towerxchange-issue_9

Tower Xchange

Tower Xchange

Towerco or powerco? Views from a major vendor, an ESCO and a community power venture

ISSUE 9 | August 2014 | www.towerxchange.com

The TowerXchange Who’s Who:18 advisory firms with experienceof emerging market tower deals

The journal for the emerging market telecom tower industry

TowerXchange Africa:< Cameroon and Cote d’Ivoire case study

< IHS acquires 2,136 Etisalat Nigeria towers

< Towershare on opportunities in MENASA

TowerXchange Americas:< CEO Olivier Puech on AMT’s BR Towers deal

< Maria Scotti on Central America and Mexico

< Torres Andinas: BTS in Colombia and Peru

TowerXchange Asia:< Myanmar: 17,300 towers by 2017, Telenor interview

< Asian tower report, India and Indonesia tower counts

< Commentary on the new towerco for China

“With our latest acquisition from Airtel, HTA now owns over 7,800 towers in Africa” – Chuck Green, CEO, Helios Towers Africa

With special thanks to the TowerXchange “Inner Circle”About TowerXchange

TowerXchange is your independent community for operators, towercos, investors and suppliers interested in emerging market 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 emerging market telecoms infrastructure.

The TowerXchange Journal is free to qualifying recipients. We also provide webinars and regular meetups. TowerXchange monetizes this community through hosting annual Meetups and the sale of advertising, without compromising editorial integrity.

TowerXchange was founded by Kieron Osmotherly, a TMT community host and events organizer with 16 years’ experience, and is governed with the support and advice of the TowerXchange “Inner Circle” – an informal network of advisors

Our informal network of advisers:

© 2014 Site Seven Media Ltd. All rights reserved. Neither the whole nor any substantial part of this publication may be re-produced, stored in a retrieval system, or transmitted by any means without the prior permission of Site Seven Media Ltd. Short extracts may be quoted if TowerXchange is cited as the source. TowerXchange is a trading name of Site Seven Media Ltd, registered in the UK. Company number 8293930.

www.towerxchange.com | TowerXchange Meetup | 11| TowerXchange Issue 9 | www.towerxchange.com2

Chairman: Daniel LeeManaging DirectorIntrepid Advisory Partners

Michel FaivreDirecteur Programme Partaged’Infrastructure AMEAFrance Telecom-Orange

Jim EisensteinChairman & CEOGrupo TorreSur

Alan HarperCEOEaton Towers

Marc GanziPresident, Digital Bridge Holdings & Mexico Tower Partners

Thorsten SchaeferCEOazeti Networks

Areef KassamDirector of InfrastructureGSMA Mobile for Development

Andrew DoyleManaging DirectorTech & Comms PracticeMott MacDonald

Nina TriantisManaging Director, GlobalHead of Telecoms & MediaStandard Bank

Chuck GreenCEOHelios Towers Africa

Hal HessEVP, International Operations and President, EMEA and Latin AmericaAmerican Tower

John StevensCEOIrrawaddy Green Towers

Nobel TanihahaPresident DirectorPT SOLUSI TUNAS PRATAMA (STP)

Tunde TitilayoVice ChairmanSWAP International

David MeganckFounder & COOAcsys

Ayman Al AdlDirector, TMT, Middle East & AfricaStandard Chartered Bank

Adeel BajwaSenior GM of Legal Affairs andContractsWarid Telecom

Torsten EsbjørnRegional Director, AfricaRamboll

Kurt BagwellPresident InternationalSBA Communications

Riana DonaldsonManager: International NetworkOperations SupportVodacom

James MaclaurinCEOedotco

Inder BajajCEOHelios Towers Nigeria

Jeffrey EldredgePartnerVinson & Elkins

Gary StauntonCEOLikusasa Group

Ahjeeth JaiJaiConsultantInvestec

Chris Gabrielformer CEO, Zain AfricaSenior Adviser, Macquarie GroupChairman, Clean Power Systems

Laurentius HumanSenior Director, Corporate FinanceJabil

Contents

Regular features

15 News: deals, launches and licenses42 TowerXchange Meetup Africa agenda19 Africa tower count and heatmap91 Indonesia tower count95 India tower count105 Myanmar tower count

1155 88

166

LatAm: Meetup report, Colombia, Central America, power, AMT

Africa: HTA and IHS deals, Malawi, Cameroon & Cote d’Ivoire

Asia: China’s towerco, Myanmar, tower counts for India and Indonesia

Towerco or powerco?

116 Interview: Olivier Puech, CEO LatAm, AMT123 Interview: Maria Scotti, CEO, Torrecom132 Colombia case study: BMI, Torres Andinas144 TowerXchange Meetup Americas Report

5 HTA’s acquisition of 3,100 Airtel towers 15 IHS’s acquisition of 2,136 Etisalat Nigeria towers 28 The Mott MacDonald Share Square for Malawi80 Cameroon and Cote d’Ivoire case study

37 A towerco for China90 Intro to the S and SE Asian tower industry97 Exclusive interview: Telenor Myanmar COO105 Myanmar: 17,300 towers, Green Power, FAQs

58 The TowerXchange Who’s who:advisors and strategic consultants

61 What investors want 65 18 firms with tower industry experience73 EY on financial due diligence76 Buying and selling at ‘grass roots’ level

167 Cummins: maturation toward power as a service 171 The world’s largest RESCO – AST 176 GIZ’s Ugandan community power pilot180 Towerpower: Turbina, ReliOn, Schneider Electric

www.towerxchange.com | TowerXchange Issue 9 | 3| TowerXchange Issue 6 | www.towerxchange.com3

Special features

30 Towershare’s appetite for MENASA119 Everest Engenharia on Brazil’s towers158 Business models: JVs and RANsharing196 How Ooredoo Myanmar use NeXsysOne

Africa’s leading, independent, telecom tower company

HTA acquires, builds and manages wireless telecom infrastructure, leasing it to mobile network operators across Ghana, Tanzania and the Democratic Republic of Congo.

HTA’s model of shared telecoms infrastructure, and its scale, helps to deliver improved efficiency and network quality and reliability for operators, reduced costs for users and increased accessibility.

Find out more about our business www.heliostowersafrica.com

6162_HTA_Ad_355x255mm_AW.indd 1 31/10/2012 16:43

TowerXchange analysis: Helios Towers Africa’s acquisition of 3,100 towers from AirtelAs HTA’s tower count exceeds 7,800, diversification and scale helps attract US$630mn in new equity resources

After 11 months of negotiations, the first tranche of Airtel’s African tower sale has been announced, with Helios Towers Africa (HTA) acquiring 3,100 towers in four countries. Like most emerging market tower deals, this looks like a win-win: Helios Towers Africa strengthens it’s leadership position in existing markets while diversifying to mitigate country and counterparty risk; Airtel pays down debt, stabilises opex, and frees up management bandwidth to concentrate on the retail side of the business. HTA have been unable to reveal in which four countries they have acquired 3,100 of Airtel’s African towers as the sale of Airtel’s other African towers is an ongoing process, and the exchanges are subject to regulatory approval and fiscal oversight. However, the Economic Times of India quotes a “person familiar with the matter” suggesting that the countries are Tanzania, Democratic Republic of the Congo, Republic of the Congo and Chad. TowerXchange are reasonably confident that Airtel’s portfolios in Tanzania and DRC are included in the deal, but have not had the opportunity to confirm the other countries at time of press. Similarly the acquisition price has not been confirmed, but it is possible to work out a window given HTA’s concurrent announcement of US$630mn of private equity capital raised (plus US$350mn in bank debt), sufficient to allow HTA to close the Airtel deal and to retain some capital for what HTA CEO Chuck Green described to TowerXchange as “other opportunities in the pipeline over the next 6-8 months”.

Read this article to learn:< The importance of scale and diversity in mitigating risk and attracting investment into emerging market towercos< Insights into the disciplined process run by Airtel< How HTA deploys improvement capex< Analysis of the tower markets in the four countries rumoured to be included in the deal

Helios Towers Africa (HTA) has acquired 3,100 of Airtel’s 15,000+ African towers currently for sale. TowerXchange present an educated guess as to the four countries involved, and note that reported valuations of US$400-550mn correspond with HTA’s parallel announcement of the injection of $630mn in new capital. This feature also includes an exclusive interview with Chuck Green, CEO of HTA and member of TowerXchange’s Inner Circle Informal Advisory Board.

Keywords: Towercos, Acquisition, Co-locations, Capacity Enhancements, Health & Safety, Data Room, Exit Strategy, Country Risk, SLA, Site Surveys, Multi-Country Partner, Sales & Leaseback, Private Equity, Debt Finance, C-Level Perspective, Infrastructure Sharing, Africa, Tanzania, Democratic Republic of the Congo, Republic of the Congo, Congo Brazzaville, Chad, Providence Equity, IFC, Quantum Strategic Partners, Helios Investment Partners, Albright Capital Management, RIT Capital Partners, Airtel, Helios Towers Africa

www.towerxchange.com | TowerXchange Issue 9 | 5| TowerXchange Issue 9 | www.towerxchange.comXX

Chuck Green, CEO, HTA

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Press and analyst coverage puts the deal value at US$400-550mn, which values the towers at US$130,000-175,000 each, a statistic of finite value without knowing the lease term and lease rate. HTA CEO Chuck Green described the Airtel deal as having “significantly increased the scale of the business, while also resulting in further geographical diversification for Helios Towers Africa.” TowerXchange’s latest exclusive interview with HTA CEO Chuck Green TowerXchange: Congratulations on HTA’s latest capital raise, attracting a further US$630mn in new equity resources from existing and new shareholders. As towercos like HTA mature, to what extent is diversification of country and counterparty risk a pre-requisite to attracting capital from a new pool of telecoms and infrastructure specialist investors who perhaps 2-3 years ago might have considered African towers an interesting but immature sector? Chuck Green, CEO, Helios Towers Africa: The long term value of this business has always been expected to be optimised with scale and diversification. Diversification means the specific risk associated with investing in any one country is mitigated, which can provide comfort to certain investors because the perception of emerging markets can be one of instability and a lack of political transparency. From day one Helios Towers Africa


set out to have multi-market exposure in order to mitigate risk and achieve a scale that would optimise exit opportunities for private equity shareholders at some point in the future. One of our priorities over the next three to four years is preparing for a substantial liquidity event, such as listing the company. Scale, geographical and customer diversification are all extremely important to attract the public markets, as investors become comfortable with counterparty and country exposure. With our latest acquisition from Airtel, HTA now owns over 7,800 towers in Africa. While HTA are delighted to have attracted new capital from Providence Equity, it is also important that we have retained our original investors. When our existing equity follows us in our next round of financing, it’s an indication of support and confidence in our business model, in our management team, and in the African tower business in general. The tower industry in Africa has been developing positively since the HTA undertook the first sale and leaseback in Ghana with Millicom back in 2010 – from that point on, the profile and relevance of investment opportunities in African towers, and investment opportunities in Africa in general, has increased. The number of people willing to consider investing in such opportunities increases as they become more familiar with the compelling prospects offered by these markets.

TowerXchange: What can you tell us about the

tower sale process inaugurated by Airtel? Chuck Green, CEO, Helios Towers Africa: Airtel have run an incredibly disciplined process –the seller’s team were very strong. Data control has been on a par with the best of the other transactions – virtual data rooms have been quite complete. Airtel have done a great job considering they didn’t appoint a banker, and ran 16 or 17 markets simultaneously with several potential buyers – it was tough enough for us and we were only dealing with 4 markets! We envisage taking on many of Airtel’s tower-operations personnel. We’re getting skills, experience and a familiarity with the assets which has been invaluable in past transactions. TowerXchange: Appreciating that you can’t confirm in which four countries HTA is acquiring the towers, I understand HTA already has operations in at least one of those countries. When you combine a new portfolio of mostly single tenant towers with a more mature vintage which has been upgraded and several years worth of co-locations added, what are the implications for the cash flow position of your local opco and their propensity to make capitally intensive investments? Chuck Green, CEO, Helios Towers Africa: Adding new towers has no effect on the propensity of our local opco to make capitally intensive investments. We always factor improvement capex into the financial structure of a transaction. Our


improvement capex budget is based on sample surveys in due diligence, and a complete survey post-completion. Whether it’s through internal cash flow or capital allocation, we ring-fence funds for improvement capex. Our first order of priority is to improve sites that are already heavily loaded or that might be less secure, for example any sites where we need improve structural integrity for health and safety reasons. Our next priority is the improvements necessary for meeting our Service Level Agreements (SLAs) – typically these are around power systems. Improvement capex then cascades into towers where we know we have demand for, or a high probability of attracting, a second tenant – we quickly strengthen such towers and upgrade power solutions for the co-location of new tenants. This improvement capex can be anticipatory or in response to demand. Upgrading towers is a systematic process can take many months to complete, but from day one we achieve a steady reduction in energy opex costs that improves incrementally for several months. Improvement capex investment doesn’t detract from the local team’s ability to continue to run the existing portfolio; we can easily fold new tower upgrades into the project group’s activity, and it doesn’t impact on annual maintenance capex and improvements. It also doesn’t affect our appetite for more capitally intensive investments; if there’s a compelling argument to use one approach to improving power over another we’ll do it from day one, even if it’s a new portfolio

TowerXchange have spoken to local stakeholders in Tanzania who have all but confirmed that the deal includes Airtel Tanzania’s towers transferring to Helios Towers Tanzania. HTA has an established presence in Tanzania, and already owned more than half the towers in the country. In 2011, HTA acquired 1,020 towers from Millicom-Tigo for US$80mn and a 60% stake in the resultant joint venture towerco, Helios Towers Tanzania (HTT). HTA added 1,149 towers from Vodacom Tanzania in 2013, paying an estimated US$75mn for a majority stake in the same combined joint venture towerco, reducing Millicom’s stake to 24.5% in the process. If HTA have added the Airtel towers to HTT, they would have a tower count of 3,200-3,500 in Tanzania, and 75%+ market share. HTA would almost certainly retain 51% of the joint venture towerco. Of Tanzania’s tier one MNO’s, only Etisalat’s Zantel’s towers remain operator-captive, and those assets (or indeed the opco itself) have

reportedly been on the block for several months.The regional nature of Tanzania’s mobile networks, with each operator dominant in a different part of the country, creates a perfect environment for infrastructure sharing as each operator seeks a broader footprint across the country. The same regional phenomenon may mean there is still a market for Zantel’s towers, even coming to market fourth. Zantel is strong in Zanzibar, Tigo is dominant in coastal areas, Vodacom in the Arusha area, and Airtel strong in the Lake zone. A further boost to HTA’s opportunity is provided by Vodacom Tanzania’s ongoing network expansion programme, together with the build-to-suit programmes of Tanzania’s other MNOs. Tanzania is also host to several other licensed MNOs, ISPs and WiMAX operators, including TTCL, BOL, Smile, Sasatel, and Benson. The enthusiasm of such parties to co-locate rather than build their own sites further raises the glass ceiling on tenancy ratios achievable in Tanzania.

