towercast Germany Media Broadcast Greece Digea Hungary Antenna Hungaria Ireland 2rn Italy EI Towers Italy Rai Way Netherlands Alticom Norway Norkring Poland Emitel Portugal RTP Romania Radiocom Russia RTRS (Russian Television and Broadcasting Network) Serbia ETB Slovakia Towercom Spain Axion Spain Cellnex Sweden Teracom Switzerland Swisscom UK Arqiva 232 TowerXchange Issue 21

233 synergies allow them to maximise their assets. With both telecom and broadcast tenants signing long term contracts with quality covenants at a time when demand for infrastructure investment is high, there is increasing interest in these adjacent asset classes. Broadcast assets for sale in Europe Over the last 18 months a handful of broadcast assets have come to market and have had very different fortunes in terms of outcome. Certainly, it seems that the larger independent towercos are becoming more comfortable with the idea of owning broadcast assets, despite a reluctance to consider them initially, which means we now see companies such as American Tower buying up small broadcast portfolios which they would not have considered before. American Tower/Westdeutscher Rundfunk (WDR) Announced in late 2016 in the German press, American Tower acquired 186 transmission towers from German radio broadcaster Westdeutscher Rundfunk (WDR). Although the purchase price is undisclosed, American Tower quarterly reports reveal that their Q purchases totalled $79.8mn for 433 towers in Germany, Nigeria, the US and Brazil, so we estimate that the German towers may have cost in the region of 35-40mn. TDF/ITAS/Towercom Until 2016 there were three broadcast towercos in France - TDF, ITAS and Towercom. In 2016, TDF acquired ITAS for a reported 100mn, rolling their 420 towers into the TDF portfolio. In September 2017 French media group NRJ announced its intention to sell broadcast towerco Towercast, declaring that Towercast isn t a fit with NRJ s core business. It s believed NRJ hopes to raise up to 300mn from the sale. Towercast owns around 500 towers across France, with a focus on DTT and FM transmission. NRJ has been close to a sale before, most notably in 2014 when the process was whittled down to two bidders and the sale was believed to be a done deal, only to fall at the final hurdle, reportedly on price. Last year, Towercast generated sales of 55 million and EBITDA of 27 million, but NRJ CEO Jean- Paul Baudecroux believes revenue could grow by as much as 20-25% by acquiring a more diverse client base across both broadcast and telecoms. The figure of at least 300mn reflects NRJ s ambitions to raise 11-13x Towercast s EBITDA of 27mn, which would not seem an unrealistic goal, given recent valuations in communications infrastructure. However, Towercast s revenues were down by 12.8% and operating income down 24% last year, much of which was related to the French government s decision to sell the 700MHz spectrum band to telecom companies, resulting in the loss of two multiplexes and creating a sharp drop in profit. Although Towercast received compensation of 18.2mn, it seems that re-grouping and driving the business in a new direction is not something for which NRJ has the appetite, and this need for a new strategy may well knock on to the valuation of the business. Axion In 2016 Spanish broadcaster Axion was sold by Antin Infrastructure to AMP Capital. Axion operates 584 broadcast towers in Southern Spain, with some telecom colocation. Alticom/Cellnex In 2017, Cellnex acquired Alticom and its 30 high towers in the Netherlands for 133mn. For Cellnex this was not simply a broadcast play, but an acquisition designed to bring in house the skills and expertise needed to create new network architectures which will provide the low latency critical for 5G rollout. Arqiva After failing to reach an agreement with strategic buyers despite getting close to a deal with a consortium led by Brookfield, Arqiva announced an IPO in October 2017, which was then cancelled two weeks later. The short turnaround time suggests that Arqiva quickly identified a mismatch between their own expectations and those of the markets, and the towerco s next move is as yet unknown. The markets excitement about telecom towers and small cells has been offset by uncertainty about the debt pile and the longevity of Arqiva s broadcast core, which accounted for 47% of revenues in the 233 TowerXchange Issue 21

234 year to June, compared to just 33% of Cellnex s revenues for FY Commentators have been speculating about the longevity of Digital Television Transmission (DTT), which itself replaced analogue transmission in 2014, although Arqiva has refuted these comments, saying hybrid platforms such as Now TV will maintain the relevance of digital broadcasting. Figure 2: European broadcast transaction map In terms of telecom infrastructure, Arqiva own roughly 25% of the UK s macro tower sites. Arqiva services all of the four MNOs and has around 8,600 active towers for these mobile operators. Their tenancy ratio is around 2.5x. Although they have 8,600 active towers, the total portfolio consists of over 16,500 towers (the remaining ~8,000 towers are not active due to MNO rollout plans, rural locations where demand is low or deployment complexities as many of them are not dedicated telecoms infrastructure, such as electricity pylons) The company has long term and secure contracts with both MBNL (an infrastructure sharing joint venture between EE/BT and 3) and CTIL (a similar joint venture between Vodafone and O2) and grew the M2M and telecoms business unit by 6.4% in FY It s worth noting that just about every major (and proven) tower investor in the world has been connected with Arqiva over the course of There s no shortage of appetite for what remains an attractive asset, just a valuation gap. Arqiva either needs to improve the confidence of their potential Broadcast assets have changed hands in the last three years Broadcast assets for sale/ipo Dedicated independent broadcast towerco offering services to telecoms tenants in the market 234 TowerXchange Issue 21

235 investors or to recalibrate their valuation. For more information read ruling-britannia-who-will-acquire-the-uks-biggestindependent-towerco/ necessarily be attractive in the long run, it may be possible identify and create value around specific broadcast assets. Says Brian Burns, Telecoms Strategy Director at PWC Alinda Capital Partners Infrastructure investors who acquired Polish broadcast towerco Emitel from Montagu Private Equity in Digita Finnish broadcaster Digita s network of 556 towers covers 99.9% of the Finnish population and has offered colocation opportunities to Finnish MNOs for several years. Their more recent diversification into IoT and data centres appears to be a savvy move, given the valuation Alticom achieved through a similar move into adjacent verticals. Several heavyweight investors have already been linked with the asset, with a formal sales process believed to be about to begin in Q417. Broadcast valuations There appears to be much less transparency around the valuations of broadcast towercos than there is around telecom assets, and it s clear that there s often a gap between broadcas towerco expectations and what the market is prepared to pay. There s also often more to a broadcast towerco deal than meets the eye; as towercos move into 5G infrastructure, they need to think about offering tenants a full service, and often the value in these broadcast companies is in skillsets and expertise as much as physical assets. Valuations for broadcast assets have not typically reached the levels seen in the mobile tower segment. As such, whilst not all assets will At a European level, the sub-700mhz spectrum has been allocated to broadcasting up to There is less certainty after that point, and some spectrum may be allocated to mobile but, particularly in countries where other alternatives are more limited, digital terrestrial television (DTT), broadcasting may continue well beyond that point. At the same time, broadcasting network operators may be well placed to act as platforms to enter or grow in adjacent markets such as mobile hosting, small cells, IoT, data centres and even fibre deployments. All of these areas have the potential to generate significant growth, although some are higher risk. In the long run, there will always be winners and losers in this sector as with any other, largely driven by the market dynamics in individual countries as well as broadcasting players chosen strategies. These assets may be most appealing to more sophisticated investors who are well placed to assess the long-term risk of DTT switch-off, as well as the suitability of the specific target to capitalise on potential growth opportunities. Who s investing in European broadcast assets? Several different entities have a proven interest in broadcast tower assets: AMP Capital Bought Axion, the Spanish broadcast towerco from Antin in Among other communications infrastructure investments, Australian AMP Capital also owns Irish towerco Towercom and has been linked to Finnish towerco Digita. Antin Infrastructure Partner Antin Infrastructure Partners has a solid track record in telecom and broadcast towers, having sold FPS Towers to ATC Europe in 2016, and also sold Spanish Axion to AMP Capital in the same year. APG Asset Management APG is a Dutch investor with a strong track record in European infrastructure. They are rumoured to be interested in Finnish towerco Digita. Arcus Infrastructure Partners Arcus form a part of the consortium which owns TDF and also sold UK-based Shere Group to Cellnex for 393mn in Brookfield Asset Management Current investors in TDF and led the consortium which came close to acquiring Arqiva in summer Brookfield are actively pursuing tower investments around the world. 235 TowerXchange Issue 21

236 Cellnex As well as owning their own legacy broadcast assets, Cellnex acquired Dutch broadcast towerco Alticom in 2017 for 133mn. Cellnex has ambitions for strong growth in Europe and a clear vision of the expertise they need to bring in to lead the 5G infrastructure rollout. Canada Pension Plan Investment Board (CPPIB) The Canada Pension Plan Investment Board is a part of the consortium, led by Macquarie, which owns Arqiva. They also own Broadcast Australia, an Australian broadcast towerco, and have a small stake in TDF in France. Digital Bridge Digital Bridge has been linked to several tower sale processes in Europe, including the Arqiva sale process. Their current companies include Mexico Tower Partners, the largest independent towerco in Mexico and companies offering neutral host and data centre services. EQT EQT is a Swedish investor with a large global portfolio and a strong background in TMT investment. They ve been linked with the Digita sale process in Finland. First State Investments Australian First State currently own Finnish broadcast towerco Digita, which they acquired from TDF in They are looking for buyers for the asset. IFM Investors Infrastructure investors on a global scale. Currently form a part of the consortium which owns Arqiva. InfraVia Capital Partners Infrastructure investor InfraVia Capital owns Cignal, the ambitious Irish towerco which acquired Cellcom in They have also been linked to the sale of Finnish towerco Digita. Macquarie Group Macquarie is a prolific investor in towers, with current investments in Arqiva, Russian Towers, Towercom in Slovakia, Ceske Radiokommunikace in the Czech Republic, Viom Networks in India, InSite in the USA, D LIVE in South Korea and Axicom Group in Australia. PSP Investments Canadian PSP Investments is currently a part of the consortium which owns French TDF. DTT and the future of broadcast Broadcasting is currently seen as a critical part of European infrastructure, and indeed it is generally considered to be critical national infrastructure by most governments. However, the increasing consumption of content via the internet and the rise of IPTV services such as Netflix and Amazon Prime have led to speculation that digital broadcasting could be switched off as soon as 2030, and the spectrum repurposed to provide further bandwidth for mobile communications. Clearly, for towercos whose profits rely on the services they provide to the broadcast industry, this is a significant threat to the longevity of the business. Simon Beresford Wylie, Arqiva CEO, refuted the claims that IPTV would replace broadcasting, It is arrant nonsense. People are over simplifying, he told the Financial Times, saying that in the UK, hybrid platforms such as Now TV were helping to maintain the relevance of free-to-air live television. However, like many broadcast towercos, Arqiva is investing heavily in diversification, working on a comprehensive small cell offering and adding the SIGFOX IoT network to their portfolio. In Finland and Estonia, Digita and Levira have both developed impressive data centre capabilities and of course broadcast now makes up just 33% of Cellnex s annual revenues, with their growth strategies focussing on telecoms towers and future networks. One advantage which broadcasting towercos have over telecoms towercos is their experience in delivering a full service to tenants. Whereas telecom towercos have often acted more as straightforward real estate investors, broadcast towercos will generally provide power, backup and O&M services, as well as delivering active services, with many providing the transmission itself. As 5G drives network evolution over the next five to 10 years, and the rise of small cells and network virtualisation drives the need for outsourcing more and more of the network to neutral hosts, these capabilities will become increasingly valuable in the towerco s toolkit 236 TowerXchange Issue 21

237 Regional coverage: CALA features In this edition of the TowerXchange Journal, we continue to present findings from the 4th TowerXchange Meetup Americas, including a report from the both the financial and the Argentina-focused panel held at the event. Additionally, TowerXchange interviewed Tower One s CEO, Alejandro Ochoa, who shared with us his perspectives on the benefits of running a listed towerco and insights into the company s footprint and future plans. TowerXchange also touched based with Miguel Angel Arrigoni, Chairman and Chief Executive Officer, First Corporate Finance Advisors (FCA) for a quick insider overview of what s happening in Argentina. Lastly, we offer an updated analysis of the state of play in Mexico, in light of ALTÁN Redes advancements and the recent acquisition of KIO Networks by American Tower. Don t miss: 238 Panel report: Why CALA is still an attractive investment platform 242 Argentina report: panel summary and FCA commentary 246 Tower One: a new listed towerco in the CALA landscape 250 Mexico update: American Tower seals deal, ALTÁN drives co-lo growth, BTS remains slow 237 TowerXchange Issue 21

238 Why CALA is still an attractive investment platform Growth and consolidation in the cards for regional towercos Investors on stage offered an overview of the pros and cons of doing business in CALA and looked at the specific dynamics of Central America, established markets such as Mexico and Brazil, diversification trends beyond macro towers and the critical factors to achieve successful exits. Panellists on stage Moderated by Marco Cordoni, Senior Partner within Analysys Mason, the investor panel at the fourth annual TowerXchange Meetup Americas featured Ariana Batori, Investment Officer at the IFC, Beth Michelson, Senior Managing Director, Cartesian Capital, Sachit Ahuja, VP Business Development at Tillman Global Holdings, Peter Bendall, Senior Vice President, Macquarie Infrastructure and Real Assets (MIRA) and Nick Del Deo, Analyst, MoffettNathanson. Here is a summary of their reflections on the investibility of the Central and South American telecom tower markets. Keywords: Americas, Analysys Mason, Argentina, Brazil, Cartesian Capital, Carve Out, Central America, Colombia, Consolidation, Editorial, Exit Strategy, Fibre, IFC, International Finance Corporation, Investment, Investors, MIRA, Macquarie Infrastructure and Real Assets, Market Overview, Mexico, MoffettNathanson, Nicaragua, Operator-Led JV, Private Equity, Small Cells, South America, Tillman Global Holdings, Valuation Macroeconomics and towers The tower model is demand-driven. Towercos need MNOs to believe in the model and release search rings. Therefore any macroeconomic turbulence affecting the level of network investment by MNOs will directly impact the tower build and leasing demand. And forex weakness will directly impact the amount of equipment they are able to buy in U.S. dollars (or in any other strong currency). Since the tower industry is governed by long term planning and year contracts, towercos tend to have some level of protection against forex exposure thanks to contractual escalators, although this doesn t really help in the short term. Strong MLAs should include inflation-related clauses that can go as far as including pass-through costs for inflation. Read this article to learn: < The effects of macroeconomics on the tower sector < Central America: the attractiveness of U.S. standards, albeit with less scalable potential < Thoughts on Brazil, Mexico and other maturing markets < How to build toward a successful exit < The opportunity of diversifying beyond towers and investing in operator-led towercos For U.S. equity investors depreciation is an issue, while on the debt side the key factor is the ability of the towerco to actually serve that debt. If a towerco loses 20% of its ability to serve its debt as a result of forex depreciation, and if economic turmoil puts a halt to carriers build to suit (BTS) programmes, then investors (and the towerco) could 238 TowerXchange Issue 21

239 be in a perfect storm. And while this might seem a catastrophic scenario, some towercos in CALA have survived despite being greatly affected by forex over the past couple of years. Central America When it comes to Central America, the region is often seen as having a business model closest to the U.S. golden standard. And the investments made into local towercos have proven to be very positive. Central America is a U.S. dollar based market, which is one of the greatest advantages of doing business in the region as opposed to South American countries. In fact, investors stressed that making a successful exit in markets where transactions are denominated in local currencies isn t easy under the current financial climate. On the other hand Central America presents limitations to growth due to the size of the markets, the presence of less carriers, and lengthy processes to build scale. Patience is the essence in the less dynamic but investment-proofed Central American region, and the payback is relatively assured given the absence of forex risks. Some investors noted that up until a few years ago, towercos could build a tower in Central America for half the price than in the United States and generate three quarters of the cash flow. And this explains why Central America has been a target for towercos since the early stages of the expansion of the model beyond the United States. Beth Michelson, Senior Managing Director, Cartesian Capital Cartesian s Michelson discussed their experience in Nicaragua with NMS, which has enjoyed tremendous growth in the country. In fact, in spite of the country s notorious instability in other sectors, the telecom infrastructure industry is a very stable and safe one due to the fact that local communities tend to understand the importance of mobile connectivity. Considerations on mature CALA markets In spite of the many expectations regarding AT&T s entrance in Mexico, so far the carrier s entry into the market hasn t yielded many positive results for towercos. However, ÁLTAN Redes is likely to improve the flow of activity for towercos, and this is particularly true at this stage for entities with sizeable portfolios such as American Tower and Telesites. Peter Bendall, Senior Vice President, Macquarie Infrastructure and Real Assets (MIRA) Ariana Batori, Investment Officer, IFC Colombia is generally seen as a crowded market and one where most investors don t feel comfortable at the moment. Panellists noted how there s a race to the bottom in lease rates and construction costs at the moment which isn t healthy for the tower sector. And since Colombia is still working on its much awaited 700MHz spectrum auction, deployment plans have been stalling and the market hasn t grown as much as towercos expected upon entering. Brazil is still seen as a very interesting market in spite of its recent financial crisis - which is just now improving. With three large players (AMT, SBA and GTS) and a long tail of smaller providers, the market is bound to experience consolidation waves in the future. Brazil presents a relatively efficient operating environment and towercos have been able to add new towers to their portfolio at low incremental cost. 239 TowerXchange Issue 21

240 Investors noted how Mexico, Colombia and Brazil are extremely competitive markets in which to operate. And the attention of towercos and investors is shifting to less obvious options such as Peru, Argentina, the Dominican Republic and El Salvador, to name a few. Making a successful exit It may be stating the obvious but the quality of assets is crucial when it comes to looking for a successful exit. Sophisticated towercos will walk away from deals rather than overpaying for bad towers and this is particularly true in CALA where there s often a mismatch between the expectations of the seller and the offer price of the buyer. Investors agreed that the CALA tower sector is moving towards a consolidation phase and expects acquisitive towercos such as AMT, SBA and Phoenix Tower International (PTI) to seize high quality portfolios across the region. In reality, portfolios aren t really evaluated in their entirety but literally analysed tower by tower. Investors noted how they won t buy mediocre, unlicensed sites, and expect each tower to be built with high engineering standards. Investors and management teams need to work during the course of the life of a towerco to meet all the characteristics that make a portfolio attractive to a buyer. The rule is actually very straightforward. A seller won t achieve the full expected multiples unless everything is done just right. A seller won t achieve the full expected multiples unless everything is done just right On top of the specific requirements of a portfolio, the macroeconomic conditions of the region have forced some investors to rethink about their exit strategy, as the forex crisis in some countries negatively impacted their chances to obtain the desired multiples. Diversifying investments beyond towers While carriers push for towercos to start offering more than just towers, investors and towercos often conclude that the economics and actual management of small cells, fibre and data centres is fundamentally different from the steel and grass tower business model. The tower industry in CALA is ruled by a straightforward real estate model and most towercos do like to keep things as simple as possible. And opinions on stage couldn t be more diverse. In fact, some panellists underlined that they felt there was no synergy between leasing towers and managing a small cell portfolio and therefore no industrial logic behind the diversification, especially in light of the stark economic differences. In order to run small cells, operators need to build a network beforehand, invest to add new tenants and simply accept a riskier model. On the other hand, some investors agreed that the concept of towercos becoming a one-stop-shop to carriers does make sense. But the question is whether than can be done with just one management team. In fact, towers, small cells and fibre all require a very unique set of skills and know-how. And they went on to note that while the return expectations aren t the same for towers, small cells and fibre, the diversification could still be attractive if the models are comparatively profitable. A practical example was offered by Tillman s Sachit Ahuja who discussed their joint venture with JCDecaux. The partnership is granting Tillman access to over 1.5mn billboards which can be utilised to host small cells. Ahuja noted how the business model is fundamentally different in terms of both revenues and growth expectations but it s 240 TowerXchange Issue 21

241 not less interesting for them, especially in light of the needs to add capacity in urban environments. The investibility of operator-led towercos Operator-led towercos are a relatively new trend and one that investors don t necessarily appreciate. From a business model standpoint, many of these towercos need to make a considerable transformation to become commercial entities whose core business is leasing and co-locations. And this is particularly crucial and challenging when management teams of operator-led towercos come from an MNO background. Another challenge this type of towercos have to deal with is the acceptance of other MNOs of their independence. Only when towercos exist as a standalone company - especially from a balance sheet perspective - will co-locating on their sites not be perceived as giving an advantage to their MNO competitors by other operators. From a financial perspective, investors expect operator-led towercos to generate returns that are less impressive than those of pure-play independent towercos. Operator-led towercos often look for minority investors because they want to maintain a good degree of control over their operations, which may not be the optimal approach for equity investors used to actively participate in the life of the towerco. Towercos need considerable capital to grow Marco Cordoni, Senior Partner, Analysys Mason and prosper and that often comes with a deeper engagement of the investors in the activities of the towerco. Minority positions can be acceptable for some (and a recent example is offered by KKR which has completed the acquisition of 24.8% of Telxius this October) but many equity investors will shy away from them. To comfortably back up a towerco with a minority stake, investors need to fully believe in the management team and strategy behind the company. Variety is the spice of life Once again, investors committed to the Central and South American tower market proved that there Sachit Ahuja, VP Business Development, Tillman Global Holdings Nick Del Deo, Analyst, MoffettNathanson simply isn t one successful recipe that fits all. The region is made of many diverse business models and markets and each investor must work to find their own comfortable niche, which might not be as attractive to others. And this is particularly true now that the CALA tower sector has moved beyond the obvious targets of Brazil, Mexico and even Colombia and is eyeing new markets, exploring alternative business avenues and addressing the needs of a more mature industry. TowerXchange expects the next few months to be driven by consolidation among towercos and pockets of M&A with MNOs. And looks forward to report on the evolutionary tale of the CALA tower industry at the fifth TowerXchange Meetup Americas, June 2018, in Boca Raton (Florida) 241 TowerXchange Issue 21

242 Argentina: still a land of chances and changes An updated report from the TowerXchange Meetup Americas 2017 Panellists on stage The Argentina panel held at the fourth annual TowerXchange Meetup Americas highlighted the country s contradictions and challenge; the attempts to improve its competitiveness and investibility and the resistance of municipalities and other local entities to enable mobile infrastructure upgrades in spite of the pressing need for more coverage and capacity. Joining TowerXchange on stage were Clarisa Estol, Secretaría de Promoción de Inversiones en Ministerio de Comunicaciones, Ministerio de Comunicaciones de Argentina, Ahmad Al-Sati, Managing Director, Albright Capital Management, Manuel Aviles, President and CEO, Innovattel/Torresec, Gabriel Leyba, Head of TMT, ICBC Argentina and Alex Sepehri-Nik, Founder and President, Plata Tower Company. Keywords: 4G, Albright Capital Management, Americas, Americas Insights, Argentina, Build-to-Suit, Carve Out, Country Risk, ICBC Argentina, Infrastructure Sharing, Innovattel, Insights, Investment, Market Forecasts, Market Overview, Ministerio de Comunicaciones de Argentina, Plata Tower Company, QoS, Regulation, Sale & Leaseback, South America, Tax, Torresec Read this article to learn: < The new telecom law and what would change if it were approved < Expectations versus reality: build-to-suit, M&A and the limitations of taxes and laws < The pros and cons of doing business in Argentina < Inflation risks and long term perspectives By now, investment in Argentinian infrastructure should be more reality than hype. But since its exposition to the international business world after the election of President Macri in December 2015, the overall change has been slower than hoped, at least for the telecom infrastructure sector and its many players who are still eagerly hoping for Argentina to deliver higher volume of business. A law in the making The Argentine government has been open to listen and engage with the international telecom infrastructure investment community and interested stakeholders. A lot of work has been done in the background and governmental officials have been very active in expanding their understanding of the towerco model and its ecosystem, meeting towercos from across the region to identify the best way to reform the national telecom sector. In order to solve some of the issues affecting the local market and contribute to the growth of the telecom and infrastructure sectors, the government has been drafting a new telecom law that will be presented for parliamentary discussion after the legislative elections in October. Measures that the law addresses include a shot clock rule, limitations on municipal taxes as well as the promotion of campaigns to educate communities on what it means to install a new site in close proximity and to reassure them regarding their health concerns. 242 TowerXchange Issue 21

243 The march of the hopefuls In the meantime, tens of towercos have colonised Argentina in the hope to gain high volumes of buildto-suit (BTS) projects, driven by an understanding that the country is quite behind in terms of its mobile coverage and capacity, particularly beyond major cities. American Tower, SBA Communications, Innovattel/ Torresec, Plata Tower Company, Tower 3 and Atis Group to name a few established their operations in Argentina to investigate business opportunities and start offering BTS. And as previously reported, American Tower went as far as acquiring a local engineering firm, CyCSA, and its 1,000 urban sites and 70+ staff. The level of interest in this market is extremely high and as many as thirteen towercos participated in a recent RFP for approximately 200 sites, which was then assigned to four different towercos. The dynamics between towercos and MNOs Panellists noted how MNOs are now starting to work with towercos as partners, after some probing and testing, and are more receptive towards their business model. While the government is enabling the entrance of towercos by creating a more conducive regulatory environment and facilitating the deployment of greenfield projects. Some of the most recent entrants were attracted by the network investments announced by MNOs for Ahmad Al-Sati, Managing Director, Albright Capital Management the triennium , with Personal leading the way at US$2.5bn followed by Telefónica (US$2.2bn) and Claro (US$1.2bn). In the case of Innovattel/Torresec, their early entrance into Argentina gave them an edge against the competition and the time to set up the right business in line with the needs of the local market. The management has spent time on the ground to meet potential customers, understand the market and the nuances of jurisdiction. The pros and cons of doing business in Argentina Analysing the pros and cons of doing business in the country, the need to enhance coverage, data demand growing at a fast speed as well as high levels of mobile penetration all contribute to making Argentina one of the most interesting tower markets in the CALA region. However, Clarisa Estol, Secretaría de Promoción de Inversiones en Ministerio de Comunicaciones, Ministerio de Comunicaciones de Argentina Manuel Aviles, President and CEO, Innovattel/Torresec the gap between theory and reality is still quite considerable and high taxes both at a municipal and federal level, a NIMBY mentality, and a business environment very much in the making aren t allowing the fast developments the tower industry initially hoped for. Another factor hindering the growth of towercos in Argentina is the fact that MNOs have depreciated their tower portfolios close to or at zero on their balance sheet, but would incur capital gains taxes of 35% if they decided to sell the assets to towercos. According to towercos, one of the positive aspects of doing business in Argentina is that MNOs were already quite aware of the infrastructure sharing model, thanks to established examples from across the region such as Brazil, Peru and Mexico. When towercos entered Argentina, MNOs were quite ready to embrace the model or at least sit at a table and 243 TowerXchange Issue 21

244 The risks of high inflation still need to be mitigated by managing both revenue and costs very carefully, and the effect on towercos is reduced since the tower industry tends to be a long term investor. At time of writing it seemed that inflation was currently under better control in Argentina; the local currency hasn t devalued as much as some expected, also as a result of the recent tax amnesty which contributed to US$116.8bn of assets being declared (corresponding to US$9.65bn of taxes and fees). negotiate, something that took towercos a long time when entering Brazil, back in the early 2010s. Forecasts versus reality Alex Sepehri-Nik, Founder and President, Plata Tower Company In terms of growth forecasts, MNOs report that around 1,000 sites have been built over the past twelve months (by both towercos and MNOs), bringing the total national inventory to approximately 16,000 sites. But that would need to at least double over the course of the next three years in order to achieve satisfactory levels of coverage across Argentina, and some commentators believe the number should actually triple by It goes without saying that these levels of growth aren t realistic but the volume of BTS in Argentina is not yet where it should be to both meet the growth expectations of many towercos and improve the Quality of Service (QoS). One of the hopes of towercos is that once (and if) the capital gain taxation is revisited, this will allow a flow of M&A opportunities to open up. However the recent entrance of Telxius in Argentina is likely to significantly limit the chances for towercos to acquire Telefónica s assets, and this is particularly true since Telxius is already managing around 350 sites transferred by Telefónica in January This would leave only Telecom Personal s and Nextel s portfolios since Claro isn t likely to engage in any sale and leaseback with towercos, as per its Group strategy. The threat of inflation Gabriel Leyba, Head of TMT, ICBC Argentina When discussing some of the financial macros affecting the local tower industry, panellists highlighted that when it comes to inflation, they anticipate it to revert to normalcy in the long term. In conclusion, panellists listed the five top questions/expectations that remain unanswered as of now, which TowerXchange hopes to discuss in tangible detail at the next Meetup Americas, which will be held in Boca Raton, June Can the telecom and tower industries come together and deliver thousands of new sites in Argentina every year for the next few years? 2. What will be the realistic benefits and quick wins of the new telecom law? 3. Financing options are largely available to towercos and other players active in the ecosystem; who needs financial support? 4. Can the regulatory framework for new deployments be streamlined as quick as possible? 5. The government is working to welcome more towercos, enhance competition and accelerate deployment - who wants to offer suggestions and ideas? 244 TowerXchange Issue 21

245 Can Argentina pull it off? Miguel Angel Arrigoni, Chairman and Chief Executive Officer, First Corporate Finance Advisors TowerXchange: What are the expectations with regards to the approval of the new telecom law? And how effective is the law likely to be in speeding the permitting process for new sites? Miguel Angel Arrigoni, Chairman and Chief Executive Officer, First Corporate Finance Advisors: The approval process on the new telecom law could be extended into 2018 due to political reasons. Although being discussed, it won t be easy for the new law to incorporate a nationwide system allowing a fast-track municipal approval (the so called shot clock rule). In fact, the handling of permits will continue to fall under the individual municipalities, with the government looking to exert indirect pressure via alternative ways such as educational campaigns. With regards to the details of the new law, we don t see the government really working to set targets to reduce the ratio of subscribers per tower, which would eventually improve the Quality of Service (QoS) across Argentina. As a result, the telecom infrastructure industry should consider the creation of a chamber to lobby towards a favourable set of norms and regulations. TowerXchange: Where do you see the level of investment by towercos in the country going? How many towers are being built by independent towercos in 2017? Miguel Angel Arrigoni, Chairman and Chief Executive Officer, First Corporate Finance Advisors: Out of the many towercos with a presence in Argentina, only a few have active build-to-suit contracts with MNOs. In fact I believe that MNOs are still testing the efficiency and opportunity of working with towercos; my estimate is that towercos will be responsible for around new sites by the end of 2017, but this number is likely to increase next year. The main limitation is not really the availability of capital to deploy, rather it is the volume of new deployments that MNOs commit to, the difficulties in the permitting process and the availability of high quality suppliers. With regards to this last point, I actually think that there is an opportunity for equipment and service providers from across the region to enter Argentina as the demand for new sites increases. TowerXchange: What do you think is needed to improve the competition against MNOs and their level of investment? Miguel Angel Arrigoni, Chairman and Chief Executive Officer, First Corporate Finance Advisors: It s going to be very hard to modify the status quo as MNOs show resistance to invest and the government isn t really demanding an improvement in the QoS. To date it s not clear whether the new telecom law is going to address the most pressing issues in the short term and it seems to me that a long term plan allowing the industry to fully bloom is not really shaping up. In my opinion, deregulation in the telecom sector, for example allowing MNOs and cable companies to compete, creates a more dynamic and competitive environment. As the economy keeps stabilising, long term financing options should become more easily available and facilitate investments 245 TowerXchange Issue 21

246 Tower One: a new listed towerco for the Americas Are new towercos better off going public? Is there an alternative to starting up as a private equity backed towerco? Tower One was created just over two years ago with a new concept in mind: being a lean, agile, healthy public company that operates in the tower industry wherever is needed, from Canada to Argentina. In this candid interview, its CEO Alejandro Ochoa shares his innovative vision with TowerXchange s readers. TowerXchange: Please tell us about Tower One, its operations and footprint. Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: Tower One was launched in 2015 with an atypical approach to the ownership, acquisition and construction of telecom tower sites. Our view is quite different from the view of private equity backed entities who tend to build portfolios with an exit in mind. Tower One is listed on the Canadian Stock Exchange and therefore entered the industry as a public firm with a mission to create a long term alternative investment platform for those investors interested in the telecom infrastructure sector, but who might not want to invest in a private equity fund or in larger public towercos. Alejandro Ochoa, Chief Executive Officer, Tower One Wireless Keywords: Acquisitions, Americas, Americas Insights, Argentina, Buildto-Suit, C-Level Perspectives, Canada, Central America, Colombia, M&A, Market Overview, Mexico, Permitting, Regulations, Sale & Leaseback, South America, Tower One, Towercos I am the Chief Executive Officer of Tower One and prior to this role, I was one of the Directors of a Canadian investment firm which is now one of our first investors. To date, Tower One counts on more than 1,200 investors and has operations in Canada, the United States, Germany, Colombia, Argentina and, starting in Q1 2018, Mexico. Read this article to learn: < Why being a listed towerco is a plus < Tower One s footprint, activities and future plans < Tower One s lean business model < The reality of doing business in Colombia < The challenges of site permitting in Argentina Tower One draws on the expertise of some of the top executives from across the telecom and infrastructure industries. Among them, Luis Parra as COO, who used to manage QMC Telecom in Colombia and is a build-to-suit (BTS) expert, and and Advisor Rolland Bopp, who served as Chairman, President and CEO of Deutsche Telecom in the United States. 246 TowerXchange Issue 21

