TowerXchange s introduction to the African tower industry

Transcription

1 TowerXchange s introduction to the African tower industry Laura Graves, Managing Director, EMEA, TowerXchange lgraves@towerxchange.com

2 Networking club for towercos Meetups, CXO dinners, must-read-journal, 3 million words of research, who s whos Meetup Africa 2018 Meetup Asia 2018 Meetup MENA 2019 Meetup China 2019 Meetup Europe 2019 Meetup Americas October, Johannesburg 4-5 December, Singapore January, Dubai March, Beijing April, London 9-10 July, Boca Raton

3 Agenda 1. Introduction to the global tower industry and towerco fundamentals 2. Spotlight on the African tower market 3. What the future holds

4 Introduction to the global tower industry and towerco fundamentals

5 The new market structure in which towercos own 67% of towers TowerXchange is tracking 276 towercos that now own 67% of the world s 4.4mn towers China Tower Corporation* 1,900,000 RCOM / RJio towerco 43,000 edotco 40,481 Crown Castle 40,039 Bharti Infratel 39,363 Deutsche Funkturm 34,700 SBA Communications 28,380 GTL Infrastructure 27,759 IHS Towers 22,860 Cellnex 21,770 American Tower 169,534 Indus Towers 122, other towercos with 5,000-20,000 towers 286, ** other towercos with <5,000 towers 213,175 * China Tower Corporation area reduced to better illustrate the relative global market share of the other towercos if illustrated to scale, China Tower Corporation s area would be almost double the scale of the rest of the industry combined disclosed updated counts

6 Towerco penetration and business models in different regions Global 15.5% 31.5% Europe 59.6% 15.4% India 46.6% 32.6% China 97.3% 2.7% 9.6% 11% 21.8% 52.6% S & SE Asia (Exc India) 66.1% 19.2% 14.7% N & E Asia (exc China) 100% 1.3% 13.5% CALA 48.2% 15.6% 36.1% USA & Canada 27% 7% 66% MENA 99.5% 0.04% 0.01% SSA 33.9% 61.6% 4.5% Oceania 87% 13% Operator-led towerco Pureplay independent towerco Joint venture infraco MNO-captive sites Source: TowerXchange

7 Typical tower components Typical Tower Components 1. Whip Antenna A stiff, monopole antenna, usually mounted vertically 1 2. Antenna Array A platform (typically three sided) where tenants place equipment to provide signal transmission and reception to a specific area. The number of antennas necessary per array is determined based on a number of factors, including: the number of active subscribers the volume and type of network usage by subscribers (e.g., average minutes of use, voice versus data) the technology being used (e.g.: CDMA, GSM, LTE) the type of spectrum currently utilized by the tenant 3. Port Holes Holes cut into the base and top of a tower to allow cables and wiring to pass through the tower structure from the base station to the antennas Panel / Antenna Tenant equipment that transmits a signal from the tower to a mobile device or vice versa 5. Microwave Dish A specific type of antenna, which is used in point-to-point radio, television and data communications. Also commonly used by wireless carriers for backhaul Source: American Tower

8 Typical tower components (continued) Typical Tower Components (continued) 6. Coaxial Cabling (Fiber) Transmission lines that carry the signal received from the antenna to the base station or vice versa 7. Reinforcement Bars Threaded anchors used to reinforce towers to add capacity to accommodate additional tenants Shelters Buildings at sites used by our tenants to house communications, radio and network equipment. Some shelters are designed to be stacked on top of one another to conserve space at smaller sites Generator Gas or diesel powered generators provide emergency backup power to keep tenant equipment operational during power outages. American Tower has also introduced Backup Power Solution to allow multiple tenants to use a single generator Ground Space The area within a site where tenants place their shelters and generators Source: American Tower

9 Towerco fundamentals Where does revenue come from? Co-location revenue Amendment revenue Build to suit contracts Power < Long term, non-cancellable leases with creditworthy tenants -> stable and visible cash flows < High contract renewal rate < Built in escalators < Economies of scale < Barriers to entry < Significant growth: data usage, population growth, coverage expansion, densification

10 Costs Operating costs < Ground lease payments < Electricity payments and diesel < Monitoring < Site maintenance < Tax Capital expenditure < Revenue maintaining capex < Revenue generating capex < Structural upgrade to increase capacity for additional tenants < New site build < Acquisitions

11 Improving operating margins Fewer, more comprehensive site visits Supply chain upskilling Control Define Improve Lean six sigma Analyze Measure Longer and deeper partnerships Introduction of new technologies Power system upgrades

12 Comparison of ROI of new build towers 40% Sample Return on Investments (1) 35% 32% 32% 30% 25% 21% 23% 24% 25% 20% 17% 15% 10% 9% 13% 11% 13% 5% 3% 0% One Tenant Two Tenants Three Tenants U.S. LatAm Africa Asia Typical Tower Construction Cost U.S. LatAm Africa Asia $250 - $300K $85 - $170K $60 - $120K $20 - $30K (1) llustrative examples recreated from American Tower, does not reflect any American Tower financial data. Sample returns on investments calculated as gross margin/upgrade costs