TowerXchange’s analysis of four possible markets

While TowerXchange have been unable to confirm which four countries were involved in

Airtel’s sale of 3,100 African towers to HTA, we’re reasonably confident that Tanzania and

DRC are included, and there are unconfirmed rumors that the Republic of the Congo and

Chad are the other two markets. Since all the Airtel African towers are likely to be sold in

the end, whether to HTA or other towercos, let’s take a closer look at these four markets.

Tanzania: Regionalised market perfectly suited to co-location

Democratic Republic of the Congo: Proven market for HTA TowerXchange are also reasonably confident that HTA’s Airtel transaction includes Airtel’s towers in DRC, where other stakeholders have confirmed that Helios Towers Africa appears to be the only towerco with an appetite to acquire towers, and where HTA’s local opco HTDRC has achieved impressive tenancy ratios amid challenging logistics. HTA entered the DRC market via the acquisition of 729 towers from Millicom-Tigo in 2010, for which they paid US$45mn for 60% equity in the joint venture towerco. Millicom-Tigo’s towers were


concentrated in urban areas, whereas the Airtel network is reputed to be the most widespread in the DRC, so would represent an excellent addition to HT DRC’s portfolio. Africa’s third most populous nation, with a population of 75.5mn spread over 2.3mn sq km, DRC is served by only ~4,000 telecom towers and mobile penetration is at 17.5%, which means the runway for growth in the country is tremendous. Four major MNOs were established in DRC (Airtel, Orange, Tigo and Vodacom), before Africell recently caused considerable turbulence by leveraging co-locations on 180 HT DRC sites to accelerate their launch and minimise costs, enabling Africell to aggressively price tariffs and grab almost 20%

market share. Supercell also has 2% market share in DRC, and may be an acquisition target. While HTA has thrived in the DRC, their experiences also demonstrate that such challenging markets are best left to proven emerging market towercos. Beyond the three main cities of Kinshasa, Goma and Lubumbashi, almost all cell sites are off-grid, with the DRC’s under-developed transport infrastructure meaning $1 worth of diesel can cost $1.80 delivered. Security is another challenge, both in terms of fuel theft and in terms of intermittent unrest in the East of the country. Ultimately, declining ARPUs and rising opex costs create a potent motivation for the outsourcing or divestiture of towers in DRC, so Millicom-Tigo and Airtel’s tower deals may not be the last in the country. While TowerXchange have been unable to confirm or deny the Economic Times of India’s suggestion that the third and fourth countries included in Airtel’s deal with HTA are the Republic of the Congo and Chad, let’s analyse these two virgin towerco markets. Republic of the Congo: Operator consolidation but strong fundamentals In Spring 2014 Airtel announced the acquisition of Warid’s assets in Congo for US$70-80mn, combining the second and third ranked operators and adding 1mn Warid subscriber’s to Airtel’s existant 1.6mn, who leapfrogged MTN to become market leaders. MTN reported 1.76mn subscribers and ARPU of US$11.77 in Q4 2013. The other MNO in Congo is

Estimated tower ownership profile in Tanzania, assuming HTA has acquired Airtel’s towers

Source: TowerXchange research

Millicom-Tigo towers, now HTT 2011 vintage

Vodacom Tanzania towers, now HTT 2013 vintage

Estimated BTS programmes since acquisition

Airtel Tanzania – now HTT 2014 vintage?

Zantel towers – for sale?

Others


Bintel subsidiary Azur, which claims to have 415,000 subscribers and which recently signed a partnership deal with Monaco Telecom. Azur’s tariffs are priced aggressively, and ARPUs are correspondingly comparatively low. Airtel announced the launch of 3G in Congo in October 2011. With a young population of 4.4mn (61% aged under 14) concentrated in Brazzaville and Pointe-Noire and mobile penetration at 89%, the fundamentals in Congo are conducive to healthy data growth. Operator market share: Congo

Maintaining QoS has been a challenge for both Airtel and MTN Congo, as both were recently fined 1% of annual revenues by local regulator ARPCE. Energy logistics are a principle cause for downtime, with electrification at around 35% in Congo. Better news for whoever acquires the Congo towers is that work on Congolese section of the Central African Backbone is expected to start imminently, connecting Congo’s second city Pointe-Noire with Mbinda on the Gabon border by 2016. Business Monitor International describes the economy of the Republic of the Congo as “the fastest-growing economy in the CEMAC bloc due to high government infrastructure spending and a booming iron ore sector. The growth of a new export industry will mitigate the effect of stagnating oil revenues.” Chad: Airtel-Tigo duopoly For readers interested in reading up on Chad, check out BMI’s excellent analysis in issue 8 of TowerXchange, highlighting another market dominated by two MNOs, this time Airtel and HTA’s old friends Millicom-Tigo, joined by a small 3rd player. Mobile penetration is below African averages at 36.8%, there is less than 15% electrification, low population density at less than 10 per sq km, and potential security concerns, this time originating from Boko Haram over the border from Nigeria Hear from Chuck Green, CEO of Helios Towers Africa, and several members of his local and central management teams, at the TowerXchange Meetup Africa, taking place on October 20 and 21 in Johannesburg.

Highlights from the official press releases Airtel divests telecoms tower assets to Helios Towers Africa < July 9, 2014: Airtel and HTA announce an agreement for the divestment of approximately 3,100 telecoms towers from Airtel to HTA< Deal includes towers in four unnamed countries across Airtel’s African operations, which will expand HTA’s tower coverage in Africa to over 7,800 owned towers< The agreement also envisages that tower operations-related personnel will be transferred from Airtel to HTA< Bharti Airtel’s Manoj Kohli describes the deal as “an important step towards the consolidation of tower assets across Africa that will drive industry-wide cost efficiencies through infrastructure sharing”< Helios Towers Africa raises US$630mn in a new equity fundraising from existing shareholders Quantum Strategic Partners, Helios Investment Partners, Albright Capital Management, RIT Capital Partners and the IFC, now joined by new shareholders Providence Equity Partners and IFC African, Latin American, and Caribbean Fund< HTA also expects to complete negotiations shortly on new and extended debt facilities of over US$350mn with a strong syndicate of international and local lending institutions< Following this latest injection of capital into the business, HTA will have raised over $1.8 billion in external financing since inception in late 2009Source: Airtel press release April 2014,

MTN quarterly results Q4 2013, Azur website

Airtel

54.5%36.8%

8.7%

MTN Azur

Analysis of IHS’s sale and leasebackof 2,136 towers from Etisalat NigeriaTowerXchange’s analysis of the IHS success story - transforming from a regional BTS and managed services player into a continental market leader


Etisalat Nigeria announced the sale of 2,136 towers to IHS on August 7 2014, making the operator the first to market of the three major GSM operators selling their Nigerian towers. Airtel’s Nigerian towers are still on the market as part of their pan-African tower sale, although the deal is believed to have hit legal snags, while the bid deadline has passed for MTN’s prize portfolio of 9-10,000 Nigerian towers. By the end of 2014, TowerXchange forecasts that 84% of Nigeria’s towers will be owned or operated by independent towercos, with only Glo retaining their towers. IHS has always made Nigeria a priority market, and they now own or manage 6,540 towers in the country, with a further 15,000 Nigerian towers for sale, for which Helios Towers Nigeria and, potentially, American Tower will compete fiercely with IHS. The financial terms of the deal have not been announced, but Reuters cites banking sources suggesting Etisalat’s Nigerian portfolio was valued at around US$400mn. The press release announcing the Etisalat Nigeria sale cites the usual drivers for network sharing; acceleration of 2G and 3G rollout, lowering costs, reducing diesel and increasing investment in alternative energy solutions. As well as releasing capital for Etisalat, IHS will improve network performance by leveraging its state-of-the-art Nigerian Network Operations Centre (NOC), which has enabled IHS to achieve uptimes of over 99% on its owned sites.

Read this article to learn:< The details of IHS’s deal to acquire 2,136 towers from Etisalat Nigeria

< The pipeline of future tower transactions in Nigeria; who are the buyers and sellers

< IHS’s amazing growth trajectory, and what they might buy next

< Are the premiums IHS is paying justifiable?

Keywords: News, Towercos, Acquisition, Investment, Valuation, Build-to-Suit, First Mover Advantage, Exit Strategy, Bankability, Anchor Tenant, NOC, Sales & Leaseback, Operational Lease, Private Equity, Africa, Nigeria, Cameroon, Cote d’Ivoire, Senegal, Mali, Guinea Bissau, Guinea Conakry, Madagascar, Kenya, Zambia, Wendel, AIIM, Goldman Sachs, IFC GIF, ECP, FMO, Korea Investment Corporation, Investec, IFC, Airtel, Orange, MTN, Etisalat, IHS

Zambia 719

Sudan & S Sudan 720

Nigeria 6,540

Cameroon 1,900

Source: TowerXchange

Another day another deal in African towers – they’re coming thick and fast, and the pipeline of future transactions is still bulging. Today is the turn of Etisalat Nigeria, who transferred 2,136 towers to IHS Africa under a sale and leaseback deal, marking the first of several imminent major tower deals in Africa’s #1 telecoms market. In this editorial, TowerXchange CEO Kieron Osmotherly highlights pertinent details from the deal announcement, looks at the changing shape of the Nigerian tower market, and shares his commentary on the enlarged IHS.

Cote d’Iviore 2,230

Rwanda 550


A US$100mn improvement capex budget has been set aside for energy efficiency initiatives and to upgrade structures and power solutions to accommodate additional tenants. TowerXchange’s commentary on the enlarged IHS Let’s take a step back and look at IHS after this transaction through the lens of a prospective investor in a future IHS liquidity event. The majority of IHS’s capital value is derived from the 7,000+ African towers they now own. There is similar value creation potential in the 2,650 towers managed with license to lease, most of which are Orange’s towers in Cameroon and Cote d’Ivoire, but depending on contractual terms governing the end of that 15+5 year contract, IHS does not own the assets. IHS’s portfolio also includes a tranche of 2,850 managed towers, most of which are in Nigeria. IHS’s tower count, already over 12,000 across Africa, may soon break the 10,000 barrier in Nigeria alone. To an investor, IHS is the leading Nigerian towerco with some valuable add-ons in West and Central Africa, providing comfort in diversification of country risk, whilst concentrating the value in Africa’s largest telecom market. IHS has done deals with credit worthy anchor tenants, MTN, Orange and now Etisalat, acquiring high quality sites that require less improvement capex for colocation than other towers currently for sale in Africa.

IHS may be the world’s fastest growing towerco, although it’s origins were modest. During IHS’s first ten years from 2001 to 2011, the company grew from zero to 270 sites. IHS then took off on an aggressive acquisition path, adding over 12,000 sites in the subsequent three years to today, converting this formerly modest Nigerian BTS and managed services business into the largest towerco in Africa. IHS’s growth isn’t all achieved through acquisition; the company delivered organic growth above 30% in the first three quarters on 2013, driven by collocation on existing towers and BTS programmes in Nigeria. By Q3 2013, EBITDA was around US$15mn on revenues of US$55mn for a 26% margin. IHS recently delisted from the Nigerian stock exchange so more up to date statistics are hard to come by.