247 TowerXchange: Why did you decide to list Tower One on the Canadian Stock Exchange? Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: The Canadian Stock Exchange has sealed agreements with various stock exchanges across Latin America, such as Chile, Colombia and Mexico. Therefore, we can easily register Tower One s stocks in various local markets as well as attract local capital funds who otherwise wouldn t be able to invest in Tower One. Our entity is able to operate regionally and access the capital markets of various countries which helps to diversify risk. Our business decisions aren t always driven by tower market drivers but also by macroeconomic considerations that allow us to increase the value of our stocks. You see, if we were investors in the stock market, we d have to choose between American Tower, SBA Communications and Crown Castle. That s it. These are mature, large companies where the growth perspectives aren t as exciting as in a startup environment, and whose price per stock can be prohibitive to many. When Tower One listed on the Canadian Stock Exchange, the stock was valued at CAD0.15. We now stand at CAD0.32, and the potential for good returns and growth for our investors is virtually limitless! TowerXchange: What are the differences between being a public company versus a private equity backed towerco? private equity firms often forget that this is Latin America, and their rules simply don t work in this region Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: When you operate in a private equity environment, the rules of the game are completely different and you have to target very strict key performance indicators. Your investor will often impose to you a certain opex to respect, a given net profitability et cetera, but private equity firms often forget that this is Latin America, and their rules simply don t work in this region. Companies like American Tower and SBA Communications can operate also during challenging macroeconomic periods because they have a liquidity surplus. But for some private equity backed entities, the reality of Latin America has proven too challenging. And this is also why I am glad that the crisis hit Colombia as hard as it did, as it helped clear the landscape and consolidate the tower market in a more rational way. Working in a public environment means that our investors trust us to make the right business decisions and investments and don t question each and every aspect of our operations. TowerXchange: Tower One is equally interested in build-to-suit (BTS) as it is involved in the M&A game. Tell us more. Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: On the BTS front, we serve the same clients - large, regional mobile network operators - across different markets, which really helps us to seal multiple contracts across the region. For a company like Tower One, any deal counts and we will not shy away from a 10, 20 or 50 tower order! Additionally, we are interested in any inorganic growth opportunity and several funds and banks see us as a possible way to enter the portfolio acquisition game. Larger public entities don t need to call smaller towercos looking for an exit. It s the other way around! Tower One is constantly looking for potential deals, whether they are BTS orders or existing portfolios up for sale. But we play a different game than other public towercos. To give you an example, we were approached by a towerco seeking to sell its portfolio. They said they received a 16x offer by a larger towerco. However, we won t compete in the multiple game. We offer a combination of both cash and stock, which allows the possibility to keep working with us to grow and make returns superior to a short term vision of comparing offers on a cash basis. This is 247 TowerXchange Issue 21

248 what happened in Mexico where we met with a tower provider who had the relationships and the agreements with MNOs but lacked the capital to deploy. And we believe that our future partnership with this Mexican firm will generate considerable growth for both of us. TowerXchange: How can you ensure that Tower One grows at a good pace? Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: Our business model is sustainable thanks to the fact that we outsource all the construction, engineering and maintenance to third parties. Therefore, we are able to move very nimbly across the region without the need of an onerous structure. On the other hand, we need solid local partners in each country where we operate. Because we aren t looking for an exit, we take into consideration every single opportunity that is presented to us. We want the small orders that other towercos aren t interested in because if we multiply that order by the many countries where we operate, we will be able to build a considerable portfolio while diversifying operations and minimising the risks. In a way, the micro-management of an individual country portfolio is less important when a towerco is able to leverage its regional presence. And while we keep expanding in our existing markets, we are also looking at adding a new country to our portfolio every year. TowerXchange: What are some of the challenges of working in a country alongside an operatorled towerco? Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: Operator-led towercos are a completely different breed of companies. It s relatively easy to shift towers from one balance sheet to the other. What s hard is to deploy towers. And when it comes to BTS, there s very little difference between Tower One and any operator-led or public towerco. It all depends on how well one knows the market, its dynamics and procedures. TowerXchange: Why did Tower One enter Colombia in spite of its challenging operating environment? Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: I am Colombian and I am glad to have the opportunity to operate in my home country with Tower One. Over the past two years, the depreciation of the local currency in Colombia was such that the investment plans of all mobile network operators changed drastically. Additionally, in July Telefónica dealt with the fine (approximately US$548mn) imposed by a Colombian arbitration court for the installed network infrastructure that the MNO failed to return upon expiration of an agreement with the government over a decade ago. Lastly, the fact that the 700MHz spectrum auction hasn t been completed yet has resulted in further delays in new network investment by local operators. On the towerco front, Telesites created much disturbance with its entrance and rumoured take over of Claro s BTS orders. But eventually it announced that it wouldn t engage in BTS activities, which to be honest was a relief. In Colombia we have a pipeline of around 150 sites but I have to admit that without the operations we have elsewhere, the current situation in the country would have seriously jeopardised our business. While some towercos panicked and looked for exits, we decided to invest in other growth avenues in Colombia and sealed important agreements with some municipalities and infrastructure businesses which will be handy when the market picks back up. Beyond Colombia, we are looking at other markets with interesting growth drivers such as Argentina, which presents broad BTS opportunities at the moment, and Mexico, where we believe there will be various interesting possibilities in the near future thanks to both AT&T and ALTÁN Redes. TowerXchange: Can you share with our readers some insights into Tower One activities in Argentina? Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: Argentina is an interesting example of how international investors are skeptical to invest in the country for fear of being unable to repatriate funds. On the other hand, institutional investors who have been operating in Argentina for a while know how to operate following the country s rules 248 TowerXchange Issue 21

249 and simply deal with its changing dynamics. Being able to offer an investor a local bond or stock doesn t only lower our cost of capital, but also allows international investors to comfortably invest in us. See you at our future events! Large towercos entered Argentina in expectation of a tributary reform. Once that happens, it should enable a flow of sale and leaseback deals. But for now, the large towercos aren t really interested in BTS. Tower One is active in the BTS space and is the number one towerco in Argentina for new deployments. And when the time comes we ll look at acquisition opportunities. In terms of the challenges, I d say that obtaining permits is still the key task we face in Argentina. In fact, MNOs still deploy their own towers while starting to work on BTS and they have worked in this field for decades and are able to better negotiate with municipalities. Only when the deployment of sites will be entirely done by towercos we will be able to improve our relationship with local entities and take over this crucial part of the BTS work. TowerXchange: Which markets are you eyeing for 2018? Alejandro Ochoa, Chief Executive Officer, Tower One Wireless: In terms of new countries, we are interested in any market that presents good opportunities. We ll consider every new potential market from Central America to Peru, Ecuador and even Bolivia Meetup Asia December, Singapore Meetup Americas June, Boca Raton Meetup Europe April, London Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

250 Mexican towers: ALTÁN drives co-lo growth, BTS remains slow Few search rings from AT&T and TEF, Telesites capturing most Telcel orders Arianna Neri, MD - Americas and Asia, TowerXchange Read this article to learn: < ALTÁN Redes: current state of deployment and future plans < The need for FTTT < Another slow year for build-to-suit: AT&T and Telefónica roundup < Mexico s mobile market context, including the latest on termination fees < Telesites still growing fastest thanks to Telcel There are very few countries in the Americas - and maybe globally - as complicated as Mexico, when it comes to its telecom infrastructure sector, and indeed telecom in general. Often perceived as a goldmine of opportunities by international investors, the reality of the country is far from rosy, and this is particularly true in the crowded build-tosuit sector. Here is an updated snapshot on the country s dynamics. Keywords: ALTÁN Redes, AT&T, American Tower, Build-to-Suit, Colocations, Editorial, Fibre, KIO Networks, Market Overview, Mexico, News, Regulation, Telcel, Telefónica, Telesites, Universal Access ALTÁN Redes The wholesale network project was awarded in November 2016 to ALTÁN Redes (ALTÁN) whose first target is to cover 30% of the Mexican population by March 31, According to local sources, ALTÁN is offering a wave of opportunities for towercos with sizeable portfolios able to offer nationwide co-location opportunities. In fact, during this first phase, ALTÁN is very much focused on utilising existing infrastructure across Mexico City, Guadalajara and Monterrey. At the moment, the major challenge ALTÁN is encountering is in the poor status of fiberisation across Mexico. So it comes as no surprise that American Tower has recently sealed the acquisition of KIO Networks, a Mexican infrastructure firm which owns more than 50,000 concrete poles and over 3,300km of fibre optic lines, primarily in Mexico s key urban centres. The deal is valued at approximately US$500mn. Hal Hess, American Tower s EVP and President for EMEA and Latin America stated We are pleased to close this transaction, which we expect not only to enhance the value of our existing tower portfolio in Mexico, but also to better position American Tower to capture a larger share of future urban 4G network densification efforts and the eventual rollout of 5G. Various sources report that while for now ALTÁN is only working on co-locations and that build to suit (BTS) could be only sporadic throughout 2018, there are expectations for the volume of BTS to pick up in Especially since ALTÁN is working ahead of its planned 2018 goals and could start phase two of 250 TowerXchange Issue 21

251 deployment (50% of the added population and 50% of the Pueblos Mágicos) as early as January The carrier landscape There is general consensus that the mobile market is improving both in terms of ARPU and overall financial performance, but this hasn t led to a positive shift in their investment cycles yet. In fact, carriers are still refraining from considerable network capex and neither AT&T nor Telefónica have been announcing any large BTS assignments. On the other hand, Telesites has been working on a backlog of orders from Telcel while the operator is preparing its 2018 deployment plan. Mexico - Estimated tower count 29, ~2,000 1,750 9,031 14,863 Source: TowerXchange Telesites American Tower Mexico Tower Partners IIMT Centennial Torrecom Intelli Site Solutions BTS Towers Other independent towercos including Conex (QMC), and MX Towers Uniti Towers Estimated MNO captive towers AT&T has not announced any major BTS programme for 2018 and according to some sources, American Tower is the only towerco currently picking up small orders. And some commentators suggest that the quality of service AT&T is offering is not up to par with Telcel yet. Telefónica has recently launched an RFQ for approximately 150 rings for new rooftops to be deployed in And local sources suggest that some aggressive bidders drove prices down considerably in what has been defined as another punch to the BTS business model. The Zero Rate In the meantime, the Instituto Federal de Telecomunicaciones (IFT) has withdrawn the ban imposed on Telcel not to charge fees for termination services on its network. The IFT established a MXN0.029 (US$0.002) fee per minute for calls terminating on Telcel s network. And Telcel will pay US$0.01 as interconnection rate to terminate calls on its competitors networks. The Zero Rate was one of the initiatives imposed on Telcel to improve competition among telecom players in Mexico. However, as recently noted by TeleGeography, to date Telcel still claims 65.6% of the Mexican mobile market, with Telefónica at 22.7% and AT&T at 11.7%. Implications for the future TowerXchange has been reporting for some time now about the possible wave of consolidation that could hit the Mexican tower market and bring some rationality to the fragmented sector. However, to date no transaction has taken place and the only rumoured deal involves Canadian towerco Tower One and an unnamed entity, although some sources suggest that the deal might actually entail the transfer of MLAs that the seller holds with AT&T, rather than exiting towers. AT&T has been assigning small orders to a wide array of towercos in 2016 and this has resulted in pockets of assets (5-10 towers) being owned by dozens of local towercos who aren t always able to sustain themselves while waiting for new orders. How long can these companies stay in business without new BTS orders though? We can only wait to see what the future might hold for Mexico s BTS sector while larger towercos are indeed starting to see the benefits of ALTÁN and reporting healthier volumes of co-location. One thing remains clear though; Mexico s telecom network is still far from complete in terms of coverage and capacity, and ALTÁN could represent a breakthrough if they are able to attract traditional carriers and MVNOs onto their network with the transparent and non-discriminatory pricing structure it has been advertising. And while this isn t good news for BTS towercos, it could be the change that Mexico needs and has been waiting for 251 TowerXchange Issue 21

252 Regional coverage: MEA features In the last quarter the first Middle Eastern tower transaction has been announced with IHS Towers, in partnership with Towershare, having reached an agreement to acquire Zain s Kuwaiti towers. We examine the details surrounding the transaction and what this means for further tower activity in the Middle East. Elsewhere in the news, Africa s three large privately backed towercos are reportedly gearing up for IPOs in the first half of TowerXchange takes a deep dive into potential timelines, listing destinations and valuations, whilst BMI Research s Andrew Kitson examines the risk profiles of the towercos and their respective markets. We are excited to announce an exclusive interview with Sam Darwish, IHS Towers Executive Vice Chairman and Group CEO who, after receiving TowerXchange s Lifetime Achievement award, makes this edition s front cover, plus we report the key take homes from our MNO, towerco and investor keynote panels at last month s TowerXchange Meetup Africa & Middle East. Don t miss: 253 Keynote interview: Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers 257 Deal analysis: IHS and Towershare s agreement to acquire Zain s Kuwaiti towers 265 TowerXchange analysis: IPOs on the horizon for Africa s towercos 274 BMI Research: Risk profiles of Eaton, Helios & IHS and their respective markets 286 Market update: Where are we now in Nigeria? 292 Meetup reports: MNO, towerco and investor keynote discussions 307 Site design: Safaricom s structural engineering team s upcoming requirements 252 TowerXchange Issue 21

253 The strategic vision of EMEA s largest independent towerco Q&A with Issam (Sam) Darwish, Executive Vice Chairman and Group CEO of IHS Towers Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers At the 2017 TowerXchange Industry Awards, Sam Darwish, Executive Vice Chairman and Group CEO of IHS Towers received a Lifetime Achievement Award in recognition of transformational impact that he and IHS have had on the region s tower industry. TowerXchange were delighted to interview Sam to understand how IHS evolved to the present day and what ambitions the company has for the future. Keywords: Acquisition, Africa, Africa & ME, C-Level Perspective, Cameroon, Cote d Ivoire, Energy, IHS, IHS Towers, Infrastructure Sharing, Ivory Coast, Kuwait, Middle East, Nigeria, Operational Excellence, Rwanda, Skilled Workforces, Towercos, Zambia Read this article to learn: < How IHS Towers transitioned from being a tower builder to EMEA s largest independent tower company by tower count < What the most important factors are in developing a successful towerco < The outlook for the Nigerian telecoms sector as the country exits recession < What CSR initiatives are being driven by the organisation < How the recently announced Kuwaiti agreement fits into the company s expansion plans < Where IHS sees future opportunities in telecoms infrastructure globally TowerXchange: Please can you introduce your background and how you got into the telecoms sector? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: I am the Executive Vice Chairman and Group CEO of IHS Towers, the largest independent tower operator in Europe, the Middle East and Africa by tower count and the third largest independent multinational tower company globally. I studied Telecommunications Engineering at the American University of Beirut in Lebanon and graduated with honors. I then joined MCI, one of the largest telecoms carriers in the world at the time, in 1992 and became a manager shortly thereafter. During this time, I developed a deep understanding of the telecoms industry and eventually joined the first Lebanese mobile network Libancell, now called Touch in Subsequently, in 1998, I moved to Nigeria where I was appointed Deputy Managing Director of CELIA Motophone Ltd, Nigeria s first GSM operator. TowerXchange: What prompted you to found IHS Towers? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: Following the Nigerian government s privatisation of telecommunications in 2001, I co-founded IHS Towers alongside a small group of engineers. This is why IHS has always and will continue to have a strong operating core. We believed there was an opportunity to provide focused passive telecoms infrastructure to enable robust and efficient mobile network coverage. 253 TowerXchange Issue 21

254 Nigeria, a country of 125 million people in 2001 then only had approximately 600,000 working telephone lines! The potential, as eventually illustrated, was immense. TowerXchange: Can you explain IHS Towers journey from being a Nigerian tower builder to being EMEA s largest towerco by tower count and one of the largest globally what were some of the most important steps and milestones in its transformation? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: IHS Towers has undergone significant transformation since its inception. We began as a tower builder in 2001 and within few years we were increasingly the company of choice for mobile network operators (MNOs) who needed to build towers in Nigeria. Soon after, and as the number of towers constructed grew exponentially, we converted our business to turnkey site management as the MNOs needed specialised third parties to handle the growing complexities of operating their passive infrastructure. In 2010, we decided to evolve the company into a tower ownership model with a strong focus on the operating elements since that s what makes up our DNA. This concept, though widespread in America and Europe, was not common in Africa and the broader emerging markets until a few years ago. By focusing on the passive infrastructure elements, we are able to provide MNOs with efficient infrastructure, thereby enabling operators to concentrate on the active side of the business, including network upgrades and expanding network coverage. We believe that our role within the sector has yielded substantial rewards for all stakeholders: our customers, shareholders and mobile phone end users. The first seed funding from the international community was $79 million anchored by the IFC. Since then, we have raised $3.4 billion of equity from credible global investors and from respected financial institutions, including Wendel, ECP, KIC, GIC, Goldman Sachs amongst many others, and over $2.0 billion of debt (net of refinancings). Today we own or operate over 23,000 towers and our markets remain poised for continued growth. TowerXchange: What do you think are some of the most important things that you have learned along the way on how to run a towerco successfully? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: The importance of strategy, planning and continued innovation with a primary focus on the quality of operations; it cannot be emphasised enough. After the Nigerian telecommunications sector was privatised, the industry became increasingly competitive, with new providers entering and setting up towers throughout the country. Building and maintaining towers requires significant CAPEX, therefore many operators are increasingly keen to outsource their towers. We focus on our engineering expertise and are committed to building robust and sustainable towers which are continuously monitored via our network operating centers (NOCs). Our NOC model is technologically advanced, monitoring many aspects of our towers including access, faults, power and so on. TowerXchange: Nigeria, where IHS has its largest footprint, has obviously experienced a turbulent time - what is your outlook for the economy and more specifically the mobile sector in the Nigerian market? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: Nigeria slipped into a slowdown due to the receding oil prices last year. However, growth has picked up since. Having said that, people will use their mobile phones in good times and in bad times. Emerging markets have the potential to become the face of global commerce in the years to come and Nigeria is at the heart of that. According to a recent study from the United Nations, Nigeria s population is projected to exceed that of the United States shortly before 2050, at which point it would become the third largest country in the world which means that there will likely be a significant growth in demand for mobile services. Furthermore, GSMA suggests that West Africa will see an average subscriber growth of 6%, resulting in an additional 45 million subscribers by GSMA also forecasts that by 2020, more than 90% of new mobile subscribers will come from developing regions, thus analysts note there are numerous future growth opportunities within the sector. Please also remember that data penetration remains modest in comparison to more developed areas where 3G and 4G is more prevalent. Almost 254 TowerXchange Issue 21

255 70% of mobile SIMs in sub-saharan Africa are still 2G, versus 11% in the US and 31% in Europe, according to industry analysts. TowerXchange: IHS has been channeling significant investment into solar-hybrid solutions on sites - can you explain some of the motivating factors behind this and what impact the work has been having? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: We have a duty to minimise our impact on the environment and protect not only the places where we operate, but the world at large. Social and environmental sustainability are at the heart of what we do and we strive to use renewable energy wherever possible. IHS Towers has significantly reduced its diesel consumption, in respect of the relevant towers on which hybrid systems have been deployed, currently operates numerous hybrid solar sites throughout its portfolio and continues to roll out new green energy solution systems. TowerXchange: IHS has also put a major focus on supporting the local communities throughout the African markets in which it operates, can you explain some of the important initiatives that IHS has in place? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: Our Corporate Sustainability and Responsibility program is tailored to each country s operations and focuses on four areas: business ethics, people, environment and education. Our flagship Generator Recycling One of the dear projects close to my heart is the recent launch of our IHS Academy. A one-stop online portal which provides education, training and development for our staff and potentially others. I m a strong believer in the value of skills acquired through education and training and we continue to invest in such initiatives Program has been rolled out in Cameroon, Côte d Ivoire, Nigeria, Rwanda, and Zambia, which has increased power access for numerous local communities and institutions, including hospitals, orphanages and schools. Earlier this year, we also rolled out various initiatives in Nigeria to address the ongoing famine crisis, including sponsoring an empowerment and training initiative for 40 women to manage 15 community food service centers and various local school feeding programs across Borno State. The Nigeria team is currently pioneering the construction of a new community food service center which is intended as a platform to feed 15,000 people in Borno State annually and is refurbishing the Queen Amina Girls College campus in Kaduna State which serves over 2,000 girls annually. CSR is important to us as a firm and we remain committed to empowering our local communities. One of the dear projects close to my heart is the recent launch of our IHS Academy. A one-stop online portal which provides education, training and development for our staff and potentially others. I m a strong believer in the value of skills acquired through education and training and we continue to invest in such initiatives. TowerXchange: News has just been announced regarding IHS s acquisition of Zain s towers in Kuwait marking the Middle East s first major tower transaction of scale. What role does IHS see itself playing in the Middle Eastern market and how does this compliment your sub-saharan African portfolio? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: Like most emerging markets, the Middle East is undergoing a period of considerable 255 TowerXchange Issue 21

256 IHS is committed to growing its business and capitalising on new and ancillary technologies such as small cell networks, fibre, and 4G-/5G-capable infrastructure. We are optimistic about the potential of wireless data and we continue to evaluate opportunities that will diversify our footprint in emerging markets digitalisation and the role of companies like IHS Towers is becoming increasingly important. While completion remains subject to certain conditions precedent, including regulatory approvals, expansion into the Middle East would complement our existing portfolio because it would allow us to apply our learnings from our business in Africa and is in line with our vision to expand operations in emerging markets the Kuwait agreement is the first step in demonstrating that. TowerXchange: We see towercos in the US and Europe in particular diversifying beyond owning macro-sites. Whilst significant new macro-site build is still required across sub-saharan Africa suggesting there is plenty more business in this yet for the region s towercos, do you see IHS playing a key role in operating other shared infrastructure in the telecoms sector? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: IHS is committed to growing its business and capitalising on new and ancillary technologies such as small cell networks, fibre, and 4G-/5G-capable infrastructure. We are optimistic about the potential of wireless data and we continue to evaluate opportunities that will diversify our footprint in emerging markets. TowerXchange: Finally can you sum up IHS vision for the future; what role does the company see itself playing in the global telecoms sector and what should we be watching out for next from the company? Sam Darwish, Executive Vice Chairman and Group CEO, IHS Towers: IHS Towers has come a long way since we were founded in 2001 and we feel that we are only getting started. We see ourselves as enablers of telecom growth by providing the various aspects of the shared networks on the global emerging markets stage. My aspiration is to see IHS Towers continue to be a leading multinational tower company, and I hope and believe that we will be at the forefront of meeting the demand for an inclusive wireless communications future that helps improve the lives of billions of people all over the world Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

257 The Middle East s first major tower transaction is announced IHS Towers, in partnership with Towershare, acquire Zain s 1,600 Kuwaiti sites On 10 October it was announced that Zain had entered into an agreement to sell and leaseback its 1,600 Kuwaiti towers to IHS Towers, in partnership with Towershare, for US$165mn. The transaction is expected to close in the first quarter of 2018 and upon completion will mark the Middle East s first tower transaction of scale. TowerXchange analyse the transaction and the knock-on effect this is expected to have on further transactions in the region. Keywords: Acquisition, ARPU, Build-to-Suit, Capex, Citi, Citigroup, Country Risk, Deal Structure, Digital Bridge, Eaton Towers, Egypt, Etisalat, IHS, IHS Towers, Infrastructure Sharing, Iranian Towers, Kuwait, LTE, Market Entry, Masts & Towers, Middle East, MNOs, Mobily, News, North Africa, Ooredoo, Operator-Led JV, Orange, Providence Equity, Risk, Sale & Leaseback, Saudi Arabia, Saudi Telecom Company, Towercos, Towershare, Viva, Zain Read this article to learn: < Detailed insights into Zain s Kuwaiti tower sale including implications for BTS, power provision and the acquiring parties < Zain s vision for further tower transactions < Attitudes of MENA s major operators towards tower sales and infrastructure sharing and where the next tower transactions could be expected < Potential key players in the future MENA towerco sector Zain and IHS announcement that Zain have agreed the sale of their Kuwaiti tower portfolio to IHS represents a landmark transaction in the global tower industry. To date, over 99% of Middle East s towers sit on MNO balance sheets and whilst there have been a number of stop-start processes over recent years, the news represents the region s first tower sale to be agreed. News of Zain s interest in divesting their Kuwaiti towers emerged back in 2015 when they appointed Citigroup to examine a potential tower sale in two Gulf countries. Later in 2015, then CEO, Scott Gegenheimer confirmed the company was opening a process for a sale of both their Saudi and Kuwait towers and in March 2016 it was announced that they were narrowing down potential bidders. In Kuwait, it is understood that interest was received from 15 parties, with Zain Group undergoing a rigorous processes to narrow this down to five shortlisted bidders before finally settling the deal with IHS Towers and Towershare. The transaction will result in the formation of a new entity which will be consolidated by IHS, and which will acquire and manage Zain s assets, with Zain retaining a non-controlling minority stake in the venture. The deal has been approved by Kuwait s Communication and Information Technology Regulatory Authority (CITRA), and is still subject to other regulatory and statutory approvals, and is expected to close in the first quarter of TowerXchange Issue 21

258 For Zain and the MENA region as a whole, the transaction is indicative of a shift in mindset towards passive infrastructure outsourcing and sharing. For IHS, Africa s largest towerco, which owns over 23,300 sites in five Sub-Saharan countries the move adds a new flavour to their portfolio; adding an investment grade market to their existing profile of countries which have significant sovereign risk. For Dubai headquartered Towershare, who recently sold their Pakistani business to edotco, the transaction signifies an important step in establishing their position as a leading MENAcentric towerco with major ambitions in the region. Figure one: Mobile market share in Kuwait* 30% Zain 38% Viva Ooredoo 32% The mobile market and infrastructure sharing in MENA The World Bank definition of MENA incorporates 20 countries extending from Morocco in the West to Iran in the East. Population size, geographical land mass, GDP, mobile penetration and ARPU varies drastically country to country although common threads tie the region together. In the majority of markets, there is a strong Arabic influence, a central role of government in the business sector, similar climates and a common set of MNOs with a presence in multiple countries. Historically, many of the operators have been reluctant to share infrastructure, with incumbent players in particular having viewed their networks as a source of competitive advantage. With many MNOs having enjoyed high ARPU, healthy balance sheets and relatively simple operating environments, the motivations that have led their counterparts in other geographic regions to divest their towers have not been concerns. As a result, over 99% of the region s towers remain on MNO balance sheets and infrastructure sharing has been limited. As data demand continues to explode across the region prompting operators to invest in improving network capacity, and competition continues to rise from OTT players, the attitudes of MENA s MNOs towards infrastructure sharing is starting to change. The Kuwaiti mobile and tower market Kuwait is a developed mobile market with a mobile penetration rate of 188%, ARPU is one of the highest in the region (although has steadily been decreasing) and LTE coverage is almost complete. Zain is the leading operator in the country with 38% market share, with Viva (owned by Saudi Telecom *Source: Zain Group 2016 Annual report Company) and Ooredoo having 32% and 30% market share respectively (see figure one). There are an estimated 3,500 towers in Kuwait, with Zain possessing the largest tower portfolio, owning approximately 1,600 sites. To date, the number of shared sites across Kuwait is minimal and significant parallel infrastructure exists. The mobile market is regulated by Kuwait s Communication and Information Technology Regulatory Authority (CITRA) which was established just two years ago, taking over responsibility from the Ministry of Communications. Zain s operations and motivations to divest their Kuwaiti tower portfolio Zain has a commercial presence in eight countries, operating in Kuwait, Bahrain, Iraq, Jordan, Saudi 258 TowerXchange Issue 21

259 Figure two: IHS Towers portfolio of 23,382 sites Nigeria 15,629 Cote d Ivoire 2,599 Cameroon 2,408 on rationalising costs and capital expenditure and increasing operational efficiency in a bid to protect their margins. A strategy involving tower divestment frees up capital to invest in other areas of the network, whilst sharing sites with other MNOs, helps to keep a handle on operating costs. In Kuwait, the sale of their 1,600 sites has raised $165mn in capital, an amount equating to approximately one third of their forecast capex for Zambia 1,960 Rwanda 786 Source: TowerXchange Spotlight on the winning bidders and their appetite for Zain s towers IHS Towers IHS is Africa s largest independent towerco with a portfolio of over 23,300 towers across five markets (figure two). The company has experience of acquiring major tower portfolios, having completed transactions with MTN and Etisalat amongst other deals (figure three). Arabia, Sudan and South Sudan. In Lebanon, the Group manages touch on behalf of the government. In Morocco, Zain has a 15.5% stake in INWI. Similar to other operators in the region, Zain has continued to face increasing economic and political challenges across many of its markets; challenges linked to currency fluctuations, a decrease in oil prices, civil unrest, the introduction of new taxes and increasing competition. In a bid to meet growing data demand, the company has been investing heavily on expanding 3G and 4G networks across its markets, resulting in a capex spend for 2016 of US$635mn (excluding Saudi Arabia). Such investment has yielded good returns, with group data revenues growing 6% in 2016, and data representing 23% of the group s consolidated revenues. In spite of this growth, total 2016 revenues were down 4% compared to 2015 figures and whilst Zain Group posted a 3% year on year growth in EBITDA, the company has placed a strong emphasis The acquisition of Zain s Kuwaiti sites brings a new dynamic to the towerco s portfolio. Whilst IHS s sub- Saharan African markets are about ensuring power uptime and rolling out new macro-sites, Kuwait is a much more developed and operationally simple market, more akin to the towerco markets of Europe and North America. Diversification of the towerco s geographical footprint may make the company more palatable to potential investors; IHS s existing portfolio has a heavy Nigerian bias, a market which has gone 259 TowerXchange Issue 21

260 through a particularly challenging time in the past 12 months. A deep recession coupled with a dramatic currency devaluation has hit the telecoms sector hard, with Etisalat s exit from the country following a failure to meet loan repayments the latest in a long line of woes. The addition of an investment grade Middle Eastern flavour to IHS portfolio could well help balance out some of the concerns about such a high concentration of business in one country. Towershare Independent towerco Towershare had developed a portfolio of 700 towers in the Pakistani market, held under their subsidiary Tanzanite; a portfolio which was built from the acquisition of WiTribe assets and the rollup of several smaller local towercos. In 2017, Tanzanite looked set to exponentially grow their Pakistani portfolio, being tipped as the frontrunners to acquire 13,000 towers from Jazz, VEON s opco in the country. Whilst the tower sale process was ongoing, one of the other competing parties in the transaction, edotco, made an offer to acquire Tanzanite for US$88.9mn; an offer which was subsequently accepted by Towershare. Headquartered in Dubai and managed by a team which previously ran one of the leading telecom equipment vendors in the MENA region, Towershare has been very much positioning itself to become a leading player in an emerging MENA tower industry. Towershare bring strong local relationships to the partnership with IHS, creating an attractive party to whom Zain felt comfortable divesting their towers. Speaking on their decision to award the towers to Figure three: A history of IHS major tower acquisitions Year Country Seller Tower count the IHS - Towershare partnership, a spokesperson for Zain said We believe they are a formidable team with a sound track record, financial capabilities, knowledge of the region and finally, good chemistry within the team which is crucial Deal value (US$) Cost per tower (US$) Source: TowerXchange Deal structure 2017 Kuwait Zain 1, ,000, ,125 SLB* 2017 Nigeria Hotspot Network Nigeria HTN Towers 1,211 Portfolio acquisition Company acquisition 2015 Nigeria Etisalat 555 SLB 2014 Rwanda Airtel 164 SLB 2014 Zambia Airtel ,000, ,061 SLB 2014 Nigeria MTN 8, ,000, ,911 JV** 2014 Nigeria Etisalat 2, ,000, ,060 SLB Cameroon & Cote d Ivoire Cote d Ivoire Orange 2,000 MLL MTN ,000, ,775 SLB 2012 Cameroon MTN ,000, ,390 SLB 2010 Nigeria Visafone ,000,000 83,750 SLB *Deal announced, not completed. Zain to retain an undisclosed amount of equity in the towers ** MTN retained a 51% stake in the JV, a stake which has since been restructured to additional shareholding at the IHS Group level for this long-term relationship. They both possess high calibre expertise with sound operational experience in diverse markets. Both entities have ambitious teams that are focused on expanding their operations across the Middle East and Africa. 260 TowerXchange Issue 21

261 Figure four: The number of site locations used by Zain Group across its different markets (inclusive of owned and shared sites) efficiency initiatives in a bid to control energy costs and reduce carbon emissions. Kuwait 2,186 Could we see more tower sales from Zain? Iraq Sudan Saudi Arabia Jordan Bahrain 2,500 2, ,424 What do we know about the deal structure? IHS are understood to have fronted and bought the assets with Towershare acting as a regional partner and Zain retaining equity in the new entity. The division of equity between IHS, Towershare and Zain has not been disclosed. With Zain s retention of residual equity reducing the capital requirement to purchase the towers, and IHS having significant liquidity on their balance sheet, IHS has not had to raise new capital to finance the transaction. Zain s retention of equity is for financial upside exposure only, with no access to strategic or competitive information, thus guaranteeing the independence of the new towerco entity. 8,598 2,000 4,000 6,000 8,000 10,000 Source: TowerXchange The deal is understood to involve a build-to-suit commitment over the next three to five years and whilst no details of decommissioning plans have emerged, consolidation is expected in a bid to bring efficiencies to the portfolio. Whilst there has been no discussions of the towerco entity expanding beyond the ownership and operation of macrosites, Kuwait s plans to become a leader in the rollout of 5G could create a potential role for the towerco entity in small cells and DAS rollout to meet densification requirements. The new towerco entity will take over power as a service and whilst the vast majority of sites are ongrid, Zain had previously been investing in energy Zain are known to be exploring the sale of their 8,000 towers in Saudi Arabia. The opco originally entered into exclusive negotiations with TASC Towers earlier in 2017 but the two parties failed to reach an agreement. On 6 August 2017, the Board of Directors, decided to enter into exclusive talks with IHS and Towershare on the matter, with the period of exclusivity being granted until the end of September. No material developments have been announced since the expiry of this period but talks are understood to be ongoing with sources suggesting the parties are close to reaching an agreement. Once the transactions in Kuwait, and hopefully in Saudi Arabia, are closed, TowerXchange s source at Zain explains that the MNO will look at both deals and examine lessons learned with a view to examining potential tower processes in other markets. Whilst definitive tower counts for Zain s other markets are yet to be obtained by TowerXchange, an indication of the relative scale of their portfolios can be obtained by the number of sites used by the operator in each of its respective markets (see figure four). Could this have a knock on effect on other MNOs in the region? Whilst no other tower transactions of scale have 261 TowerXchange Issue 21