13 Illustration of the impact of increasing tenancy ratio One Tenant Two Tenants (1) Three Tenants (1) Construction / Upgrade Costs ($ in USD) $275,000 Tenant Revenue $20,000 $50,000 $80,000 Operating Expenses (including ground rent, utility, monitor) $12,000 $13,000 $14,000 Gross Margin $8,000 $37,000 $66,000 Gross Margin (%) 40% 74% 83% Gross Margin Conversion Rate (%) 97% 97% Return on Investment (2) 3% 13% 24% (1) Colocating tenants typically pay higher rents than anchor tenants on build-to-suit towers. (2) Calculated as Gross Margin divided by Construction/Upgrade Costs. Table recreated from American Tower for illustrative purposes only. Does not reflect any American Tower financial data

14 Towercos versus other equities ,600 1,400 1,200 1, GLIO Telecom Infrastructure GLIO Satellites GLIO Core Global Infrastructure MSCI World Equities Dec-01 May-02 Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 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 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Source: Global Listed Infrastructure Organisation (GLIO) 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% Source: Global Listed Infrastructure Organisation (GLIO)

15 Trading multiples of the world s listed towercos (March 2018) Source: Moffett Nathanson Oct 2017

16 Why do towerco valuations vary? Business model Currency risk Counterparty risk Competition Technology risk Operational risk Growth potential Contract quality Ground lease Leverage Experience

17 The African tower landscape

18 Estimated tower counts for selected countries in Sub-Saharan Africa Malaawi 1,000 Botswana 850 Burkina Faso Namibia 1,700 2,000 Madagascar 2,020 Angola 2,600 Senegal 3,151 Congo B 800 Gabon 1,000 Rwanda 1,300 Niger 1,800 Chad 2,000 Zambia 2,300 Zimbabwe 2,700 Cameroon 3,200 Uganda 3,554 Cote d Ivoire 4,142 DRC 4,293 Mozambique 4,400 Ethiopia 6,600 Ghana 6,296 Kenya 6,629 Tanzania 8,278 South Africa 28,581 Nigeria 29,652 Source: TowerXchange

19 Towercos now present in 19 (soon to be 20) Sub-Saharan African countries Owning 39% of the continent s 150,834 towers 34% 61% 5% Legend Towercos active New tower deal announced No known towerco activity Source: TowerXchange Pureplay independent towerco operator-led towerco MNO captive

20 Africa s biggest tower transactions to date Year Country Seller Buyer Tower count Deal value US$ Cost per tower US$ Deal structure 2018 Kenya Telkom Kenya American Tower 723 SLB* 2016 Tanzania Zantel HTA 185 6,700,000 36,216 SLB** 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 Nigeria Hotspot Network IHS 85 Portfolio Acquisition 2016 Nigeria HTN Towers IHS 1,211 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 4,717 1,060,000, ,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%)**** 2014 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 65,274 SLB with direct investment in HTT Kenya Telkom Kenya Eaton 1,000 MLL (Contract since cancelled, towers currently for sale) 2013 Cameroon & Cote d'ivoire Orange IHS 2,000 MLL * announced, not yet closed ** 101 closed as of 31 Dec 2017 *** Deal included 368 SWAP sites under MLL; agreement since cancelled **** MTN s equity since restructured for additional shareholding at IHS group level + Vodacom acquired a 24.5% stake in HTT, which Helios has since purchased for $58.5mn

21 Africa s biggest tower transactions to date (continued) Year Country Seller Buyer Tower count Deal value US$ Cost per tower US$ Deal structure 2012 Cote 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 1,200 81,000, ,500 Joint venture (HTA 60%, Milicom 40%) DRC Millicom/Tigo HTA ,500, ,758 Joint venture (HTA 60%, Milicom 40%) Ghana MTN American Tower 1, ,500, ,835 Joint venture (AMT 51%, MTN 49%) 2010 South Africa * Cell C American Tower 1, ,000, ,857 SLB with BTS 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, ,303 Joint venture (HTA 60%, Milicom 40%) Ghana Millicom/Tigo HTA ,000, ,000 Joint venture (HTA 60%, Millicom 40%) Totals / average 41,248 4,726,950, ,486 * announced, not yet closed ++ Millicom restructured their equity into Helios operations into a 24% stake at group level (since reduced to 22.83%) which Millicom is now looking to monetis +++ Cell C deal included 1,400 existing towers plus 1800 to be constructed. Total acquisition cost of US$430mn excluded here because the BTS component distorts the average

22 Towerco M&A activity in Africa Year Country Seller/aquired party Buyer Tower count 2016 South Africa Eaton Towers SA American Tower Nigeria Hotspot Networks Nigeria HTN Towers IHS Towers 1,211* * Deal included 368 SWAP sites under MLL; agreement since cancelled