What next for IHS? We expect IHS to bid aggressively for the remaining Nigerian towers. IHS may have an interest in extending their relationship with Orange in Senegal, Mali, Guinea Bissau and Guinea Conakry, where the towers are offered on a manage with license to lease basis. Of Airtel’s towers, Madagascar, Kenya, Zambia and of course Nigeria may be of interest to IHS. IHS may have a tower count over 20,000 by the end of 2015. IHS are already big enough for an IPO, but there are no definite timescales for the next substantial liquidity event, and IHS has proved itself adept at raising capital. IHS has raised US$1.6bn to date, most recently from AIIM, Goldman Sachs and IFC GIF, joining existing shareholders the IHS management team, ECP, FMO, Korea

“ “The decision to sell our passive infrastructure to an experienced commercial partner, such as IHS, is part of our strategy to increase network coverage and capacity which is already rated number 1 for quality of service by the Nigerian Communications Commission – Matthew Willsher, CEO, Etisalat Nigeria


Investment Corporation, Investec, IFC and majority stakeholder Wendel, who have participated in more than one round of capital raising. IHS has acquired a reputation as an aggressive bidder in tower auctions. While their counterparties have realised good valuations for their assets, tower investment commentators consider the premiums that IHS have paid justifiable, such that IHS are considered the world’s greatest success story of a BTS-centric regional towerco transforming itself into a continental market leader

“

“

We are delighted to have been trusted by Etisalat Nigeria with their passive network infrastructure… This partnership will provide significant long-term benefits to Etisalat Nigeria, allowing them to focus entirely on marketing new customer propositions to a wider market- Issam Darwish, CEO, IHS

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31,600, or 20%, of Africa’s towers are

now owned or operated by independent towercosAnd a further 31,000 towers are currently for sale


African towercos now own or operate 31,600, or 20%, of Africa’s towers. TowerXchange forecast that proportion will almost double to 38.8% by year end 2014, rising to 50% by the end of 2015 (see Figure 4). We’ve updated our infographics to reflect three significant pieces of news since issue 8 of the TowerXchange Journal; acquisitions by Helios Towers Africa and IHS, and confirmation of the cancellation of Eaton Towers’ contract with Telkom

719550

Figure 1: Estimated number of towers owned or managed by towercos in Africa

3851

1998

14000

6540

1912 1226


Kenya/Orange. Helios Towers Africa has acquired the first tranche of 3,100 of Airtel’s African towers. Helios Towers Africa were asked not to reveal in which countries the towers were acquired, but TowerXchange are reasonably confident that DRC and Tanzania plus at least one new country for HTA were included, but we’ll only update the infographic to reflect this when we have confirmed. The deal value is believed to be US$400-550mn – see figure 3. A

further 12,000+ Airtel towers remain for sale, with further deals expected to be announced before the TowerXchange Meetup Africa – see figure 6. IHS announced the acquisition of 2,136 towers from Etisalat Nigeria. We were trying to confirm if this represented all Etisalat‘s Nigerian towers as we went to press – there may be a second deal to follow. The deal takes IHS’s tower count to 6,540 in Nigeria – see figure 1. TowerXchange confirmed that, owing to the financial difficulties of the operator, Eaton Towers’ contract with Orange/Telkom Kenya has been cancelled, temporarily reducing Eaton’s tower count by 1,000 managed towers. Eaton’s team remains on the ground in Kenya waiting for their tranche of the Airtel African tower sale to close. Meanwhile, Helios Towers Nigeria has raised US$225mn through a bond issue to bid aggressively for some of the estimated 15-17,000 additional Nigerian towers for sale. Helios Towers Nigeria is targeting a tower count of 8-10,000 by year end 2014, and TowerXchange are forecasting that 84% of Nigeria’s towers will be owned or operated by towercos by year end 2014, including Airtel’s and MTN’s towers and leaving only the sites owned by Glo. See figure 7. If you count only towers that are owned, Helios Towers Africa leads the African market with 7,800 to IHS’s 7,159. If you count towers that are owned and operated, IHS is the market leader with 12,659. See figure 1a

Bergey Windpower Norman, OK USA [email protected] www.bergey.com

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< Square1 Infrastructure (Nigeria and South

Africa)

< TASC (targeting MENA)

< TowerCo of Madagascar

< Towershare (targeting MENA)




Figure 1a: Count differentiating towers that are owned from those that are managed and marketed by towercos

12000 1400010000

2650 28507159

7800

5136

8000

Dashed bar = Managed Services

Unfilled bars = Managed and marketed towers

Filled bars = Owned Towers

600040002000

Figure 2: Africa's regional and prospective new entrant towercos TowerXchange are tracking several towercos who are active in or targeting Africa (there are a couple more, but we’re not at liberty to disclose them!):

< Communication Towers Nigeria

< Frontier Tower Solutions (targeting Burundi)

< Hotspot Network Limited (Nigeria)

< Infratel (South Africa)

< Pro High Site Communication (South Africa)

< Shared Networks Tanzania (active

infrastructure sharing)TowerXchange estimate that these towercos own or operate a total of around 800 African towers.

Please feel free to contact the TowerXchange team

For editorial & speaking enquiries regarding Africa:Kieron OsmotherlyCEO & Head of AfricaE: [email protected]: +44 7771 148001

For editorial & speaking enquiries regarding LatAm or Asia:Arianna NeriHead of Americas and AsiaE: [email protected]: +39 338 111 2103

For advertising opportunities & event participation:Annabelle mayhewChief Commercial OfficerE: [email protected]: +44 7423 512588

For media partnerships & to request additional subscriptions:

Harpreet SohanpalHead of MarketingE: [email protected]

For the designers of the TowerXchange Journal & brand:Jon WhittySenior Designer & Brand DevelopmentE: [email protected]

The TowerXchange Journal is published by Site Seven Media Ltd.

© 2014 Site Seven Media Ltd. All rights reserved. Neither the whole nor any substantial part of this publication may be re-produced, stored in a retrieval system, or transmitted by any means without the prior permission of Site Seven Media Ltd. Short extracts may be quoted if TowerXchange is cited as the source. TowerXchange is a trading name of Site Seven Media Ltd, registered in the UK. Company number 8293930.

www.towerxchange.com | TowerXchange Issue 9 | XX| TowerXchange Issue 9 | www.towerxchange.com22

2010 Millicom / Tigo Ghana Helios 750 $54m for 60% Joint venture

2010 Vodafone Ghana Eaton 750 Not applicable Operational lease

2010 Cell C South Africa American 1,400* $430m Sale and leaseback

2010 MTN Ghana American 1,876 $218.5m for 51% Joint venture

2010 Starcomms Nigeria SWAP 407 $81m Sale and leaseback

2010 Millicom / Tigo DRC Helios 729 $45m for 60% Joint venture

2011 Millicom / Tigo Tanzania Helios 1,020 $80m for 60%** Joint venture

2011 MTN Uganda American 1,000 $89m for 51% Joint venture

2012 Orange Uganda Eaton 300 Unknown Sale and leaseback

2012

2013

Warid

Orange

Uganda

Cameroon & Cote d’Ivoire

Eaton

IHS Africa

400

2,000+

Unknown

Unknown

Sale and leaseback

Managed services

2012 MTN Cameroon IHS Africa 827 $143m Sale and leaseback

2012

2013

2014

2013

2014

MTN

Vodacom

Airtel

MTN

Etisalat

Cote d’Ivoire

Tanzania

Unknown

Rwanda & Zambia

Nigeria

IHS Africa

Helios

Helios

IHS

IHS Africa

931

1,149

3,100

2,136

1,269

$141m

Approx $75mn for 75.5%

~$400-550mn

Unknown

~$400mn

Sale and leaseback

Joint venture

Sale and leaseback

Sale and leaseback

Sale and leaseback

*Cell C deal included 1,400 existing towers plus additional towers under construction **Millicom/Tigo’s stake in Helios Towers Tanzania reduced to 24.5% after Helios acquired towers from Vodacom Tanzania in 2013

Figure 3: Africa’s biggest tower sharing transactions to date

Figure 4: African tower industry achieves launch velocity

Year Operator Country TowerCo Est. # of towers Publicly stated purchase price Deal structure

End of Year

Est total # of towers in Africa

Est # of African towers owned or operated by towercos

% of African towers owned by towercos

*Includes an estimate of the number of towers owned by a small but growing segment of regional ‘middle market’ towercos

2009

120,000

100

0.001%

2010

125,000

6,000

4.7%

2011

130,000

9,000

6.9%

2012

140,000

16,661

11.9%

2013

150,000

*25,510

17%

2014(f)

165,000

*64,000

38.8%

2015(f)

180,000

*84,500

46.9%



123456

Figure 5: TowerXchange tower transaction heat map: current state

No tower transaction completed or rumouredEither rumours of a tower transaction (unconfirmed), or the country is known to be on at least one towerco’s hit list, or there is a registered Africa Towers subsidiary in the countryRumours of a potential tower transaction have been confirmed by TowerXchangeTower transaction believed to be imminentOne or more tower transactions have taken place, no more transactions expected imminentlyOne or more tower transactions have taken place, more transactions are expected imminently

Legend


Have you missed one of the past eight editions of TowerXchange?

Tower Xchange

Tower Xchange

Don’t miss TowerXchange’s checklist of the data you need to buy and sell towers

ISSUE 2 | FEBRUARY 2013 | www.towerxchange.com

The front lines of the African Tower IndustryWho’s who in the telecoms infrastructure supply chain

Standard Bank: aggressive bids likely to continue Helios take you inside the due diligence process Who’s who: turnkey infrastructure and law firms TowerPower: reducing Africa’s reliance on diesel

Africa’s New telecoms infrastructure journal

Tower Xchange

Tower Xchange

Top 200 decision makers in African towers invited to TowerXchange Meetup

ISSUE 3 | April 2013 | www.towerxchange.com

Marc Rennard: Why Orange is sharing towersStructuring deals to meet the requirements of each affiliate

Why IHS invested in Cameroon and Cote d’Ivoire

Eaton CTO Thomas Jonell’s procurement priorities

Egypt’s 4 companies licensed to lease infrastructure

Growth stock ATC vs the PE-backed towercos


Tower Xchange

Tower Xchange

Join 200 African tower decision makers at the TowerXchange Meetup

ISSUE 4 | June 2013 | www.towerxchange.com

African tower market heats up

TowerXchange maps past, current and future tower transactions


< HTN, SWAP and BMI on the Nigerian tower market

< Tower deal news from Egypt, Mali, Senegal & Rwanda

< Who’s whos in Managed Services, RMS & TowerPower

< A closer look at Telkom Kenya’s deal with Eaton

Tower Xchange

Tower Xchange

TowerXchange forecasts the growth of African towercos from 23k towers today to 54k by the end of 2014

ISSUE 5 | September 2013 | www.towerxchange.com

Let’s meet up!Top 200 decision makers in African Towers converge at TowerXchange Meetup

< Vodacom and Etisalat’s tower strategy

< MTN’s tower strategy in Rwanda and Zambia

< Tanzania case study with exclusive HTA interview

< TowerCo of Madagascar, FTS and Eaton interviewsThe journal for the emerging market telecom tower industry

Tower Xchange

Tower Xchange

TowerXchange extends our coverage to include Africa and the Americas!

ISSUE 6 | December 2013 | www.towerxchange.com

The drivers of SBA Communications’ expansionExclusive interview with Kurt Bagwell, President - International, SBA Communications

The journal for the emerging market telecom tower industry

TowerXchange Africa:< Airtel’s 15,000 African towers may be sold country by country

< The risks and rewards of operating towers in DRC

< Rural infraco pioneers Connect Africa and AMN

< Insights and images from the TowerXchange Meetup Africa

TowerXchange Americas:< Brazil case study: 9,000 new towers needed for World Cup

< Accelerating new tower construction - the Lei das Antennas

< Brazil’s Ministry of Communications’ view of the tower industry

< LatAm transactions to date, plus new deals by AMT and SBAC

For a limited period, you can download back issues FREE at:

www.towerxchange.com/publicationsEnsure you have the entire back catalogue of TowerXchange, which provides a record of emerging market tower industry evolution, and a comprehensive index of proven solution and service providers in Africa, LatAm and Asia.

4,000


Figure 6: TowerXchange tower transaction heat map: end of 2014 forecast

123456

No tower transaction completed or rumouredEither rumours of a tower transaction (unconfirmed), or the country is known to be on at least one towerco’s hit list, or there is a registered Africa Towers subsidiary in the countryRumours of a potential tower transaction have been confirmed by TowerXchangeTower transaction believed to be imminentOne or more tower transactions have taken place, no more transactions expected imminentlyOne or more tower transactions have taken place, more transactions are expected imminently

Legend

Source: TowerXchange Source: TowerXchange

Figure 7:Nigerian towers for sale (estimated counts)

9,000

5,000 6,540

1,300

700

MTN

Airtel towers

4,000 remaining operator captive towers,

primarily belonging to Glo

Towers owned and operated by independent

towercos:

IHS, now including Etisalat towers

HTN

SWAP

Djezzy launches 3.5G, Mobilis to launch 4G

Agence Ecofin reports that Djezzy has launched 3.5G services in seven provinces of Algeria. Meanwhile, Algeria Telecom’s mobile arm, Mobilis, is rumoured to be extending its business-oriented fixed-wireless LTE service to consumers. TeleGeography’s CommsUpdate, report that Mobilis have already deployed 200 ‘eNodeB’ sites across the country, with plans to install 2,000 LTE-enabled base transceiver stations by year end 2015.

Third operator license may make Angola more attractive to towercos

Tier one MNOs MTN, Airtel and Vodacom may all be interested in Angola’s rumoured third license, believed to be being made available later this year. There are currently no independent towercos in Angola, despite otherwise attractive fundamentals, largely because of the current MNO duopoly between Unitel and Movicel.