262 We are delighted to partner with Zain on this agreement which will expand our operating footprint into the Middle East. We look forward to a long-term partnership with Zain, where we can demonstrate our strong operating capabilities and service offering in support of their customers. We expect significant growth in wireless phone and data usage in a number of emerging markets over the next few years and we believe, given the significant experience we have gained in our African operations, we are well positioned to meet the growing needs of wireless network operators in these countries - Sam Darwish, Executive Vice Chairman and Group CEO, IHS been completed in MENA, several of the region s MNOs have experience working with towercos in other geographies, whilst others have started to embrace infrastructure sharing strategies more readily; Etisalat, with a presence in the UAE, Saudi Arabia and Egypt and a share in Maroc Telecom had previously sold their Nigerian towers to IHS before exiting the market. The company s Saudi Arabian opco, Mobily, had initiated a process to sell its 9,600 sites before abandoning the transaction to study the formation of a towerco joint venture with Saudi Telecom Company. Plans for the joint venture have currently been shelved but should Zain reach an agreement to sell their towers in the market, one can imagine that tower strategy will once again move up the boardroom agenda. Whether this could lead to a tower sale however remains in question; Etisalat s experiences in Nigeria are thought to have left the team wary of divesting their towers and being unable to make lease payments. Ooredoo, with a MENA footprint in Qatar, Kuwait, Oman, Iraq, Palestine, Tunisia and Algeria had previously outsourced new build to towercos in Myanmar. The operator is particularly keen to explore infrastructure sharing strategies, especially in its more challenging markets and has entered into discussions with operators in several jurisdictions (although an absence of towercos in such markets means relationships with the latter have not been explored). Ooredoo had reached an agreement to carry out active sharing with Djezzy in Algeria, only for the plans to be blocked by the regulator. It is thought however that active sharing may be permitted for the rollout of 4G in the country. Whilst no tower processes have been discussed in MENA, Ooredoo may well be receptive to discussions in the market. Orange has a long standing history of working with towercos across multiple sub-saharan African markets. Whilst the company has not completed a sale and leaseback transaction of its own, Orange has inherited towerco relationships through the acquisition of Tigo in the DRC and Airtel in Burkina Faso (both of which who had sold their tower portfolios), has entered into manage with license to lease (MLL) arrangements with IHS in Cameroon and Cote d Ivoire and has a footprint in further markets where towercos are present. In 2016, Orange reached an agreement to sell 2,000 of its ~6,000 Egyptian towers to Eaton only for the deal to time out, with regulatory roadblocks proving insurmountable at the time. The MNO is now putting a heavy focus on examining partnerships with ESCOs, with an RFP known to have been issued in Egypt. In MENA, Orange also has a footprint in Jordan and Morocco although no plans around tower sales have emerged. 262 TowerXchange Issue 21

263 Saudi Telecom Company, with a presence in Saudi Arabia, Kuwait and Bahrain (operating in under the Viva brand in the latter two) had explored a tower sale in Saudi Arabia before examining the aforementioned joint venture with Mobily. With talks surrounding the joint venture having stalled, reportedly due to Mobily dragging their heels, it is uncertain whether STC may reconsider a tower sale instead. The entrance of IHS and Towershare into the Kuwaiti market will expose STC to towerco activity and potentially influence their view point on further working with such parties. In Iran, number one and number three operators, MCI and Rightel, have joined forces with domestic towerco, Fanasia, to form a new towerco venture, Iranian Towers. Iranian Towers will manage all new site rollout for the two operators, with a long term vision that an undisclosed number of the two s tower portfolios will be transferred into the entity. In addition to such multi-country operators there are host of other MNOs with a presence in one or more markets whose ears may be pricked up by the news of towercos and infrastructure sharing coming to the region. As the first wave of towers start to transition into towerco hands, further activity may start to emerge as MNOs look to bring efficiencies to their networks. Which towercos could have an interest in the MENA region? Through the acquisition of Zain s Kuwaiti towers and entrance into exclusive negotiations regarding This transaction is set to support Zain s transformational strategy in becoming a digital lifestyle provider as it will optimise operational efficiencies, enhance customer experience, and deliver greater value for its shareholders. This deal will unlock value that can be more efficiently deployed in new technologies and higher yielding investments for Zain, and at the same time pave the way for further network expansion and tower infrastructure sharing in Kuwait - Bader Al-Kharafi, Vice-Chairman and Group CEO, Zain the operator s Saudi Arabian portfolio, both IHS and Towershare have signalled their intent to take a leading role in MENA s emerging tower industry. Eaton Towers, Africa s fourth largest towerco, had made an offer for Orange s Egyptian towers and remain committed to the country, but have expressed less of an interest in the more developed Middle Eastern market. Helios Towers Africa, SSA s third largest towerco, have also expressed similar apathy towards the Middle East, seeing their business model as being one focussed around macrosite rollout and power provision. Publicly listed American Tower, who also have a robust footprint in Africa, in addition to portfolios across Asia and the Americas, could represent a further candidate, although certain Middle Eastern markets may be off limits given the nature of US relations in the region. Names linked to the previous sale processes in Saudi Arabia include Digital Bridge (who have investments in towercos Vertical Bridge, Andean Tower Partners and Mexico Tower Partners as well as small cell player ExteNet systems), Providence Equity Partners (who have money at work in India s Indus Towers, Brazil s Grupo Torresur and Indonesia s KIN) and TASC Towers (who had previously entered into exclusive negotiations with Zain KSA). Quippo International (whose team was behind India s Viom Networks, recently sold to American Tower) have also been linked to the 263 TowerXchange Issue 21

264 Middle Eastern market, as has Turkcell s captive towerco, Global Tower, who has stated its ambitions to explore opportunities beyond its home markets. See you at our future events! In Egypt, infraco licences were awarded to Alkan, Mobiserve, EEC and HOI-MEA, with only the latter having chosen to build and retain a portfolio of sites. TowerXchange has also been made aware of a managed service provider in at least one other MENA country who has ambitions to become the first towerco in their market, whilst a handful of tower builders, such as Saudi Arabia s ACES and Al Babtain are retaining sites. One could expect further build-to-suit towercos starting to emerge; companies which would establish their footprint in a given country and thus have operational experience should a tower process arise. Meetup Asia December, Singapore Meetup Europe April, London Conclusion The announcement that Zain has reached an agreement to sell and leaseback towers in Kuwait represents a major milestone in the opening up of the MENA tower industry. With the operator also in advanced discussions regarding a divestment in Saudi Arabia and TowerXchange having been made aware of one other tower sale process being kick started in MENA, the tides are very much turning in what, to date, has been the market the least penetrated by the towerco business model. TowerXchange anticipate further developments starting to emerge throughout 2018 and eagerly await news in what is set to become a very interesting market place Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

265 IPOs on the horizon for Africa s towercos What timelines and valuations could be expected? Laura Graves, Managing Director, EMEA, TowerXchange Africa s three largest privately owned towercos, Eaton Towers, Helios Towers and IHS Towers, have commenced proceedings for a public listing, with each targeting the first half of 2018 for their IPOs. With tower stocks on the rise, TowerXchange examine the details starting to emerge around their IPO processes and examine potential listing destinations, time frames and valuations that could be achieved. Keywords: Africa, Country-Risk, EBITDA, Eaton Towers, Exit Strategy, Helios Towers, IHS Towers, IPO, Investors, Middle East, News, Private Equity, Risk, Sale & Leaseback, Tower Count, Towercos Read this article to learn: < The background on Africa s three privately listed towercos gearing up for a listing < Why all three towercos have decided to list in H < Key developments in each of their IPO processes < What the likely listing destinations will be, and what kind of valuations could be achieved < Whether an acquisition by a third party still represents a viable alternative exit for investors Who are the tower companies in question? Eaton Towers, Helios Towers and IHS Towers represent three of sub-saharan Africa s four largest towercos. With portfolios ranging from 6,000 to 23,282 towers (figure one), the three towercos collectively own 29% of sub-saharan Africa s 124,428 towers. Their portfolios have largely been acquired through a series of sale and leaseback transactions with the region s tier one MNOs (figures 2a-c) and have been supplemented by organic portfolio growth through build to suit activities for the various operators in their respective markets. Revenue growth has further been driven by the addition of co-locations on built and acquired sites, with amendment revenues as MNOs move to upgrade equipment contributing to an increasingly large proportion of revenue growth. Each of the towercos offer power as a service and have deployed significant investment into the repair, maintenance and upgrade of power infrastructure. IHS have now directly installed solar hybrid systems at well over 2,300 of their sites in Cameroon, Cote d Ivoire and Zambia, with a further 12,000 systems being installed through their big five initiative in Nigeria; Helios have commenced hybrid system rollout with $28.2mn having been earmarked for investment in power systems in 2017 (read Energy strategies and priorities for Africa s big four towercos for further information). Each of the towercos report that they are starting to see 265 TowerXchange Issue 21

266 Figure 1: Tower ownership by Eaton, Helios and IHS IHS Towers Eaton Towers 2408 Helios Towers *Transaction announced, not yet closed the effect of their upgrades filtering through to their financial results. Along with power investments, the towercos have embarked on operational excellence programmes, supply chain optimisation and training initiatives which have further improved site uptime and decreased operating costs. Since 2015, Helios application of Lean Six Sigma processes has enabled * Uganda Tanzania Kenya Nigeria Ghana Burkina Faso DRC Cote d Ivoire Figure 2a: Eaton Towers major tower transactions Year Country Seller Tower count Deal value US$ the towerco to realise capex savings of $28m; streamline its suppliers down from 147 to 32; take employees per tower from 8.6 to 5.9; and achieve an 82% reduction in downtime. Why IPO and why now? Cameroon Niger Rwanda Zambia Cost per tower US$ Source: TowerXchange With private equity comprising the majority of the respective shareholdings of the three Congo B Kuwait Deal structure 2014 Niger Airtel 600 SLB 2014 Ghana, Burkina Faso, Kenya & Uganda Airtel 2, ,000, ,417 SLB 2012 Uganda Warid 400 SLB 2012 Uganda Orange 300 SLB 2010 Ghana Vodafone 750 MLL towercos (figures 3a-c) and the investors having held their investments for a long time, IPOs will give the towercos the opportunity to expand their shareholder base, with it likely that each towerco will seek to list approximately 50% of their share capital. With towerco stock market indices at a record high, the towercos are aiming to take advantage of such favourable conditions and push for a listing in the first half of A quick view of the performance of the world s 20 publicly listed towercos shows impressive growth over the past year; Europe s Cellnex is up 56.5% YoY and US public towercos American Tower and SBA Communications show an increase of 44.5% and 70.5% respectively (Source: Reuters, 14 November 2017). Should the markets stay favourable, early 2018 represents an ideal time to bring a towerco to market. As well as a high demand for towerco assets there is similarly strong investor appetite for emerging market telecom businesses. With few sound investment opportunities, the towercos stand out as attractive enterprises, alongside fibre company Liquid Telecom, which is similarly gearing up for an IPO. What progress has there been in the IPO process to date? Each of the towercos are understood to have appointed banks to run their IPO processes. Eaton have appointed JP Morgan, UBS, Barclays and Societe Generale; Helios are understood to 266 TowerXchange Issue 21

267 have appointed Standard Bank, Credit Suisse and BAML; whilst IHS have reportedly hired Goldman Sachs, Citi and Morgan Stanley. Advisors have also been appointed with both Moelis and Hardiman Telecommunications both rumoured to be involved. Early look roadshows have also commenced, with Helios having already completed their first roadshow and Eaton understood to be embarking on theirs at present. Each of the towercos are thought to be aiming for the H window to take advantage of the current positive market conditions. Where will the towercos look to list? Both Eaton and Helios are understood to be targeting a listing on the Main Market of the London Stock Exchange (LSE), with a potential secondary listing on the Johannesburg Stock Exchange (JSE) under consideration. With both towercos headquartered in London and the LSE serving as a popular listing destination for many African firms, the LSE makes a natural choice, whilst the JSE has high levels of liquidity at present. IHS are thought to be aiming for the New York Stock Exchange. With both American Tower and Crown Castle currently listed on the NYSE, there is familiarity of the towerco business model and, given American Tower s footprint in Africa, some exposure to the towerco model on the continent. What kind of valuation could be expected? Telecom infrastructure stocks are in high demand as they continue to outperform other stocks (figure Figure 2b: Helios Towers major tower transactions Year Country Seller Towercount 4a and 4b). Speaking on the rise, Fraser Hughes, CEO of the Global Listed Infrastructure Association said The continued growth and development of the telecom infrastructure sector is critical to global economic prosperity. Subsequently, this offers investors an extremely attractive investment case. The impressive outperformance of the sector over the short, mid and long term is a result of the central role companies like American Tower, Crown Deal value US$ Cost per tower US$ Deal structure 2017 Tanzania Zantel 185 6,700,000 36,216 SLB 2016 DRC Airtel ,000, ,631 SLB 2014 Congo B Airtel ,000, ,226 SLB 2013 Tanzania Vodacom 1,149 75,000,000 87,616 SLB with direct investment in HTT* 2010 Tanzania Millicom/ Tigo 2010 DRC 2010 Ghana Millicom/ Tigo Millicom/ Tigo 1,020 81,000, , ,500,000 94, ,000, ,000 Joint venture (HTA 60%, Millicom 40%)** Joint venture (HTA 60%, Millicom 40%)** Joint venture (HTA 60%, Millicom 40%)** * Vodacom sold 100% of equity in its towers but subscribed to acquire a 24.5% interest in HTT; HTA has since agreed to purchase this stake from Vodacom ** Millicom restructured their equity into Helios operations into a 24% stake at group level which Millicom is now looking to monetise Source: TowerXchange Castle, and SBA play in how the global population does business and socialises. GLIO views global telecom infrastructure a fundamental part of any allocation to a global core infrastructure allocation. With no pure play African towercos currently listed, there is a lack of an obvious comp from which to derive a valuation for Helios, Eaton and IHS. Whilst American Tower has an African footprint, 267 TowerXchange Issue 21

268 Figure 2c: IHS Towers major tower transactions Year Country Seller Tower count Deal value (US$) Cost per tower (US$) Source: TowerXchange Deal structure been proposed as a likely target valuation although some of the towercos are understood to be setting their ambitions higher Kuwait Zain 1, ,000, ,125 SLB* 2017 Nigeria Hotspot Network Nigeria HTN Towers 1,211 their African portfolio represents less than 10% of their total tower portfolio thus precluding direct comparisons. The US public towercos, American Tower, Crown Castle and SBA Communications Portfolio acquisition Company acquisition 2015 Nigeria Etisalat 555 SLB 2014 Rwanda Airtel 164 SLB 2014 Zambia Airtel ,000, ,061 SLB 2014 Nigeria MTN 8, ,000, ,911 JV** 2014 Nigeria Etisalat 2, ,000, ,060 SLB Cameroon & Cote d Ivoire Cote d Ivoire Orange 2,000 MLL MTN ,000, ,775 SLB 2012 Cameroon MTN ,000, ,390 SLB 2010 Nigeria Visafone ,000,000 83,750 SLB *Deal announced, not completed. Zain to retain an undisclosed amount of equity in the towers ** MTN retained a 51% stake in the JV, a stake which has since been restructured to additional shareholding at the IHS Group level are enjoying multiples substantially north of 20x (see figure five), a valuation that would be highly unlikely given the different risk profiles and site revenues achievable in Africa. A 15x multiple has Helios posted an EBITDA of US$85mn in 2016 (Source: Helios Towers 2016 Financial Results) but looks on track to significantly improve on this in 2017 with YoY comparisons for H1 showing a 72% increase on 2016 figures, posting a H EBITDA of US$56.3mn. If such growth is maintained, and with Helios believed to be targeting an EBITDA multiple around 20, one could assume that Helios would be targeting a valuation north of US$2bn. Eaton Towers are also understood to be targeting a valuation above $2bn. Whilst Eaton s earnings are not in the public domain, one source suggests that they are on target for a 2017 EBITDA over $130mn, which, with a valuation multiple in excess of 15x, appears to correlate with the suggested target. With IHS having a portfolio 3-4x larger than either Eaton or Helios, the company is targeting a higher valuation. In MTN s 2017 interim results they report the fair value of their 29% stake in the towerco (at June 30, 2017) as ZAR24,859mn; a figure which puts IHS total estimated valuation at US$6.5bn. With MTN seeking a significant increase on their book value, and with IHS since having reached an agreement to acquire Zain s 1,600 Kuwaiti towers and understood to be in the final stages of agreeing the purchase of 8,000 towers from the operator in Saudi Arabia, this figure is likely to escalate with observers suggesting a target valuation of US$10bn. 268 TowerXchange Issue 21

269 What risks will investors being assessing? Helios and IHS bond issuances have done much to pave the way for the listings, introducing African towercos to institutional investors who may ultimately invest equity on the other side of the house. The high degree of appetite for the bonds (Helios $600mn bond attracted over $1.9bn of orders; one of highest ever orders for an issue of that type from Africa) serves as testament to the confidence in the towerco business model as well as comfort in the specific risks posed by the portfolios. Investors have become increasingly comfortable with the towerco asset class, buoyed by the proven performance of listed towerco stocks, plus (with the exception of Ghana, Nigeria and Uganda) each of the towercos are the only towerco in their respective markets, in many cases owning over 50% of the total tower stock in such countries, thus warding them against the entrance of a competitor. Figure 3a: Eaton Towers leading shareholders Shareholder Capital Group Private Markets Development Partners International Ethos Private Equity Standard Chartered Private Equity Shareholder Helios Investment Partners Details Majority shareholder and a leader in emerging markets private equity. Part of Capital Group, one of the world s largest investment management companies with over $1.4 trillion in assets under management Pan-African private equity fund Leading South African fund manager Figure 3b: Helios Towers leading shareholders Private equity and venture capital arm of Standard Chartered PLC Details Investment firm making private equity investments in Africa, with a primary focus on the sub-saharan region. Helios portfolio companies operate in 35 African countries across a range of industry sectors, with telecom infrastructure and services playing an important part Geopolitical and regulatory risk present a potential concern in several jurisdictions, although the fact that telecommunications is seen as part of critical national infrastructure in such economies affords some degree of protection during times of civil unrest and against dramatic regulatory change. The civil unrest being witnessed in the DRC along with the Tanzanian government s mandate for telecommunications companies to list a 25% on the Dar Es Salaam stock exchange did not appear to deter investors during Helios bond issuance, with many of the investors involved in the bond expected to invest equity in the IPOs. Albright Capital Management LLC RIT Capital Partners Quantum Strategic Partners International Finance Corporation Chaired by former US Secretary of State Madeleine Albright, Albright Capital Management LLC is an investment advisory firm dedicated to the emerging markets Chaired by Lord Rothschild, RIT Capital Partners is an investment trust listed on the London Stock Exchange with a widely diversified portfolio Private investment vehicle, managed by Soros Fund Management LLC, focused upon long duration investments exclusively for the benefit of certain family clients. In recent years QSP committed more than $3bn to projects around the world, including to telecommunications infrastructure Member of the World Bank Group and provides investments and advisory services to build the private sector in developing countries 269 TowerXchange Issue 21

270 Figure 3c: IHS s leading shareholders Shareholder Details UBC Founders and Management Wendel Long term investment company ECP Pan-African private equity firm MTN MEA s largest MNO with a footprint in 20 markets Korea Investment Corporation Sovereign wealth fund established by the Government of Korea balanced portfolio and, whilst revenue figures are not available, tower counts as a proxy show Eaton as having no more than 22% of its business concentrated in any one particular market. Whilst IHS had a heavy Nigerian bias with two thirds of its towers in the country, the towerco is in the process of expanding its geographical footprint, extending into the Middle East with the addition of Zain s Kuwaiti and potentially Saudi sites. As investment grade countries, the addition of the Middle Eastern markets will balance some of the developing market country risk. GIC IFC AIIM IFC Global Infrastructure Fund Investec Goldman Sachs Sovereign wealth fund established by the Government of Singapore Member of the Work Banking Group (Aaa stable) Specialised infrastructure investor Infrastructure investment arm of the IFC South Africa banking group with market cap of c. US$6bn Large financial institution with market cap of c. US$66bn With targeted listings on the NYSE and Main Market of the LSE, high standards of corporate governance will need to be displayed by each of the towercos, with each having put in place processes to prevent bribery and corruption whilst implementing a robust workplace code of conduct. Major steps have also been made by the towercos to achieve high levels of operational governance and operational excellence, delivering effective cost control measures to protect profits. FMO In markets where currencies are not pegged to the Dollar or Euro, currency risk presents a concern, especially when issues surrounding repatriation of capital are brought into question. In the case of IHS, approximately 60% of their contracts are beleived to be hard currency linked with 40% in local currency (with both USD and local currency contracts indexed each year for US and local inflation respectively). In response to the devaluation of Development bank with investment portfolio >US$7bn the Nigerian Naira, IHS moved to more regular resetting of conversion rates, whilst hedging in the market also helped to offset some of the impact of forex fluctuations thus reducing currency risk. Geographical diversity in their portfolios further helps offset the aforementioned risks, with each of the towercos having a presence in at least four markets. Eaton, in particular, has a very Eaton is known for running a tight, lean ship with a low cost, challenger culture embedded in the organisation focussed on keeping overheads and operating costs low. Helios implementation of Lean Six Sigma processes has helped the company reduce their operational headcount by over 30% per tower, improve power uptime by over 80% and save over $20mn in supply chain costs. At IHS, major investment has been put into the installation of solar hybrid systems in a bid to reduce power costs. With power accounting for close to 50% of African 270 TowerXchange Issue 21

271 Figure 4a: Total returns telecom infrastructure versus other equities ( ) 1, , , , Dec-01 May-02 GLIO Core Global Infrastructure, GLIO Telecom Infrastructure, & GLIO Satelittes v Global Equities December 31, 2001 to October 31, 2017 US$ Total Returns Oct-02 Mar-03 GLIO Telecom Infrastructure GLIO Satelittes GLIO Core Global Infrastructure MSCI AC World Equities Aug-03 Jan-04 Jun-04 towercos cost of sales, reducing power costs has a significant impact on company operating margins, whilst reducing diesel reliance helps mitigate the risks associated with fuel price fluctuations and delivery challenges. When assessing counterparty risk, the vast majority of each towercos contracts are signed with the opcos of investment grade operators. This, coupled with the fact the towercos have agreements in place Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 with each of the operators in at least two different countries (for the most part), means that the likelihood of a default on payment is low. Should the MNO lapse on one contract it would put them at risk of the towerco pulling the contract in the other country and as such, the parent company would most likely step in. Whilst Etisalat s woes in the Nigerian market had a knock on effect on IHS with delayed payments, IHS is making good progress with retrieving payments from the company s Jan-14 Jun-14 Source: Global Listed Infrastructure Organisation (GLIO) Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 creditors who have taken over the opco which now trades under the 9mobile brand. Whilst some investors in the European and US publicly listed towercos may shy away from the unique risks that are associated with developing market towercos, others with a remit to invest in emerging markets will see Helios, IHS and Eaton s IPOs as sound investment opportunities given the proven performance of the towerco asset class; a proven asset class with a total global valuation of $300bn. Could a strategic acquisition represent an alternative to an IPO? Whilst all three towercos appear to be heading towards an IPO, speculation still exists as to whether a strategic acquirer could step in. Whilst the world s largest independent towerco, American Tower, with over 10,000 African towers amongst their global portfolio, may be thought by many to be the most obvious party, CEO James Taiclet s lukewarm response to a question on the subject during a recent investor call suggests otherwise. Whilst not ruling out further African M&A appetite in the future, Taiclet commented that American Tower didn t necessarily see an opportunity to consolidate with any of the others [towercos] on the immediate time horizon adding that they didn t think that Africa would be their biggest investment market in the near future. Whilst American Tower s appetite for upcoming 271 TowerXchange Issue 21

272 4b: Annualised total returns of telecom infrastructure versus other equities Figure five: Enterprise values and EV:EBITDA multiples of the world s publicly listed towercos Enterprise Value (USD Billions) Holding Period GLIO Telecom Infra GLIO Satelittes GLIO Global Infra MSCI AC World YTD 35.19% -9.11% 17.31% 20.22% 12 months 25.08% -9.99% 16.85% 23.86% 3 years 14.12% % 5.25% 8.51% 5 years 14.56% -3.24% 10.59% 11.40% 7.5 years 18.66% -0.63% 11.28% 9.46% 10 years 12.83% 0.88% 6.40% 4.26% 12.5 years 19.32% 7.05% 9.87% 7.65% 15 years 32.12% 13.47% 12.58% 9.34% 24.0x 26.3x 25.5x 91.0 American Tower 57.4 Crown Castle 29.1 SBA Enterprise value EV to annualized EBITDA multiple 11.5x 12.0x 11.6 Bharti Infratel 0.8 GTL Infrastructure 15.3x 3.6 Tower Bersama 11.1x 3.5 Protelindo 8.4x 0.9 STP 1.0 IBS Source: Global Listed Infrastructure Organisation (GLIO) 12.5x x 17.3x x 13.1x United States India Indonesia Europe Mexico Balitower Cellnex INWIT 2.1 EI Towers 1.7 Rai Way 20.6x 3.6 Telesites 30.0x 27.0x 24.0x 21.0x 18.0x 15.0x 12.0x 9.0x 6.0x 3.0x 0.0x EV to Annualized EBITDA Multiple Source: MoffettNathanson African towerco M&A opportunities may be somewhat lacking (if Taiclet isn t just showing a poker face!), SBA Communications have hinted at more interest. Historically the towerco has shied away from portfolios where power as a service would be required, with the company used to the steel and grass towerco model of the Americas. However, commenting on upcoming African opportunities during an investor call, SBA Communications CEO Jeff Stoops observed that the currency risk and power concerns posed by the African portfolios could be mitigated with the right financial transaction. Stoops added that Africa was a good fit for the kind of growth markets which SBA look at and that it would fit well into their levered capital appreciation strategy. When pushed on whether they would look to enter the region from the ground up on a build-to-suit strategy as they had done in Canada or rather make a significant acquisition, Stoops commented they would always want to go in with some size and some scale if you can do it for the right financial terms. Whilst no further names have been linked with a potential acquisition, the growing interest in the tower asset class could see appetite from a financial investor with an appetite for the annuity-like returns delivered by the towerco business model. Conclusion Significant growth is forecast for the African telecommunications sector, and towercos are positioned to be an important part of that growth. 272 TowerXchange Issue 21

273 Ericsson s Mobility report projects that mobile subscriptions in sub-saharan Africa will grow at a CAGR of 6% between 2017 and 2023, from 700 million mobile subscriptions to 990 million; whilst LTE subscriptions will expand at a CAGR of 47% from 30 million to 310 million in the same period. Such growth requires new towers and more equipment on towers. Simultaneously, towercos, with their annuity like returns, contracted with investment grade parties are becoming an increasingly popular asset class globally. Stock market indices for the world s 20 publicly listed towercos are at an all time high and, whilst there are no African towercos with which to directly benchmark valuations, general consensus indicates a 15x multiple, or even higher, could be achieved. With each of the towercos having demonstrated robust EBITDA growth year on year, current estimates suggest both Eaton and Helios will achieve valuations north of US$2bn and should IHS expansion plans beyond the African market go as hoped, a suggested valuation of close to US$10bn could be achievable. With roadshows underway and banks and advisors appointed, all three towercos appear to be aiming for that H window, with the jury out as to whether all three will make it within such an aggressive timescale. Whilst an IPO looks the most likely route for all three parties, an offer by a strategic acquirer is not to be ruled out, a move which could introduce a change in market dynamics in the African tower industry See you at our future events! Meetup Asia December, Singapore Meetup Americas June, Boca Raton Meetup Europe April, London Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

274 BMI Industry Trend Analysis: Analysing the risk profile of Africa s towercos ahead of their prospective IPOs By Andrew Kitson, Senior Global Telecoms Analyst, BMI Research Keywords: 3G, 4G, 9mobile, Africa, Africell, Afrimax, Airtel, Amotel, Azur, Benson, Bintel, BMI Research, Burkina Faso, Cafe Mobile, Cameroon, Capex, Celtel, Cote d Ivoire, Congo, Country Risk, Comium, DRC, East Africa, Eaton Towers, EMTS, Equitel, Etisalat, Expresso, Ghana, Glo, Globacom, GreenN, Halotel, Helios, Helios Investment Partners, Helios Towers, Helios Towers Africa, IHS, IHS Towers, Ivory Coast, Kenya, LPTIC, Market Overview, Millicom, Moov, MNOs, MTN, Multi- Links, Network Rollout, New License, New Market Entrant, Nexttel, Niger, Niger Telecom, Nigeria, Onatel, Orange, QoS, Risk, Rwanda, Safaricom, Sahelcom, Sema Mobile, Smile, Sonitel, Southern Africa, Supercell, Tanzania, Telecel, Telkom Kenya, Tigo, Timeturn, Towercos, TTCL, Uganda, Urban vs Rural, Viettel, Visafone, Vodafone, West Africa, YouMee, Yozma, YU, Zambia, Zamtel, Zantel Read this article to learn: < Operational risk profiles of Eaton, Helios and IHS and how they compare < Key macro dynamics in the countries in which they operate < Operator market share and health in each region < Forecasts for mobile market growth across Helios, Eaton and IHS respective jurisdictions < Further factors influencing the towercos mobile markets BMI View: We expect that at least one Sub-Saharan African tower company will list in 2018, with Eaton Towers, Helios Towers and IHS Towers likeliest to announce an initial public offering (IPO) before long. Cash injections would give the newly listed company or companies the impetus to scale-up in existing markets or more aggressively pursue acquisitions in new markets. Prospective investors will need to consider each player s financial and organisational strengths and weaknesses. They must also consider the long term stability of each company s operational foundations, with the fundamentals of the markets within their existing footprint key to understanding how likely they are to deliver attractive returns on investment. We have used our proprietary mobile subscription forecasts, macroeconomic forecasts and operational risk indices to assess the size and growth outlook for each company s current footprint. Between them, the three tower companies we have surveyed are active in 13 markets, each with their own very distinct investment risks and rewards profiles. Eaton Towers Eaton Towers has the smallest number of towers under its control than any of its rivals, with 5,000 units deployed across its five markets (Burkina Faso, Ghana, Kenya, Niger and Uganda). The company has grown rapidly since we last partnered with TowerXchange to assess its importance to the African mobile market and it now lags only a little way behind Helios Towers in terms of size. In addition, it is present in four mature markets where 274 TowerXchange Issue 21

275 operators will need to manage capex costs even more tightly than ever, so opportunities arising from densification or rationalisation should not be overlooked. From an Operational Risk perspective, Eaton has a better risk profile than Helios, averaging 36.3 points out of a potential 100 across its footprint. In our Operational Risk Index, the higher the score the lower the risk. A presence in countries with robust trade and investment frameworks means Eaton benefits from access to consumers either already owning smartphones or who will soon upgrade, with rapid growth in data service usage likely to come on the back of that trend. There will therefore be a greater need for higher tenancy on existing towers or for new towers to be built. Additional investments in wireless or fibre backhaul might also be expected. These high-value assets are often targeted by criminals and, worryingly, only one of Eaton s five markets has a relatively attractive Crime & Security risk profile. Niger has one of the least attractive Operational Risk profiles across Eaton s footprint, but it is the smallest of Eaton s businesses. Figure one: Eaton Towers Operational Risk profile Opera<onal Risk Trade & Investment Crime & Security Logis<cs Labour Market Ghana Uganda Kenya Burkina Faso Niger Figure two: Helios Towers Operational Risk Profile For the most part, Labour Market risks are acceptable, linked to the relatively high rates of population urbanisation in Eaton s five markets, and this in part aids the countries Logistics profiles as employment in road, rail and port infrastructure is high, suggesting good access to both urban and rural plant for maintenance and expansionary needs. 275 TowerXchange Issue 21

276 Figure three: IHS Operational Risk Profile Helios Towers Helios has 6,501 towers under its control, spread across four markets (Congo-Brazzaville, Democratic Republic of Congo, Ghana and Tanzania). However, its Operational Risk profile is less attractive than that of Eaton, mostly because of its exposure to the politically volatile, infrastructurally-weak and generally unstable DRC. The DRC has an overall Operational Risk score of 25.6 for 2017, compared with an average of 37.8 out of 100 for the other markets in Helios footprint. Significantly, it has a score of just 4.4 out of 100 for the business cost of crime, highlighting the considerable challenges Helios faces in one of its largest markets. Figure four: Eaton, Helios and IHS macro and operational comparisons, 2017 IHS Helios Towers Eaton Towers Number of Countries Total Mobile Subscriptions (mn), June Mobile Subscriptions 5-Year CAGR (%) Total 3G/4G Subscriptions (mn) G/4G Subscriptions 5-Year CAGR (%) GDP per Capita (USD) 1,415 1, Average Real GDP Growth, (%) Operational Risk Score (out of 100) Total Population (mn) Average Urbanisation Rate (%) Helios covers markets with relatively high urbanisation rates, this means it has few incentives to expand into rural areas and it must therefore invest more on local backhauling, increasing tenancy ratios, lowering power utilisation costs and attempting densification. This will be difficult to justify, given that its markets are forecast to record annual total mobile and 3G/4G subscription growth rates of just 3.4% and 22.3%, respectively, real GDP growth is expected to be much weaker in markets controlled by rivals. Eaton Towers faces more attractive prospects in this regard. IHS Towers IHS is the most attractive of the three tower companies we survey, owing in no small part to its presence in some of the largest addressable markets 276 TowerXchange Issue 21