23 Airtel s history of tower transactions Sold to Eaton Towers Sold to American Tower Sold to Helios Towers Sold to IHS Currently retains towers No opco present Sold to Eaton Towers; opco subsequently acquired by Orange

24 MTN s history of tower transactions Sold to IHS JV with American Tower MTN retains towers No opco present

25 Vodacom s history of tower transactions Sold to Helios Towers with 24.5% stake acquired in Helios Towers Tanzania which Helios has since purchased for US$58.5mn MLL with Eaton Towers Vodafone retains towers Vodacom retains towers Safaricom retains towers No opco present

26 Africa s towerco-owned towers: ,000 50,000 40,000 30,000 20,000 10,

27 Tower ownership by Africa s four largest independent towercos * Uganda Nigeria Cote d Ivoire Zambia Tanzania Kenya South Africa Ghana Burkina Faso DRC Cameroon Niger Rwanda Congo B *Pending closure of Telkom Kenya deal Source: TowerXchange

28 Towerco footprints in Sub-Saharan Africa African Towers Helios Towers Africa Tanzania Congo Brazzaville DRC Eaton Towers Niger Burkina Faso Eighty Four Dynamics Zimbabwe Senegal Al Karama Towers* Ghana Uganda Kenya SEAL Towers Madagascar TowerCo of Madagascar Pan- African Towers Nigeria BCTek Engineering Hotspot Networks Communications Towers Nigeria Nigeria American Tower South Africa Atlas Tower Namibia PowerCom Botswana Pula Towers Cameroon Rwanda Zambia Cote d Ivoire Gyro Towers, Atlas Towers, Coast to Coast, Blue Sky Networks, Sentech, Comco, Eagle Towers, Sky Coverage, International Tower Corporation Angola Antosc IHS Towers

29 The South African tower industry 7,000 6,500 2,575 10, MTN Vodacom Gyro Towers American Tower Cell C Atlas Tower Sentech Smaller towercos including International Tower Corp, Eagle Towers, Coast to Coast, Blue Sky Towers, Pro High Site Communications, Sky Coverage and Comco Source: TowerXchange < 2010: Cell C divests towers to American Tower < 2016: American Tower acquires Eaton Towers < 2018: Helios Tower announces entry into South Africa < Fragmented towerco ecosystem < Power as a pass through < MNOs acting like towercos

30 MNO infrastructure sharing strategies Towercos Co-location sales $ Joint venture Active sharing Barter agreements ESCOs

31 Breakdown of Orange s tower ownership and sharing in Sub-Saharan Africa Botswana Burkina Faso CAR Cameroon Cote d Ivoire DRC Guinea Bissau Guinea Conakry Liberia Madagascar Mali Niger Senegal Sierra Leone Owned (not shared with other MNOs) Owned (but under towerco mgmt) Leased from towercos (BTS or co-lo) Owned (shared with other MNOs) Leased from other MNOs

32 What the future holds

33 Threats to the towerco business model < Pressure on lease rates < MNO consolidation < Active sharing < Competition < Regulatory and permitting concerns < Market maturation

34 Towerco diversification - examples Global TowerCo P&S benchmark Towers DAS Small cells Fibre Data centre Wi-Fi Exploring service Country/Region Towercof Logo # of towers Service types offered China CTC 1900k China Guodong 20k Czech Republic CETIN 5k Europe Cellnex 25k India Bharti Infratel 40k Indonesia Protelindo 15k Indonesia Tower Bersama 13.5k Indonesia STP 6k Italy INWIT 11k Malaysia, Myanmar, Vietnam OCK Group 3k Nigeria & Central Africa IHS 23k Russia Russian Towers 3k UK Arqiva 9k UK, Ireland, Netherlands Wireless Inf. Group 2k US AMT 170k US Crown Castle 40k US Digital Bridge 3k US Uniti Towers <1K Through acquisition of iforte Investment in the creation of microcoverage and fibre backhauling Have a license to deploy Through acquisidon of KIO Networks Source: Delta Partners

35 Fibre network operators vs towercos: Friends or foes? < Towerco land grab moves to heterogenous network layer < Acute interest in metropolitan and last mile fibre < Are towercos competitors? Partners? Investors? Acquirer? < Will fibre network operators compete to deploy small cells? < Some towercos will retain focus on macro cells, others fiercely diversifying e.g. Crown Castle, Digital Colony < What you can see in Africa is the tip of the iceberg of their current thinking

36 Towerco diversification in Africa Power as a service DAS Fibre Small cells Well established 100s systems deployed ATC - Frogfoot Yet to begin Helios - Undisclosed partner Further partnerships/m&a?

37 Thank you! Laura Graves Managing Director, EMEA TowerXchange Africa special edition journal: released Wednesday 12th September Join us at the Meetup Africa 9-10 October 2018 Sandton Convention Centre, Johannesburg