Tigo Chad to launch 3G and 4G from Sept/Oct 2014

MIC’s Tigo Chad is investing US$200mn over the next five years to develop infrastructure. The imminent arrival of an independent towerco in Chad, via the sale of Airtel’s towers in the country, may further facilitate Tigo’s cell site densification as they move to


3G and 4G. MIC themselves have previously divested tower assets in Africa (Ghana, Tanzania and DRC) to Helios Towers Africa.

Viettel targets DRC

Tariff-busting Vietnamese operator Viettel has announced the extension of their vision to create a substantial African portfolio by targeting the acquisition of a telecoms licence in DRC. A holding company named ‘Viettel Congo DR’ has been created, while rumours have long been circulated that Supercell’s license could be acquired. Viettel already operates in Mozambique and will soon launch in Cameroon and Burundi. Viettel is believed to have applied for a license in Burkina Faso.

Ethio Telecom adds 410 new cell sites, expands 4G

All Africa report that sole and national operator Ethio Telecom have added 410 new cell sites and added capacity to serve 400,000 4G customers in capital Addis Ababa.

Bidders for Orange’s stake in Telkom Kenya

While Etisalat, Unitel and MTN had been linked with a bid for Orange’s 70% controlling stake in Telkom Kenya, Business Daily Africa identifies Nigeria’s MegaTech Engineering as having placed

Africa News the highest bid at KES25 billion (USD280.2 million), ahead of rival suitors Viettel (KES10.6 billion) and an unidentified British consortium (KES16.3 billion). Lazard are believed to be advising Orange on the sale. Telkom Kenya has not reported a profit for seven years.

Safaricom closing in on yu’s assets, Airtel may get subs

Safaricom is closing in on the acquisition of the base stations and transmission infrastructure of Essar Telecom Kenya, which trades under the yu brand name, while Airtel Kenya are believed to be acquiring yu’s customer base.

Another infrastructure sharing drive from Kenyan regulator; Eaton may switch from managing Orange’s to Airtel’s towers

Francis Wangusi, DG of the Communications Authority of Kenya has hinted at another drive to compel Kenya’s operators to share infrastructure. Historically market-leader Safaricom has stopped short of full participation in infrastructure sharing, while Airtel’s Kenyan towers are likely to be sold imminently, with Eaton Towers in pole position to acquire the assets. With Orange’s Kenyan management team recalled and the future of Telkom Kenya’s ownership uncertain, Orange/Telkom Kenya’s contract with Eaton has been cancelled. The Eaton team remains on the ground in Kenya whilst Airtel’s assets in the country remain up for grabs.

Algeria

DRC

Ethiopia

Kenya

Kenya

Kenya

Angola

Chad

3G licence for Airtel Niger

The value of another of the tower portfolios for sale by Airtel, in Niger, has been boosted by the recent award of a 15-year 3G licence to the Indian-owned market leading MNO.

American Tower throws their hat back into the African tower auction ring

Having been widely rumored to have stayed out of the bidding for Airtel’s African towers, it appears American Tower (AMT) are back in the game with a bid for MTN’s 9,000 towers in Nigeria, which could attract a valuation of over US$1bn. MTN’s process had been under way for several months, and the 23 May bid deadline meant the opportunity was widely discussed among the 220 tower industry leaders attending the TowerXchange Meetup in Florida on May 20-21. AMT has not closed a tower deal in Africa since 2011, with power strategists at African operators reporting that AMT’s preference to structure transactions with power passed through to the tenant made the US giants a less attractive partner than IHS, HTA or Eaton Towers. It remains to be seen whether AMT’s bid includes an assumption of responsibility for energy logistics in Nigeria. TowerXchange expects Helios Towers Nigeria and IHS to bid aggressively for the assets, having made their home market of Nigeria their number one priority.

Helios Towers Nigeria issues US$225mn bonds to finance acquisition of Nigerian

towers Targeting a tower count of 8-10,000 by the year end, and with Airtel and MTN’s Nigerian towers still ‘on the block’, Helios Towers Nigeria (HTN) issued US$225mn of senior unsecured notes maturing in 2019 through fully owned Dutch finance subsidiary, Helios Towers Finance Netherlands B.V.. According to the Financial Times, the bonds will yield at just over 8%. According to one banker, familiar with African tower finance, “independent towercos are an infrastructure and heavy asset based business, which lends itself to the bond market. For example, several US towercos have issued highly rated bonds, and some of the emerging Asian players have issued bonds. Some African towercos that meet certain criteria are starting to consider high yield bond issuance, perhaps by refinancing their bank debt through high yield bonds. They might have pay a bit more, but it’s an attractive option because you can extract cash and payoff the investors sooner.” If HTN’s bond issue is well received and investors get comfortable, other towercos will doubtless follow a similar path. Whilst rating Helios Towers Nigeria and their proposed bond ‘B(EXP)’, Fitch Ratings noted: “HTN is the second-largest independent tower company


in Nigeria (based on the number of towers) with 1,187 towers at end-2013... HTN benefits from a visible revenue stream driven by long-term lease agreements, which comprise embedded contractual escalators and, in some cases, cost pass-through mechanisms. Following the shift in the market from CDMA to GSM operators, over 75% of revenues are derived from three major Tier 1 GSM players, MTN, Etisalat, and Airtel, which are all backed by investment-grade parents. As at 31 December 2013, the average remaining life of all tenancy agreements was 4.8 years, and HTN had total contracted revenues of USD352m.”

Minority shareholder dispute delaying Airtel Nigeria tower sale

TMT Finance reports that “disagreement over leaseback rates, further complicated by an ongoing dispute between Bharti Airtel and the minority shareholders of Bharti Airtel Nigeria,” are delaying Airtel’s Nigerian tower sale. The dispute may relate to the ongoing legal battle between Airtel and Econet Wireless, who claim rights to a 5% stake in the business dating back to Airtel’s original acquisition of Zain’s African assets.

Regulator cuts tax on telecoms infrastructure to boost network investment

Bloomberg quote Communications Technology Minister Omobola Johnson saying “For every naira that is spent on infrastructure, about 70% is spent on taxes. We’re going to bring that down to a much more reasonable level at 30% to 40%.” It seems that

Niger

Nigeria

Nigeria

Nigeria

Nigeria

Hal Hess, American Tower’s President, Latin America and EMEA, joins TowerXchange ‘Inner Circle’ Informal Advisory Board We’re delighted to welcome Hal Hess to TowerXchange’s ‘Inner Circle’, our informal network of advisors who help shape the editorial content and strategic direction of our community.

Hal first joined American Tower in 2001 as CFO for American Tower International, later serving as EVP, General Counsel and Secretary of American Tower Corporation, before taking up his current role with the LatAm remit in 2007, adding responsibility for EMEA in 2009


state and local authorities are heavily taxing cell sites as a way of sidestepping Nigerian laws which only allow the federal government to tax mobile phone companies.

IHS delists from Nigerian stock exchange

IHS paid out US$118mn to buy out equity holders in the small stake in the company previously listed on the Nigerian stock exchange.

Third MNO licence for Togo

An international tender has been launched for the auction of a third mobile licence in Togo, covering 2G, 3G and 4G. Submission of offers is due by October 1, 2014. Togocel and Moov, recently acquired by Maroc Telecom, currently share the Togo mobile market between them; the launch of a third operator could make Togo a much more interesting market for Africa’s towercos.

147 4G cell sites for Airtel Zambia

As Airtel’s Zambian towers come to market, hard on the heels of MTN’s tower sale to IHS in the same country, 4G is emerging as a near-term driver for tenancy ratio growth as the independent towerco business model takes root in Zambia. The Zambia Daily Mail report that Airtel Zambia is investing US$80mn in it’s network in 2014, including in the rollout of 147 4G sites in Lusaka and Copperbelt, and rural network extensions adding a further 353 3G sites. Airtel are believed to have 1,096 base stations in Zambia

Nigeria

Togo

Zambia

Tower Xchange

Participate in the TowerXchange

community

Join the TowerXchange LinkedIn™ group at

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Investors & advisers

Decision makers

at operators

Independenttowercos

Tower manufacture & installation

Equipment & managed

services

Regulators & policy makers

Share Square: Malawi

Market SituationCompared to the rest of Africa, the Malawi telecommunication market is particularly under-developed. There were 5.56 million mobile subscriptions at the end of 2013, giving a low penetration rate of 35%. Relatively low subscriber growth of 2.3% is forecast for 2014, and is expected to taper off over subsequent years.


BackgroundWith a population of 15.9 million1 people and with over half of Malawians living below the poverty line, Malawi is one of the most densely populated and least developed countries in Africa. The country is located in the south east of the continent, landlocked and surrounded by Zambia, Tanzania and Mozambique.

Opportunity for TowerCo entry with focus on high Lease Up Rate (LUR)

Opportunity for Outsourcing by MNO to TowerCo

Limited opportunity for new entrant TowerCo

3G 4G

Cu

rren

t Sh

arin

g

Non

ePa

ssiv

eA

ctiv

e

Technology Deployment

Airtel

61%

39%

Malawi

More than 99% of the subscribers are prepaid users. A SIM registration programme is taking place in 2014 and, as observed in other SSA countries, this is likely to have a negative impact on subscriber figures.

Like many other sub-Saharan African countries, Malawi’s telecommunication market was originally dominated by the state-owned telecommunication operator Malawi Posts and Telecommunications Corporation (MPTC). In 19952, the first mobile license was awarded to Telekom Networks Malawi (TNM), which is 40% owned by MPTC. At the outset, the entire spectrum in the GSM 900MHz band

Figure 1: Malawi Mobile Telecommunication Market Share

TNM

• Almost 5.56 million mobile subscriptions at the end of 2013- low penetration rate of 35%.

• Duopoly between Telekom Networks Malawi and Airtel.

• More than 99% of the subscribers are prepaid users.

• Airtel invested US$5.2m to upgrade its network for the roll out of the first 3.75G network in Malawi.

• Operators are promising investment to roll-out 4G, but there are no signs of activities from the regulator in this regard.

• No legislation or regulatory guidance concerning tower sharing but strong intention to be involved on the part of the regulator.

• Operators have agreed sharing agreements, and share small numbers of towers.

• Operators have already started to outsource tower maintenance of their equipment

• The introduction of a towerco in Malawi could stimulate the entrance of new mobile players in the market, encourage competition and thus increase mobile penetration.

the country. Officially there is no legislation or regulatory guidance concerning tower sharing; however it seems that there is a strong desire on the part of the regulator to address the growth in telecommunication and broadcasting towers in the country5, and it has officially announced its willingness to be involved in tower negotiations between operators. Regardless of the lack of regulation in tower sharing, operators have already concluded sharing agreements and share a small number of towers.

At the moment no tower operating companies (towercos) are active in Malawi, but operators have already started to outsource tower maintenance of their equipment, with Northern Engineering Works Ltd (NEWL) managing 285 sites of Airtel’s portfolio in Malawi, for example. A recent announcement in the press indicated that Bharti Airtel has agreed on the key terms of a deal to sell its tower assets in 17 African countries, including Malawi, with the portfolio to be split between four separate buyers.

With the current duopoly and the consequently low market penetration, the introduction of a towerco in Malawi could stimulate the entrance of new mobile players in the market, encourage competition and thus increase mobile penetration

[1] World Bank[2] TNM[3] My Broadband[4] GSMA[5] MACRA

was originally allocated to Telekom Networks Malawi. In 1999, a second mobile operator was licenced in to provide mobile services through allocation of part of this GSM 900MHz spectrum. This second operator was originally MSI Cellular Investments/ Celtel, before being acquired by Zain in 2008, and then being acquired by Bharti Airtel in 2010. At the end of 2013, Airtel was the market leader in Malawi with 3.4 million mobile subscribers, followed by TNM with 2.1 million as illustrated in the figure above. Malawi is unusual in that a duopoly still exists in the mobile market – where most other countries have at least 3 mobile operators. RegulationIn 1998 the Malawi Communications Act permitted the reallocation of spectrum, which stimulated competition in the mobile telecommunication sector with the licensing of a second operator, MSI Cellular Investments (now Bharti Airtel). A third mobile operator, G-mobile, was licensed in 2008 but had its license revoked in 2013 due to continuing rollout delays. A fourth mobile operator, Celcom Limited, was licensed in 2011; its rollout deadline was extended from October 2012 to April 2013 but the operator has recently requested a further 3 years. Recently the government has been pressuring the Malawi Communications Regulatory Authority (MACRA) to revoke Celcom Limited’s license in favour of Lacell Private Limited, which scored poorly

during the licence application in 2008.

TechnologiesAs a consequence of difficulties introducing more competition in the mobile sector, in November 2010 MACRA announced a new converged licensing regime, which allowed fixed telephony service providers to operate full wireless networks. Consequently, the two fixed network operators, Malawi Telecommunications and Access Communications have started to provide mobile service for voice and internet access using respectively CDMA2000 1x EV-DO and EV-DO Rev.A technologies, which support up to 3.6Mb/s in the 450 and 800MHz frequency bands.

In 2009 MACRA awarded 3G licences to TNM and Airtel who launched 3G services based on UMTS/HSPA technology. In 2011, Airtel invested US$5.2m3 to upgrade its network for the roll out of the first 3.75G network in Malawi. Recently, MACRA has renewed Airtel’s licence for another 10 years. As a consequence, Airtel has pledged a US$42 million network expansion and upgrade and plans to roll-out 4G as part of this investment. There is, however, no sign of activity from the regulator regarding licensing and spectrum allocation for the roll out of fourth generation (LTE) networks.