277 in the region. Nigeria is its key market, having acquired towers from MTN and Etisalat and having bought rival HTN Towers. It has further solidified its presence in Nigeria through its acquisition of the broadband infraco licence for the North Central Zone, for which it is rolling out wholesale fibre-optic networks in the region around capital city Abuja. Ordinarily, Nigeria s huge population would make it the most enticing market in the continent, with the 3G/4G subscriber base expected to more than triple to 124mn between 2016 and However, record fines imposed on MTN (even after being reduced) and the withdrawal of Etisalat Nigeria s shareholders after cash-starved local banks pressured the company for loan repayments mean that investors will be more wary of investing in a market that has suddenly become much less predictable. While IHS currently has no footprint in South Africa, the company has cultivated a deep partnership with MTN in other markets, which would make it a strong contender should MTN s South African assets come to market. IHS also benefits from being the sole tower operator in countries with rapidly growing telecoms markets and bright economic prospects. The BMI country risk team forecasts Cote d Ivoire to be the fastest growing economy in Sub-Saharan Africa over the five years to 2021, which we expect to have positive knock-on effects in demand for more advanced telecoms services from consumers and enterprises alike. Figure five: Burkina Faso revenues & capex by operator (FCFAmn) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Country profiles Burkina Faso 0 Onatel - Revenues Telecel - Revenues Tower companies present: Eaton Towers Orange - Revenues Q416 Orange s acquisition of Airtel Burkina Faso in March 2017 will provide a welcome boost to the mobile market as the newcomer is more focused on value-added services as a revenue growth driver than its predecessor. Orange Money and similar services are likely to be used as tools to attract and retain customers and we expect incumbent Onatel to respond with innovative new services of its own. Third operator Telecel is likely to remain a minor player, given its relatively limited resources. Although Airtel accounted for 39.4% of the country s Onatel - Capex Telecel - Capex Orange - Capex Q117 Source: ARCEP mn mobile subscribers as of March 2017 (latest available data from regulator ARCEP), it accounted for 41% of industry revenues and 7% of capex in the first quarter of the year, only a little behind market leader Onatel. We expect revenue and capex contributions to increase under Orange s ownership. Airtel had already sold its local towers to Eaton under a leaseback arrangement struck in October 2015, so there is limited scope for Orange to pursue further asset rationalisation to achieve operating efficiencies, so a focus on differentiated mass-appeal services is inevitable. After mobile money, video content seems the next likeliest avenue for diversification, although we do not expect a rapid movement in this direction while disposable incomes remain subdued. In the longer term, however, tower operators will need to 277 TowerXchange Issue 21

278 Figure 6: Cameroon 3G/4G Forecasts, 2015/2021 consider whether to pursue densification strategies or augment backhauling resources in order to respond to higher data traffic requirements. Cameroon 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 f = BMI forecast. 0 Tower companies present: IHS Towers f 2018f 2019f 2020f 2021f 3G/4G Subscribers (000) (LHS) Cameroon s telecoms market is benefiting from increased competition in the mobile voice and broadband sector aided by greater availability of cheaper bandwidth, courtesy of new international cables. The market shed 1.24mn mobile subscribers in 2016, the result of mandatory SIM registrations that began in A return to growth was seen in H117 and we expect this trend to continue now the bulk of the SIM registrations/deactivations have taken place. 3G/4G % Of Mobile Market (RHS) Source: BMI, Agence de Regulation des Telecommunications du Cameroun Healthy 3G/4G uptake momentum will be seen over the five years to 2021 given that there is still room for organic growth. Operators will need to innovate and invest in higher-value offerings to offset aggressive pricing, and the growth of messaging and over-the-top services which are driving down voice revenues. A new MVNO (YouMee Mobile), which launched in August 2017, the introduction of mobile number portability (MNP) and the anticipated launch of 4G services from Viettel-owned Nexttel will increase competition, although it will likely drive down revenues further. 0.0 Vodafone s data-only LTE service it operates in partnership with Afrimax was suspended until further notice in September Vodafone s service is aimed at the high end of the market and whatever the outcome of the suspension, does not have an impact on our top-level subscription growth forecasts. MTN will continue to account for around 50% of mobile subscriptions, with Nexttel working hard to erode Orange s one-third market share. Congo-Brazzaville Tower companies present: Helios Towers Volatile mobile market growth is apparent in Congo- Brazzaville, arising from operators concerted efforts to shed inactive accounts. Modest uptake in rural areas will contribute to organic subscriber growth but, overall, the market has few inherent expansion prospects over the medium to long term. However, 3G migration continues and MTN has launched 4G services so we now anticipate faster adoption rates of advanced services. There are three mobile network operators, all of which are backed by regional players. MTN Congo and Airtel Congo compete with the much smaller Bintel-owned Equateur Télécom (trading as Azur Congo). Airtel had a 3G monopoly for nearly two years until MTN launched its own 3G service in August 2013 and 4G in December Azur continues to struggle to compete with its larger rivals. At the end of June 2017, Azur s 331,000 subscribers gave it a market share of 7%, up slightly q-o-q. Nonetheless, we believe Azur s performance will continue to be overshadowed by its larger rivals (MTN: 50%, Airtel: 43%) for the foreseeable future, with some reports questioning its viability. 278 TowerXchange Issue 21

279 Figure six: Congo-Brazzaville mobile subscription market share by operator 7.2% MTN 49.5% Airtel 43.3% Azur Source: BMI, operators Figure seven: Côte d Ivoire mobile subscription market share by operator 22.6% 42.2% Orange MTN Moov 35.2% the country a bright spot in the region for telecoms operators. The telecoms market in Côte d Ivoire is in a state of flux. The success of 3G and mobile data services led the regulator to award the first licences for LTE, so that operators can take advantage of the demand for advanced data services; Orange and MTN launched 4G services in June and August 2016 respectively. The government altered the structure of the market, revoking the licences of the smaller players Comium, GreenN and Café Mobile. Whilst the government subsequently awarded a license to LPTIC (GreenN s backer), that too has since been revoked. Whilst smaller MNOs have struggled to compete with the more dominant players, the introduction of mobile number portability, which the regulator aims to have introduced by December 2017, would help any future new operator. Out of 31.3mn subscribers at the end of June 2017, Orange served 13.2mn and held 42.2% of the market. MTN s 11.0mn gave it 35.2% and Moov s 7.1mn gave it 22.7%. Côte d Ivoire Tower companies present: IHS Towers Côte d Ivoire s mobile market will benefit from recent consolidation and the launch of new Source: BMI, operators technologies. 4G services have been launched and the revocation of the licences of minor players leaves Orange, MTN and Moov free to create a more rational competitive landscape. The strong macroeconomic outlook, as well as clear demand for advanced services such as mobile money, makes Democratic Republic of Congo (DRC) Tower companies present: Helios Towers Since Orange completed the acquisition of Tigo in April 2016, there are five active mobile network operators in the DRC: Vodacom, Airtel, Orange, Supercell and Africell. South African operator Smile plans to launch 4G services by the end of 2017, 279 TowerXchange Issue 21

280 though 2G licensee Yozma (Timeturn), which had started testing its network at end-2014, appears to have defaulted on its licence and is not active. Despite the excessive number of operators, the DRC remains underserved in terms of coverage and service quality. A mandatory SIM registration process which began in December 2015 means operators have to disconnect further inactive SIMs with each passing quarter. Further disconnections are likely, but volumes will be lower as most customers would have completed SIM registration by the end of Figure eight: DR Congo net mobile subscription additions/losses Figure eight: DR Congo net mobile subscription additions/losses Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Vodacom , Airtel , CCT , , Tigo Supercell Total 1,082-1,444-5, , Figure nine: Ghana mobile subscription market share by operator Source: BMI, operators We believe Vodacom led in terms of market share at the end of June 2017, having completed the bulk of its SIM deactivations by Q116. With 10.79mn subscribers, it accounted for 30.41% of the market at that time. Its main rival is Airtel: with 10.1mn 24.1% 47.6% MTN Others subscribers, its share stood at 28.5% of the market at the end of June. AirtelTigo Vodafone Ghana Tower companies present: Helios Towers, Eaton Towers (plus American Tower) Ghana s mobile market is among the most competitive in Sub-Saharan Africa (SSA) with six mobile operators and a mobile penetration rate of 126.1% in June As the opportunities 26.2% 2.1% to acquire new subscribers organically dwindle over the next five years, we expect operators to increase their focus on migrating customers to more advanced mobile data services in order to offset declining revenue growth from traditional voice services. Ghana s 3G penetration skyrocketed Source: BMI, operators throughout 2015 and showed stable signs in However, intense competition between the mobile operators and the depreciation of the currency have eroded ARPU levels, with take-up of data services and digital content not yet strong enough to offset falling voice revenues. 280 TowerXchange Issue 21

281 Figure ten: Kenya total mobile & 3G/4G subscription forecasts 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 e/f = BMI estimate/forecast e 2018f 2019f 2020f 2021f Total Mobile Subscrip>ons (000) (LHS) Mobile Penetra>on Rate (%) (RHS) MTN dominates the market and its share of 47.6% in Q217 puts it in a very strong position. Smaller players Globacom (Glo) and Expresso, with a combined market share of less than 3%, are likely operating at a loss and will not be able to compete with the regional giants indefinitely. With Ghana s new licensing framework enabling MVNOs to enter the market, in theory there is little risk of consolidation down to four players - which would reduce consumer choice - though no MVNO launch appeared imminent by mid Meanwhile, the Tigo-Airtel merger that concluded in November 2017 creates a new carrier with a subscriber base of around 10.0mn and a market share of nearly 27%, which has displaced Vodafone from its secondranked position. Kenya 3G/4G Mobile Subscrip>ons (000) (LHS) Source: BMI, operators Tower companies present: Eaton Towers (plus new players including SEAL Towers emerging) Kenya s mobile market is fiercely competitive, with the country s two smaller operators, Airtel Kenya and Telkom Kenya (previously Orange Kenya), and new MVNO entrants Equitel, Mobile Pay Limited and Sema Mobile looking to erode market leader Safaricom s dominance. Such is the level of competition that it forced the third operator, YU, to exit the market in 2014, dividing its assets between Airtel and Safaricom. The former took over YU s subscriber base and Safaricom acquired its network infrastructure and employee base. YU s exit left the Kenyan mobile market with three active operators - Safaricom, Airtel and Orange. Safaricom remains the dominant operator, with Airtel s boost from the acquisition of YU s subscribers proving short-lived. Ultimately, Airtel s market share has been declining, from 20.2% in Q115 to 16.4% in Q217. Much of that outcome has been the result of intensifying services and price competition from new MVNOs active in the market. Safaricom launched 4G services in December 2014 and Airtel has moved to follow suit, although it only began testing its 4G network in January Backed by new owner Helios Investment Partners, Telkom Kenya began rolling out its 4G services in June Their delayed entry means that Safaricom will dominate the 4G market, particularly if it leverages the technology to offer more complex M-PESA-branded mobile money services, MFS being key to encouraging greater non-voice usage. Niger Tower companies present: Eaton Towers There are four mobile network operators in Niger, serving 7.56mn subscribers in total at the end of 2016 (latest data from the regulator, ARTP). The largest is Celtel; with 3.9mn subscribers, it commands a market share of 51.6%, well ahead of Orange (22.9%) and Moov (18.8%). Niger Telecom is the smallest player in the market; it was established in 2016 through the merger of mobile operator Sahelcom and fibre backbone operator Sonitel. Niger s telecoms market is characterised by a high degree of market competition and the presence 281 TowerXchange Issue 21

282 Figure eleven: Niger real GDP growth increasing from e 2018f 2019f 2020f 2021f of three international, well-established groups. Nevertheless, chronic poverty, low spending powers and weak incomes continue to constrain robust growth in the market. Furthermore, with the majority of consumers based in rural areas, investing in mobile infrastructure is a challenging affair. Significant economic and social headwinds will continue to weigh on market growth through to 2021 and beyond. Nevertheless, the market has significant growth potential, as highlighted by the low degree of penetration and the regulator and the government remain actively committed towards boosting competition and equitable telecoms access in the country. Nigeria Nominal GDP, USDbn (LHS) Real GDP Growth, % y-o-y (RHS) e/f = BMI estimate/forecast Source: BMI, United Nations Figure twelve: Nigeria mobile subscription market share by operator Tower companies present: IHS Towers (plus American Tower, BCTEk Engineering, Communication Towers Nigeria, Pan African Towers, Hotspot Network and various other small players) 0.2% 12.5% 23.9% 37.2% 26.2% MTN Globacom Airtel 9mobile CDMA Operators Source: BMI, NCC, operators Nigerian mobile subscriptions totalled mn at the end of June 2017, down by 4.9% y-o-y, with penetration reaching 74.9%. Globacom continued to see positive customer growth in the second quarter, but this was not enough to offset losses from Airtel, MTN and 9mobile (formerly Etisalat). The first quarter of 2017 had seen the market shed 2.715mn subscribers, which implies a high rate of inactive SIM ownership. The country has four active GSM operators - MTN, Globacom (Glo), Airtel and 9mobile - and two active mobile CDMA operators - Visafone and Multi-Links. 282 TowerXchange Issue 21

283 In 2015 MTN acquired Visafone, with the aim of repurposing its 800MHz spectrum for 4G services; however, the regulator is yet to allow this to happen. Figure thirteen: Rwanda improving living standards to drive mobile usage Creditors currently control 9mobile after Etisalat and Mubadala pulled out over their failure to repay a USD1.2bn loan that had been called in by a group of 13 local banks, anxious to reduce their exposure to the devalued Naira. A new lead investor is being sought. However, intense competition and a regulator that seems intent on inflicting harsh financial penalties for violations of service quality and SIM registration - MTN was hit by an industryrecord USD5.2bn fine in 2015, a reduced version of which it is struggling to repay - will deter most investors. Rwanda Tower companies present: IHS Towers Mobile subscriber growth in Rwanda is expected to remain robust, owing to the healthy competition that exists between the country s three network operators - MTN, Tigo and Airtel - as well as the long-term potential for the government to increasingly implement policies which are conducive for operators expanding in the market. With a penetration rate of 68.5% at the end of June 2017, Rwanda s mobile market has strong growth potential. This potential will be accentuated by the current focus on MFS and advanced data networks. In Q217 the mobile market contracted by 6.3% y-o-y, reaching 8.37mn subscriptions. We believe this was the result of a combination of decelerating e/f = BMI estimate/forecast economic growth (real GDP declined from 8.9% in 2015 to 5.9% in 2016 and to 3.7% in 2017) as well as saturation in operators core urban markets as players focused more on value growth through services rather than subscriber growth via the expansion of networks to underserved areas. Tanzania Tower companies present: Helios Towers There were 40.23mn mobile subscriptions in Tanzania at the end of June The market has been growing robustly since late 2014, driven by falling prices in anticipation of the arrival of Viettel-owned Smart in We believe the market harbours numerous inactive SIMs that could be disconnected at any time. Airtel and Vodacom lost Source: BMI large numbers of SIMs in 2016, but this was most likely due to customers switching to Halotel and to the new 4G service provided by incumbent TTCL. The periodic discounting continued into H117 when the market shed another 317,000 subscribers. The market, which has long been served by six operators (Vodacom, Airtel, Tigo, Zantel, TTCL and Smart), has most recently been expanded by MVNO Amotel. We believe growth in Tanzania s mobile market will be driven by competition as well as increased investment in network expansion by operators. As such, Amotel has an important role to play in market development. Given the high level of competition in the market and the high cost of rolling out infrastructure to underserved rural areas, we believe the market would benefit most if Airtel were to withdraw, as it has threatened to do. 283 TowerXchange Issue 21

284 Figure fourteen: Tanzania total mobile & 3G/4G subscriptions forecasts 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 e/f = BMI estimate/forecast Figure fifteen: Uganda mobile money increases customer stickiness 25,000 20,000 15,000 10,000 5,000 e/f = BMI estimate/forecast e 2018f 2019f 2020f 2021f Total Mobile Subscrip>ons (000) (LHS) Mobile Penetra>on Rate (%) (RHS) 3G/4G Mobile Subscrip>ons (000) (LHS) 0 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Total Mobile Subscribers (000) Mobile Money Subscribers (000) (LHS) Value Of Mobile Money TransacFons (UGXbn) (RHS) Source: BMI, TCRA 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: Uganda Communications Commission There is room for growth in mobile services in Tanzania, especially in rural areas, which represent around two-thirds of the country s population: Tanzania had a mobile penetration rate of 72.2% at the end of June We forecast mobile subscriptions to grow to 47.4mn in 2021, reaching a penetration rate of 73.3%, with the main driver for that growth being 3G/4G upgrades, which by then will represent 31.65mn subscribers. Uganda Tower companies present: Eaton Towers (plus American Tower) We hold a positive medium-term view for the Ugandan mobile market. Sector growth will stem from low penetration rates and falling tariffs. Although operators continue to make modest investments in advanced data networks, MFS is likely to remain the primary key VAS in the mobile market as traction in the uptake of advanced mobile data services remains slow. Low spending power, poor urbanisation rates and chronic poverty all constrain premium service upselling. Limited access to devices will also keep a lid on the market s true potential. There were 23.43mn mobile customers at the end of Q217. The market is highly competitive, with seven operators present. Operators focus on basic services, as opposed to more premium offers, with the exception of mobile money. MTN s nationwide 4G coverage, Vodafone s 4G-only services and Smile Telecom s VoLTE offerings are only attractive to a small proportion of the population. However, as 284 TowerXchange Issue 21

285 Figure 16: Zambia total mobile & 3G/4G subscriptions forecasts 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 e/f = BMI estimate/forecast e 2018f 2019f 2020f 2021f Total Mobile Subscrip>ons (000) (LHS) Mobile Penetra>on Rate (%) (RHS) operators have not put as much effort into rolling out to rural areas, because of its costs, this is a way they can differentiate themselves, even if uptake remains limited for services that are expensive. The mandatory SIM registration that came into effect in 2015 resulted in significant losses, but the market seems to be recovering as well as organic growth prospects. Nevertheless, the regulator has been pushing for a second re-registration drive, mandating that each SIM card be linked to a government issued national ID card number, backed by the national ID card registration database. An initial sweep in September 2017 suggested that 4.2mn SIM cards could not be tracked to a national ID card number. Consequently, a significant number of SIMs may be deactivated in late-2017 and early 2018 as a result of the stringent regulator criterion. The government and the regulator have both taken opposite stances on the matter with the government proposing a higher degree of leniency whereas the regulator has been insistent on a stronger reregistration effort. Zambia 3G/4G Mobile Subscrip>ons (000) (LHS) Tower companies present: IHS Towers Source: BMI Zambia had 12.40mn mobile subscriptions at the end of June 2017, a y-o-y increase of just 1%. We forecast annual growth to remain positive, but far from stellar, throughout our forecast period to Operators will continue investing in rural network expansion to unserved and underserved areas, and address quality of service problems across all networks, including 2G. An increased focus on migrating customers to 3G/4G and encouraging steady growth in data usage patterns will also aid subscriber and revenue growth. Moreover, we maintain that there is significant room for growth over the medium- and long term as the market grows toward maturity and new technologies are adopted. Our view is underpinned by the fact that penetration in the market had yet to surpass 75% as of June There are three operators in Zambia, with the market dominated by MTN (45.0%) and Airtel (40.5%). Incumbent Zamtel remains a minor player, with 14.5% of subscribers. However, it has been making impressive gains relative to its larger rivals, almost doubling its market share y-o-y. We believe its improved performance stems from expansion of its network, leveraging new regulator-funded infrastructure, competitive pricing and service innovation. Advanced mobile data services provide a useful opportunity for Zambian operators to diversify their revenue stream away from traditional voice services. We expect the operators to take advantage of the strong demand for data services and the increasing availability of affordable data-enabled devices to expand their data offerings and next generation data networks. In addition to mobile data services, operators are also rolling out a wide range of non-voice services, including MFS, mobile health and other entertainment- and informationbased value-added services 285 TowerXchange Issue 21

286 The health of the Nigerian tower industry at the end of 2017 Etisalat exits, the country returns to GDP growth but what has changed? In light of the new developments in the Nigerian telecoms sector, TowerXchange held a roundtable discussion on the Nigerian market as a followup our Q2 analysis on the country s tower industry. In this article we summarise the most significant recent developments and examine how these are being felt by stakeholders on the ground. Keywords: 9mobile, Africa, Airtel, American Tower, BCTek Engineering, Build-to-Suit, Capex, Communications Towers Nigeria, EMTS, Energy, Etisalat, Glo,Globacom, HTN, IHS, IHS Towers, IPO, Logistics, MTN, Market Overview, Nigeria, Off-Grid, Regulation, Research, SWAP, Tax, West Africa Earlier in 2017, TowerXchange published a detailed study on the Nigerian tower industry, from how the independent towerco market had first evolved in the country to the impact of Nigeria s deep recession throughout 2016 and early 2017 (read the full article in journal 19). With the recession starting to lift, and further developments being reported in the country s telecom sector, TowerXchange brought together key stakeholders from the Nigerian tower industry to join a roundtable discussion examining how such changes are being felt on the ground. Welcoming a host of different companies and representatives including IHS, American Tower Nigeria s former CEO, Gordon Porter, managed service providers and manufacturers operating in the market, the roundtable was held under Chatham House rule at the 2017 TowerXchange Meetup Africa & Middle East. In this article, TowerXchange examines the key developments in the market in recent months and shares some of the anonymised opinions of the roundtable s participants. The Nigerian telecom sector and tower industry at a glance Read this article to learn: < Mobile market shares and tower ownership in Nigeria < Updates on the sale of 9mobile and MTN s proposed listing < MNO appetite to invest as the country exits recession < An update on power system upgrades and new strategies tackling the power challenge < The interplay of currency, regulations and theft on operating conditions in the market There are four GSM mobile network operators in the Nigerian market, namely MTN, Glo, Airtel and 9mobile (formerly Etisalat Nigeria). In addition to the four GSM players there are two CDMA operators and a host of LTE-only players. GSM subscriptions make up over 99% of subscriptions in the market, with total GSM subscriptions, as of September 2017, standing at 139mn. MTN has the largest market 286 TowerXchange Issue 21

287 share (37%), followed by Glo (26%), Airtel (24%) and 9mobile (13%). Nigeria s total subscriber base has grown by 36% in the past four years, with recent growth impacted by the disconnection of unregistered SIMs in accordance with the government regulations. A further 62mn additional mobile subscribers are expected by 2020, illustrating the huge growth still expected in what is already Africa s largest mobile market. Nigeria is still very much a 2G market (with 2G accounting for 70-80% of subscriptions) although rollout of 3G and 4G is underway as data usage continues to grow exponentially. MTN, the country s largest operator, reports a 72% increase in data revenues for the year to date with voice revenues increasing 5.4% in the same period (source MTN Q quarterly report). There are 29,113 towers in the Nigerian market with 78% owned by independent towercos (figure two). Of the country s four GSM players, three have divested their tower portfolios with Airtel selling to American Tower and MTN and 9mobile (whilst they operated as Etisalat Nigeria) selling to IHS. Back in 2010, IHS also acquired CDMA operator, Visafone s towers and more recently bought HTN Towers and their portfolio of 1,211 sites. As part of IHS acquisition of HTN Towers, the operator also inherited the management contract for 702 towers owned by SWAP Technologies with 368 of these towers being live; in Q this agreement was cancelled. Number two operator Globacom still retains their towers as does fixed line player Figure one: MNO market share (subscribers) 24% MTN Glo Airtel 9mobile CDMA operators Figure two: Ownership of Nigeria s 29,113 towers , % 4,757 13% <1% 37% 15,629 IHS Towers American Tower BCTek Engineering Communication Towers Nigeria Hotspot Network Other small Nigerian towercos Globacom NATCOM SWAP Technologies Source: TowerXchange Source: TowerXchange 287 TowerXchange Issue 21

288 Figure three: A history of major tower transactions in the Nigerian market Year Seller Buyer Hotspot Network HTN Towers Tower count IHS 85 IHS 1,211 * MTN has since restructured its interest to an additional shareholding in IHS Holdings NATCOM. In addition to IHS and American Tower there are a number of other smaller towercos in the market including BCTek Engineering, Communication Towers Nigeria and Hotspot (who recently sold 85 towers to IHS). Whilst IHS and American Tower remain each other s biggest competitors, the two have commented that the market is big enough for both players, adding that their presence helps rationalise pricing, avoiding any rash price cutting manoeuvres that their smaller competitors might do. Deal value US$ Cost per tower US$ Deal structure Portfolio acquisition Company Acquisition 2015 Etisalat IHS 555 SLB 2014 Airtel American Tower 4,717 1,060,000, ,719 SLB 2014 MTN IHS 8, ,000, ,911 Joint venture (IHS 49%, MTN 51%)* 2014 Etisalat IHS 2, ,000, ,060 SLB 2010 Starcomms SWAP ,000, ,017 SLB 2010 Visafone IHS ,000,000 83,750 SLB 2010 Multilinks HTN 400 MLL Further details of the evolution of the tower industry can be read in journal 19 in the article Challenging macroeconomic conditions but a bullish outlook for Nigerian towers Recent dynamics affecting the telecoms sector The two most notable events in the Nigerian telecommunications sector in the past 18 months were MTN Nigeria s NGN330bn fine for a failure to disconnect unregistered SIMs and the takeover of Etisalat by its creditors after failing to meet its loan repayments. As part of the settlement with the Nigerian government, MTN is to list shares on the local stock exchange with the operator announcing in a recent analyst call that preparations for the IPO are underway. Having appointed Citigroup and Stanbic IBTC Capital as joint transaction advisors, MTN stated in their Q3 call that they expect a listing in H1 of 2018 if market conditions are favourable. Since our earlier analysis of the Nigerian market, Etisalat has exited the country after being forced to transfer its 45% stake to United Capital Trustees, the security trustee of the opco s consortium of lenders. The opco was rebranded to 9mobile and Barclays was appointed to find new investors for the embattled MNO. 16 expressions of interest were received by the bank with local press reporting that 10 bidders had been progressed through the pre-qualification phase. Those 10 parties were named as Globacom; Bharti Airtel; Smile Telecoms; Africell with Centricus Capital; Abraaj Capital, The Carlyle Group; Helios Investment Partners; Alheri Engineering; Dangote Group s telecoms business unit; Teleology Holdings Limited; and Africa Capital Alliance (ACA). According to the report, the companies will be required to submit bid bonds of USD150mn each as part of the financial bid process. At the time of going to press however, Barclays were reported to have pulled out of its role after questioning by the Central Bank of Nigeria over the transparency of the bidding process. 288 TowerXchange Issue 21

289 How have the developments been felt on the ground? Whilst MTN still remains conservative regarding capital expenditure and full payment for the fine is yet to be made, those on the ground in Nigeria report that talk around the fine and its impact appears to have mostly subsided and that investment has picked up. On the subject of currency challenges faced by the operator MTN Group CFO, Ralph Mupita commented in a Q3 earnings call that they had no concerns about dollar availability impacting on their plans for network rollout. The company s service revenues grew by 11.2% for the year to date, in spite of the economic challenges in the country, and the operator remains committed to one of its most important markets. Etisalat were a significant customer for towercos, with IHS in particular exposed given the operator s presence as anchor tenant on the 2,691 towers that IHS had acquired from them. Whilst the operator was behind on their lease payments to IHS, since the opco s takeover by its creditors, IHS report that they are starting to see payments come through. Whilst the opco is up for sale there has been an investment freeze which has a dampening effect on towercos and the supply chain, yet observers expect a buyer to enter. Whilst it is not yet clear who that buyer will be, with just over 17mn subscribers and a good quality network, towercos are optimistic of a turnaround in due course. In terms of new site build, the majority of build to suit contracts in the country have gone to IHS with American Tower having historically shied away from new build. It is widely thought that Nigeria requires a doubling of its tower stock in order to meet growing mobile usage, with 13,000 new towers forecast to be added in the next five years. Whilst country specific breakdowns are not available, IHS forecast they will add 1000 new sites per year across their entire portfolio, and with Nigeria accounting for two thirds of their total portfolio size, one can expect the market to receive its fair share of such activity. In Q3 2017, IHS subsidiary, IHS Netherlands Holdco (which owned the towers outside the former JV with MTN in the country and which issued an $800mn bond in 2016) added 53 new towers. Whilst American Tower have historically not built in Nigeria, the towerco s Q3 results report a net increase of 9 towers in the country, with the operator understood to be considering further new build opportunities. Whilst major new site rollout is required, stakeholders in the market remain cautious as to what timeline this will be achieved in. Stakeholders report that every year an additional 4,000-5,000 new sites are promised by the country s operators, only for this number to be drastically scaled back amidst cost control measures. After a challenging months however, companies on the ground report that MTN, Airtel and Glo have started investing significantly, rolling out additional 3G equipment and moving into 4G. MTN has announced their intention to take over 11,000 slots over the next year, which is driving the others to act to keep pace. Whilst the appetite of MNOs to reduce capex spend sends new build opportunities towercos way, and rollout plans hold the potential for increased tenancies, significant frictions exist in the market between the two parties. With the majority of existing lease payments indexed to the dollar and operators receiving revenues in Naira, MNOs complain of lease rate payments in the market tripling in local currency terms after depreciation of the Naira. Such escalating lease payments were a major contributing factor to Etisalat s exit from the Nigerian market and as such, towercos are coming under increasing pressure from MNOs to reduce their fees; with the regulator threatening to wade in on the situation. With the towercos having paid hard currency for the towers, they have loan payments in USD to repay and pressure from shareholders makes it difficult to meet MNO demands. Such a stance puts towercos between a rock and a hard place, drop the lease rates and risk your own financial metrics or enforce the payments and risk your counterparties going bust. The ongoing power challenge Grid availability in Nigeria is reported to be as low as four hours per day, with the vast majority of sites being off-grid. The Nigerian government initiated a utility-scale solar programme to increase generation capacity but the programme appears to be on hold as they await guarantees from the World Bank for 289 TowerXchange Issue 21

290 projects. Whilst lack of generation capacity is a contributing factor, Nigeria s power challenges are multifaceted with transmission troubles equally contributing to the poor grid infrastructure. Whilst a large proportion of Nigeria s ~29,000 cell sites are off-grid entirely, operational experts on the ground comment that this is actually one of the biggest strengths. Managing off-grid sites is better than trying to manage those on poor grid; it is easier to dimension off-grid sites properly rather than deal with the variability of supply to those on poor grid. Understandably, given the scale of the power challenge in Nigeria, much of the discussions on our Nigeria roundtable centred around methodologies being deployed by local stakeholders to handle such issues. Running a diesel generator on a site can cost as much as $ $2000 per site per month in Nigeria, and that is before you start taking into consideration the capex spend associated with the replacement of broken or stolen components. The price of fuel in Nigeria has increased relative to the increase in underlying diesel price with such price hikes levied by suppliers who are struggling to locate US Dollars. Towercos also complain of high charges to connect to the grid whilst the implementation of new electricity tariffs has further impacted the sector. Whilst American Tower have been more conservative in their investment in power infrastructure, with the mainstay of capital being directed towards generator efficiency programs and getting the most out of existing equipment, IHS have had a much more bullish attitude to upgrading the generation equipment on sites. With a desire to increase the proportion of their operational costs being paid in Naira, IHS embarked on their ambitious big five energy initiative to install solar hybrid systems on their portfolio of sites in the country. Dividing their assets between five different contractors (and retaining a portion in-house for benchmarking purposes) IHS handed over the installation and management of energy equipment to their network of partners. Whilst the partners were known to IHS through their work in the installation, commissioning or operation of sites, many had a steep learning curve as they sought to put in place processes to manage a large portfolio of assets effectively. Simultaneously, the decision to use DC over AC gensets has also caused teething problems as companies got to grips with the newer technology. Whilst rumours had been circulating the IHS may look to cancel contracts with their partners, it is understood that at least four of the five partners are performing within the initial parameters laid out and IHS has reported a 50% reduction in diesel consumption. Further operational and logistic challenges Linked to and extending beyond the power challenge, stakeholders reiterated the challenges presented by theft and organised crime in the Nigerian market. One company had had some success with the installation of tracking systems in batteries, using the technology to catch crime syndicates who had turned such theft into a professional operation. Some spoke of designing cabinets with access locking codes whilst others highlighted the success they have had in displaying wanted posters. Participants explained that it wasn t just the theft of equipment on sites that presented problems, the unauthorised installation of additional equipment on sites by MNOs and their contractors is another area that is eating into profit margins. One participant discussed their use of smart cameras which can detect the addition or amendment of any equipment, although underscored the importance of robust implementation of such systems. Training and continuity of personnel on sites helps to improve site operations, whilst a balance of local and expat stakeholders is critical to getting the right mix of expertise at the right price. Nigeria has a large and diverse supply chain, with many tiers of contractors reporting into each other. Everyone on the table spoke of their desire to rationalise this supply chain, consolidating the market to fewer, larger, more professional parties in which you could have confidence that the job would be done effectively. Whilst this remained an ambition, few thought that the market would evolve this way any time soon. 290 TowerXchange Issue 21

291 The logistics of getting equipment into the country continues to be a challenge with port congestion remaining high. On what kind of import timeline could be considered good, one party suggested 16 weeks as a typical benchmark to aim for. A handful of parties have assembly lines in place in the country, the added advantage being that complete products may be subject to import tariffs of 20%, whilst components may only be charged 5% Regulatory overreach In addition to threats from the regulator to interfere in the lease rate disagreements between MNOs and towercos, participants at the table spoke of the increasing influence of both national and local government on the profitability of the tower industry. Often both local and national governments will both handle the same services, with each looking to levy taxes. The regulator has also been threatening to impose quality of service regulations on towercos in the market. At the TowerXchange Meetup Africa & Middle East this year we held our first regulatory task force for the global tower industry, an invite only session for towerco CXOs co-hosted by the IFC. With participants including American Tower, IHS Towers, Helios Towers, Eaton Towers, edotco, Powercom and ANTOSC amongst others, characterisation of emerging threats as well as industry-wide solutions to tackle them were raised. A full report will be available shortly See you at our future events! Meetup Asia December, Singapore Meetup Americas June, Boca Raton Meetup Europe April, London Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

292 Investment priorities and infrastructure sharing strategies at MTN, Orange and Etisalat Three of MEA s leading MNOs share insights MNO Keynote panel Read this article to learn: < To what extent decisions are made at both the group and local level < What limitations exist in improving their network expansion and quality < Where they each place priority on investment < What is the company s current tower strategy and from where is it derived? < What has been the MNOs experience working with towercos? < How MNOs view the opportunities presented by ESCOs At the 2017 TowerXchange Meetup Africa & Middle East, TowerXchange invited three of MEA s largest MNOs to share their strategies when it comes to prioritising investment and managing their passive infrastructure. In this article, TowerXchange examine their key messages shared with this year s delegation. At this year s TowerXchange Meetup Africa & Middle East, we were delighted to welcome three heavy weight MNOs to the stage. MTN were represented on the panel by Group CTO, Navi Naidoo. The operator, with a footprint in 20 countries, is Africa s largest MNO and has divested towers in seven of its markets (see figure one). Orange were represented on the panel by Nat-Sy Missamou who heads up the operator s infrastructure sharing initiatives, managing relationships with towercos as well driving their exploration of the ESCO market. Etisalat were represented by Wiktor Barcicki who oversees technology economics for the international unit of the operator, supporting the different opcos in spending capex and opex more efficiently whilst providing input into special initiatives such as infrastructure sharing and tower deals. The panel was moderated by Darragh Stokes, Managing Partner of Hardiman Telecommunications. How strategy is set market to market With each of the invited panellists sitting at group level within their respective company, the question arose as to what extent passive infrastructure strategy was driven by the group level and to what extent it came from within each opco. Orange explained that strategy was driven heavily by head office in Paris, although market and cultural differences meant that the company s opcos were broadly divided up into different clusters with common strategies. This pattern was very much echoed by MTN who ran the strategy centrally but with regional groupings and different tiers of operations. For Etisalat there was very much a combination between group and opco-led strategy; 292 TowerXchange Issue 21

293 with the Maroc Telecom-owned opcos having, to date, operated rather independently, although Etisalat is looking to become more closely involved. Whilst group level may be involved in setting strategy, strategy is not homogenous across all opcos in an operator s portfolio. The macrodynamics in a given country heavily affect an opco s spending, and so too does the opco s time of entrance and market share. Where an operator is number one in a market, they will have a very different strategy to one where they are sitting in a much lower position. Speaking on the Kenyan market, Orange referenced how they had made the decision to exit the country as they were never going to be able to topple Safaricom from their number one spot; in the DRC, however, the company is making significant headway in growing their market share. On the subject of time of entrance into a given market, Etisalat explained how their late entrance into Nigeria had been a contributing factor to their struggles in the country, although a crashing economy and currency devaluation were the main factors that led to their eventual exit. Prioritisation of investment in spectrum and active infrastructure The MNOs commented on how demand for connectivity is outstripping capacity across the region; it being particularly surprising how rapidly data usage is growing, in spite of the low smartphone penetration in much of sub- Saharan Africa. This particular issue of data usage growing whilst smartphone penetration remains low presents a key problem to operators on the continent; they need to maintain 2G networks to support older handset users whilst also rolling out 3G and 4G to meet the growing data usage by others. Whilst in some parts of Europe and Asia, 2G has started to be switched off, it isn t possible to do this in Africa as you cut off a large subscriber base. Today s operators need to add 3G, LTE and U900 as well as 2G to towers thus creating significant capex and leasing costs. Requirements to continually rollout and use multiple technologies simultaneously not only puts a strain on budget but also on spectrum usage, with access to additional spectrum presenting another key problem to the region s MNOs. In particular, one of the operators on the panel voiced their struggles in obtaining the lower band 700MHz and 800MHz spectrum; spectrum critical to getting inside buildings and being able to offer high speeds. Without access to adequate 700MHz and 800MHz spectrum, capex outlays can quickly escalate when trying to improve connectivity. As such, the operators explained how it was of critical importance to work closely with OEMs to get the most out of their spectrum, whilst working closely with infrastructure providers to reduce the costs of rolling out new sites. Early discussions on the panel reinforced the well established viewpoint that operators have a preference for focussing investment on active equipment and spectrum, whilst finding ways to reduce their spend in other areas. In markets where revenues were dependent on the 2G voice segment, due to a lack of 3G and 4G handsets in use, operators were keen to drive data usage, transitioning users from 2G to 3G and increasing ARPU and customer experience. On the other hand, Etisalat explained that in a significant proportion of their markets, LTE coverage was well over 90% and as such the focus there remained about improving capacity rather than improving coverage. The Middle East, where Etisalat has a significant footprint, has some of the highest data usage figures globally, figures which are continuing to climb. Whilst there was a preference to spend on spectrum, active equipment and services, operators were also focussed on deploying capex on making the network more efficient; consolidation of infrastructure, cloudification of platforms and bringing multiple countries into a common factory remained a key focus at Etisalat. Infrastructure sharing and the role of towercos Infrastructure sharing is, of course, one key methodology to make networks more efficient. When questioned as to what extent they view their networks as a differentiator and to what extent they were willing to share, the panellists explained that it was important to include a timeframe parameter in the question. When you are the first to roll out infrastructure in a given region you benefit from a first mover advantage; whilst you are securing market share during this period there is less of an appetite to share. After months most of the first mover advantage has been obtained and, as such, operators became more willing to share as a means to reduce costs. 293 TowerXchange Issue 21

294 Where the MNOs have entered into towerco agreements or passive infrastructure sharing agreements with their competitors was to some extent influenced by the different markets in which they were operating. Orange explained how in Central and Eastern Africa there was a good presence of towercos and so they tended to use them to rollout and manage their passive infrastructure; conversely in West Africa there was a limited amount of towerco activity in many of the operators markets thus limiting their use. Additionally, in West Africa there is less of a culture of infrastructure sharing between operators which has also limited Orange s strategy on this front; in North Africa however, operators tend to be much more open to infrastructure sharing - an attitude which could ultimately make active sharing a possibility. Figure one: MTN s footprint and history of tower sales BAHRAIN MTN has divested their towers in seven markets (see figure one); these divestments represent the majority of the most attractive markets to towercos with some markets where they still retain towers being too small to attract the interest of the major players. MTN explained, however, that they continue to evaluate their strategy in relation to tower sales, assessing what is best for them in each region. On the subject of giving build to suit contracts to towercos, MTN explained how this was dependent on a number of different factors. There may be times of year when the opco is particularly capex constrained and thus in these instances contracts may be given to towercos. At the same time, it depends on whether towercos can offer the most competitive price relative to other vendors, with this not always being the case. Sold to IHS JV with American Tower MTN retains towers No opco present Source: TowerXchange Source: TowerXchange 294 TowerXchange Issue 21

295 Etisalat explained that increasing the utilisation of both their passive and active infrastructure is an essential part of the company s strategy to lower their cost base. To date, the adoption of infrastructure sharing has been lower than they would like, with many agreements having taken a long time to reach. The lack of regulatory frameworks regarding infrastructure sharing has been a contributing factor to these delays, with there being a difficult decision as to whether you should wait for the frameworks to be ironed out and lose out on benefits in this time; or alternatively forge ahead but potentially risk penalties down the line. Etisalat now have some degree of passive infrastructure sharing in the majority of its markets, working with other MNOs to look at deeper cooperation, although regulatory challenges can prevent active sharing from being feasible. Etisalat has more limited experience in working with towercos, having only sold towers in Nigeria, a market which the towerco has now exited. The company s Saudi Arabian opco, Mobily, had previously explored a tower sale only to cancel it to explore the formation of a joint venture with Saudi Telecom Company, with plans for the joint venture also now on hold (see figure three). Experiences working with towercos On the subject of how positive their experience working with towercos has been, each of the MNOs explained that it has not always been plain sailing. Lessons have been learned along the way and there is need to constantly be in discussions and negotiations. Inflation linked contracts, exposure Figure two: Orange s MEA footprint and history of tower sales Sold to Eaton Towers Sold to American Tower Sold to Helios Towers Africa Sold to IHS Currently retains towers Source: TowerXchange No opco present Sold to Eaton Towers; opco subsequently acquired by Orange 295 TowerXchange Issue 21

296 to forex issues plus concerns with power cost and availability have all presented challenges in MNOtowerco relations. In addition to this, operators cited examples of advantages being given to their competitors, in terms of both pricing and access to sites, which has put a strain on relationships. Figure three: Etisalat s MEA footprint and history of tower sales Another challenge faced by divesting tower portfolios to towercos comes when an operator needs to roll out sites to areas in which towercos do not want to build. With the towerco business model being predicated on securing multiple tenants, and lease payments being their source of revenue, there are areas which are unattractive for a towerco to enter. For operators who have outsourced passive infrastructure, this presents a challenge as they have lost a large proportion of their in house capabilities to build and manage towers. In spite of this, MNOs did confirm that on the whole, the quality of their networks has improved when they have passed on their towers to towercos. An operator is less incentivised to want to spend money on purchasing the highest quality energy equipment, preferring instead to invest heavily on active equipment. For a towerco, energy equipment is their active equipment and so the focus and spending that they have placed on this has delivered results. The potential held by ESCOs With outsourcing to towercos having delivered improved power uptime, discussion turned to the role that ESCOs could play in each of the operators Sold to IHS (Opco since taken over by lenders and rebranded to 9mobile) Towerco JV previously explored, now on hold Etisalat retains towers Maroc Telecom (53% owned by Etisalat) retains towers No opco present Source: TowerXchange 296 TowerXchange Issue 21

297 networks. Orange are the most advanced in terms of studying the ESCO model with a contract signed in the DRC with GreenWish Partners and an agreement being finalised in Burkina Faso with Energy Vision. In addition, the operator has at least four further RFPs issued (see figure X). Whilst it was perhaps too early to comment on the impact of ESCOs, Orange expected similar benefits to be observed as had been when outsourcing to towercos. With energy equipment being an ESCO s number one priority in terms of deploying capex, one would expect that similar improvements in power uptime would be seen when sites were taken over by ESCOs. Figure four: Orange s exploration of the ESCO model BAHRAIN MTN is just at the beginning of their path in exploring the suitability of ESCO contracts, but for markets where the operator does not expect to sell their towers, the ESCO model could offer an attractive alternative. Etisalat explained that they are not actively looking at the ESCO model at present although they may start to explore this more in a few years. For now, their focus remains much more on improving energy efficiency through the deployment of batteries and cooling solutions For further detailed discussions from the 2017 TowerXchange Meetup Africa & Middle East, stay tuned for the post event report which will be made available in early December. The next TowerXchange Meetup Africa & Middle East will be held on 9-10 October 2018 at the Sandton Convention Centre Johannesburg. For more information please visit our website at: ESCO contract signed with GreenWish Partners ESCO contract being agreed with ENERGY VISION Power from solar farms owned by Neoen, MEI & Catalyst Private Equity ESCO RFP issued No formal ESCO RFP in the public domain Source: TowerXchange 297 TowerXchange Issue 21

298 Operational priorities, growth & diversification opportunities for towercos in MEA Keywords: 3G, 4G, Acquisition, Africa, Africa & ME, American Tower, Atlas Tower, Batteries, Buildto-Suit, C-Level Perspectives, Capacity Enhancements, Capex, DAS, East Africa, Eaton Towers, Energy, ESCOs, Helios, Helios Towers Africa, IBS, IHS, IHS Towers, Lithium, Masts & Towers, Middle East, Multi-Region, North Africa, Operational Excellence, Opex Reduction, Procurement, SLA, Towercos, West Africa Read this article to learn: < Growth opportunities and limitations in towercos existing markets < Attitudes towards geographical expansion < How and where the companies are prioritising energy investment < Towerco perspectives on the ESCO model < Strategies to control overhead and supply chain costs < The appetite to diversify beyond macro sites The towerco asset class has been experiencing exponential growth, signifying the potential held by and confidence in the towerco business model globally. TowerXchange took a deep dive into the economics, growth opportunities and priorities of sub-saharan African towercos, inviting Helios Towers, Eaton Towers and Atlas Tower to a discussion at the 2017 TowerXchange Meetup Africa & Middle East. In market revenue growth potential Significant revenue growth was forecast by each of the towercos in the countries in which they currently operate. Major rollout is required with the emphasis in more developed countries being placed on meeting the growing data demand (with IBS coming to the fore in the most advanced markets), whilst in less developed countries such as the DRC, primary focus was still going to be heavily focussed on improving 2G and 3G coverage and capacity. Speaking on the DRC, Helios commented that the country had one of the highest number of subscribers per tower (approximately 6,000), further emphasising the amount of new build requirements. Spectrum limitation is an issue impacting growth, although MNO consolidation in markets has helped. Whilst regulators and ministries have been opportunistic about spectrum rollout thus causing bottlenecks, the towercos commented that they plan to be ready when customers have the spectrum to continue to roll out 3G, 4G and ultimately 5G. In South Africa, Atlas referenced how the Ministry of ICT was proposing the formation of the Wholesale Open Access Network in a bid to stimulate MVNO activity in the market but Atlas felt that such spectrum would be better placed in the hands of MTN and Vodacom. Towercos spoke of operators having significant network upgrade spend planned, with Eaton referencing Kenya in particular as a market where MNOs were channeling investment into both new build and technology upgrades. All of the towercos noted how amendment revenues in particular had 298 TowerXchange Issue 21

299 really stepped up in the past year with this becoming an increasingly large portion of the total revenue growth. With towercos being the only independent telecoms infrastructure providers in many of their respective markets, the growing trust that they have worked hard on developing with the MNOs means that a lot of this spend on network upgrade is coming their way. In markets where there are competitors present, the towercos measure their success by their take rate, i.e. the percentage of new business won versus the percentage of towers owned. Geographical expansion When speaking of tower transactions in the sub- Saharan African market, we repeatedly hear the statement that the land grab is over and that most of the attractive tower portfolios have been sold; but does this mean that the towercos are done buying? Eaton commented that they were absolutely not done buying stuff. In particular what makes a lot of sense is acquiring additional portfolios in countries where they already have a presence. Such a move brings immediate benefits as you can spread management SG&A costs across the portfolio (Eaton is known to be in the running for Telkom Kenya s ~1,000 sites, and should the acquisition proceed this would lead to an 80% increase in their total site count in the country). Eaton have turned down different opportunities in markets they haven t seen as attractive but have capital available to invest should the right opportunity present itself in new country; Egypt in particular, where the towerco had previously agreed to acquire 2,000 MobiNil (now Orange) sites, remains attractive to the towerco. Helios ethos is to look at opportunities in the right markets where they are able to be a strong player and deliver good service at the right price point; a high release of capital coupled with high lease rates in tower transactions has caused issues for other players in the sector and so they want to avoid getting into that position. Helios are very keen on the markets that they re in and should towers come to market in those countries, Helios would be in a leading position to acquire them. In terms of expansion outside of the African market, Helios would be open to looking should the right opportunities arise. Atlas African footprint has been confined to South Africa, to date, and they remain committed to the market with ambitious growth plans through The towerco does however have plans to expand into other sub-saharan African countries with a shortlist in place and investments already made in two countries with local staff recruited. How attractive is the MENA region for sub- Saharan Africa s towercos? With IHS having entered the Middle Eastern market in partnership with Towershare through the acquisition of Zain s Kuwaiti sites, and the pair in talks to acquire the operator s Saudi Arabian portfolio, there are significant signs that the Middle Eastern market is opening up to the towerco business model. With few towercos present, Dubai-headquartered Towershare has been positioning itself to be MENA s leading player, and the partnership with IHS brings much valued scale and a long track record of operational experience to the table. In Iran, the formation of Iranian Towers, a new towerco venture between MNOs MCI and Rightel and towerco Fanasia, represents another significant player in MENA s emerging towerco industry, whilst TowerXchange knows of more parties either active or looking to enter the build to suit market in Egypt, Algeria and Saudi Arabia. It is as yet unclear as to what extent Zain s landmark deal in the region will precipitate other transactions. The operator themselves is thought to want to get the Kuwaiti and Saudi deals done and then assess lessons learned before examining other potential divestments. In Egypt, MobiNil (now Orange) had previously agreed the sale of c. 2,000 towers to Eaton Towers, only for the deal to lapse after failing to obtain the relevant regulatory approvals in time. Orange is known to have shelved plans for further tower sales across its portfolio preferring instead to focus on the ESCO model as an alternative form of outsourcing; in Egypt the MNO currently has an ESCO RFP out covering 800 sites. Saudi Telecom Company and Mobily s on-off joint venture in KSA appears to be off for now and TowerXchange eagerly await news of their next steps; whilst Ooredoo, which has worked with towercos in Myanmar, is keen to look for partners in its more challenging markets. With Eaton having previously reached a deal in Egypt, CEO Terry Rhodes commented that they would still go back and address the market should the opportunity arise. Speaking on the Saudi 299 TowerXchange Issue 21

300 Arabian market and the ongoing process there, Terry commented that they had looked at it but decided against. Saudi Arabia has totally different business characteristics to those that Eaton are accustomed to; there is huge penetration, high ARPU, enormous use of data and a lower growth potential. Kash Pandya also confirmed that Helios had looked at the Saudi process but decided against it. Speaking more broadly on their appetite to get into MENA, Kash mentioned that it really depends on the market and the market position of the MNO who is looking to sell their towers. Where is spend on energy prioritised at present? Towercos are very much incentivised to spend capex on energy equipment, with reduced downtime improving performance on SLAs and their reputation with MNOs, whilst energy savings translate into improved margins for the towercos. Questioned as to what extent the towercos were coming under pressure from their MNO partners to share some of the savings they are achieving through power investments, the panel commented that the pressure was not so great. MNOs are happy to see towercos invest capex to improve the quality of their network and in large part don t seem to disagree with towerco thinking that those who make the capital investment should benefit. Should the MNO take steps on their side to lower power consumption, such as through the installation of more energy efficient active equipment, then the towerco would be more open to discussing gain sharing. Whilst towercos are incentivised to invest in improving the energy efficiency of sites, there has been a notable difference between the strategies of different players as to how readily they invest in replacing new technologies. IHS has been the most advanced in terms of energy equipment upgrades: in the Cote d Ivoire over 70% of the company s 2,599 sites now have solar-hybrid systems in place with further upgrade work being done in Zambia and Cameroon. In Nigeria the company is undertaking a major overhaul of energy equipment on its portfolio through their big five initiative. Eaton commented that they had always had a more cautious approach to spending capex, sweating the assets as hard as they can without risking prejudicing service agreements. The company added, however, that there is every incentive to invest and improve: once they can see that a technology is proven to be working at scale they will look to upgrade Helios Towers have also put in place preventative maintenance programmes to extend generator lifespan and has also embarked on the installation of hybrid solutions with phase two of their programme now underway. The company is on schedule for 400 hybrid sites in 2017 with 400 DRC solar systems planned by Q Speaking on the solar systems, Kash Pandya commented that they were pleased with the results so far. Eaton had inherited several hundred solar sites through various acquisitions and had found that the solar systems were not performing well. The attitude of the previous tower owner had been that solar could be installed and left alone. In reality you need to ensure that the panels are being effectively cleaned and that you have specialist people who can manage the systems. Whilst Eaton thought that solar looked promising, they didn t forecast any major deployment. On the subject of batteries, Helios reported that they were in the process of evaluating lithium ion, adding that should they get the results promised, they plan to start switching lead acid for the technology. Further investigation is going into the assessment of alternative chemistries at present with MTN reporting that they re in the early stage of testing different technologies with zinc air showing good promise due to the limited to no re-sale value of components. Along with the maintenance and upgrade of energy equipment, tower owners are also bringing grid connectivity to more of their sites, with Helios reporting in Q2 that they had brought connections to approximately 200 sites with a further 100 sites planned before the end of the year. What would it take for towercos to look at the ESCO model? The ESCO model has been gaining traction in their existing markets amongst MNOs, with Millicom, Orange and Airtel all signing ESCO agreements and MTN voicing that they have begun evaluation of the ESCO proposition. For towercos, however, the argument has been less compelling. Kash Pandya commented that Helios were keeping a watchful eye on ESCOs but that they are yet to see a strong argument. The very capabilities that 300 TowerXchange Issue 21

301 ESCOs are proposing are Helios core capabilities themselves: Helios serve the telecoms sector but are a power infrastructure business and are keen to look at generating additional revenue from additional services and competencies. Whilst Atlas footprint in South Africa means that power has been less of an issue for the towerco, their expansion into other markets may present opportunities for ESCOs to get involved. Although Atlas are yet to speak to ESCOs, they are not opposed to having the conversation and remain open minded as to whether a compelling business model can be presented. Beyond energy, where is emphasis placed on improving efficiencies and optimising spending? The focus on reducing opex and controlling capex doesn t solely hinge on site technologies; optimising the O&M regime and managing your business with greater discipline is critical to driving efficiencies. Eaton comes from a low cost challenger culture and so has historically kept a very tight control on costs and overheads. In the company s London headquarters there are just ten people with no more than a further 200 people running the company s local operations in their five markets. In terms of the local operations, Eaton have focussed on employing local staff whilst also pushing more responsibility into their supply chain partners. Further improvements in margins are a knock on effect from not only meeting but improving upon SLAs with their customers, with the towerco reporting that their biggest customer is paying them service level bonuses in every country. In the wake of the rush of tower transactions, Helios Towers focus has very much switched to optimising the operational cost base of the organisation with Kash Pandya explaining that individuals such as Colin Gaston and Roy Cursley have come into the business with a valuable set of skills sets which have been driving performance improvements. The company has been using Six Sigma processes to drive out inefficiencies, reporting an 80% reduction in the number of suppliers they use leading to $30mn in supply chain savings. They have trained up 75 individuals in Six Sigma principles, focussed on employing local staff with typically just one expat per country and improved operational headcount per tower by 30%. The company has improved service uptime by over 80% and is making good progress in its target of less than two seconds of downtime per tower per week. Atlas, who have now been in the tower business for over ten years, explained that the fact that their sites were on grid meant that opex was marginal in comparison to the figures that other towercos are used to. Whilst opex is lower, the towerco still looked at ways to constantly improve their spending, reporting that initiatives such as ensuring a quick turnaround with vendors could help negotiate discounts. As a towerco s portfolio continues to grow, economies of scale start to have an impact, with the company being able to negotiate volume discounts. Having also built the vast majority of their sites, Atlas don t have to deal with many of the issues brought by legacy assets; the company can decide exactly when they want to deploy capex on a quarter by quarter basis meaning that every dollar is spent at the right time. Similarly to Helios and Atlas, Eaton noted they had also put huge focus on optimising procurement, ensuring that they buy and build as effectively as possible. In addition to procuring effectively, panellists also advocated the use of standard site configurations when designing sites; reducing variation to bring further efficiencies to their operations. What appetite is there to explore infrastructure beyond macro sites? In developed markets, there is a growing trend for towercos to diversify their business models beyond macro sites and expand into areas such as small cells, DAS and fibre in order to meet densification requirements and solve capacity problems. In sub- Saharan Africa, activity on this front has been much more limited, and so TowerXchange questioned the panellists on their appetite to expand into this line of business and the role that towercos could play. On the whole, towercos felt that there was plenty of growth in macro sites still to be had in Africa and so that was where their focus would remain; Africa is at least 6-8 years behind more developed markets and so it is going to be a while before we start to see small cells becoming more important than new macrosite rollout. With South Africa being a more developed market it was likely that small cells would start to play a bigger role there sooner. Atlas, who are South Africa s fastest growing towerco, observed that they are having to start looking at alternative site typologies, increasingly looking at small cells. 301 TowerXchange Issue 21

302 Ultimately a towerco should aim to have as many touch points with an MNO as possible, being a single point of call for access to a whole range of site types. Helios commented that they were in the very early days of looking at small cells. They have done inbuilding solutions in some markets and although this remained a small part of their business it was growing. Additionally, Helios are currently piloting a small cell solution in one of their markets, with a view to understanding the business model and associated challenges better and learning from it. Helios view was that they saw the role of small cells starting to become a more significant part of the African telecom infrastructure business in the next four to seven years. Eaton have been addressing a small part of addressable market in Nairobi and see there being more potential. The towerco recently went to Indonesia and India to look at what towercos were doing there with small cells, fibre and DAS with a view to understanding what other low cost markets (albeit ones that are more developed) are doing. A lot of interesting things were learnt from the trip but ultimately the economics of playing in that space are more challenging. In addition the space brings new operational challenges, for example, dealing with building owners is harder than dealing with land leases. Ultimately however, it is an area that MNOs want to get into and so towercos want to find solutions that work. In key buildings such as malls, stadiums and convention centres, indoor DAS is already profitable in Africa; as long as it is an area that all MNOs want to get into, the business model can work. When it comes to fibre, major rollout is currently underway across the African continent, with one participant commenting that you can even get FTTH in Kinshasa. Liquid Telecom are currently putting a major focus on bringing fibre to the tower, acting as a neutral host from which MNOs can lease capacity, American Tower appear to be dipping their toe in the African fibre market having recently acquired Frogfoot Networks in South Africa and IHS have a fibreco license in Nigeria. Atlas have been involved in fibre in the US market but are yet to look at this in Africa and others stakeholders maintain a watchful eye on the potential held by the fibre sector. Speculating on how the dynamics will play out, Chuck Green who was one of the founders of Crown Castle commented that when they had created the towerco, there was a notion to move along value chain to share anything that was shareable up to the switch; what Crown Castle is doing today in US is exactly that. It seems logical to expect that in emerging markets we ll follow same pattern with the beauty being that you know what to expect by following in the footsteps of more developed markets, even if you don t know the timeframe. Crown Castle has extended their offering beyond macro sites, densifying into in-building solutions, small cells and now fibre. Ultimately, Chuck added, that s the future for this business model. Towercos need to respond to the demands of the carriers and investors appear happy to continue to build the growth pattern of the business Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

303 From the first round of capital raising to bonds, IPOs and business model diversification How finance and investment continues to evolve in the African tower industry With new towercos forming in the African market, IPO activity ramping up amongst the continent s bigger players and new business models being proposed as the telecoms sector matures, TowerXchange invited three investors and Helios Towers to join a discussion examining finance and investment trends and appetites in the African tower industry. We summarise the key talking points in this article. Keywords: Africa, Africa & ME, Bankability, Build-to-Suit, Business Case, Business Model, Cashflow Finance, Country Risk, DAS, Debt Finance, EBITDA, Helios Towers, Helios Towers Africa, IFC, IHS, IHS Towers, Investors, KPIs, Private Equity, Project Finance, RBC Capital Markets, Risk, Standard Bank Read this article to learn: < What are the key KPIs investors look for when evaluating towerco investments? < What do bond issuances in the sector tell us about the market? < What can we expect to see around upcoming IPO activity? < What appetite do investors have for complementary business models covering small cells, DAS and ESCOs? This year s panelists Standard Bank is the largest bank in Africa offering a diverse set of products from finance to advisory through to capital markets. The bank has been very active in the tower sector across the continent and provide debt from their own balance sheet ranging from mezzanine financing to senior debt. Whilst the company doesn t do private equity they can help companies raise private capital and can further support in the public capital markets. Philip Hobden, who is a Director in their TMT unit, joined this year s debate. Dutch-headquartered ING Bank provides senior debt globally and has a keen interest in the telecom infrastructure space. They have had exposure to the towerco business model in Europe, Indonesia and Myanmar and started looking at the African market five years ago. Whilst the company is active in the Middle East, there hasn t been much towerco activity in the region (to date). Jeroen Kleinjan, Managing Director in their TMT division, joined the discussion. The IFC has a focus on digital infrastructure which spans towers, data centres and broadband. The organisation has invested in three home grown towercos in Africa whilst also having towerco investments in Asia, Latin America and Eastern Europe. A half to a third of the IFC s tower investments are in sub-saharan Africa and the company has also invested in CSquared which is rolling out fibre in Uganda and Ghana. Eric Crabtree heads up the company s tower and data centre practice and was one of this year s panelists. 303 TowerXchange Issue 21

304 Helios Towers is Africa s third largest towerco with a portfolio of 6,501 sites across four markets. The company has a diverse investor base, issued their maiden corporate bond in early 2017 and is understood to be gearing up for an IPO in the first half of Helios was represented on the panel by their Chief Commercial Officer, Alex Leigh. The panel was moderated by RBC Capital Markets Managing Director and Senior Analyst, Jonathan Atkin who covers the telecom sector. Investor appetites With a diverse set of towercos in the room, alongside a range of companies who are looking to potentially expand beyond their current capabilities, the panellists were questioned as to what KPIs or milestones they would be looking for in a deal or company in order to get involved. For ING, the main KPI which they look at is the EBITDA size; it is difficult to finance a start up build to suit towerco with senior debt and so they would require a minimum EBITDA in the range of $20-25mn. Standard Bank, however, voiced that they do not have a minimum EBITDA requirement, adding that they have done zero EBITDA deals if they have the right credentials in place. The bank did however require a minimum transaction size in order to be able to offset the cost of doing the work. For the IFC, as minority investors they would typically look for quality co-investors whilst also seeking a board position in the towerco. In terms of those aforementioned right credentials, a seasoned management team and well structured contracts with creditworthy counterparties were critical. Investors had a much stronger appetite for contracts signed with number one or two MNOs in a market, whilst it became a lot more challenging to do deals where a third of fourth placed MNO was the counterparty. How M&A in a market might play out as well as the macroeconomic conditions, all influenced the investors decision making process along the way. From new market entrant to Africa s third largest towerco As one of Africa s leading towercos, Helios Towers tick the key boxes. The company acquired their first tower portfolio back in 2010 and have since grown their portfolio to over 6,500 sites, posting an EBITDA of $85mn in Speaking on financing in the early days, Alex Leigh commented how the involvement of Helios Investment Partners had brought significant value to the shareholding. Helios Investment Partners had been one of the investors in build to suit towerco, HTN Towers (which has since been acquired by IHS). The involvement of Helios IP in Helios Towers Africa attracted likeminded investors with either an experience in towers or real emerging markets experience. The first hurdle that the towerco had to overcome was to make investors comfortable in the markets in which Helios operated. Their investors understood the growth opportunities whilst having confidence in the towerco business model with its long term contracts and recurring cash flow. Helios were supported from a lending point of view by institutions who had African or development finance in their DNA. The likes of Standard Chartered, Standard Bank, the IFC, FMO and other DFIs supported the company s vision as they developed their track record. Helios discipline that it has demonstrated in contracts, on par with the contractual discipline of the US publicly listed towercos has helped instill confidence in a wider group of investors, with Helios drive towards operational and business excellence further strengthening their reputation. A deep dive into Helios bond issuance On 8 March 2017, Helios Towers Africa announced its maiden corporate bond. The $600mn bond, listed on the Irish Stock Exchange and paying a 9.125% coupon with a 2022 maturity date, was three times oversubscribed. The majority of the proceeds were to be used to refinance existing debt, with US$31mn being used to fund the acquisition of remaining sites not yet closed in the DRC, Congo Brazzaville and Tanzania; $110mn to be used for planned capital expenditures; $62mn to be used to finance the buyout of Vodacom Tanzania s 23.7% stake and remaining shareholder loans in Helios Towers Tanzania; and $23mn allocated for estimated fees and expenses. Helios bond, as well as that of IHS, served as great branding for the towercos, and more broadly, the 304 TowerXchange Issue 21

305 towerco business model in Africa, with the panel commenting that it introduced the companies to investors who ultimately may invest equity in the potential upcoming towerco IPOs. The size of both bonds was an important factor in their successful listing; at over $500mn greater liquidity was afforded. The bonds enabled firms who were less familiar with Africa to access investment opportunities on the continent with a greater deal of comfort. IHS bond was given a rating higher than the sovereign rating in Nigeria due to its dollar-linked contracts, a quality which was significant given the economic troubles in Nigeria at the time. For Helios, the geographical diversity of their portfolio as well as the early involvement of DFIs as anchor investors helped bring comfort to conventional investors who otherwise would have had concerns with the African specific risks. The bond also came at a time when there were significant inflows into emerging market asset classes as investors sought high yields; thus creating a perfect time to issue. Speaking on Helios bond, Alex Leigh commented that it was a natural step in the company s evolution and growth. Until then, Helios had financed their operations with operation-specific loans which were separate for each market. Whilst they were well supported by the banks, managing separate loans created a lot of additional work from a treasury point of view. The towerco can now support operations with one finance team which has best in class international finance processes. The move has fuelled and simplified growth. As to whether we could expect more bonds in the African market, the panelists thought that it was very specific to the circumstances of different towercos. Whilst it was impossible to say whether issuances were likely in the short to medium term, one thing the panel did agree on was that Helios and IHS bonds have laid the foundations for future issuances by either them or other towercos in the market. What to expect in the upcoming IPOs With the bond issuances having also paved the way for potential towerco IPOs in the African market, the question was raised as to what activity we could likely see around the mooted IPOs by three of Africa s largest towercos. The IFC observed that whilst they haven t yet had one of the towercos in which they are investor list, they have been through the process with internet services company Yandex which listed on the NASDAQ for US$12bn. One take home from the listing was the lengthy SOX compliance required. Ultimately you re looking at spreadsheet yield investors who need stability, systems and order, towercos need to make sure that things such as permitting compliance and environmental compliance are up to scratch and that processes are standardised. In addition to ensuring that accounting, reporting and governance are all in order, towercos will also be working on their equity stories, firming up their proposition with regards to growth versus dividends and explaining when one may switch the other. The towercos may also need to reconfigure their board in preparation. In terms of a listing destination, the panellists commented that the London Stock Exchange and Johannesburg Stock Exchange are the natural homes for African corporates. With the most valuable towercos listed in the US it was questioned whether it would be feasible and indeed favourable for the African towercos to list on the other side of the Atlantic. Jonathan Atkin from RBC Capital Markets, who was chairing the panel, commented that in the past five or so years both a European and a Chinese data centre operator had listed in the US, attracted by the deeper ecosystem of listed firms with common business models. Aiming for a listing on a local exchange when you re the only company of your type may leave you having to educate a generalist. (For further insights into the prospective African towerco IPOs read: IPOs on the horizon for Africa s towercos ) Investor appetite beyond macro-sites in the telecom infrastructure space Whilst discussion around the towerco business model in sub-saharan Africa tends to centre around macro sites, the panel were asked about their views on the investability of business models that incorporated alternative site typologies. The IFC commented that they hadn t seen any business models with a sole focus on small cells or DAS 305 TowerXchange Issue 21