Infrastructure SharingThe two mobile operators cover 79% of the geography and 94% of the population4 with a combined total of more than 800 towers across


Towershare’s appetite for towers in MENA and Southern AsiaThe criticality of local knowledge and local relationships in tapping a diverse range of opportunities in the MENASA regions

TowerXchange: First please introduce yourself and your management team at Towershare. Ray Hassan, CEO, Towershare: I’ve been in telecoms for almost 20 years, working my way through various project management, radio planning, strategy, consulting and optimisation roles at Nokia and Lucent, before launching Telecom Global Solutions, a radio planning consultancy which we sold to Flextronics as part of their telecoms division. Seven years ago I joined Ericsson in what is now classified as the Middle East and Africa region (spanning 22 countries including Turkey, Iraq, Egypt, Sudan, Ethiopia, Saudi, GCC and Pakistan amongst others) first as VP and Head of Services across the region, rising to become the President of GCC (Gulf) countries and heading a Global account. On a daily basis I found myself having meetings with C-level executives at operators whose primary concern wasn’t the cost of active infrastructure, but the rising cost of passive infrastructure. The prices of steel and diesel have been steadily rising, while the grid has been struggling to meet increasing demand in many of the countries I was involved in, which was beginning to cause a significant opex challenge for many of my customers. It became clear that the rising costs of both building and maintaining passive infrastructure was a genuine problem that needed to be addressed, and that infrastructure sharing could be a pertinent solution. However, the Middle East has not been a priority market for global towercos.

Read this article to learn:< The credentials of Towershare’s experienced management team

< How Towershare is funded and their view of Islamic Finance as an option

< What happened when eight towerco licenses were issued in Pakistan, and the prospects for a

large scale tower transaction in the country

< The impact of the Arab uprising on the prospects for large scale tower transactions in the Middle East

< ‘Steel and grass’ versus end to end real estate, power, and O&M business models

Established in 2010, Towershare runs the largest independent towerco in Pakistan. Towershare’s renewed appetite for tower opportunities in the Middle East, North Africa and Southern Asia has been stimulated by funding from Cyan Capital at the beginning of 2014, followed by the appointment of Ericsson’s former President of GCC, Ray Hassan as Towershare’s new CEO. TowerXchange enjoyed a long chat with Ray to learn about Towershare and the countries they are targeting.

Keywords: Who’s Who, Towercos, O&M, Investment, Build-to-Suit, Business Model, Pass-Through, Regulation, Country Risk, Unreliable Grid, DG Runtime, Operator-Led JV, Sale & Leaseback, Private Equity, Islamic Finance, Infrastructure Sharing, Africa, Middle East, Southern Asia, Pakistan, Oman, Bahrain, UAE, Saudi Arabia, Cyan Capital, Towershare


Ray Hassan, CEO, TowerShare

I passionately believe in the benefits that mobile broadband can bring to society and hence believe in the many benefits that infrastructure sharing can bring in reducing the cost and accelerating access to mobile broadband. In some of the countries we deal with, there is such a shortage of basic resources and infrastructure that to spend hundreds of thousands of dollars to put towers next to each other seems almost criminal. It seemed to me that solving these issues in passive infrastructure was a business that was both compelling and noble. I was involved with the initial startup of Towershare, but had to exit because of other work related conflicts. At the end of 2013, Cyan Capital, a Private Equity Fund, enticed


my return and as entrepreneurial ambitions took over, we worked out a deal for my participation in Towershare. I will take on the role of CEO effectively from middle of July 2014. Towershare is assembling a management team of telecom veterans who between us have built over 15,000 towers in MENA and Asia. Farid Madhani will be moving across from Cyan Capital to look after strategy and M&A, Shannon Grewer (a US-based lawyer) will be joining us in Dubai as our legal counsel and a senior executive is about to join us as CTO.

TowerXchange: In which market is Towershare currently active, and where are your priority growth markets? Ray Hassan, CEO, Towershare: Towershare’s ambitions are quite huge and widespread, but our current HQ is based in Dubai and our only operational footprint is in Pakistan where we have completed some small acquisitions and are on the cusp of completing a small carve out. My vision is to expand from our new HQ in Dubai into new markets in the Middle East as quickly as

“ “

My vision is to expand from our new HQ in Dubai into new markets in the Middle East as quickly as possible, and from there we’ll expand by following the Middle Eastern MNOs into the other countries in which they are based. We are currently in discussions in four different markets for sale and leaseback and build to suit opportunities

The benefits of passive infrastructure sharing


possible, and from there we’ll expand by following the Middle Eastern MNOs into the other countries in which they are based. We are currently in discussions in four different markets for sale and leaseback and build to suit opportunities.

TowerXchange: How is Towershare funded, and therefore what is your ‘digestive capacity’ in terms of the scale opportunities you can bid for at auction? Ray Hassan, CEO, Towershare: We’ve brought in some private investors and commitments for up to $100mn in Private Equity from Cyan Capital and other regional PEs. We have further funding available, all (so far) sourced from within the region. Capital is readily accessible and relatively cheap in the Middle East, so I don’t forsee funding being a constraint for our business. Our ‘digestive capacity’ could be substantial given our initial funding of $100mn, depending on the leverage we want to take. In some of the markets we’re exploring, it is not permitted to charge interest, which could take us into the realm of Islamic Finance. Tower assets are perfectly tuned for the application of Islamic Finance principles. Different countries and different opportunities are more suited to one type of financing or the other – so, while we don’t want to limit ourselves to one way of working, we will of course work with our customers to find alternatives that suit them best.

TowerXchange: What can you tell us about your experiences in the Pakistani tower market – are there consolidation opportunities among small local towercos? Are there potentially larger scale opportunities? Ray Hassan, CEO, Towershare: Pakistan is a significant and sizable market for Towershare –

it’s no coincidence that it was our first market. Pakistan is a challenging tower market with five Mobile Network Operators, a population of 200mn, a sizable land mass, high import costs, an unreliable grid and a scarcity of electricity, which means all five MNOs have cell sites requiring 8-10 hours of DG runtime daily – not to mention security problems in some areas and very low ARPUs overall. We started up in Pakistan when the Regulator, one of the most forward thinking in the region, introduced regulations governing infrastructure sharing around 2009. Eight (non-transferable) infrastructure provider (towerco) licenses were sold, before the government stopped the issue of new licences, leading to the launch of six towercos while two never really came to market beyond single sites. Towershare has since bought and taken over the tower assets of some of the other licensed companies, and hence we’re the only independent towerco of any size in Pakistan. Pakistan’s operators have considered the consolidation of their networks on several occasions, but as often happens with almost all operator-to-operator network consolidations, it proved difficult to agree upon which towers to retain, and to agree the structure, management team and relative proportions of ownership of a joint venture towerco, hence nothing has materialised despite numerous efforts. At the time, the lack of a funded third party able to prove they could operate and maintain

““Pakistan’s operators have considered the consolidation of their networks on several occasions, but as often happens with almost all operator-to-operator network consolidations, it proved difficult to agree upon which towers to retain, and to agree the structure, management team and relative proportions of ownership of a joint venture towerco


a substantial portfolio of towers in Pakistan was another drawback. Now Towershare has experience, capability and funding, we feel large scale consolidation of tower networks may become a reality in Pakistan. TowerXchange: Is the launch of a edotco potentially good news for Towershare in further raising the profile of infrastructure sharing in Paksitan and elsewhere in South Asia? Ray Hassan, CEO, Towershare: We welcome the launch of edotco – the South Asian marketplaces are big enough for multiple towercos, and the more people working towards shared infrastructure, the better. Towershare differentiates itself by being flexible and adaptable. Understanding the local market is critical in every one of our markets, not just Pakistan; the dynamics of provincial rules, the different languages and security situations. We have extensive personal experience and local relationships in every market and international relationships with most of the large regional operators too (for example, in Pakistan, all five MNOs are ultimately owned by international operators). Towershare also has experience of owning, building and operating a network in Pakistan, and now we have plenty of local money that understands the local and regional risks well. TowerXchange: How will Towershare leverage your presence in Pakistan as a launchpad into

new markets in the Middle East?

Ray Hassan, CEO, Towershare: There are challenging markets very similar to Pakistan in the Middle East. There are also more developed markets with very different dynamics, where power is effectively free with 100% access – more akin to the Western towerco businesses. Leveraging our experience, local knowledge and relationships with the Global operators while being based in the UAE is crucial to our ambitions. A lesson I’ve learned running Ericsson in the GCC is that there’s a lot of complexity within the region. It would be wrong to categorise the Middle East as one set of operators and a recurring set of challenges. The Middle East is about as extreme in differentiation from country to country as you can imagine, with some of highest GDPs and ARPUs in the world, and some of the lowest; some of the most dense and least dense populations. Some countries are on the bleeding edge of advanced communication technology, and some countries are still anchored in 2G. With the diversity of religions, languages and security challenges, it’s hard to treat the Middle East as one market – you need to be flexible and adaptable. For example, I had 2,000 people working for me when I was running the Services business in Ericsson. In theory I felt we could sometimes do the job with 6-700 people if it weren’t for the logistical challenges of transportation, local representation, and travel restrictions on different nationalities and visas.

Towershare are establishing our headquarters in Dubai with local offices in three other countries based on local opportunities – we are being aggressive. TowerXchange: We haven’t seen the same pipeline of tower transactions in MENA as SSA to date. What opportunities are you finding in MENA – are there BTS programmes and/or large scale sale and leaseback opportunities to be found? Ray Hassan, CEO, Towershare: There are opportunities in the Middle East, and they are maturing. Resistance to the independent towerco business model has reduced just by operators observing what has happened in SSA. In the near term, the Arab uprising has demanded a lot of operators’ attention, but there is an acceptance that a large scale tower divestment is going to happen in MENA, and a number of operators are open to the idea. In all walks of life in the Middle East, business is generally conducted with the people you know. In the absence of local MENA towercos, the market has had to start slow while new entrants build relationships.

Towershare is in an advantageous position as our team have developed personal relationships with operators in the Middle East over eight years – we’ve done our time and now have an opportunity to capitalise on those relationships and trust.


We feel there are sale and leaseback opportunities in the Middle East, but you have to start with build-to-suit whilst you build relationships with your customers and demonstrate that you know what it takes to operate and maintain critical infrastructure within the specific markets. You have to put a foundation in place of a management structure capable of running an O&M team of scale. In countries where there are security issues, the biggest concern for MNOs and their towerco and investor partners remains whether an independent tower company can sustain and maintain networks given the uncertainty of those regions. Just look at Iraq as an example. The long term ability to maintain critical infrastructure remains the last barrier to outsourcing in many operators’ minds. TowerXchange: Do you see Towershare as a lean, “steel and grass” towerco, or do you have a full end to end build, power, O&M service model? Ray Hassan, CEO, Towershare: We struggled with this question ourselves – where do we want to play, what opportunities do we want to limit ourselves to? We concluded that if we want to grow we need to be flexible and adaptable. In some cases we are targeting more frontier markets, where if the customer will accept a steel and grass model then that’s perfect, but in many countries the primary driver of outsourcing is to solve power issues. In such circumstances, Towershare will take

advantage of the management team’s experience, including my own, of Managed Services in the region and take on energy logistics as well as real estate. So there is no clearcut answer; we’re open to doing both models and would consider opportunities on a case by case basis. Ultimately we’ll provide the service that our customers want. TowerXchange: Finally, please sum up your vision for the future of Towershare. Ray Hassan, CEO, Towershare: Towershare has capital, but capital is commoditised in this business, and all of our serious competitors have access to finance. What is unique about Towershare is our relationships with operators, regulators, subcontractors, and service providers in the MENASA region. We have a fantastic network of people; people with experience of

leadership roles at major managing service providers. If I felt we could maximise the opportunities in this region using a ‘steel and grass’ model then that would be great, but we need to be prepared to roll our sleeves up, get our hands dirty and do what operators need. Towershare is very aware of the challenges that our customers face on a market by market basis – we understand our customers and what we can do to help them. We’re going to be aggressive, but we have a degree of humility and understanding and genuine desire to do something good – I strongly believe in the benefit of mobile communications and I look forward to fulfilling Towershare’s opportunities to accelerate rural access and improve urban QoS in the MENASA regions while helping the operators unlock some cash and reduce their operating costs

“ “We feel there are sale and leaseback opportunities in the Middle East, but you have to start with build-to-suit whilst you build relationships with your customers and demonstrate that you know what it takes to operate and maintain critical infrastructure within the specific markets

Cambodian operators could be forced to sell infrastructure

Rumours suggest that the Ministry of Posts and Telecommunications Cambodia (MPTC) is drafting a law forbidding mobile operators to own network infrastructure assets. Cambodian newspapers suggest that the law will force mobile operators to sell off their assets and utilise government-controlled infrastructure companies. If approved, the new law could be implemented before the end of this year.

Aircel launches 4G services

Aircel is the second operator to launch 4G services in the country after Bharti Airtel, which started its 4G LTE offering in 2012. The third network operator in India, Reliance Jio Infocomm, should launch its 4G services in September.

Nusantara Infrastructure expanding its portfolio

The Indonesian towerco is currently looking at increasing its portfolio via acquisitions and greenfield projects. The company is looking at buying 250 towers in 2014, bringing its total count to 750. Nunsantara Infrastructure is rumoured to be bidding for XL Axiata’s portfolio.


XL Axiata divesting its towers

XL Axiata, second ranked operator of the country, is getting ready to sell part of its tower assets. The company has invited bidders to express their interest to acquire part of its 8,000 tower portfolio. XL Axiata acquired PT Axis Telekom earlier this year and the tower sale will contribute to raise funds to pay part of the company’s debt.

SMN raising capital for new tower projects and acquisitions

SMN is raising US$ 332 million to be used to finance its subsidiary Protelindo new tower projects across the country. Protelindo is planning to build up to 2,000 new towers in 2014 and SMN is looking at acquiring a stake in Mitratel.

LTE auction on hold

The LTE auction planned for August has been suspended by the National Broadcasting & Telecommunications Commission (NBTC) as ordered by the military National Council for Peace and Order (NCPO). NCPO reportedly requested the suspension in order to assess the transparency of the regulator.

Yoma increases its stake in Digicel

YSH Finance, subsidiary of Yoma Strategic Holdings, is increasing its stake in Digicel Asian Holdings from 8% to 25%. Digicel Asian Holdings is currently developing telecom towers in Myanmar and is partially owned by Caribbean operator Digicel Group.

Ooredoo rumoured to acquire a stake in Digicel Myanmar Tower Company

Ooredoo Myanmar is rumoured to potentially acquire 10% in Digicel Myanmar Tower Company (MTC). The operator has previously signed a deal with Digicel’s tower company to roll out wireless infrastructure across Myanmar.

U Mobile leasing antenna space on edotco’s assets

Rumours suggest that U Mobile, fourth mobile operator of the country, has signed an agreement with edotco to lease antenna space on its towers. Under the deal, edotco would provide antenna space as well as power and O&M services.

MobiFone towards privatisation while Vinaphone undergoes restructuring

MobiFone could be privatised before the end of 2014, rumours report. The national government is due to approve the privatisation of the second largest operator of the country which will lead to

Cambodia

India

India

Indonesia

Indonesia

Thailand

Mynamar

Mynamar

Malaysia

Vietnam

Asia News

its separation from state-owned Vietnam Posts and Telecommunications (VNPT).

The government is also pushing VNPT to restructure Vinaphone, the third operator in Vietnam. The restructuring process is aimed at improve the status of the telecom industry and increase its competition.

New spectrum auctions planned for 2015

The Bangladesh Telecommunication Regulatory Commission (BTRC) is appointing a special committee to draft the licensing guidelines for a 450MHz mobile frequency auction to take place in 2015, after the 700MHz band is auctioned. The two auctions will allow mobile operators to extend their network coverage at a lower cost.

A towerco for China

Media reports suggest that the Chinese government may centralise passive infrastructure into a newco owned by China Mobile, China Unicom and China Telecom. The resultant towerco would initially be focused on building, owning and maintaining new shared BTS sites, but with the potential to have an estimated US$30bn+ worth of existing towers transferred to it. There has been no confirmation of the plan from the Chinese government


Bangladesh

China

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Tower Xchange

China creates operator-led towercoIs this the start of the largest towerco in the world?


In August 2014 the structure of a new towerco for China was announced. China Communications Facilities Services Corporation Limited will initially focus on build to suit, but all of China’s legacy towers could potentially be injected into the entity in the future.

Liu Aili, who is also Vice President of China Mobile, will serve as Chairman of the Board at China Communications Facilities Services Corporation, while Tong Jilu will, who is also Vice General Manager of China Unicom, will serve as General Manager.

China Mobile is the leading mobile operator in China with over 760mn subscribers. It is the largest mobile telco by market cap. So far, China Mobile hasn’t engaged significantly with the infrastructure sharing model. China’s other two national operators, China Unicom and China Telecom, have shared towers on a case by case basis.

The Ministry of Industry and Information Technology (MIIT) has had the objective of promoting infrastructure sharing since 2008, and the 4G network rollout has created the impetus for the towerco to launch. In fact, both the Government and MIIT have recognised the huge investment needed to deploy new sites in rural areas and increase coverage and capacity in urban areas via in-building solutions.

As reported by Chris Lane, Senior Research Analyst, Telecommunications for the Asia Pacific

Read this article to learn:< The creation and structure of China Communications Facilities Corporation< All of China’s BTS sites, including tens of thousands of new towers for 4G, will run through the towerco from 2015< The potential future injection of hundreds of thousands of existing towers into the towerco< Limited opportunities for foreign investors prior to a future partial IPO< What proportion of the world’s green powered cell sites are in China?

Keywords: China Mobile, China Unicom, China Telecom, MNOs, Towerco, China Communications Facilities Services Corporation, Sanford C. Bernstein, China, Asia, North Asia, Towers, Capex, 4G, LTE, Ministry of Industry and Information Technology, Infrastructure Sharing, Build to Suit, IPO, Investment, Market Cap, Third Party Research, Renewables

Reset your diaries. This is day zero for the Chinese telecom tower industry. With the creation of China’s first towerco, China Communications Facilities Services Corporation Limited, as a shared entity owned by China Mobile (40%), China Unicom (30.1%) and China Telecom (29.9%), we share some commentary from Sanford C. Bernstein, plus TowerXchange’s own analysis.


region at Sanford C. Bernstein, the newly formed towerco is likely to focus on greenfield projects in its first operational phase, effectively becoming the BTS branch of the three Chinese MNOs.

The operators’ estimated 600,000+ existing sites, a vast portfolio valued at around US$30bn, could be injected into China Communications Facilities Services Corporation Limited, bulking up the towerco for a potential future partial IPO, undoubtably creating the largest towerco in the world.

Sanford C. Bernstein has recently issued a research note focused on China’s new towerco and its impact on the Chinese telecom market in which it noted that a capex slowdown is likely to occur from 2015, when China Mobile starts to deploy 4G in rural areas. To date 4G coverage in urban areas is substantial and a China Mobile executive has recently commented that 400,000 of the 500,000 4G base stations targeted for year end 2014 have already been deployed. MIIT is likely to leverage the towerco to bring high speed LTE connectivity to rural areas and smaller towns.

Quoting Sanford C. Bernstein Ltd.: “Investors should note that this is not a commercial deal between the operators and a professionally managed tower company. […] We expect the operators to simplify the process, standardize pricing and write leases contracts with favourable rates. MIIT has already stated that the lease fees will be set ‘low’ by International

standards. We assume existing towers are purchased at replacement value (i.e. construction cost) and that leases are set to generate returns of 10%-16% IRR even if they attract less tenants than hoped for.”

As an operator-led towerco, China Communications Facilities Services Corporation invites comparisons with entities such as Bharti Infratel rather than purely commercial, truly independent towercos like American Tower. Nonetheless, this development is extremely important for the vendor community as all of China’s new builds and associated equipment

requirements will be funnelled through the towerco, probably via existing subcontractor China Comservice and it’s various regional subsidiaries.

TowerXchange foresee limited near-term opportunities for foreign investors to participate in China’s towerco until an IPO takes place and, for the time being, the newly formed towerco remains focused on value creation for the Chinese MNOs only. With the new entity set to start deploying sites in 2015, we look forward to reporting on any new developments relevant for our readers

More than half the world’s green powered base stations are in China

11,863

5,500

5,400

20,188

China Mobile

China Telecom

China Unicom

Rest of the world

Source: GSMA GPM Deployment Tracker

Mexican telecom reform approved

Both the Mexican Senate and Chamber of Deputies approved the secondary laws on telecommunications and

broadcasting. The upper house approved the bill 85 to 12 in favour while 340 votes in favour were reached by the

deputies.


Courtesy of the transcript provided by Seeking Alpha (www.seekingalpha.com), here is a summary of insights gleaned from CEO Daniel Hajj’sremarks on América Móvil’s tower strategy on a July 22 conference call with analysts:

“It’s not going to be a sale, it’s going to be a spin-off”

Hajj indicated that the preferred strategy was to spin off, rather than sell the towers, while still opening the “towers to rent to everybody.” América Móvil recognise that tower assets often attract a higher valuation, and thus deliver more value to shareholders, when held on a separate balance sheet from the retail telecom company.

Tower strategy may not be clarified for two to five months

To be fair, América Móvil were instructed to reduce their national market share in Mexico to under 50% in order to cease being a preponderant economic agent on July 8, although had doubtless anticipated regulatory reform in Mexico would eventually result in pressure to restructure, so it is unsurprising that Hajj was non-committal about the details and timeline for a potential tower spin-off. “We need to present our plan, but maybe (in) two months we can have a decision, but it’s important because you need to have (the) authorization to do the spin-off and it’s going to take time… I think before the end of the year we are going to have much more clarity on the spin-off.”

Latin America NewsMexico

Mexico

América Móvil to spinoff Mexican towerco?

América Móvil is analysing how to restructure its businesses in Mexico to comply with the ongoing regulatory changes occurring in the country. As a result, the company has said it is planning a spinoff of its Mexican towers, potentially creating an operator-led towerco owning an estimated 28,000 towers in Mexico.

“ “

On July 8, we (América Móvil) were instructed by our Board of Directors to implement various measures to reduce our national market share in the Mexican telecommunications market to under 50% in order to cease to be a preponderant economic agent. It is desired that the assets be sold to a strong player, willing to invest and compete in the Mexican market. The sale of Telcel’s and Telmex’s assets is contingent upon América Móvil receiving the necessary assurances from the Mexican regulator to the effect that it would no longer be subject to specific asymmetric regulation and that it would be allowed to provide convergent services. It is also contingent upon the assets being sold at market prices. The Board also decided that all cellular sites, including towers and related passive infrastructure, be separated from Telcel for their corresponding operation and commercialization to all interested parties

Would América Móvil consider expanding the

business strategy to separate towers and monetise

them also in other Latin American countries?

CFO Carlos García Moreno Elizondo again alluded to

the importance of giving “our shareholders value…

some of the assets that we have buried in our balance

sheet (are) not being assigned the real value that

they have in the market. So we’ll be looking at ways

of… showing the value of some of the assets that we

currently have.” To which Hajj added “we are going to

do it in other countries in Latin America”.

TowerXchange commentary

Any development which improves current and

prospective new entrant operator’s changes of co-

locating on Mexico’s largest tower network is to be

welcomed.

TowerXchange are not regulatory analysts, so we’ll

make no comment as to whether the spin-off of a

majority-owned towerco would significantly affect the

dominance of América Móvil in Mexico. What is clear

is that América Móvil does not need cash, so unless

directly required to do so, they remain highly unlikely

to sell their towers in Mexico, Colombia or any other

market in which they are dominant. Therefore it’s

not in their interests to cede control of those assets

to a third party tower company whose independence

might maximise competitive carriers’ confidence in

co-location. The net effect of all this could be minimal.

The net effect could be to stimulate the creation of a

pan-Latin American operator-led towerco of a scale not

seen outside of India.

Until América Móvil makes clear the structure,

ownership and governance of their proposed spin-

off, and until the regulator is satisfied, then few

conclusions can be drawn. The Mexican tower industry

was one of the top five most investible emerging

market tower industries in the world before this

announcement, and it still is afterwards. Keep reading

TowerXchange – we’ll keep you informed!

Movistar schedules 4G LTE launch

Movistar is planning to launch 4G LTE services in Q3

2014 and will initially cover 50% of Guatemala City.

Movistar enters 4G LTE market

Spanish carrier Movistar has launched 4G LTE services

in Costa Rica for both its post-paid and prepaid

customers. Movistar joins state-backed ICE and Claro

Costa Rica which have already launched LTE services.

Avantel planning 4G LTE launch

Avantel will launch its LTE services by the end of Q3

2014. The company acquired the 4G license back in

June 2013, but reportedly experienced difficulties in

securing access to the networks of existing carriers,

despite the CRC encouraging infrastructure sharing

with new players entering the wireless market.

Une-EPM and Tigo Colombia one step closer

to merger

The merger between the two carriers has been

approved by the antitrust authority Superintendencia

Industria y Comercio and the Asociacion Nacional de

TV - the broadcasting watchdog. The companies are

still waiting for the authorisation from the financial

watchdog Superintendencia Financiera de Colombia.

Brazilian telecom regulators push bidders

for 700MHz 4G auction

Paulo Bernardo, Brazilian Minister of Communications,

and João Batista de Rezende, President of Anatel,

gathered in central London in June during the 700MHz

4G auction roadshow. The roadshow was organised

with the goal to attract new bidders to join the four

national incumbents.

In the meantime, Anatel has recently approved the

terms for the auction which is likely to take place in

September.

TIM Brasil towers attract towercos

While Telecom Italia has recently announced its

intention to retain its stake in TIM Brasil, the potential

sale of the carriers Brazilian towers has gained the

interest of several players such as Cell Site Solutions

and American Tower Corp.

According to local rumours, both companies have

already sent to Telecom Italia formal letters of interest

to participate in the bid to acquire approximately

6,000 towers - with a valuation around USD 1 billion.

TIM Brasil’s CEO, Rodrigo Abreu, has denied that the

company itself is for sale. TIM Brasil currently owns


Guatemala

Costa Rica

Colombia

Colombia

Brazil

Brazil

8,500 towers across the country.

While TIM Brasil might be selling its towers, rumours

persist that Telefonica is planning to sell its shares

in Telecom Italia in order to solve regulatory issues

regarding shareholdings in Brazil.