306 in Africa, although they had seen this in other emerging markets, sometimes embedded into advertising and marketing. Small cells and DAS is a natural step for many towercos although some have been deterred by the requirement to become involved in managing active components whilst others have cited uncertainty about the kind of cost structure of the model and the amount of scale that would need to be achieved in order to make the business profitable. According to the panel, one characteristic of African towercos which would make them perhaps more adept at handling some of the complexities of the small cells and DAS market than their peers in developed markets, is their superior logistics capabilities. In Africa, a towerco s operations are more complex and having sophisticated processes in place to deal with these may serve them well in handling the logistic and speed to market demands of small cells rollout. Beyond small cells and DAS the panel touched upon data centres, commenting on how they were yet to see anyone looking to build scale in data centres on the African continent. On the fibre front there has been a bit more progress with American Tower having recently acquired Frogfoot Networks in South Africa and IHS having a fibreco license in Nigeria. Ultimately however, towercos can leverage their contract expertise and execution capability to support other infrastructure although the panel thought that it would be a while before we saw any kind of scale in small cells. As the cost of 4G handsets continues to come down however, the demand for data will continue to grow exponentially, creating opportunities for small cell solution providers. The future success of the market requires companies to exert the right kind of discipline to deliver value to MNOs over ten year periods, opportunistic companies who are only in the market for the short haul could be detrimental to the reputation of the sector. What role do investors see ESCOs playing? The panel were yet to see any major activity in the ESCO space, observing that the only opportunities to date have been with MNOs on a rather limited scale. Whilst the ESCO model doesn t appear to be gaining much traction with the larger towercos, the panel felt that there could be opportunities for ESCOs to work with middle market build to suit players who do not have the same operational capabilities as their bigger cousins. In India, there has been a mixed response to ESCOs in the market but the investors thought that it could be possible to stitch together a successful ESCO business in the African market. In conclusion, the panel all echoed the same sentiment that the towerco business model was now well proven and increasingly attractive should the right conditions be in place with the company in question Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

307 Rethinking the design of towers for tomorrow s networks Safaricom s structural engineering team search for innovative solutions Timothy Waga, Structural Engineer, Safaricom With over 70% of mobile market share and owning over 60% of the country s total stock of towers, Safaricom are Kenya s biggest owner and user of telecoms infrastructure. With a need to expand cost effectively to rural areas, meet growing capacity requirements in urban areas and ensure their towers are capable of meeting the demand from third parties, Safaricom are keen to examine new solutions in the market. TowerXchange speak to the company s Structural Engineer, Timothy Waga, to find out more. Keywords: 3G, 4G, Africa, Build-to-Suit, Capacity Enhancements, Construction, DAS, East Africa, Eaton Towers, Greenfield, IBS, Kenya, Masts & Towers, MNOs, Network Rollout, Rooftop, Safaricom, Site Surveys, Small Cells, Steelwork, Telkom Kenya, Tower Count, Urban vs Rural Read this article to learn: < The profile of Safaricom s existing tower portfolio < How the company manages new site design and build and what they are looking to change < Key requirements for new macrosite deployment and priorities for the company s current tower stock < What alternative site typologies the company is looking into < How to get involved in TowerXchange s tower design and strengthening special feature TowerXchange: Whilst Safaricom itself requires no introduction, please can you tell us a little more about Safaricom in terms of its market share, network coverage and tower footprint. Timothy Waga, Structural Engineer, Safaricom: Safaricom is Kenya s leading mobile network operator. Founded in 2000 and with the current shareholding comprising Vodafone, Vodacom, the Government of Kenya and individual shareholders, Safaricom is listed on the Nairobi Securities Exchange. With 29.5mn subscribers, the company has a 72.6% market share in the country, ahead of Airtel and Telkom Kenya. In terms of coverage, Safaricom s 2G network coverage extends to 96% of the population, with 3G covering 85% and 4G covering 32%, starting initially in the big cities. Our network performance ranks as one of the best within the African region according to P3 tests. Safaricom has a footprint of just over 5,000 sites of which over 2,500 have 3G and a little over 1,000 have 4G. The vast majority of our sites are ground based towers (almost 80%) with rooftop sites, inbuilding solutions and small cell poles making up the balance (figure two). In addition to using our own sites, we co-locate on towers being owned by other MNOs and towercos in the market. 85% of our towers are on grid, with the ratio of good to poor grid being about 70:30. In terms of backup for our on grid sites, almost 90% of sites have diesel generators, with batteries in place for further 307 TowerXchange Issue 21

308 backup. On average, our on-grid sites rely on diesel generators under 10% of the time. Figure one: Current Safaricom site rollout TowerXchange: Can you explain how new site build has been managed to date? Timothy Waga, Structural Engineer, Safaricom: We build 90% of our new towers, giving some business to Eaton who can often build very cost effectively, although they will not necessarily be willing to go into areas where they feel the potential for securing additional co-locations is limited. We re starting to see new companies springing up offering build to suit contracts, the challenge is that most of these companies don t yet have a license and it can be very hard to obtain one G 3G 4G 4G+ Safaricom currently have eight partners who provide site construction and integration services in distinct geographical regions, whilst Safaricom free issues the towers. Over the past couple of years we have just been purchasing towers from two partners but are keen to look at broadening this out to make sure that we are finding out about new site designs, bringing down costs and designing the right sites for the future. When it comes to site maintenance (including energy) we work with six partners, once again with each partner active in a distinct geographical region. TowerXchange: In particular, what new solutions are you looking for when it comes to deploying new macro sites? Figure two: Safaricom s network site type distribution 3% 7% 11% Greenfield towers Rooftop (stub towers, wall mounts & poles) In-building solutions Small cell poles 79% Timothy Waga, Structural Engineer, Safaricom: 308 TowerXchange Issue 21

309 Figure three: Tower ownership in the Kenyan market 300 our existing stock to accommodate requests whilst also making sure that we make it suitable for future use. 1,200 1,000 4,100 Safaricom Telkom Kenya Eaton Towers Other Whilst towercos have always focused on building towers suitable for multiple tenants, many MNO sites have been historically built for a single operator. It is important that we look at the upcoming requirements of our existing and future sites to ensure that we are building the most appropriate solutions. TowerXchange: To what extent do you see growing opportunities beyond macro sites? With decreasing ARPU, we are under a lot of pressure to manage costs when rolling out cell sites. As such, finding ways and solutions to do this as cost effectively as possible is of paramount importance. In Northern Kenya, where there are a lot of small settlements in remote areas where security is also a concern, the need to control costs is particularly acute. As such, we re looking for ultra-low cost solutions which help us bring coverage to such areas. We are also going to be doing a lot of deployments around events in the country and this creates the need for rapidly deployable, low cost, transportable solutions which can be quickly assembled and then disassembled around the events. It is likely that many of the solutions for these rural and remote areas may also be good solutions for rapid deployment. We also have an interest in learning more about different camouflage solutions that are in the market. To date, we have had very little exposure to these but are very keen to find out more about some of the innovative designs that are being used elsewhere across the globe. TowerXchange: Plus what are the key structural considerations when it comes your current stock of sites? Timothy Waga, Structural Engineer, Safaricom: With such a large portfolio of assets in the country we get a large number of requests from various different parties, beyond just the MNOs, to use our sites. We need to look at what we are able to do with Timothy Waga, Structural Engineer, Safaricom: Whilst macro sites will continue to make up the majority of our portfolio, we are seeing a growing role for small cells and DAS in the market. Safaricom has been deploying small cells for a couple of years and are keen to learn more about the different infrastructure options and deployment models to facilitate rollout. Similarly, as the skyline continues to expand in major cities, macro sites are struggling to deliver the coverage required and so we re seeing a lot of growth in indoor DAS. In the rollout of such alternative site typologies it is important to work with a whole host of different stakeholders from billboard owners to building developers to ensure that communications are being considered in their planning. TowerXchange: As a structural engineer, how would you like to see your interaction with your peers and suppliers change? 309 TowerXchange Issue 21

310 Timothy Waga, Structural Engineer, Safaricom: When it comes to the active side of the network you often find a host of different working groups designed to get different stakeholder together to look at the technology evolution roadmap. These types of interactions are hugely valuable but have been lacking for the passive side of things. Discussions around site design have been rather disjointed, with different stakeholders tending to operate independently and many MNOs only considering site design around the time of issuing an RFP. Creating a platform where different stakeholders with an interest in tower design can come together to discuss how site design needs to evolve and share innovative solutions that are already in the market would bring a lot of benefit to the industry See you at our future events! Meetup Asia December, Singapore Meetup Europe April, London Join TowerXchange s special feature on tower design and strengthening Amidst growing demand from operator and towerco structural engineers, TowerXchange are producing a special feature on developments in site design, assessment and reinforcement. We re interested to learn about the break through designs that tower manufacturers have been working on globally whilst examining new and innovative ways to assess and upgrade existing sites more cost effectively. Do you think you have an interesting story to tell? Contact Laura Graves, Managing Director, EMEA to get involved! lgraves@towerxchange.com Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

311 TowerXchange s who s who in passive infrastructure equipment and services Welcome to the TowerXchange who s who! Welcome to the TowerXchange who s who, a kind of vendor directory with personality! Over the last five years we ve interviewed over 236 business leaders from innovative passive infrastructure equipment and service providers. By popular demand, here we categorise those pro les, with each company name hyperlinked to our exclusive interviews. 316 ABLOY: Helping MNOs and towercos achieve operational excellence 319 Aerial Application: inspections can bring time savings of up to 50% 323 Ascot: how you do anything is how you do everything 328 Ausonia: how to reduce total cost of ownership 332 Bhaskar Solar: Making the ESCO model scalable 335 EGE Battery: Crystal-lead batteries for towercos and MNOs 337 Flexenclosure: five reasons why ESCOs are the future for African telecoms tower power 340 Microtex: Powering 10,000+ sites in India with efficient, safe and reliable ebergy solutions 345 Reddot: obstruction lighting solutions for tower aviation compliance 347 TowerShield: Would you like almost unlimited capacity to add more tenants to your towers? 351 Shangdong Zhaowei Steel Tower Company: trusted supplier to MNOs Image courtesy of Camusat and towercos worldwide 311 TowerXchange Issue 21

312 TowerXchange's who's who in passive equipment and services Is your company not included in our Who's who? Would you like to suggest additions? Please Energy equipment and ESCOs Beijing Dynamic Power Eltek on ESCOs Huawei energy intelligence 4energy Bergey Windpower Emerson Network Power Huawei Network Energy Aktivco Bhaskar Solar Enatel SYNERGi IPS Apollo Solar Bladon Jets Enatel IPS+METKA Apollo Solar on Africa Bladon Jets revisited Energy Vision IPT Powertech Ascot Camusat Enertika IPT Powertech T-ESCO Ascot Asia CCE FG Wilson IPT Powertech T-ESCO2 Ascot hybrid CCE EMSaaS case study FG Wilson opex-busters! KIRLOSKAR OIL ENGINES Ascot mini-grids Controllis Flexenclosure Mecc Alte Ascot & Makasa Sun Cummins Flexenclosure Africa MediPower AST (Applied Solar Technologies) DAQS Europe Flexenclosure Myanmar Orun Energy AST case studies Delta Electronics Flexenclosure Myanmar, part two Pace Group Ausonia Eltek Africa Gen Power Panasonic Ausonia Asia Eltek APAC Heliocentris Perkins Ballard Eltek CALA Heliocentris hybrid solutions Polar Power Ballard CALA Eltek optimise energy systems HIMOINSA PowerOasis 312 TowerXchange Issue 21

313 TowerXchange s who s who in passive equipment and services (cont.) Is your company not included in our Who's who? Would you like to suggest additions? Please amayhew@towerxchange.com PRAMAC Vertiv system design GILDEMEISTER AIO Systems Asia ReliOn Volatalia GS Yuasa AIO Systems CALA Schneider Electric ZTE GS Yuasa dual chemical AIO Systems Nigeria SDMO Energy storage Imergy Asentria SEDEMAC Amara Raja Microtex azeti Networks SerEnergy Aquion Energy NorthStar azeti Networks on site protection Solar BK Coslight India Redflow Broadnet Telecom SUNCO EGE Battery Saft Caryon Development SunEdison EnerSys Trojan Battery Company Cattleya Technosys TECNOELETTRA EnerSys Africa Zhu Hai Coslight Codefish Total EnerSys Europe Site monitoring and management ConnectM TSi Power EnerSys optimise cyclic use Accruent Digant Technologies Turbina Exide Technologies Accruent on globalisation FieldForce UGE (Urban Green Energy) Flexenclosure on batteries Accruent s SaaS Flexenclosure emanager Unipower Fluidic Accruent site management Flexenclosure on fuel monitoring Vertiv GE Energy Storage AIO Systems Galooli 313 TowerXchange Issue 21

314 TowerXchange's who's who in passive equipment and services (cont.) Is your company not included in our Who's who? Would you like to suggest additions? Please Galooli fuel monitoring HMS Industrial Networks Inala SAM Inala Infrastructure Intelligence Infozech Infozech Discipline of Action Infozech India and Myanmar Infozech make automation consumable Infozech on use of data InfraSTAT Invendis Invendis Africa and Asia ITD Nexsysone network management Qowisio Long Range Technologies Qowisio goes wireless Quintica Tarantula Tarantula Asia Tarantula Europe Tarantula process optimisation Tarantula shared infra Telemisis Telemisis and Jabil Inala Treefrog VAS-X WebNMS Westell Africa Abloy Africa ABLOY ASIA Abloy CALA Abloy Europe Acsys Acsys on access control Acsys on SLAs Acsys mobile app Acsys productivity Acsys efficiency AKCP Capital Safety EMSS Consulting Karam Construction, O&M and managed services 4site ADNA AJ Ingenieros Alifabs (now CommScope) Alkan CIT Alkan CIT diversify Ardom Telecom Camusat Camusat East Africa Camusat Myanmar CLEARGOL COTECH EEC Group Jabil Inala Westell CALA LockedUp Ericsson NAAP Global Solutions ZNV Outlocks Ericsson Nigeria Nexsysone Access control, Health and Safety Sera4 Ericsson Managed Services Nexsysone Africa Abloy Supra Everest Engenharia 314 TowerXchange Issue 21

315 TowerXchange's who's who in passive equipment and services (cont.) Is your company not included in our Who's who? Would you like to suggest additions? Please Grid Rental Sites NETIS Delmec Solaris Technologies GSMTOWERS turnkey NETIS Ghana Elektroskandia SPTDI Huawei Managed Services NETIS workforce Ganges Internationale TIA Telecom HOI-MEA NETIS drive quality Ganges total tower solution TKM Maestro i engineering NEWL Geostrut TNX IPT PowerTech Orissa Wicomm GSM Telecom Products TowerShield Jtel Planex GSM Telecom Products Myanmar Valmont Site Pro 1 KGP Logistics Plessey Intelli Towers on costs VNTower Leadcom Reime Group Intelli Towers on evaluation Zamil Infra Leadcom CALA Sagemcom Intelli Towers on strengthening Small cell & DAS Leadcom Myanmar TES Leadcom on strengthening Airspan Lemcon Americas ZTE Le BLANC CommScope Likusasa Likusasa Mozambique Structural engineers, rooftops, masts, towers and accessories Metalogalva Mott MacDonald Ericsson Others Mer Group Aerolens NANHUA Aerial Application Mer Group CALA Ambor Structures Orion Intelsat Mer Group Ghana ASE Structure Design Ramboll Intelsat nextgen Mer Group low cost sites Calzavara Sabre Industries Reddot Mobiserve Cue Dee Sierra Tower Partners Viavi Solutions 315 TowerXchange Issue 21

316 ABLOY: Helping MNOs and towercos to achieve operational excellence Site security solutions for greater flexibility, transparency and efficiency Pauli Jormanainen, Regional Director, ABLOY Read this article to learn: < ABLOY s footprint and client base < Market dynamics in Asia s telecom industry < Top security issues faced by MNOs and towercos < Cutting-edge solutions for MNO and towerco operational excellence Securing telecoms sites has never been more important as they are increasingly considered a part of critical national infrastructure. Sabotage, internal theft, vandalism and changing shape of the infrastructure are challenges telecom tower owners face in today s world. These challenges and their impact can be overcome by intelligent security solutions from ABLOY, one of the leading manufacturers of locks, locking systems and architectural hardware in the world. Keywords: Abloy, Access Control, China, Fencing, India, Interview, MNOs, Operational Excellence, Opex Reduction, Outdoor Equipment, Regulation, Shelters, Singapore, Site Visits, Southeast Asia, Towerco, Urban vs Rural TowerXchange: Please introduce your company, your footprint and how you fit into the telecoms infrastructure ecosystem in Asia. Pauli Jormanainen, Regional Director, ABLOY: With 110 years of history, ABLOY is one of the leading manufacturers of complete high security solutions. ABLOY door and asset locking solutions are used extensively within high risk, high value markets as well as by infrastructure, government, and defence end users who demand the ultimate in high security. ABLOY has a proven history of telecommunication business for decades. Along with the new technology in telecom business, ABLOY has introduced new methods and systems to create value and fast pay-back time to telecom customers. We provide a complete solution including hardware, project management, and managed services from installation to managing access rights. ABLOY is active in all major Asian markets thanks to our own sales and support units in Singapore, India and China. Other countries have a wide network of well-trained distributors to look after the specific requirements of each customer. Our product range includes electric locking, key cylinders, padlocks, small locks and associated products to secure the door or asset. Together our solutions offer secure, compliant and lasting solutions trusted by organisations throughout the world across a variety of industries. ABLOY has major MNO customers using its CLIQ technology in over a dozen countries and an installed base of more than 90,000 locking points utilising the CLIQ mechatronic locks and keys. 316 TowerXchange Issue 21

317 The high security range from ABLOY is capable of securing applications ranging from large corporate headquarters, network buildings, data and media centres, retail outlets, down to the smaller base stations, gates and equipment cabinets as well as anti-climb hatches, road site cabinets, monopoles, masts, hubs, feeders and chamber pits. We understand that all have their own unique security requirements and a demand for long serviceable life. Our ABLOY CLIQ CONNECT is a revolutionary product and has been recognized worldwide with prizes such as the Golden Award in the Access Control category at the Merlion Awards in the Safety & Security Asia 2015 Exhibition and the Gold Medal in MTP Securex 2016 in Poznan, Poland. TowerXchange: As a global company, you serve clients worldwide. How would you characterise the Asian market compared to some of the others you are active in? Pauli Jormanainen, Regional Director, ABLOY: We have a deep understanding of the telecom industry and its dynamics in Asian region, thanks to our 30 years experience in Asia. Operations in the telecommunication infrastructure are very much similar everywhere, naturally with its own flavors in each market/country. In Asia manpower is still quite affordable and operators and towercos handle many of the processes which are outsourced to different partners in many other regions. Fast growth of telecommunication infrastructure, strong competition between the operators, mergers, new technologies and changing requirements are putting telcos to quite demanding position also in Asia. In many countries in Asia also, MNOs own their towers and are not sharing them with others. This is one of the reasons tower counts are high and new towers continue to be built as MNOs extend their coverage. On the other hand, in the countries where towercos exist, you see a mixture of statebacked entities with strong positioning in the market alongside independents. So there are varied and interesting market dynamics in the region. TowerXchange: What are some of the top security challenges faced by MNOs and towercos in Asia? And how can you help? Pauli Jormanainen, Regional Director, ABLOY: According to our customers, the main security challenges for them are the unauthorized access to sites, high running costs, theft (be it materials or information and perpetrated by external or internal parties) and vandalism. Lost keys are rarely reported and the percentage of returned keys is often smaller than unreturned. Also, with current mechanical locking systems, the patent can be already expired and the number of keys out in the field is unknown. MNOs and towercos are thus experiencing sizable costs when rekeying or replacing locks and losses with stolen equipment and wiring. Carriers also need to be prepared for possible outages, which in turn can damage their reputation and bring substantial financial consequences. Mechatronic master key systems overcome these challenges by not only providing a high level of physical security in the key mechanism, but also full flexibility in the electronic element. System owners can maintain full control of keys, thereby preventing any unauthorized access. The full audit trail, from either key or locking point, enables the owner to narrow down who has gained access and when to counter the threat of internal theft. TowerXchange: What would you say has driven the shift from padlock and key to more sophisticated security solutions such as what ABLOY offers? Pauli Jormanainen, Regional Director, ABLOY: Actually padlocks and keys are still needed, but not only the traditional mechanical padlocks and keys but more intelligent mechatronic ones with double security features. Intelligent security solution is needed to allow flexible granting of access rights and give reliable, online information who, when, and how long has had an access to the sites. With electronic locking systems security is not compromised in case of say lost keys. Operational excellence drives many companies today and telecom companies are no exception. Incident management must be handled promptly and preventive maintenance in an efficient manner. No one wants field engineers to drive hundreds of kilometers just to get a key and notice at the site that it is a wrong key! Investment in mechatronic system brings greater efficiency and productivity of personnel, reduce aborted visits, and improve management of contractors on site. 317 TowerXchange Issue 21

318 Carriers play a central role in fighting emerging security threats. In the future, securing the entire internet value chain will be an even bigger priority. The pressing need for secure networks and high service levels is a central challenge that is already been addressed in security standards and protocols. In the future we expect to see various governing bodies start to enforce certain level of security standards to ensure satisfactory protection of the operators assets and at the same time service availability. ABLOY can offer a system where every key holder has only a single identifiable key. In the system there are flexible ways to grant (and also take out) access rights, monitor, and measure key users online as well as offline. The ABLOY system offers towercos with great possibilities to plan, control, and measure workforce even at remote areas. Access rights can be given for as short as five minutes! The rights can be given only when needed and even by using a smartphone. Audit trails can be carried out both from keys and locks, and from keys even in real time. Instead of manual keeping of records, key holder and audit trail information can be pulled from the administration system any time to fulfil regulatory audit requirements. TowerXchange: When it comes to urban versus rural sites in Asia, what are some of the considerations in maximising site security? Can you share some success stories with us? Pauli Jormanainen, Regional Director, ABLOY: The nature of the requirements for security tends to differ between cities and remote areas. Within cities, problems depend on the level of security of specific neighbourhoods. According to our customers, urban sites are many times more vulnerable if they aren t properly protected. Naturally in cities the sites can be reached easier and faster, whereas in remote areas the response time can take longer. On the other hand, rural areas communities tend to value the sites and the connectivity they ensure, which can mitigate some of the risks. But both in city and rural sites we need to implement solutions that are at the same time strong enough to resist any attempt of non-authorised access and flexible enough for efficient remote planning, granting, and controlling of authorised access. In both cases, not only access to site needs to be protected, but also the equipment, batteries and any other subcomponent as they are in high demand on the black market. TowerXchange: What is the typical capital outlay per site to install your solution? And how does this translate to efficiencies and savings? Pauli Jormanainen, Regional Director, ABLOY: Every case is unique and the complete solution price tag depends on many different components. The product / lock has naturally one price, but it also depends on the level of security, model, size and features. Mechanical solution is the most cost effective, offering high physical and key security, but less flexibility to control access rights and monitor the system. The full solution can include site surveys before building up the proposal, system planning, integration, installation, and service. Based on the wide experience of complete solution users, normal return of investment for the customer is less than 24 months. TowerXchange: Lastly, what is the ABLOY advantage? How does your solution differentiate from your competitors? Pauli Jormanainen, Regional Director, ABLOY: We have decades of experience working with telcos and have always been developing suitable solutions for them. This often means customized solutions both in hardware and software, and that is one of our strengths. We can combine both economical mechanical systems with the more advanced electronic systems to cover all of our customers security needs. We can integrate our software into the customers existing RMS, access control, HR, or job management systems which will offer flexible use of all systems. ABLOY has a proven track record of producing strong locking products against physical attacks, products that work superbly under any environmental conditions and exceed many quality and performance standards. We have a global approach and references, but also permanent local expertise in consultancy, planning and implementation, and service functions. We have been around for almost 110 years and have very high commitments for the next 100 years 318 TowerXchange Issue 21

319 Aerial inspections can bring time savings of up to 50% Aerial Applications supports the telecom sector to gather accurate data and improve efficiency Joe Sullivan, CEO, Aerial Applications Read this article to learn: < Aerial Applications its activities and footprint < How does aerial inspection software work < The real advantages of using drones in the telecom business < How much time can be saved thanks to drone inspections? < Which rules do drone pilots need to comply with in the Unites States? Joe Sullivan is a young serial entrepreneur who recently founded Aerial Applications to serve the telecom industry with a state of the art aerial inspection software. Unimaginable just a few years ago, drone-based inspections are now a reality and in this interview, Joe discussed with TowerXchange this exciting technology, its current use, and what the future might hold for those embracing it. Keywords: Aerial Applications, Americas, Americas Insights, Health & Safety, Masts & Towers, NOC, Operational Excellence, Regulation, Site Surveys, Site Visits, United States TowerXchange: Please tell us about your background and the creation of Aerial Applications. Joe Sullivan, CEO, Aerial Applications: Aerial Applications was created two years ago. Prior to this I was one of the founders of OfferBoard, a private placement platform for emerging companies which was then acquired by Entoro Group. Aerial Applications offers an innovative softwarebased solution for telecom players to capture, process, analyse, and socialise data, using drones. Our clients include telecom giants like Comcast. Since our inception, we ve also started talking with various tower companies in the U.S. and we are now seeing lots of interest in our solution. While our focus currently is on the U.S. market, we are also looking abroad and are in talks with potential customers in both Asia and Africa. In creating Aerial Applications with my co-founders, I ve had the opportunity to work alongside some extremely bright and talented individuals. I consider myself very fortunate to be a part of such a great team! Our CTO, Nathan Sullivan, was an award-winning developer recognised as one of the top performers at Intel, for example. TowerXchange: So Aerial Applications is a software company, right? Joe Sullivan, CEO, Aerial Applications: Yes, we re a software company. Our customers buy the license 319 TowerXchange Issue 21

320 to use our cloud-based, Software-as-a-Service and additionally receive from us full support on how to get started with drones. I think drones are one of those tools yet to be fully understood by the industry and it s very important that we offer customer service throughout to ensure carriers and towercos buy the right drones and comply with the various existing policies and procedures. TowerXchange: Once installed, how does Aerial Applications work? Joe Sullivan, CEO, Aerial Applications: Maintenance crews can perform inspections utilising drones without the need to climb towers, which is a great plus when it comes to reducing H&S risks. We ve created a flight automation app that will be released at the end of December 2017 that allows users to create pre-set patterns for the drone, complete with a perfect flight control system. So the drone doesn t actually need to be guided anywhere, and instead the team can watch as the inspection is performed using their phone or tablet. A key aspect of our software is that while the drone is up in the air, it takes hundreds of photos of the tower from different angles. These photos then get sent to our cloud, where we generate an extremely accurate 3D model of the tower that engineers can manipulate or download then upload into their engineering software (e.g. AutoCAD). With the right equipment, our customers have been able to construct models that are so realistic, they are able to take measurements that are accurate within centimetres. So the added value is not only in the speed of the inspection and reduced risks but also on the creation of a system of record of a tower portfolio that is extremely accurate and increasingly valuable to our customers over time. Right now we are working with some of our customers on a new feature that utilises artificial Aerial Applications 3D rendering intelligence (AI) for visual recognition and object classification. It will be released towards the end of Q Once operational, it will allow our customers to track the number of antennas on a tower and the type of equipment installed. We are very excited about this tool that will considerably enhance that system of record I referred to previously. AI is going to be huge for our customers, and we re excited to help them adopt it through our software. 320 TowerXchange Issue 21

321 We re realising that feature in Q1 of 2018, but we know that s just the beginning. We know it will make a big difference in their operations, and we re aiming to be the market leader in that space. TowerXchange: What are some of the advantages of opting for aerial inspection tools? Joe Sullivan, CEO, Aerial Applications: I see Aerial Applications as a spellchecker that the inspection crew can use. We are automating an important piece that considerably relieves the cognitive burden on inspection professionals, by allowing them to focus on the key aspects of the operation, like the structural integrity of the tower, or how many pieces of equipment are on it. Thanks to Aerial Applications, inspections are getting done faster and nothing gets missed. To give you a practical example, recently we went on a site visit with a customer who realised that some space on a tower was still occupied by equipment of two other operators who had gone out of business. In terms of savings, our existing customers are reporting time saving up to 50% thanks to our solution, and this is an indicator of considerable financial savings, too. A regular tower inspection can be performed in around thirty minutes of flight time. TowerXchange: What type of regulations do drone users need to be aware of? recently we went on a site visit with a customer who realised that some space on a tower was still occupied by equipment of two other operators who had gone out of business Joe Sullivan, CEO, Aerial Applications: We encourage everyone interested in utilising drones to familiarise themselves with their local, state and federal regulations on the matter. In the United States, companies that use drones need to be aware of the applicable rules established by the Federal Aviation Administration (FAA). The FAA establishes that drones must be registered and that drone pilots need to comply with Small Unmanned Aircraft Regulations (Part 107). Remote pilots need to maintain visual contact with the drone at all times and drones cannot fly over 400ft nor at night. They cannot fly over people or cars (unless they are part of the inspection crew) nor in no fly zones such as airports or national parks. For tower inspections, these rules aren t too restrictive since most towers are located outside major urban areas and on private properties. To be honest, the major limitations to drone adoption are regulatory, not technological. Certainly, the FAA has done excellent work to incorporate drones safely into the airspace to date, but there is so much more that the technology can accomplish. In fact, we are now actively researching pre-set flights that go as far as 100km from the take off point. So a drone could fly autonomously into the jungle for example and come back without the need to be followed by a crew. But in the U.S. drone pilots need to visually follow the drone at all time, unless they receive a specific exemption. TowerXchange: Are we saying that drone inspections could replace inspection crews altogether? Joe Sullivan, CEO, Aerial Applications: Robotics experts tend to be very hyperbolic with regards to the impact of aerial technologies on the industry, and while I certainly believe we will see incredible efficiency gains, I don t believe we will see crews replaced altogether. We are seeing that customers who adopt drone technology use it as an opportunity to improve the quality of their work and speed by as much as 50%. We re helping teams get the most out of their people, by focusing them on the tasks that really need their human expertise. 321 TowerXchange Issue 21

322 get sound legal council. Some companies find that training their existing staff provides them with better oversight and control while other prefer to work with subcontractors for the operation. We can help our customers think through those options, and our software is built to serve information sharing under both models. I d also add that some of our customers are initially concerned about the risk of working with new technology, and are reluctant to make even a small investment to see if it could be a fit. It is far riskier to sit on the sidelines while your competitors adopt new technology than to allocate a small research budget to determine if it is a fit for your business. TowerXchange: What type of customer care does Aerial Applications offer? TowerXchange: What are some of the most common objections you deal with when discussing with potential customers? Joe Sullivan, CEO, Aerial Applications: We are finding that often people aren t really aware of how a drone works. We get asked all sort of questions related to how easy it is to use a drone, whether it is a good investment for a telecom business and if staff can be swiftly trained. In the case where companies are currently building out their drone program the request we often get is for additional drone pilot training for their Aerial Applications 3D rendering internal pilots. To accommodate these requests, we offer support packages that give access to specific learning tools tailored to accelerate their pilots training programmes. Once we are able to explain and show how our technology works, customers quickly realise that an inspection performed in twenty or thirty minutes is priceless! Another question is whether a carrier s (or towerco s) legal department will allow aerial inspections, and I would certainly recommend that a company seeking to implement drone technology Joe Sullivan, CEO, Aerial Applications: We ve been very proactive in ensuring a high level of after-sale care. I think this is a key opportunity to differentiate ourselves from competitors since there are plenty of companies out there who don t offer strong customer services. On top of standard tools such as our call line, FAQs and support, we also check in with our customers during the first months of adoption to ensure they are satisfied with the product. Additionally, next year we ll launch a set of virtual trainings that customers can participate in for free as well as paid training sessions that can be booked and organised in their office 322 TowerXchange Issue 21

323 How you do anything is how you do everything Italian firm Ascot brings innovation, experience and passion to revolutionise energy solutions Dr Michele Greca, CEO, Ascot Read this article to learn: < Ascot s journey in revolutionising energy solutions < Ascot s new E3 program for the telecom industry < Who are Ascot s customers in Asia and worldwide < Why the ESCO model is the future of the industry Ascot is an Italian manufacturing company that operates internationally in the power energy sector. Ascot is mainly focused on the production of diesel generating sets, hybrid technologies and power plants designed in accordance to the customer s specifications and varying climate conditions. Its products are manufactured in Italy and made of the highest quality European materials. To-date, it has more than 34,000 installations worldwide across multiple sectors including telecoms and oil and gas. Read on to find out how it has stepped up to client challenges to deliver innovative and proven solutions that keep off-grid and unreliable grid sites running. Keywords: Africa, Americas, Ascot, Asia Asia, Batteries, Capex, ESCO, East, Efficiency, Energy Energy, Fuel Grid Hybrid Middle Myanmar, Off-Grid, Ooredoo, Opex Pacific, Philippines, Power, Reduction, Renewables, Security, Solar, Telenor, Unreliable Who, Who s Wind, Zain TowerXchange: For our readers who may not be familiar with Ascot, please tell us about the company. Dr Michele Greca, CEO, Ascot: I am pleased to introduce Ascot Industrial SrI, an Italian company with a presence in 59 emergent countries in Africa, Middle East, Asia Pacific and the Americas; a long, winding and successful path that started 30 years ago and carried out with the passion, enthusiasm and determination of the whole team. Since 1986, Ascot has been one of the world s leading suppliers of customised high efficiency energy products, hybrid power plants and diesel and gas generators. TowerXchange: Why is Ascot considered the pioneer of the advanced tailor-made AC generators and the father of hybrid technologies? And how does it fit today into the telecom ecosystem? Dr Michele Greca, CEO, Ascot: We entered the telecom market in early 2003 by chance as we were engaged in a big EPC power project in Sudan. We were summoned for consultancy by Mobitel (today Zain) as their off-grid generators were not functioning at all due to the high operating temperatures. Immediately, as we were approaching their telecom site in the desert, we identified the harsh environment as the key reason why generators failed, even before seeing them. In fact, using a standard generator in the desert is like going off road with a city car instead of using a 4x4 car. 323 TowerXchange Issue 21