Shaky grounds for the PT-Oi deal

Portugal Telecom is currently engaged in reassuring

Oi in light of its acquisition of US$1.2bn in debt from

Rioforte, held by one of PT’s shareholder, Espirito

Santo. The investment in debt is currently under

investigation in Luxembourg for possible financial

irregularities.

The merger between the two carriers is in its final

phase but PT’s legal issue could potentially delay the

successful conclusion of the deal.

In the meantime, TIM Brasil has denied it is holding

negotiations with Oi and GVT for a possible merger.

Oi and SBA Communications ink third deal

in 12 months

Oi has sold 1,641 towers to SBA Communications for

a reported US$527.6mn. The deal includes a leasing

agreement for the use of antenna space on each site

and is the third between the two companies.

American Tower acquires BR Towers

ATM has acquired privately owned towerco BR Towers


for approximately US$978 million in a cash and debt deal. Through the deal, ATM gains ownership of 2,530 towers and exclusive rights to an additional 2,110.

Regulatory approvals and T&Cs will delay the official close of the deal until the end of 2014. For further insights into this deal, see TowerXchange’s exclusive interview with Olivier Puech, CEO LatAm for American Tower, later in this edition.

Grupo TorreSur looking for buyers?

Grupo TorreSur has reportedly hired Credit Suisse Group AG to find a U.S. buyer. The company owns and operates 6,000 telecom towers in Brazil and could be valued around US$2bn.

Local authorities requested to ease tower deployment

The Ministry of Transport & Communications is demanding that local authorities facilitate the deployment process for towercos and carriers involved in greenfield projects across the country.

Municipal permits to install towers have been hard to obtain, as reported by several local players.

Paraguay to run 4G LTE auction in 2014

Paraguayan news sources report that the national government is likely to award spectrum for 4G LTE during the course of this year. Details of the auction’s date and characteristics haven’t been made public yet.

NII Holdings potentially selling its Argentinian and Chilean units

US carrier NII Holdings, operating in Latin America under the brand Nextel, is reportedly close to selling its Argentinian and Chilean units for around US$250mn.

Rumours report the media group Grupo Veintitres to be negotiating with the US company.

Argentina plans 4G spectrum auction in October

The Argentinian government is organising a high speed wireless auction with the goal to attract international investments in 4G networks.

The auction, scheduled for October 31, also aims at assigning the remaining 3G spectrum. The current mobile networks run with 2G and 3G technologies.

Bidders can acquire the documentation from 24 July to 17 September and the pre-qualification stage is expected to take place on September 18.

Argentina hit by second default in thirteen years

Argentina and U.S. creditors failed to reach an agreement on the repayment of US$1.3bn in debts.

The breakdown in talks resulted in the country tumbling into its second default in thirteen years

Brazil

Brazil

Brazil

Brazil

Peru

Chile Argentina

Argentina

Argentina

Paraguay

Take YOUR seat at the table with 250 leaders of the African tower industry

Meetup Africa 2014

DiamondSponsor:

Silver Sponsors: Bronze Sponsors:

To discuss your participation, contact Annabelle on +44 7423 512588 or email [email protected]

October 20 - 21 Gallagher Convention Centre, Johannesburg

The unique experience of a TowerXchange Meetup

< African market forecasts< Q&A with the CEOs< Round tables add insight< Structured introductions< Select your own agenda< Local market knowledge

< Market transformation< Next sale & leasebacks< BTS opportunities< Site upgrades< Energy opex reduction< Country specific round tables

Insights

Infrastructure focused

Personal development

Connections

Experience

Learning

< Top 250 decision makers< Towerco CXOs< MNO tower strategists< Investors< Strategic advisors< Proven suppliers

< Networking< Selective audience< Curated exhibition< Relax and enjoy< Professionally hosted

< Undiluted focus on passive infrastructure< Real estate< Power< Construction< Monitoring< O&M

< Learn from 250 peers, the leaders of the African tower industry< Align your role and strategy with the needs of the ecosystem

For more information visit www.towerxchange.com/meetups/africa

10:40 Introducing the leading energy equipment and service providers< CPS, Cummins, ELTEK, Emerson, Enatel, Flexenclosure and Heliocentris 11:00 Morning coffee and networking 11:20 Round table breakouts 12:40 Networking lunch 1:40 Round table breakouts 3:00 Afternoon coffee and networking 3:20 Regional and potential new entrant towercos< Ray Hassan, CEO, Towershare< Dan Ryan, CEO, Square1 Infrastructure< Laurent Roineau, General Manager, TowerCo of Madagascar< Monty Simus, CEO, Frontier Tower Solutions< Morenikeji Aniye, MD/CEO, Hotspot Network< Kesavan Madhavarao, Acting CEO, SWAP< Aymeric de-Cardes, VP M&A & Director of International Development, TDF 4:20 Close of conference

* = subject to final confirmation

Day one, Monday October 20

9:00 TowerXchange market analysis and forecasts for the growth of the African tower industry< Kieron Osmotherly, Founder & CEO, TowerXchange 9:40 Round table breakouts 11:00 Morning coffee and networking 11:20 Keynote panel: CXOs of Africa’s leading towercos< Chuck Green, CEO, Helios Towers Africa< Rhys Phillip, CCO, IHS Africa< Alan Harper, CEO, Eaton Towers< Hal Hess, President EMEA and LatAm, American Tower*< Prakash Ranjalkar, CEO, Africa Towers (Airtel)< Inder Bajaj, CEO, Helios Towers Nigeria 12:40 Introducing the leading turnkey infrastructure providers in Africa< Camusat, Leadcom, Likusasa, MER Group and Sagemcom 1:00 Networking lunch 2:00 Round table breakouts 3:20 Introducing the leading RMS, access control and Site Intelligence Platforms< Acsys, azeti, Galooli, HMS, Inala, Infozech and

Telemisis 3:40 Afternoon coffee and networking 4:00 Keynote panel: investors< Daniel Lee, MD, Intrepid Advisory Partners< Ayman Al Adl, Director, TMT MEA, Standard Chartered Bank< Eric Crabtree, Senior Investment Officer, IFC< Nina Triantis, MD, Global Head of Telecoms & Media, Standard Bank 5:00 Close of day one

Followed by drinks reception and dine-around (evening meal not included) Day two, Tuesday October 21 9:00 MNO passive infrastructure procurement priorities< Edwin Mantsha, Senior Procurement Manager, MTN< Jawad Chaudhary, Head of Network Site Infrastructure, Vodafone* 9:30 Keynote panel: MNO tower strategists< Sandile Msimango, General Manager, MTN*< Michel Faivre, Directeur Porgramme partage d’Infrastructure AMEA, Orange< Tim Knowles, Head of M&A, Etisalat< Riana Donaldson, Manager: Network International, Vodacom< Sudhir Chopra, Group CTO, Smile

TowerXchange Meetup 2014 Agenda


TowerXchange Round Table Ropics and Expert Hosts

www.towerxchange.com | TowerXchange Issue 9 | 45| TowerXchange Meetup | www.towerxchange.com4

< Select round tables focused on your priority countries or issues< 80-minute ‘deep dive’ structured networking session< Participants represent the whole tower ecosystem< Director to C-level participants only< Subject matter expert host introduces the discussion< Participants introduce themselves, share questions AND answers< Held under the Chatham House Rule to protect confidentiality< Sales pitches strictly prohibited

< Bill Bates, VP Business Development, SBA Communications< Keith Boyd, MD, Eaton Towers South Africa< Marco Cordoni, Senior Partner, Analysys Mason< Nathan Foster, CEO, Atlas Tower< Marc Ganzi, CEO, Digital Bridge Holdings< Chuck Green, CEO, Helios Towers Africa< Chris Grundberg, Head of Equity Research – South Africa, UBS Investment Bank< Enda Hardiman, Managing Partner, Hardiman Telecommunications< Ray Hassan, CEO, Towershare< Dion Jerling, Special Projects Director, Connect Africa< Henrik Kamstrup, CEO, Intelli Towers< Daniel Lee, MD, Intrepid Advisory Partners< Chris Lundh, COO, Frontier Tower Solutions< Ken Okeleke, Senior Analyst, Business Monitor International< Collins Onumajuru, CEO, Secured Towers< Rhys Phillip, CCO, IHS Africa< Gulfrz Qayyum, MD, TMT Investment Banking, Citi< Kevin Koch, COO, Helios Towers Africa< Laurent Roineau, GM, TowerCo of Madagascar< Darragh Stokes, Partner, Hardiman Telecommunications< Bora Varliyagci, Head of Africa, Mott MacDonald

< Country focus: Cameroon and Cote d’Ivoire< Country focus: DRC< Country focus: Egypt< Country focus: Ghana< Country focus: Kenya< Country focus: Madagascar< Country focus: Nigeria (strategic)< Country focus: Nigeria (power)

< Why and when Africa’s MNOs divest tower assets< The investibility of African towers< How to raise capital for tower transactions< How to conduct commercial and technical due diligence on towers< How to audit your asset register

< How to startup a towerco< As a towerco matures, how do our priorities shift?< How to overcome the perceived risks of operating in frontier markets< How to align stakeholder interests in the tower supply chain< How to improve the economics of rural connectivity< Site acquisition, leasing and permitting in Africa< The impact of nextgen networks and fibre IBS, small cells and DAS

< How to minimise the total cost of evaluating and strengthening towers< Innovations in site design< How to reduce energy opex< Health and Safety policy and practice< How to evolve from reactive to preventative maintenance< How to protect your sites from fuel and equipment theft< How and what Helios Towers Africa buys< How to align ESCO and towerco business models< Lessons learned running the world’s largest RESCO

< Country focus: Rwanda and Zambia< Country focus: South Africa< Country focus: Tanzania< Country focus: Uganda< Country focus: Sierra Leone, Niger, Chad and Burkina Faso< Country focus: Malawi, Congo B and Gabon< Regional focus: Americas< Regional focus: Southern and Southeast Asia

< How to structure joint venture towercos< Contractual conditions that create, and destroy, value< How tower transactions create capital value< Building and selling towercos: lessons learned realising exit strategies< MNO consolidation: implications for the tower industry

Country and region-specific round tables

Tower investments and transactions

Tower strategy Operational issues

How our structured networking round tables work

Some of our expert round table hosts

Backhaul, FTTT, Core Network Active equipment

Tier 1 OEMs

Mobile Network Operators

Investors: private equity, debt finance, infrastructure funds

Law firms

www.towerxchange.com | TowerXchange Meetup | 46

Group level strategistsC-suite & network planners at local OpCos

Outsourceto

Strategic consultancyDue diligenceDemand forecastsValuations

Independent TowercosSell co-locationsUpgrade capacityBuild-to-suitMaximise uptimeReduce opexInvest in network

Transfer assets to

Construction servicesTurnkey infrastructure rolloutManufacture of steelworkImport, customs & deliveryLeasing & permittingInstallation of towersUpgrades for capacityO&M services

Dynamic assets

Energy equipmentDiesel gensetSolarWindFuel cell

BatteriesRectifiersInvertersLine conditioningPIUs

Air conditioning Lightning protectionControllerVoltage regulator

Managed service providers

ESCOs

Static assetsTowers & mastsSheltersBracketsEnclosuresLightingFencing

0&M servicesMaintenanceStaffingSpare partsVMI?Refueling

Energy as a service

Monitoring & managementRMSIntelligence/analysisSite managementJob ticketingAsset lifecycle platform

Access control

Subcontract

MicrogenerationCommunity power

Subcontract or in-house

Outsourceto

Som

e be

com

e to

wer

co

Tower Industry Value Chain

Investment management advisors

TowerXchange serves the African tower community along two intersecting axes. On a horizontal axis we facilitate relationships between MNOs, towercos, investors and their advisers, aiding the structuring of deals and the transfer of assets. On a vertical axis, we examine the impact on, and opportunities for, the passive infrastructure supply chain, whether they sell to MNOs, towercos or through OEMs.

How TowerXchange ensure an audience of decision makers

Many of our clients complain that similar events have failed to deliver genuine decision makers; that won’t be the case at TowerXchange.

The TowerXchange Meetup is exclusively for Director, VP and C-level decision makers. If registrants are substituted, we will only accept replacement registrants of equal or greater seniority than those pre-approved.

Through our passive infrastructure focused journal publication and research, TowerXchange have cultivated relationships with 5,503 (at time of press) decision makers in emerging market towers, 84% of whom are Director, VP or C-level.

More importantly, we have personal relationships with the 250 or so individuals with genuine strategic and procurement decision making responsibilities. The TowerXchange Meetup has been requested and designed by the top decision makers in African towers, so you can be confident that the vast majority of those key contacts will be at the event.