324 In order to solve the problem, we analysed several factors and discovered the inefficiency of the entire power system that was designed by just adding components which were immediately available in the market off the shelf, without any specific engineering study; the telecom site was made of one or two diesel generators with a separate fuel tank of 1000 litres, separate ATS and with service intervals to be done every week as the generators needed to function 24/7. Furthermore, in order to install the entire system, civil works were required to build three platforms to allocate the fuel tank and the two generators plus all the cabling and piping connections. In March 2003, Ascot made the first revolution in the telecom industry by starting to offer a plug-andplay box capable of functioning for up to 41 days without stopping independently from fuel, oil and service interval we called it the first SWAP from standard DGS to advance tailor-made DGS. This began a new era: an all-in-one box housed the diesel generator, the 1300 litres fuel tank to guarantee fuel for 41 days, the integrated control panel and ATS to prevent the sand from blocking the contactor, the automatic lube oil system to avoid the weekly service interval and the automatic dummy load to prevent the damage of the engine when the load was so low after peak to start the air conditioning of the indoor shelter. The systems were all ready to work as a plugand-play solution in 30 minutes, situated on two concrete slabs removing costly and laborious civil works. The high-quality products were the The first ASCOT hybrid deployed in Sudan, where it replaced an existing dual generator system and achieved 68% fuel saving (2007) result of Italian design and engineering coupled with German technology. Above all, as the result of extensive R&D, Ascot designed the first Remote Management System (RMS) to control the performance of the diesel generator. With this SWAP, the telecom operators made a substantial reduction in capex costs as the civil works together with the additional cost of transportation, procurement of components and installation were reduced to minimal, while the opex got a huge reduction as the service interval, 5x less (one visit in 41 days compared to a minimum of five visits in the same period for the standard DGS). The Ascot products were the most demanded products all over Africa as unique solutions. It took ten years for our competitors to understand what was inside the Ascot magic box and to try and copy our inventions, while advertising it as something innovative. 324 TowerXchange Issue 21

325 idea of creating a hybrid system was born. We just needed to replicate the technology of the chargers on a smaller scale. On November 7, 2007 the first prototype of hybrid units was deployed in Sudan replacing existing gensets running 24/7 with the first Ascot Hybrids. On June 27, 2007 Ascot made the second telecom revolution designing the first hybrid in the world of the telecom; we call it the second SWAP from advance tailormade to hybrid. On that date, I personally visited Khaled Pervez in Bahrain and at that time he was managing the whole network of Zain in Africa and his big concern was the huge fuel consumption of the diesel generators operating in his network; while I entered into his office he said to me Mike, as you are the The hybrid installed in Tanzania, then deployed in Durban (South Africa) power specialist, please find an engine with low fuel consumption. While I was trying to explain that the fuel consumption is directly linked to power, he stopped me saying Ok, then please invent a diesel generating set that gives power even when the engine is switched off. At that moment a project done some years before related to the construction of huge battery chargers (900 KW 2000 Amps DC) to charge the mega batteries of the submarines came to mind: then the Despite the great result achieved in Sudan, Khalid Pervez considered the Ascot Hybrid as a prototype and not a product ready to be mass deployed in the market so he challenged Ascot again requesting to deploy another twelve samples for all their operations in Africa. It was a painful journey and a lot of money was invested in the project. We learned on the field and each single hybrid was followed by an Ascot engineer that fixed errors in real-time and reported to Ascot factory; an online guidance between field and company that brought the project in three years to an advanced stage until October 2010 when Vodafone group entered into a deal with Ascot. In October 2010, Vodafone Group s innovation center (Johannesburg) was searching for a proven hybrid solution with at least three years testing on field and apparently Ascot was the only choice. After six months testing in Durbans (South Africa), they adopted the Ascot Hybrid at group level and a FWA was signed and Ascot started the first massive deployment of hybrids in Tanzania, Kenya and South Africa. In 2011, the world of telecoms started to talk about 325 TowerXchange Issue 21

326 hybrid and Ascot already had five years of proven experience ahead of any other company. From 2011 to 2014, Ascot continued to deploy hybrid solutions to the market becoming the pioneer of the hybrid solution and once more, as it had happened in the first SWAP, all the biggest competitors started to attempt to copy Ascot s solutions without great results, as they could attempt to copy the concept but never the spirit and the soul with which the hybrid was born. Today many hybrids are available in the market, but no one has fifteen years of field-proven experience and results that make the real difference between one hybrid and another. Today we sell actual performance and not just promises and we have solid performance tables built on real numbers and tracked via our RMS. Since the last two years, the Ascot Hybrids have been successfully installed successfully in North America and ready to change and positively influence a new big market as the United States and Canada with innovative solutions always one step ahead. TowerXchange: Based in Italy, the company has expanded globally to serve customers worldwide. Specifically, what have been some of your activities for Asia? Dr Michele Greca, CEO, Ascot: The innovative telecom products became the Ascot trojan horse and thanks to them, the Ascot brand became recognised worldwide thanks to the recommendations of our satisfied customers. In addition, I was motivated to personally kick start each and everyone of our 59 current operations and today with an active park of 34,000 installations worldwide, I am proud to have contributed to emissions reduction worldwide. Ascot Hybrid power systems in telecoms have a successful and documented track record, capable of reducing fuel use by up to 78% against customer Indonesia 2010 with Tower Bersama baseline at sites with 2kW loads and up to 98% when adding an alternative energy source such as PV panels or wind. Activities in Asia started in early 2011 with Tower Bersama in Indonesia and continued in the Philippines. We also went on to become the best products in Myanmar with Ooredoo and Telenor both choosing Ascot as their preferred partner in the country. 326 TowerXchange Issue 21

327 TowerXchange: What do you see MNOs and towercos struggling with the most when it comes to their energy requirements? Dr. Michele Greca, CEO, Ascot: The MNOs and towercos must consider the energy requirements as the heart of their system, as without power they cannot run the show. They must trust companies that have a proven reputation in the market and with clear commitment to performance. They must be able to put precise numbers in their P&L, numbers that only proven products can guarantee. TowerXchange: We understand Ascot is launching a new program for the telecom industry which is very exciting. Can you share the details with us and how this concept came about? Dr. Michele Greca, CEO, Ascot: Yes, the new Ascot E3 program for telecoms acts at two levels: one is represented by telecom operators and tower operators, the other one is what we can consider corporate social responsibility, so it is about people (mainly villages). We called it E3 because the keywords are: EMPOWERMENT: For tower operators, more products, tools and models to maximise efficiency and increase savings; for people it means energy ready for utilities and fitting with their demands. ENVIRONMENT: For tower operators, products and system based on hybrid technologies, batteries and fuel reduction; for people it stands for silent batteries, able to reduce environmental pollution (low carbon emissions). ECONOMY: For tower operators, a product to reduce costs for fuel, maintenance and using also natural Gas/LPG; to people it means energy for utilities, at the right price for value considering they are mainly generated using renewables sources (sun and wind). To each of those categories, we have developed innovative products, which cannot be disclosed at this point, however will be presented at the Mobile World Congress 2018 as the third revolution in telecoms. TowerXchange: Looking forward, how do you think energy and network requirements will evolve, whether from a business case, regulatory or operational perspective? Dr. Michele Greca, CEO, Ascot: The ESCO model will be the future. The goal of telecom operators is to generate profit from phone calls and to gain more market share; to do so they need to have a reliable network operating at lower opex. The phone call tariff and the revenues generated by the operator have a direct impact on the opex, in fact only with lower expenditure and reliable service operators will be able to decrease the call tariff and acquire more subscribers or simply generate more revenue. In this context, the traditional model and focus of low initial capex is shifting to capex+opex. All in all, this leads us to one word only and that word is ESCO Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

328 Ausonia: how to reduce the total cost of ownership via full-service energy offering Italian firm discusses solutions for off-grid and remote sites in Asia and beyond Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia With 85 years of experience in the power business and thousands of installations across the globe, Italian company Ausonia offers a wide portfolio of energy solutions to help Asian MNOs and towercos reduce fuel consumption and maintenance costs. To cater to the evolving demands of the industry, Ausonia has also created its own energy service company (ESCO) known as MediPower, to provide energy-as-a-service, based on the opex model. With both capex and opex solutions available and against the backdrop of various regional market drivers, Ausonia looks to continuously adapt its offerings to best serve its customers. Read this article to learn: < Ausonia s history, experience and footprint in Asia < Beyond energy products, the creation of Ausonia s ESCO < How to improve energy efficiency in off-grid and remote sites < Clever solutions to reduce total cost of ownership (TCO) Keywords: Asia, Ausonia, Bangladesh, Batteries, Capex, China, DG Runtime, ESCO, Energy, Energy Efficiency, Hybrid Power, Infrastructure Sharing, Interview, Japan, Job Ticketing, Korea, Loading, Malaysia, Managed Services, MediPower, Meetup Preview, Multi-country Partner, Myanmar, NOC, O&M, Off-grid, Opex Reduction, Outdoor Equipment, Pakistan, Philippines, ROI, Rectifiers, Site Surveys, Site Visits, TIM, Unreliable grid, Uptime, Vietnam, Vodafone, Who s Who, Wind TowerXchange: Could you please introduce yourself, your role and background? Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia: I have over 12 years of experience in the power business, including business development and sales in different geographical areas (EMEA, Americas, Asia and Oceania). I joined Ausonia in 2012, when the CEO, Massimo Ombra, asked me to help him launch the new Hybrid and High Efficiency DC gensets portfolio recently designed by the company to meet the needs of the telecom industry in lowering opex and TCO. Over the years, we have worked with tens of MNOs and towercos across the globe and came to understand their specific power needs to identify the right energy solutions for their sites. As a result of our efforts and partnerships with our clients, we have one of the most acclaimed portfolios of AC and DC gensets solutions in the telecom industry, with thousands of installations in different countries and strong references, even among the ESCO community. TowerXchange: For those that might not be familiar with Ausonia, please tell us about the company and the customers you work with. Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia: If you ask any power specialist working in our home market (Italy), they will certainly know Ausonia. In fact, we were the first company in Italy to manufacture generating 328 TowerXchange Issue 21

329 In Asia different scenarios are possible. We see opportunities in supplying our energy solutions directly to the MNOs or to local and regional towercos. But there is also increasing attention and study towards the power lease offers (energy-as-a-service), in which Ausonia Group can play a direct role by offering its local presence in the market, as well as partnering with local managed service providers (MSPs) who want to add something more to their current service offerings sets and we are constantly expanding our footprint in the local market. On top of this, the know-how and experience we have accumulated over many years of business helped the company achieve a high level of specialisation and quality, such that our products today are widely requested by different industries and customers. We are very active in sectors where power is a critical issue. Our gensets are used to power drilling stations for the oil and gas industry from Central Asia to Saharan Africa; to ensure backup power to hospitals, airports and industrial sites from South East Asia to Latin America. We even serve NATO with gensets for their military applications. In the telecom industry, Ausonia has a long history of success, with thousands of generators installed worldwide. We receive positive feedback year-onyear since 2003 by our controlled ESCO known as MediPower, which uses Ausonia gensets to perform their services under the Power Lease Agreements signed with all the MNOs operating on the Italian territory (Vodafone, TIM, Wind and 3). The capability to develop, design, manufacture and offer energy solutions to our customers, starting from a basic capex offer to a pure opex business model represents a unique value proposition in the telecom market. This gives new potential customers a strong sense of confidence, as they see us not only as a manufacturer of power solutions, but also as the first user of our products. TowerXchange: Specifically, what is your footprint in Asia and what are some key issues and challenges your clients face in this region? Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia: Ausonia started looking at Asia in the nineties, when the company was strengthening its focus on the export markets. We approached various customers in the region, from Bangladesh to the Philippines, from Pakistan to Myanmar and Malaysia, and we realised their power requirements were very specific and could not be standardised. Since then, we have delivered generators to companies in Vietnam, China, Korea, Japan, Philippines and many other countries. Today we are in discussions with major regional players in the telecom industry for the supply of generators to power their off-grid and poor-grid sites. At this time, the main concern is around the opex of their traditional power solutions and everyone is trying to understand what would be the best energy solution to be deployed on each site, with the ability to achieve the lowest capex and the highest opex reduction. Within this context, Ausonia is an ideal energy partner as we have the skills and expertise to design customised and efficient energy solutions in line with their technical and financial needs, supporting them also with local maintenance teams and warranty. 329 TowerXchange Issue 21

330 speed DC genset with deep-cycle batteries in an allin-one product. We also helped customers in solving critical problems with the very high costs related to refueling and maintenance of off-grid and remote sites. In those cases, customers used to go to the sites once a month, with employees or contractors literally carrying heavy fuel canisters on their shoulders while climbing hills and mountains, or accessing sites only after having paid mandatory fees to local gangs. On these types of sites we have deployed our Dual Variable Speed DC Generators system, which has been able to reduce fuel consumption up to 63%, reducing the number of site visits by 88% and dropping down the TCO by 51%, with a payback period of only 11 months, guaranteeing a power availability rate close to 99.99%. Additionally, our energy solutions can be equipped with anti-theft devices which help our customers in reducing the risks connected to robbery of fuel, batteries and other components of the power systems, thereby further increasing their savings on the capex replacements and making our proposals more attractive. TowerXchange: Would you be able to share one or two examples of how you ve helped clients address their energy/uptime requirements? Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia: In several countries we experienced situations where many customers tend to oversize their power systems compared to the real power consumption of their equipment on site. We conducted several site surveys with our technicians and found that in some cases the customer could get to the target of improving efficiency and reducing opex by simply replacing the existing genset with a new one of smaller capacity or by installing a variable speed DC genset. In other cases, we helped the customer to hybridise the site by adding rectifiers and batteries or by totally replacing the existing set up with a brand new hybrid power system, integrating a variable TowerXchange: What do you think is the Ausonia advantage? Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia: There are multiple advantages in selecting Ausonia as an energy partner. On top of what I said earlier about our history and know how, our products offer several configurations of energy solutions which, thanks to a significant reduction in the fuel consumption and to different capacities of integrated fuel tanks, can extend the refueling intervals up to three to four months. Moreover, our high efficiency solutions can be configured to require preventive maintenance after 330 TowerXchange Issue 21

331 as many as 2,000 running hours, equivalent to more than 80 days, allowing customers to schedule only four or five site maintenance/refueling visits per year, with great savings in yearly opex. Additionally, our power units can be controlled and managed remotely through a dedicated webbased system, which can be integrated to the network operation centre (NOC) of the customer for managing alarms tracking, ticketing and escalation. Last but not least, thanks to the scalability of our modular solutions, we can deliver systems to power multi-tenant sites, in which a new operator can be added and billed singularly for its energy consumption. Considering all this, if our customers compare our DC gensets solutions with the traditional solutions installed around the globe, they realise that the payback period is often less than one year and the product lifetime typically goes over five years, making it an excellent investment, even looking at short-term business plans. TowerXchange: Lastly, what is the vision for the company, and for Ausonia s presence in the Asian region moving forward? Giuseppe Taranto, International Sales - Telecom Business Leader, Ausonia: Being a proactive and flexible company, we see great opportunities of growth in Asia, especially in countries where telecom players need to urgently go through a renovation of their power assets, or where the network expansion is mandatory to comply with local strategies or simply to follow the indications given by the local regulators. In Asia different scenarios are possible. We see opportunities in supplying our energy solutions directly to the MNOs or to local and regional towercos. But there is also increasing attention and study towards the power lease offers (energy-as-aservice), in which Ausonia Group can play a direct role by offering its local presence in the market, as well as partnering with local managed service providers (MSPs) who want to add something more to their current service offerings. The market in Asia is changing fast and new scenarios and players are emerging, and this naturally lends to new energy requirements which Ausonia is ready to follow closely, by adapting our energy solutions portfolio to new power demands, more specific technical requirements and efficient technologies 331 TowerXchange Issue 21

332 Bhaskar Solar: Making the ESCO model scalable A view from the inside of India s 10,000 cell site telecom ESCO market Partha P Chatterjee, CEO, Bhaskar Solar Pioneers of renewable energy in India, Bhaskar Solar currently has around 3,500 Indian cell sites, large solar firms and rooftops, 500+ bank branches, 200+ irrigation and water treatment plants. Thousands of other installations including rural households and institutes are also under operation. TowerXchange spoke to the CEO, Partha P Chatterjee about his vision for the future of both Bhaskar Solar and of the telecom ESCO market in India and beyond. Keywords: Asia, Asia Insights, Bhaskar Solar, Community Power, ESCOs, Energy, Energy Efficiency, Environ Solar, Fixed Price, IFC, India, Nigeria, O&M, Off-Grid, On-Grid, Opex Reduction, Pass-Through, SLA, SREI Infrastructure Finance, Solar, Unreliable Grid, Uptime Read this article to learn: < Bhaskar Solar s vision to connect every household and installation with renewable energy solutions < The scale and business model of Bhaskar Solar < The importance of ESCOs being technology agnostic < Why growth of telecom ESCOs has slowed in India TowerXchange: Please introduce the TowerXchange community to Bhaskar Solar. Partha P Chatterjee, CEO, Bhaskar Solar: Environ Solar, operating under the brand name Bhaskar Solar, has been in renewable energy services since Our vision is to touch every life with sustainable and renewable energy solutions to connect every unit, both residential and commercial, across the country, with a focus on scalability and sustainability. Our initial focus was to create investible revenue streams through the transformation of households to solar energy, and we have subsequently diversified to become a systems integrator and EPC solution provider. We partnered with the Photovoltaic Market Transformation Initiative (PVMTI) of the IFC and SREI way back in which helped establish solar solutions as an alternate energy source in un-electrified areas, replacing diesel and kerosene. Bhaskar Solar is deploying solutions across various segments, for example we were the first energy services company in India to provide solar solutions to rural banks and ATMs. We see telecom towers as another segment in need of reliable power, and have identified this segment as an area for potential scale. Our experience in telecoms started with a project for the Department of Telecommunications (DoT). We did a pilot project with the DoT and BSNL in and were the first to convince the DoT to adopt the solar+diesel+genset+battery hybrid model to optimise opex and reduce carbon footprints. Indus 332 TowerXchange Issue 21

333 Towers and Idea Cellular were our early customers subsequent to which we added other customers like ATC and Viom Networks (earlier Quippo and now acquired by ATC). TowerXchange: Are your sites concentrated in a particular region of India, and do you have ambition to expand? Partha P Chatterjee, CEO, Bhaskar Solar: Our headquarters are in Eastern India, but Bhaskar Solar are not limited by geography we are a pan-india player. However, with the towercos focusing on the good grid sites, like most India s ESCOs we ve been somewhat focused on off-grid sites or locations with erratic grid availability. The provinces where the grid is most unstable tend to be in Eastern and West-Central India (West Bengal, Bihar, Jharkhand), as well as Uttar Pradesh, Northeast, and few small pockets in the West. TowerXchange: Please describe your contract structure and business model. Partha P Chatterjee, CEO, Bhaskar Solar: We use a simple contract structure to provide our customers with assurance of power supply at a fixed rate that includes energy, O&M, management of the NOC, site security et cetera or/and components thereof. Our rates are also linked to uptime SLAs. TowerXchange: Appreciating you cannot disclose your actual pricing, how do the economics compare to tower leases? We usually offer a 10-20% optimisation opportunity for the towercos. This gives the towercos (who own around two thirds of India s towers) a timely opportunity to make an arbitrage on energy efficiency at a time when MNO consolidation is putting their core revenues under pressure Partha P Chatterjee, CEO, Bhaskar Solar: The towercos usually have two components of their revenue; tower lease or rental charges and energy charges. While tower lease charges factor in site security and O&M costs, energy is typically a pass through cost for the towercos, though these are increasingly being converted into fixed energy models. We help the towercos to optimise both on tower lease charges by optimising O&M, security and energy infrastructure capex and also energy costs through various efficiency measures. Energy management remains our core competency as we have both monitoring and control technology for optimising energy usage and the cost thereof. We usually offer a 10-20% optimisation opportunity for the towercos. This gives the towercos (who own around two thirds of India s towers) a timely opportunity to make an arbitrage on energy efficiency at a time when MNO consolidation is putting their core revenues under pressure. Lease rates in India are typically around US$500pcm per tenant and energy cost per tenant also is around US$500pcm. We can improve upon these numbers if towercos and MNOs outsource energy management to us. TowerXchange: Do you see community power as an opportunity for Bhaskar Solar? Partha P Chatterjee, CEO, Bhaskar Solar: We focus on scalability and sustainability. I m not sure if the community power model can be scaled as fast as the segments we re focusing on. To date we have found the provision of community power services too variable, while the regulatory environment is less than ideal. TowerXchange: How is your business financed? Do you have an interest to attract more capital? Partha P Chatterjee, CEO, Bhaskar Solar: Our key funders are SREI Infrastructure Finance. We are currently exploring supplementary finance options to reduce our cost of debt and expand our network, so we d love to connect with other members of the TowerXchange community to identify long term investors interested in the ESCO market. 333 TowerXchange Issue 21

334 TowerXchange: Please describe the energy equipment on your cell sites - what is the blend of DG, batteries and renewables? Are you technology agnostic? Partha P Chatterjee, CEO, Bhaskar Solar: We have been technology agnostic since day one. Bhaskar Solar is solution rather than product focused we work solutions around customer requirements to resolve their pain points. We have no commitment to a given technology, component or brand, so can optimise TCO by selecting solar, wind, fuel cell, lithium-ion et cetera, delivering reliability and leveraging long term support from our suppliers. We take responsibility for our sites; for example Bhaskar Solar was the first ESCO in India to offer five year warrantees and TCO, which we offered before the market had achieved the proof of concept of solar which we have today. TowerXchange: What is your personal view of the telecom ESCO market in India - it seemed to make a great start a couple of years ago, but has grown slowly since are we right, if so what must be done to reinvigorate the market? Partha P Chatterjee, CEO, Bhaskar Solar: The Indian telecom market is undergoing a period of unprecedented consolidation everyone is trying to survive or merge. The tower portfolios of Idea Cellular, Vodafone and even potentially Indus Towers are all on the block. This inevitably contributes to a degree of indecisiveness in the market, as decision makers hold off commitments awaiting confirmation of the new market structure. By the end of , this phase of consolidation will largely be over, and the decision makers focus will revert to forging long term relationships to optimise operating costs. Growth in the Indian ESCO market also stalled because people previously didn t understand technology evolution there were initial doubts whether to back PV, fuel cell, lithium-ion et cetera. While all those solutions have their use cases, solar has emerged as the way forward in the majority of circumstances. TowerXchange: What do you think is the key to ESCOs forging partnerships with towercos? Partha P Chatterjee, CEO, Bhaskar Solar: The sheer scale of installation and maintenance is a challenge across towercos increasingly diversified portfolios, which creates opportunities for ESCOs to create greater efficiencies than towercos can achieve inhouse. While towercos are proactive in driving their partners efficiency, through remote monitoring, control and SLAs, there is a threshold of efficiency towercos cannot push beyond without ESCO partners to help them optimise the longer term payback technology solutions they need to bring their costs down even further. We feel the focus of towerco energy efficiency programmes is now shifting. Originally their focus was on replacing diesel, but with the cost of grid power going up, they re increasingly seeking to offset the cost of the grid, leveraging renewables to bring down TCO, so good grid sites are becoming part of our addressable market. TowerXchange: What is the scale of the Indian telecom ESCO market today? Partha P Chatterjee, CEO, Bhaskar Solar: ESCOs are operating a little under 10,000 cell sites in India in total. The ESCO market is quite fragmented, and not all the players will be sustainable in the long term. Consolidation among ESCOs is as inevitable as it has been among MNOs and towercos. Most of the ESCOs are striving to scale up and prove to the financial partners that we can achieve deliverable results, rather than constantly needing more funding. TowerXchange: What is your vision for the future? Partha P Chatterjee, CEO, Bhaskar Solar: I will reiterate our vision to touch every life with sustainable renewable energy solutions, from households, businesses, and telecommunications to energy utilities. We have the necessary strength in-house, and the right partnerships, to scale and meet the requirements of our target markets in India. We are already engaged in Africa, having started working in Nigeria, and we re exploring opportunities in Myanmar and Bangladesh 334 TowerXchange Issue 21

335 EGE BATTERY INTERNATIONAL: Crystal-lead batteries for towercos and MNOs Environmentally friendly and high performance batteries for cell sites Crystal-lead battery has been in existence for almost 20 years, and over the last ten years, one company in China has invested nearly CNY 100mn (~US$15mn) to improve both its technology and production. EGE BATTERY INTERNATIONAL has enjoyed success over the years within its domestic market in China, working with clients such as China Mobile, China Telecom, China Unicom, as well as the State Grid company. It also has a strong overseas presence worldwide, typically relying on distributors and agents to grow its footprint. With many energy solutions available on the market, read on to see how crystal-lead batteries compare against others. Keywords: Asia, BATTERY Batteries, China China China China, EGE Energy Energy, Grid, INTERNATIONAL, Lithium, Malaysia Meetup Mobile, Off-Grid, Preview, Storage, Telecom, Unicom, Unreliable Uptime, Who s who, TowerXchange: Please introduce your company where do you fit in the telecoms infrastructure ecosystem? Charles Qin, VP, EGE BATTERY INTERNATIONAL: Founded in 2003, EGE BATTERY INTERNATIONAL is a high-tech company based in Zhejiang China, providing patented lead-crystal batteries with superior performance to replace existing lead acid batteries in performance driven industrial applications. As an innovative, high performance and green lead-crystal battery supplier, we are committed to the research and development of safe, environmentally friendly, durable and sustainable battery products for today s world. With enhanced operational life, quicker charging time and a wider operating temperature range, the lead-crystal batteries are designed to perform exceptionally well in telecoms infrastructure ecosystem. Integrating R&D, manufacturing and sales, the company occupies an area of 35,000 square metres, with the plant at over 20,000 square metres. We have almost 200 employees and an annual production capacity of two million units. Read this article to learn: < Who is EGE BATTERY INTERNATIONAL < EGE s footprint and key customers < What are some of the strengths of crystal-lead batteries < How different battery solutions compare against each other TowerXchange: What is your experience with the Asian market? Who are some of your customers? Charles Qin, VP, EGE BATTERY INTERNATIONAL: Our products are currently distributed and in 335 TowerXchange Issue 21

336 use across the globe, with applications in railway, mobile communications, UPS power supply, electric power, solar energy storage, electric vehicles, electric bikes and more. Our footprint covers over 30 countries, including Germany, the Netherlands, Britain, France, the United States, South Africa, Australia and Malaysia. We ve also established partnerships with Emerson and Philips. In 2011 and 2012, the company won consecutive bids for Guangzhou city s procurement of solar street lamp batteries. Our major clients include China Mobile, China Unicom, China Telecom, China State Grid, BT and Emerson. TowerXchange: How do lead-crystal batteries compare to some of the other solutions on the market? Charles Qin, VP, EGE BATTERY INTERNATIONAL: Some of the strengths for lead-crystal batteries include zero to limited acid fog, long use life, a wide range of working temperatures, and limited environmental impact, so they are eco-friendly. Comparison of different batteries Acid Gel Crystal Lithium Range of temp -25 C~+50 C -30 C~+50 C -40 C~+65 C -30 C~+65 C Use life 3-4 years 3-5 years years 3-4 years Workability as a battery pack Discharge ability at high current Ok Ok Good Normal Poor Poor Good Normal Transportation safety Poor Poor Good Good Environmental Pollution Pollution Green Green Safety Acid leakage Acid leakage Cost Lower Low No acid leakage Little higher than gel No acid leakage Much higher than crystal The batteries have 2/6/8/12V series, with capacity ranging from 7.2-3,000V, and 1,500 cycles at 80% DOD (depth of discharge). There is also less water loss associated, which prolongs battery life. Lead-crystal batteries also have good charging capabilities, where after 100% deep discharge, it can be restored to capacity at the ambient temperature of 20 C ~ 30 C, with charging voltage set at 2.35V/cell ~2.40V/cell. In addition, it can accept charging at a higher current (0.35C10A), reducing charge time and improving charging efficiency. The batteries feature less self-discharge, with power maintained at 85%+ over a 12-months period. The cost is around 20 to 30% more than traditional VRLA batteries. But this is outweighed by the enhanced lifecycle. TowerXchange: What warrantee and after sales support do you offer? Charles Qin, VP, EGE BATTERY INTERNATIONAL: While we currently do not have overseas service capacity, we are seeking potential partners to do so 336 TowerXchange Issue 21

337 Five reasons why ESCOs are the future for African telecom tower power Food for thought for African tower owners as more players explore the energy-as-a-service model Carita Tissari da Costa, Sales Director, Flexenclosure Read this article to learn: < What are the drivers for the emergence and growth of ESCOs < Estimated opex and capex savings for MNOs and towercos < Estimated carbon reduction for MNOs and towercos through ESCOs < Minimised operational risks through energy-as-a-service offerings The single biggest challenge to being able to offer stable and reliable mobile phone services in Africa is power. Or more precisely, the lack of reliable power at telecoms tower sites. Tens of thousands of towers across the continent are located in areas without access to reliable electricity grids or indeed, any electricity grid at all and they typically have to be powered by diesel generators 24/7. And as the networks expand into ever more rural areas, the problem is getting worse as Africa is the only region in the world where the population is growing faster than the rate of electrification. Keywords: Africa, Capex, DG Runtime, ESCO, Energy, Energy Efficiency, Flexenclosure, Hybrid Power, Interview, KPIs, Loading, Managed Services, O&M, Off-grid, On-grid, Opex Reduction, Outdoor Equipment, ROI, Risk, SLA, Unreliable grid, Uptime, Who s Who TowerXchange: Please share with us the context in which you see a growing need for ESCOs? Carita Tissari da Costa, Sales Director, Flexenclosure: The power challenge has vexed mobile network operators (MNOs) for years, as well as more recently, the towercos which have been acquiring towers from MNOs. Managing the supply of reliable power is not a traditional core business competency of either of these two groups. So just as the MNOs divestment of assets to the towercos came from a desire to refocus on their core telecommunications service offerings, that same desire to focus is now driving the next evolution in the industry s dynamics the rise of the energy service companies (ESCOs). The growth of this new ecosystem of MNOs, towercos and ESCOs is being enabled by a new generation of hybrid power technologies systems that have been specifically designed from the ground up to operate reliably in even the harshest of environments and over the lifetime required for an ESCO s business model to make good business sense. The result is a set of very compelling reasons why outsourcing power requirements to an ESCO should be a no-brainer to MNOs and towercos alike. TowerXchange: What might be some of the arguments for an ESCO then? Carita Tissari da Costa, Sales Director, Flexenclosure: The first is significant opex savings. With an average single-tenant telecom tower site powered 24/7 by a generator consuming about 337 TowerXchange Issue 21

338 28,000 litres of diesel per annum, it s not hard to see how site power costs can account for per cent of the total operating costs of an MNO or a towerco. Implementing the latest generation of hybrid power systems though, such as Flexenclosure s esite x10, can significantly reduce opex by decreasing diesel consumption by 70% or more. And these savings can increase further if the power loads are reduced, there is intermittent grid power available and/or solar energy can be harvested. And opex savings are not just made on the cost of diesel. By outsourcing power to an ESCO, the MNO or towerco no longer has to worry about generator maintenance, spare parts, or the cost of an operations team on standby 24/7 to manage power failures, site break-ins, fuel theft, et cetera. Another major reason is freed-up capex. According to the GSMA, Africa will need tens of thousands of new towers in the next couple of years, yet capex budgets keep tightening as mobile markets become more competitive and much of Africa struggles with economic downturn and forex issues. When a telecom tower site is powered 24/7 by a generator, that generator will run for 8,760 hours per year and will need replacing every three years, not to mention replacement costs of other legacy power equipment. From a tower operator s perspective, this budget (and effort) would be far better spent expanding network coverage, rolling out revenue-generating services or on customer acquisition activities and by outsourcing power to an ESCO, that s exactly what they can do with the freed-up capex. TowerXchange: And what about additional benefits of an ESCO, perhaps less related to capex and opex? Carita Tissari da Costa, Sales Director, Flexenclosure: All respectable organizations across the globe today are looking at ways of reducing their carbon footprint, so for MNOs and towercos, this means cutting carbon emissions. With an average single-tenant telecom tower site with a 2kW power load running 24/7 on diesel generators producing over 75kg of CO2 emissions per year, tower operators have very big footprints. By implementing the latest hybrid power technology such as the pioneering esite x10 annual carbon emissions for the same site can be brought down to below 20kg per site. That s a significant drop with equally significant benefits to the environment and to a tower operator s corporate social responsibility aspirations. And as before, lower power loads, 338 TowerXchange Issue 21

339 partial grid availability and/or solar energy can further reduce a site s carbon emissions. TowerXchange: On an operational level, how might working with an ESCO change things for tower owners and/or operators? Carita Tissari da Costa, Sales Director, Flexenclosure: Its means more risks are outsourced and complexity reduced. Managing power at telecom tower sites is prone to risks related to both the generation and the delivery of power to the active telecom equipment. By outsourcing all responsibility for power generation and delivery, a tower operator can effectively unburden themselves from all the complexities and distractions that power comes with, even at those sites that are connected to an electricity grid. A Power Purchasing Agreement (PPA) with an ESCO will detail agreed SLAs and KPIs, with penalties for non-performance. The result of signing up to such a power-as-aservice contract would be the tower operator s moving from having to manage the operational power complexities for all its sites to simply managing an insurance policy of sorts on its outsourced power risks. TowerXchange: When it comes to investing in new energy technologies, we ve often heard that the business case or incentive is not there for a MNO or towerco. But this would be different for an ESCO? Carita Tissari da Costa, Sales Director, Flexenclosure: Yes, for tower operators whether MNOs or towercos historic investment in telecom tower power equipment can be a significant obstacle when trying to justify investing in newer power technologies now given it s not core to their business focus. However ESCOs don t have this issue though. Their investment strategy will be to implement the latest hybrid power systems offering the most reliable long-term performance, so it makes absolute sense for tower operators to unload their legacy equipment and pass the power baton to ESCOs to run with. TowerXchange: Lastly, how might you summarise the ESCO opportunity for Africa? Carita Tissari da Costa, Sales Director, Flexenclosure: The general consensus in the industry is that approximately 50 per cent of all telecom towers in Africa will have implemented outsourced power in the coming five years. Whatever the actual number, it is clear that outsourcing power to a specialist ESCO will have far-reaching benefits. It will release MNOs and towercos from the burden of managing inefficient and unreliable legacy power equipment. It will create a new industry segment within the larger telecommunications ecosystem, thus increasing employment opportunities and skills levels. It will have significant environmental benefits. And most importantly, it will support the connection of the unconnected the quest to bring mobile telephony and online access to the hundreds of millions of people across Africa who still remain beyond the reach of networks today 339 TowerXchange Issue 21

340 Microtex: Powering 10,000+ sites in India with efficient, safe and reliable energy solutions Indian firm combines technical expertise with in-field experience to support telecom clients Dr Mike McDonagh, Technical Head, Microtex Keywords: Aircel, Asia, BSNL, Batteries, DG Runtime, Energy, Energy Efficiency, Energy Storage, Huawei, Hybrid Power, Idea Cellular, India,Indus Towers, Meetup Preview, Microtex, Off-Grid, Opex Reduction, Renewables, Solar, Unreliable Grid, Uptime, Viom, Who s Who, Wind Read this article to learn: < Microtex and its unique energy offerings < Which parameters to use when calculating total cost of ownership (TCO) < What are the potential TCO savings for off-grid sites < How energy storage solutions can be tailored to specific site requirements Microtex is a leading technology company that manufactures industrial batteries for energy storage in Bangalore, India. Established in 1969, Microtex produces in-house specially designed lead alloys, lead oxides, grid castings, pasted plates, injection molded containers, multi-tubular gauntlets, PVC separators, as well as the complete battery using state-of-the-art industry standard machinery. With telecoms being one of its main focus areas, it has built up an impressive portfolio of clients that include BSNL, Indus Towers, Idea Cellular, Aircel, Viom and Huawei. TowerXchange: Please introduce your role and background. Dr Mike McDonagh, Technical Head, Microtex: I have worked in the energy storage and battery industry since 1977, with broad experience covering design, manufacturing and applications of both lead acid and lithium ion batteries. I approach my role with a thorough grounding in electrochemical and materials science but also practical hands-on experience. In addition to having more than 30 years of practical experience manufacturing and designing lead/acid batteries for automotive and industrial applications, I was also responsible for building and managing several battery plants in the UK. I was also the chief of R&D as well as production manager for many leading battery companies, such as Oldham Crompton Battery and FIAMM UK. TowerXchange: Please tell us about Microtex where does it fit in the telecoms infrastructure ecosystem? Dr Mike McDonagh, Technical Head, Microtex: Microtex was established in 1969 and manufactures industrial lead acid batteries for different segments: telecom, railways, nuclear and power facilities and material handling equipment. There are about 400,000 telecom towers in India and we have a market share of about 2.6%. Microtex developed VRLA batteries for telecoms in Since then we have supplied VRLA battery sets 340 TowerXchange Issue 21

341 to BSNL, Indus Towers, Idea Cellular, Huawei, Aircel and Viom. TowerXchange: The first question our readers will want to know is how proven is the solution in the field please tell us about the performance of your solution in the field who is using it and what results have been achieved? Dr Mike McDonagh, Technical Head, Microtex: Initially the sets were housed in air-conditioned enclosures which gave good life and was typically an ideal condition for the battery. However, the demand from the industry was to move to covered shelters without air conditioning. Our batteries were redesigned to withstand India s high temperatures which sometimes can reach 50 C during summer. This was achieved by using a superior blend of corrosion-resistant lead alloys of the positive plate in the cycle life. Batteries were also subjected to frequent deep discharges and often replacing the DG sets altogether. This called for a complete redesign of the battery from a purely standby design, to a cyclic application using flat plate AGM VRLA in place of the higher priced TGel battery. German supplier whose consistent valve opening and closing at the right pressure ensure no water loss takes place leading to cell dry outs, which causes thermal runaway. A common cause of failure in this type of battery. Our major customer BSNL trusts Microtex for its MSC (Mobile Switching Centre) sites with several installations of 48v 1000Ah to 5000Ah. Typically, only the best products are used for MSC sites for their reliability and dependency in a country where power failure is regular. TowerXchange: Please compare the TCO for a fairly typical off-grid cell site running dual DGs with a similar site where your energy storage solutions have been installed. Dr Mike McDonagh, Technical Head, Microtex: The total cost of ownership is a difficult parameter to calculate. There are several reasons for this: < The capital costs are dependent on the installation and financing costs which are variable depending on tower location and interest rates. < Diesel fuel and electricity costs are variable. < Maintenance and fuel delivery costs are very different depending on the location. Despite this, it can be demonstrated with an example that in many cases reducing dependency on diesel power and substituting stored mains energy will enable considerable monthly savings. Reducing the monthly running costs which include amortisation of the equipment and batteries will clearly reduce the total cost of ownership. Looking at a typical tower with three base transceiver stations of around 2.5 to 3kw average demand, it is possible to make some simplified assumptions about the energy supply costs. These are not accurate costs for the reasons explained above but allow us to get a reasonably close to real estimate. Assuming a 12-hour gap in the mains electricity supply we would expect the following equipment: < Diesel generator, DG (10kW) < Battery bank 48V 600 Ah < Power interface unit PCI The connectors and special terminals were designed to meet the current carrying requirements for deep cycle applications, meeting C3.33 rate of discharge. The vent valve which is often ignored, is a critical component like the heart of the battery; Microtex gets its vent valves specially manufactured with a < Different sites have their own requirements of autonomy and grid availability, depending on their specific location across India. For example, Bihar will have around seven hours on the grid compared to Gujarat which will have more than 21 hours of available mains electricity. These sites will require different capital investments for their power supply. < Switch mode power system (SMPS) Total cost of equipment amounts to around INR500,000 (US$7,700) for which the battery will be around 30%. Looking at doubling the battery size then using 341 TowerXchange Issue 21

342 eight hours of battery time and halving the diesel time to four hours instead of eight gives a 30% increase in the amortisation, an extra INR162/day, but a decrease of INR in energy costs. The total saving per month is ( ) x30 = INR9,012/month (US$140/month). This is a total monthly saving which includes capital investment and therefore it does demonstrate in a simplistic way that the TCO is indeed reduced with the increased use of battery solutions. This can be extrapolated to completely remove the diesel generator to provide even lower cost of ownership. TowerXchange: How much tailoring to the specific requirements of individual sites can really be achieved through the selection of the right energy storage solution? Dr Mike McDonagh, Technical Head, Microtex: The important parameters to measure for any specific site are the available energy supplies (eg. solar, wind, hydro-electricity, diesel et cetera). The remoteness of the area and ease of access are also critical in choosing the energy supply filling a diesel tank from a supply tanker for instance may not be possible. The cost of running and the capital investment are major considerations. In a remote site with no mains electricity, where there is abundant daylight and mostly sunshine it makes sense to install an automated solar supply with battery storage. In less obvious cases, there may be hybrid solutions Daily running costs Electricity INR 8 96 Diesel fuel (delivered) INR 126 (1.8 litres/hour x INR 70 ) 1,008 Battery output INR 10.4 (charge efficiency factor 70%) 41.6 Maintenance of all power supply equipment Amortisation including finance approximation Total monthly costs are ( ) x 30 where the cost of the electricity is key to the size of the battery installation. In the example of a diesel hybrid using solar energy storage, the cost of running a diesel engine is high so a larger capital investment in the battery/solar segment would make sense. In order to maximise the benefits, the type of energy storage and the size are critical components of the equation. At night, the runtime of the battery depends on its capacity (size) and the output (again size) of the solar panels. The lifetime of the battery is also important to calculate the running costs, eg. a 4-year battery life compared with an 8-year life for a more expensive battery. In this case the less expensive battery needs to be replaced twice as often and the amortisation cost may be higher. Microtex can advise the optimum solution for a particular customer s needs based on initial capital budget, running costs and maintenance costs. In the TOTAL DAILY COST INR1,145.6 INR160/day INR540/day INR55,368/ month latter case, the location and access to personnel are key factors, whereas the capital cost of a battery and energy supply depend upon the autonomy of the site and the depth of discharge (DOD) the battery will undergo. The larger the battery the lower the DOD for a given autonomy and the longer the battery will last. If maintenance is not possible then the type of battery chosen should not need topping up and the AGM VRLA lead acid version will be specified. In case of deep cyclic applications tubular gel VRLA battery will be recommended. Battery chemistries other than lead acid can be considered but Microtex recommends that for most installations, lead acid batteries are usually the most effective option given their stability over a wide range of temperatures, safety and their lower costs. Lead acid being completely recyclable allows for effective pollution control. As many other chemistries do not have the option of recycling and 342 TowerXchange Issue 21

343 usually end up in landfills leading to a growing battery waste problem. TowerXchange: What is unique about your energy storage chemistry? Dr Mike McDonagh, Technical Head, Microtex: There are several established battery chemistries which can be used for energy storage and supply or even backup emergency power. These are sealed valve regulated lead acid (VRLA), open or flooded lead acid, nickel metal hydride/cadmium (NiMH/NiCd) or Li-ion types such as LiFePO4, LiCo, LiNMC et cetera. Right now Microtex promotes lead acid variants as the most reliable, safe and costeffective energy storage solution for most telecom applications, but has the capability of providing any of the commercially available battery chemistries which it has approved. Our lead acid batteries are uniquely designed to give optimal performance in terms of life and efficiency of operation. There are several important criteria to consider when choosing a battery for a particular site or operating pattern: < The operating load and the length of time < The availability and amount of energy for charging the battery < The cost of the energy (diesel, renewable, grid, et cetera) < The cycle life and calendar life of the battery < The cost and capability for battery maintenance on the site < The efficiency of the ratio battery output to battery charge Without going into too much detail, a lead acid battery consists of lead compounds (active material) held in place by a lead alloy grid which also acts as the conductor (plates), all of which are immersed in sulphuric acid (electrolyte) separated by a porous membrane (separator). The positive plate has active material made of a porous lead dioxide and the negative is a spongy pure lead when in the fully charged state. During discharge both plates react with the acid to form porous lead sulphate. All lead acid batteries operate the same way what differentiates the Microtex brand are the unique design and compositions used in the grid alloy, the active materials of the plates and the separators. The balance of active materials used in the plates which provide the electricity have to be carefully balanced, the exact balance required depends upon the application: the depth and rate of discharge and recharge, the number of times it will cycle in a week, the calendar life expected, the depth of the discharges, the length of time of any idle periods, the operating temperature all are fundamental factors for which there is not a one size fits all solution. Microtex has developed a range of grid alloys which are a unique blend of stiffness to provide a strong abuse resistant grid suitable for higher operating temperatures, as well as a low electrical resistance which maximises the recharge efficiency to give lower operational costs. The alloys for flooded cells and sealed VRLA cells are not the same. Microtex, unlike the majority of its competitors actually manufactures its own grid alloys which it has developed over decades and is still carrying out trials and tests for ongoing improvement. Likewise, unlike its competitors Microtex also manufactures other critical components such as the separators and cell boxes in order to optimise their properties in line with its field experience and own laboratory research. Other components such as the terminals which connect to the intercell and supply cables are uniquely designed to prevent loosening during heating and cooling cycles of charging and discharging as well as day and night temperature variations. They also ensure minimal resistance at connection joints to ensure minimal resistance and energy losses through raised voltages or temperature Another factor which should be considered for series parallel connected cells is the cell-to-cell variation which can lead to damaging imbalances between cells over time. This can result in overdischarge of some cells and overcharge of others leading to early battery failure. Microtex has optimised its production methods to ensure that the absolute minimal variation is obtained in every single component to give the lowest possible difference between its finished cells. This is backed up by a stringent, nationally accredited quality control procedure and extensive product testing in our laboratories. TowerXchange: Is a different energy storage chemistry the optimal choice for different 343 TowerXchange Issue 21

344 cell site scenarios? In what typical scenarios will your solution perform best relative to alternatives? Safety as well as cost are also important in this scenario and lead acid is still regarded as the safest and most stable energy storage chemistry Dr. Mike McDonagh, Technical Head, Microtex: There are several aspects of the Microtex products which set it apart from the competition. Dr. Mike McDonagh, Technical Head, Microtex: Microtex has a range of lead acid designs which should cover all telecom site requirements with advantageous properties compared with alternative chemistries. These are essentially summarised as follows: Remote applications with high temperature variation We have a range of sealed VRLA batteries which have high efficiency charge/discharge ratios, as well as being maintenance free and give good performance over a wider temperature range than alternative chemistries Populated locations with on-site maintenance and low capital budget In this situation Microtex can supply flooded or VRLA alternatives to suit the budget. Maintenance for the lower cost flooded range would require occasional water additions, for this range we have optimised the battery grid chemistry to minimise the water loss through gassing on charge. This means fewer occasions for topping up the battery which reduces the maintenance costs, we also can fit automatic watering systems to remove this cost. However, the cost of distilled water and the controls needed to prevent gassing and stratification mean that usually the VRLA option is preferred. Remote applications with a renewable energy such as solar panels The VRLA battery made by Microtex is highly efficient on charge with a lower ratio of on-charge/ discharge voltage ratio. This means you get more energy from the same restricted energy supply from a fixed size of battery. Other chemistries such as liion are very efficient but will cost around five times as much as an equivalent lead acid installation and will always have the question of how to recycle at the end of life. TowerXchange: What can be done to protect against battery theft? Dr. Mike McDonagh, Technical Head, Microtex: Very little I m afraid; there is no stopping a determined thief. Microtex has looked at several solutions but has not yet found a satisfactory and affordable option. However, we are very aware of this problem and we are actively working with other companies in the security field to find suitable cost-effective solutions to this problem. One solution used by another manufacturer is to put battery installations underground. This is just one of the options which Microtex are examining. TowerXchange: Please sum up how you would differentiate your solution from your competitors? The lead alloys used for the grids are manufactured and designed specifically by the company to meet the demands of different end applications. Most lead acid battery companies buy standard alloys from a lead recycling company for their grid production. The active materials in the electrodes have unique additive blends which enhance the battery performance. These additive blends have been formulated over decades of field and laboratory research to provide optimum battery performance in all the diverse market applications. The connector and battery poles are designed to minimise resistance losses and inefficiency which improves energy capture and reduces costs. Apart from the product differentiators, Microtex has extensive experience and knowledge to provide the best possible solutions and advice to customers in this market. It is true to say that Microtex has unique experience both in the field and within its technical staff, which have combined to produce a battery with the best possible balance of materials for battery performance and life in most telecom applications. We do not believe any other company could match this 344 TowerXchange Issue 21

345 REDDOT: obstruction lighting solutions for tower aviation safety compliance American Tower, Telenor, China Telecom and Hutchison among client list of Shanghai-based firm Charlie Dong, Managing Director, REDDOT Electronics With a deep specialisation in lighting solutions and big name clients in the telecommunications field, REDDOT Electronics has been steadily growing its business over the past seven years. Domestically, its clients include China Tower Corporation and China Telecom while overseas the company serves the likes of American Tower, Apollo Towers and Telenor. With a strategic headquarter in Shanghai, the firm is centrally located to access manufacturing supply chain resources as well as shipping hubs. Small but mighty, obstruction lightning is a key item for MNOs and towercos to ensure air safety compliance. Keywords: American Tower, Apollo Towers, China Telecom, China Tower Corporation, Etisalat, Health & Safety, Hutchison, Interview, Malaysia, Mast & Towers, Meetup Preview, Myanmar, Outdoor Equipment, PCCW, Telenor, Thailand, Vietnam, Who s Who Read this article to learn: < Details about REDDOT Electronics, its activities and footprint across Asia < Who are REDDOT s MNO and towerco customers < What are the high growth markets for aviation lighting < What new technologies are being integrated into next-gen lighting systems TowerXchange: Please tell us about your company and how you fit into the telecoms infrastructure ecosystem. Charlie Dong, Managing Director, REDDOT Electronics: REDDOT has been an obstruction lighting solutions provider for seven years. In the telecom industry, our solution has been applied to hundreds of customers including top towercos and MNOs in China and beyond. We are based in Shanghai, which is a centre point for the manufacturing supply chain of many industries as well as a major shipping centre. As a result of our extensive experience and strategic location, we are able to provide the best products in a speedy manner, which are key requirements in the telecom business. TowerXchange: What is your footprint in Asia and who are some of the customers you work with? Charlie Dong, Managing Director, REDDOT Electronics: In Asia, we are active in Malaysia, Myanmar, Vietnam and Thailand. We are seeing considerable growth in Myanmar and Vietnam as both countries have been undertaking large-scale infrastructure upgrades in recent years. Some of our customers include American Tower, Apollo Towers, China Tower Corporation, Telenor, China Telecom, Etisalat, PCCW and Hutchison. TowerXchange: Please explain how your products can help MNOs and towercos. 345 TowerXchange Issue 21

346 Charlie Dong, Managing Director, REDDOT Electronics: Our customers span more than 100 countries and 80% of them are focused on the telecommunications field. Given this, we have a deep understanding of the major aviation safety regulations in different countries -- we know exactly what product and service our customers need. Our products are also certified in most of the markets we operate in, which facilitates purchasing approval processes. TowerXchange: When it comes to the actual deployment on towers, what are some of the do s and don ts that you have learned? Charlie Dong, Managing Director, REDDOT Electronics: There are plenty of small things we need to be aware of during the deployment phase. For example, if our customer orders obstruction lights, mounting kits and cables together, we will make sure we provide matching screw and nuts and we ll also provide extra ones. We double check that all cables are accurately labeled and all wires come with cable lugs to make the installation nice and easy. TowerXchange: What is the maintenance process of your products? Charlie Dong, Managing Director, REDDOT Electronics: We offer five-year warranties on almost all of our products. And we always try to run the extra mile to serve out clients. For example, to make sure the printed circuit board (PCB) can function even in harsh outdoor environments for a longer period of time, we apply sealing glue on the surface of PCB, which is not commonly done because of the complexity and high costs. TowerXchange: How does REDDOT differ from your competitors? What makes you stand out? Charlie Dong, Managing Director, REDDOT REDDOT obstruction light collection Electronics: An in-depth understanding of obstruction lighting is one of our major advantages as we have been specialists in this field for seven years now. Our lights consume the least energy, can last longer outdoors and our solar system is specially designed for each specific customer as sun exposure and conditions may vary. We are also adding more technologies like GPS, GSM, ZigBee, et cetera into our solutions to give our customers more options 346 TowerXchange Issue 21

347 Would you like almost unlimited capacity to add more tenants to your towers? Innovative Tower Shield can more than double wind load capacity at significantly lower cost than upgrading structures and foundations 1:16 DWG The innovative Tower Shield SH M CABLE LADDER 600 It s one of those ideas so simple that you can t imagine why anyone DWG SH DWG SH didn t think of it DWGbefore! In the tower industry we all understand that SH wind load is usually a more important factor than equipment weight in determining the capacity of a tower. Round shapes are more A A aerodynamic than boxes. So if we mount a light weight, round shield over the equipment DWG on our towers, will the capacity be increased? SH Tower GSM design and installation wizard Christian Strømme has built a 1250X150 prototype that could revolutionise the tower business. MW 600 Keywords: Camouflage, Capacity Enhancements, Capex, DWG 1PANNEL Co-locations, SH ANTENNAS Construction, Foundations, GSM Towers, 2500X150 A - A Infrastructure Sharing, Insights, Installation, Loading, Masts & Towers, Multi-Region, Passive Equipment, Site Level Profitability, Steelwork, Tower Shield, Who s Who Read this article to learn: < What is the Tower Shield and how does it work? < How has the concept been proved? < How Tower Shield can enable a tower designed to accommodate two tenants to accommodate four at half the cost of upgrading the foundation and structure < How to design new towers to accommodate Tower Shield, thereby reducing weight and cost < What will Tower Shield cost? TowerXchange: Please introduce your revolutionary Tower Shield. Christian Strømme, CEO, GSM Towers: The Tower Shield can enable you to make your towers available to all the tenants you want. Deploying the Tower Shield will unlock almost unlimited capacity, even on towers designed for single tenants, at significantly lower cost than by upgrading structures and foundations. The Tower Shield enables towercos to dramatically improve return on investment in improvement capex, and increase tenancy ratios and tower cash flow. TowerXchange: How does it work? Christian Strømme, CEO, GSM Towers: A round shape has a lower wind factor than a square shape, such as the antenna and other square-shaped parts mounted on a tower. Installing a round shield over the antenna makes a tower more aerodynamic by reducing the wind forces on any equipment inside it. The prototype we have designed has an EPA of 4.2sqm, is 3m high with a radius of 2.4m, and has capacity to enclose up to 12 to 16 antennas (depending on the size) inside the shield. But the Tower Shield is designed to be a modular solution, so the shield specification can be adapted to suit the tower, and more shields can be added according to the amount of equipment to be hung on the tower. 347 TowerXchange Issue 21

348 The Tower Shield is made of light but strong material which allows signal to pass through without being disrupted. We use a 7mm sandwich laminate GRP the same material radar domes are made from which means we are able to achieve a signal loss of less than 0.3 db. The Tower Shield complies with the ANSI/TIA-222-G American design code, EN and EN : Eurocode 3, European codes. TowerXchange: How would the Tower Shield be installed and mounted? Christian Strømme, CEO, GSM Towers: The Tower Shield can be easily mounted on the outside of a tower with clamps. Each part is about 60kg, so it s a quick and easy installation easier than adding an antenna. TowerXchange: It sounds almost too good to be true. How have you proved the concept? Christian Strømme, CEO, GSM Towers: We have just completed construction of a prototype in Beijing, from where it will be shipped to be unveiled at the TowerXchange Meetup Africa in Johannesburg on October 3 and 4. TowerXchange introduced us to some potential customers at their Americas Meetup in June, and we ve also done some calculations for another towerco showing how the Tower Shield could enable a tower designed for two tenants to accommodate four tenants at a site in Southeast Asia. Tower Shield prototype But Tower Shield can improve the capacity of any tower, anywhere in the world. TowerXchange: Tell us more about the calculations that revealed that installing Tower Shield could enable four tenants to be accommodated on a tower designed for two. Christian Strømme, CEO, GSM Towers: We examined a tower located in Southeast Asia which had been designed for two tenants and was just about able to support three. The towerco that owned the tower had been asked to co-locate a fourth tenant, for which they calculated that they would need to upgrade the existing structure with 5,000kg of steel and 10sqm of concrete foundation. We found that we were able to deliver more than enough wind load capacity to accommodate the fourth operator by placing a Tower Shield over just the RDUs and filter boxes of one existing tenant. If a 3m x 3m Tower Shield was installed over six RF antennae, each with an area of around 1m, we would reduce the wind load by a factor of 60%, while the coefficient for the antennas is 1.2, so the Effective Projected Area (EPA) was reduced from 8.4 to 5.4, reducing uplift by 7% and compression by 5%. Installing a Tower Shield would mean the foundation wouldn t need upgrading and the addition of just 400kg of steel would bring the tower within reasonable range. TowerXchange: That s a great example of upgrading an existing tower. How can Tower Shield transform the economics for new build towers? Christian Strømme, CEO, GSM Towers: We spoke to one of the Directors of a leading towerco in Indonesia who shared a common challenge that other towercos will recognise: whether acquiring an existing tower or building a new tower, it is difficult to predict whether and when there will be demand for capacity for a second, third or fourth tenant. 348 TowerXchange Issue 21

349 As a result most towercos (and an increasing number of MNOs) have designed and built new B towers with capacity for two tenants. With Tower Shield you can now use low cost, lightweight, single tenant structures for all new builds, minimising capex, therefore minimising risk. All you need to do is pre-install structures with shield brackets, then a single tenant tower can be easily upgraded to accommodate two, three, even four tenants by adding a Tower Shield. R32 intuitive that it took him seconds to understand and he didn t have any questions he just ran off to tell his colleagues about it! TowerXchange: What will Tower Shield cost? Christian Strømme, CEO, GSM Towers: Like any tower modification, the cost depends on the specific requirements and dimensions of the tower concerned TowerXchange: What is a Top Shield and what are its use cases? Christian Strømme, CEO, GSM Towers: The Top Shield is a way to extend the tower while adding the minimal additional load to the structure. By their nature, tower extensions typically create a heavy burden on the structural capacity of the tower, but by using a Top Shield, the effect of the extension is minimised. A A The Top Shield is conceptualised as a 3-5m extension requiring no internal structure - the shield has its own B structure - which maximises the space available for new antennas while minimising EPA TowerXchange: How have the towercos you ve spoken to about Tower Shield responded? Christian Strømme, CEO, GSM Towers: We spoke to the VP of Tower Development at one towerco. He was a structural engineer and promised us a tough cross examination, but the concept is so simple and In the example we quoted in Southeast Asia, the improvement capex to upgrade the structure and the foundation to accommodate a fourth tenant would have been in the region of US$20,000. With Tower Shield, we d anticipate being able to achieve the same capacity for half the price, including shipping and installation. Of course higher volumes would mean we d be able to manufacture and sell Tower Shield at a lower 67 price. We re also making arrangements such that we will be able to provide one to two years of financing. Top Shield B - B TowerXchange: Could customers offset the cost used for camouflaging the tower and antennas have of Tower Shield by selling advertising on the been used as a billboard. shield s surface? x H = 1.8 x = 6.78 sqm. TowerXchange: What is your background how EPA =4.2sqm. Christian Strømme, CEO, GSM Towers: Sure thing! did you come up with this idea? Where landlords allow the structures to be painted, logos or marketing campaigns can be added on. We Christian Strømme, CEO, GSM Towers: As I m the have seen examples of this where similar solutions third generation of my family in the tower business, TowerXchange Issue 21

350 I d love to say this was something I have invented on my own, but its been a team process! Our engineering, supply and sales departments have worked this one out together. The idea of reducing wind drag on the towers has been discussed both at the office and around the house as long as I can remember; but the combination of three recent circumstances have pushed us to develop this solution. First, we are frequently asked about upgrading legacy towers by towercos that have recently acquired older towers. We recently had a very detailed discussion with a towerco in Indonesia that wanted to minimise improvement capex, while preserving the potential to make recently acquired towers available for multiple tenants. We investigated re-filling of foundations, easy steel upgrades (adding bracings et cetera), but all the solutions we came up with were either sub-optimal on the saving side or very costly. Then there was a discussion with a client about extending existing tower structures to accommodate new tenants. Though this is very possible, it eats a lot of the structural capacity, and we were back again looking at how to strengthen towers in an efficient way. At the same time, we ve had the oil crisis in Norway, and though this has been damaging for the O&G industry it lead to us getting a new flow of talent from outside the telecom industry, especially on the engineering side. They brought a fresh approach to things and the result was the idea of the TowerShield Meetup Asia December, Singapore Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

351 Shandong Zhaowei Steel Tower Company: trusted supplier to MNOs and towercos worldwide Footprint spans thousands of sites in Africa, Central America and Asia Jin Li, CEO, Shandong Zhaowei Steel Tower Company Keywords: Africa, Asia, Cambodia, Capacity Enhancements, China, China Tower Corporation, Construction, Ericsson, Ethiopia, Huawei, Installation, Interview, Masts & Towers, Meetup Preview, Myanmar, Philippines, Steelwork, Who s Who, ZTE Read this article to learn: < History and footprint of Shandong Zhaowei Steel Tower Company < How to recognise a high quality steel tower < Finding the balance between standardisation and customised towers < How to make camouflaged towers more affordable From its roots in China, Shandong Zhaowei Steel Tower Company (Zhaowei) is now expanding to include manufacturing capacity in Ethiopia. With ten years of experience, the company has grown to 20 engineers and 400+ staff. Since its early days, Zhaowei has paid great attention to the overseas market, while at the same time building its domestic presence as the audited supplier of China Tower Corporation and the State Grid of China. With a keen focus on quality and customer satisfaction, Zhaowei has an impressive roster of MNO and towerco clients around the world, as well as tier one OEMs Huawei, Ericsson and ZTE in the telecom field. TowerXchange: Please introduce your company and history in the telecoms industry. Jin Li, CEO, Shandong Zhaowei Steel Tower Company: The company was established in 2007 in the development area of Dezhou City, Shandong Province, China. Zhaowei has flourished as a result of the accumulated experiences from our parent company, adoption of scientific management, use of advanced equipments and the hiring of many talented staff. Since its creation, the company tackled aggressive domestic expansion and nurtured overseas growth at the same time. And after ten years of intense work on R&D to improve the quality of our products and develop new solutions, Zhaowei has become one of the leading steel tower manufacturers in China, with a worldwide footprint. Our products have been exported to Central America, Ireland, Kenya, Somalia, Angola and many other African countries. In Asia our clients are spread across the Philippines, Myanmar and Cambodia; we are also an audited steel tower supplier for China Tower Corporation, and work with Huawei, ZTE and Ericsson in the telecom sector. We now have after-sales teams in Manila, Yangon and Dhaka. Our expansion also includes a new fabrication plant that is currently under construction in Ethiopia and will begin operations next year. 351 TowerXchange Issue 21

352 TowerXchange: The first question our readers want to know is how proven are the structures in the field please tell us about some of your clients and projects. Jin Li, CEO, Shandong Zhaowei Steel Tower Company: Our products and services have been proven by our customers, by our ten years of history, and by the thousands of towers standing worldwide. Currently, we have a lot of projects in the Philippines, where we fabricated the first set of hybrid steel towers in the market and won the praises of our MNO customers. We are the preferred weather test tower supplier for the nuclear power stations in China, where almost all are 100m (and over) guyed towers and survived the beating of multiple typhoons. TowerXchange: How should buyers distinguish between the quality of products offered by different tower manufacturers? Jin Li, CEO, Shandong Zhaowei Steel Tower Company: Towers can be easily judged by appearance. For example, at a glance, you can see if the cutting is straight, if the Hot Dip Galvanisation (HDG) surface is smooth and if the welding is clean and neat. If you have test tools, you can test the HDG thickness, the welding quality and the strength of the steel and bolts. You can t hide quality issues with towers, because everything will be exposed during the installation! Completed TUNDALARA Tower TowerXchange: How should MNOs and towercos strike a balance between the cost and volume benefits of standardisation versus the needs to customise structures for different environments and wind loading? Jin Li, CEO, Shandong Zhaowei Steel Tower Company: Yes, it is like the two side of one coin. If a customer decides to standardise the structure across all sites, this will most likely result in higher costs as all towers will need to meet the highest requirements. Customers could decide to customise each site to their specific conditions, which may be a more affordable option. But on the other hand, standardisation could bring savings, since a lot of the work could be simplified and clients can also prepare stock towers. In general, it is best to divide into several standard zones, in order to minimise the waste that may come with one set of standardisation. TowerXchange: What are the most economical ways to strengthen a tower structure to accommodate extra tenants and handle more wind load? Jin Li, CEO, Shandong Zhaowei Steel Tower Company: Firstly, for new tower sites, towercos should consider upfront possible extra tenants and wind load, since strengthening a tower is not always an easy thing to do. When it comes to existing sites, clients ask for economical yet efficient tower strengthening. As a steel tower manufacturer, we ve worked on many strengthening orders and the way to approach this differs depending on the type of tower. For each project, we perform a structural analysis and decide the best way forward. TowerXchange: How do you ensure the deliverability and easy installation of your structures? 352 TowerXchange Issue 21

353 Meetup Asia December, Singapore Jin Li, CEO, Shandong Zhaowei Steel Tower Company: Nowadays most tower structures are quite similar so the key when it comes to delivering and installing a tower is the quality control. We have a comprehensive QC system that spans the drawings, production and tower installation phases. We are always in communication with our clients to improve or revise our designs and to ensure ease of installation. And our large production plant (200,000 sq. mt.) ensures the fast deliverability of orders. TowerXchange: When designing new sites, how do you balance the concerns of camouflage, cost and structural capacity? Jin Li, CEO, Shandong Zhaowei Steel Tower Company: Camouflage is becoming more and more important in the telecom field, however these solutions usually are more expensive than traditional towers. One of the ways to balance this is to adopt new or high strength materials, to reduce total weight, which then contributes to both cost savings and extra capacity. TowerXchange: Please sum up how you would differentiate your solutions from your competitors? Jin Li, CEO, Shandong Zhaowei Steel Tower Company: As a private company, we have the flexibility to work and make decisions in an efficient way, and we really try to take advantage of that. Secondly, we always set up local after-sales teams for major projects, in order to provide attentive service to our clients. We also prioritise quality control and delivery time. In addition, we are building a fabrication plant in Ethiopia, which would allow us to shorten delivery times and enhance customer service for clients in the African region Meetup Europe April, London Meetup Americas June, Boca Raton Meetup Africa & ME October, Johannesburg TowerXchange Issue 21

354 See you at our future events! Meetup Asia 2017 Meetup Europe December, Singapore April, London Meetup Americas June, Florida Meetup Africa & ME October, Johannesburg 354 TowerXchange Issue

355 Subscribe! TowerXchange, the tower industry s journal of record, is moving to a subscription model to enable deeper business intelligence and faster access to insights TowerXchange quarterly journals TowerXchange Dossier reports TowerXchange online archive What s new: < Keep your finger on the pulse with our fortnightly e-newsletter* < TowerXchange Intelligence: towerco site counts over the last two years, updated quarterly* < Crowd SiteIntel: site locations and tenancies, powered by M2Catalyst Features you know and love: < Regional summaries of the tower markets in EMEA, Asia and CALA < Detailed studies of over 100 single country tower markets < Industry news: latest rumours and deals < Exclusive towerco and MNO CXO interviews < The world s most comprehensive who s who of solution providers < Comprehensive reports from all four annual TowerXchange Meetups < Full access to our archive of over 2.5mn words of research at *Select features only available to premium subscribers Includes complimentary copy of issue one of The Future Network! Subscribe now at TowerXchange Issue 21 Tower Xchange