Who will you meet

| TowerXchange Issue 9 | www.towerxchange.com46

Sample of registered delegates for the TowerXchange Meetup Africa 2013


MTN Group, ExecutiveCFO, NeotelDirecteur Programme Partage d’Infrastructure AMEA, OrangeVice President, Business Development, SBA CommunicationsVice President - International, SBA CommunicationsGroup CTO, Smile CommunicationsCTO, Smile CommunicationsGeneral Manager, Stelekom Global Network LtdChief Executive Officer, SWAP InternationalDirector Real Estate Consulting South Africa, SWORN Asset Management South Africa Founder, TASC Towers Senior Manager, Telkom MobileExecutive, Telkom MobileManaging Executive, Telkom MobileManaging Executive, Telkom SA SOC LtdGeneral Manager, Towerco of MadagascarChairman, Towerco of MadagascarChief Technology Officer, Vimpelcom (Telecel Zimbabwe)Business Performance Partner, VodacomManager, Network International Operations Support, VodacomGroup Executive: International Business Development: International Business Development, Vodacom

Investors and advisers Head: TMT Coverage, Absa Capital / BarclaysAssociate Principal, Absa Capital / BarclaysConsultant, Analysys Mason

Partner, AT KearneyInvestment Analyst, Capital International Research Inc.Partner, Capital International Private Equity FundsAnalyst, CitiVP, Corporate Finance, Delta PartnersManaging Partner, Ergos EnergyPartner, Freshfields Bruckhaus Deringer Director of Infrastructure, GSMA Mobile for DevelopmentPartner, Herbet Smith FreehillsSenior Investment Officer, IFCManaging Director, Intrepid Advisory ServicesConsultant, InvestecInvestment Banking Specialist, InvestecMerger and Acquisitions, LazardSenior Advisor, MacquarieManaging Director, Technology & Communications, Mott MacDonaldDirector of Technology Strategy & Design, Technology & Communications Mott MacDonaldHead of Africa: Technology and Communications, Mott MacDonaldPartner, Norton Rose Fulbright Managing Director, RBC Capital MarketsMD: Energy & Infrastructure, Shanduka GroupManaging Director, Global Head of Telecoms & Media, Standard BankInvestment Banking Credit Manager, Standard bankDirector - TMT | Middle East and Africa, Standard Chartered Bank Head of Equity Research, South Africa, UBS Partner, Vinson & Elkins

Operators and towercos

Chief Executive Officer, Africa Towers (Airtel’s towerco)Operations Director, Africa Towers (Airtel’s towerco)Key Accounts Manager, Africa Towers (Airtel’s towerco)Head: Power Solutions, American TowerChief Executive Officer Africa, American TowerChief Executive Officer, Atlas Tower CompaniesDirector of Legal Affairs, Atlas Tower CompaniesSpecial Projects Director, Connect AfricaChief Executive Officer, Eaton TowersManaging Director, Eaton Towers South AfricaCo-Founder and Director, Eaton TowersBusiness Development Director, Eaton Towers South AfricaSHERQ officer, Eaton TowersGroup Corporate Finance Operator, Econet WirelessHead of Mergers and Acquisitions, EtisalatDirector - Valuations Mergers and Acquisitions / Corporate Strategy, EtisalatChief Operations Officer, Frontier Tower SolutionsChief Executive Officer, Frontier Tower SolutionsChief Commercial Director, Globacom GroupChief Executive Officer, Helios Towers AfricaGroup COO, Helios Towers AfricaBusiness Development Director, Helios Towers AfricaDirector of Compliance and Safety, Helios Towers AfricaChief Commercial Officer, DRC Helios Towers DRCChief Executive Officer, Helios Towers NigeriaChief Marketing Officer, Helios Towers NigeriaChief Technology Officer, Helios Towers NigeriaChief Executive Officer, Helios Towers Tanzania


Area Manager, Ascot IndustrialManaging Director, Clean Power SystemsTechnical Director, Clean Power SystemsMarket Strategy and Planning Manager, CumminsManaging Director, DAQs EuropeVP MEA, Eltek GroupRegional Sales Manager, Eltek GroupManaging Director, Sub Sahasa Africa, Emerson Network PowerVP of Global Marketing, Emerson Network PowerSales Director, Emerson Network PowerSales Manager, Enatel EnergyCEO, ENNERA ENERGY AND MOBILITY S.L CCO Telecom, ENNERA ENERGY AND MOBILITY S.L Global Accounts Manager, FG WilsonVP Strategy, FLEXENCLOSURECEO, FLEXENCLOSUREVP eSite, FLEXENCLOSUREGlobal Sales Leader, GE Energy Storage Head of Emerging Markets, GILDEMEISTER energy solutions Head of Marketing, GILDEMEISTER energy solutions Director, Sub-Saharan Africa, Heliocentris

RMS and site management systems Co-founder and CEO, AIO systemsVP Sales, AIO systemsVP Marketing, AIO systemsCEO, azeti Networks AG, SiteOneVP Sales and Marketing, azeti Networks AG, SiteOneCEO, Galooli GroupGlobal Key Account Manager, HMS Industrial Networks ABGeneral Manager, Infrastructure Intelligence, Inala

TechnologiesCEO, Inala Technologies CEO, InvendisVP Business Development, InvendisSales Director, QOWISIOGeneral Manager: SMC Operations, QuinticaStrategy Director, QuinticaExecutive Chairman, TarantulaSales Director, TarantulaMarketing Manager, TarantulaCommercial Director, Telemisis Towers and components Channel Manager, Dialight BTIHead - Telecom and structures, Ganges InternationaleCo-Founder, President and CEO, GeostrutDirector, GeostrutCEO, Intelli Towers LtdMarketing Manager, Orion SloboziaMD/CEO, Sparkwest Steel Industries Head of Business Development, TESA AfricaManaging Director, TESA AfricaSales Manager, International, Valmont Site Pro 1Export Sales Manager West Africa, Valmont

Others Founder & Chief Operating Officer, Acsys Sales Director, Acsys Managing Director, Anzac Cables & Wire President Africa, Ceragon VP, CHANNEL IT NIG LTD. Managing Director, EMSS Consulting President, PN International (Karam) Chief Executive Officer, Site Acquisition Services

Turnkey infrastructure and managed services Chief Marketing Officer, ACME GROUP / REIME AFRICACEO - Africa, Alkan CITCountry Manager, Alkan CITSales Account Manager, Alkan CITDirector Business Development, Camusat InternationalDeputy CEO, Camusat InternationalHead of Engagement Practice Managed Services, SSA, Ericsson Infrastructure Sharing Project Manager, HOI -MEASudan Country Manager, HOI - MEAMember of the board, HOI - MEACEO, Leadcom Integrated SolutionsBusiness Development, CEO Leadcom Integrated SolutionsSVP, Lemcon, SiteOneCEO, LIKUSASAManaging Director, LIKUSASADivisional Director - Group Sales, LIKUSASAGroup HSE Manager, LIKUSASAGroup Business Development Manager, LIKUSASAFinancial Accountant, LIKUSASAVP Sales and Marketing, MER TelecomRegional Director Africa, MER TelecomHead - Projects & Strategy, NEWLBusiness Development Manager, NEWLManaging Director, REIME EAST AFRICADirector, TKM Maestro Limited Deputy Sales Director, Networks & Integration Services BU, SagemcomEnergy & Site Management Product Manager, Networks & Integration Services BU, Sagemcom

Energy solutions VP & CEO, Ascot Industrial

2011

2015

50%+

15-20,000Airtel African towerscurrently being sold

African towerscurrently for sale

Further 20,000+

Towercos now‘KING BUYERS’

Tower transactions

O&M contracts,site upgrades,

DG and batteryreplacements

unlock

Towercos securefirst refusal onbuild-to-suit programmes

By 2015 towercoswill ownmoreAfricantowersthanMNOs

US$5bn+investedby 2014$$$$$

$$$$$

Renewables Access control DGs RMS ILM Batteries A/C AVR HSE

of Nigeria’stowers ownedby towercosby y/e 2014

84%

1-2

75%

of Tanzania’stowers are now owned by Helios Towers Tanzania

90% of the towers in Cameroon and Cote d’Ivoire are owned or operated by IHS

90 % of DRC’s towersare owned byHelios Towers DRC

1in2

majortowercosoperatein Ghana:AMT, HTA and Eaton

3

2nd towercoabout to enter Madagascanmarket,ToMthriving

2

AMT and Eatonactive in Uganda

2014: IHSannouncesacquisition of 1,269 MTN towers in Rwanda and Zambia

AMT, Eatonand severallocal towercosactive inSouth Africa

2++

Towercos own or operate 50%of Africa’s towers by y/e 2015

Africantowercosstart to deployDAS & IBS

improvement

capex

Meet the top 250 decision makers in African towers at

TowerXchange!

6,000+ readersof the TowerXchange

Journal

MNOinfrastructureprocurementstrategy

As tenancy ratiosapproach 2, towercosaccelerate investment in

site e§ciencyprogrammes

Opportunities in African towers



TowerXchange exhibition floorplan

Helios Towers Africa

Helios Towers Africa (HTA) is the leading independent telecom towers company in Africa.

HTA builds and manages shared telecom infrastructure, delivering improved efficiency and reduced costs for operators and their customers.

Helios Towers Nigeria, an affiliate of HTA that was launched in 2005, was the first independent tower company in Africa.

In 2010, HTA pioneered Africa’s first sale/leaseback transaction with the acquisition of Millicom’s network of tower sites in Ghana.

HTA currently owns and manages 3,500 towers and has operations in Ghana, Tanzania, the Democratic Republic of Congo and a sister company in Nigeria, with new operations under development in several other African markets.

www.heliostowers.com

DIAMOND SPONSOR:

Diamond Sponsor:Helios Towers Africa

Silver Sponsors:Eltek GroupSiteOneACSYS

Bronze Sponsors:HOI-MEAMer Group Telecom DivisionHMSCummins Power Generation

Exhibitors:GalooliGanges InternationaleClean Power SystemsLIKUSASALeadcom Integrated SolutionsTelemisis LtdFLEXENCLOSUREInala TechnologiesSagemcomENATEL ENERGYGeoStrutEmerson Network PowerKARAMTowershareCamusatInfozechMetalogalvaGS YuasaPRAMACHeliocentrisAmara Raja BatteriesWebNMS

Ballroom

Networking area

11

28

GS Yuasa12

Mer Group

36

Towershare13

Camusat35

TowerXchange

30

Leadcom14

Flexenclosure

34

Amara Raja Batteries

15

SiteOne33

Galooli32

Acsys14

Heliocentris3

Cummins24

Geostrut26

CPS4

Likusasa23

Sagemcom27

Enatel5 HMS

Industries22

INALA6

Infozech21

EmersonNetwork

Power7 Telemisis

20

PNInternational

KARAM8 Ganges

Internationale

19

PRAMAC9

Metalogalva18

HOI-MEA10

Eltek17

1

29 31

25

Media Partners

2

SiteOne

SiteOne is an innovative Telecom site management solution based on a unique Intelligent Site Management System to monitor and manage remotely distributed sites. By installing the azeti NG at the site to be monitored/controlled, you can continually watch over IP based equipment and other operational technologies such as access control, energy consumption or environmental parameters. This combination provides a complete view of all the critical elements installed on the site, while allowing operators to not only monitor performance but also to execute and program intelligent actions based on multiple scenarios. SiteOne adresses some of the most common remote site issues including theft of equipment, inefficient energy usage, unauthorized entry, HVAC control, lack of real-time data or general performance monitoring.

www.azeti.net

Our sponsors


Eltek

Eltek are committed to meeting the power needs of our customers. For more than four decades Eltek has provided power solutions for telecommunication networks globally. Our systems cover the entire range of power requirements; from small to very large, meeting all the power needs of the telecom industry, in both fixed and mobile networks.

Our broad range of rectifiers and converters comply with all international standards and requirements. Eltek’s high efficiency solutions and new, innovative designs help the industry achieve the objectives of combating climate change whilst remaining competitive, by reducing energy spend and environmental impact.

Eltek have offices in more than 40 countries and business in more than 100. Our presence and expertise is close to each individual market we serve. This enables us to truly understand the needs of each market and provide solutions and services specifically adapted to local requirements.

Telecom Hybrid Solutions

Eltek’s hybrid solutions are based on the HE technology for optimal utilization of all energy resources. By combining solar or wind energy input with smart

generator control and optimally dimensioned batteries, the scene is set for dramatic OPEX reductions and a positive environmental impact.

http://www.eltek.com/wip4/hybrid_telecom/?utm_source=TelecomXchange&utm_medium=banner&utm_campaign=Hybrid

SILVER SPONSOR:

SILVER SPONSOR:

Acsys

Acsys is one of the global leaders in cell tower access control solutions. Our patented, military-grade solutions fill the industry gap for highly secure, remote site access management. Acsys offers a combination of solutions that are wired, wireless and/or wire-free to gain access to any site under any circumstances. European-rooted, with an innovative team from around the globe, and the benefits of China-based production, Acsys stays at the forefront in designing cutting-edge security and staff management solutions at a competitive price. Our programmable locks and keys have earned recognition from Africa’s leading telecom operators, tower management companies, and equipment providers.

www.acsys.com

HOI-MEA

HOI-MEA is a leading company in GSM full turn key industry field in Middle East, North Africa and Gulf Areas. Since its establishment in 2001, the company has always strived for the highest quality innovated

SILVER SPONSOR:

Bronze Sponsor:


products, which contributed to several projects’ success.

HOI-MEA offers technical solutions from Antenna

Supporting Structures, Rapid deployed Mobile &

Permanent Solutions, Decorative Structures (Pine Tree,

Palm Tree, Flag Pole…) and Passive Cooling to Hybrid

Power Solutions.

HOI-MEA was the first company to get the right to provide

IS service in Egypt, that lead up to signing agreement

with Vodafone Egypt to build-to-Suit for 150 Sites in Delta

region.

http://174.132.188.9/~hoiaste/index.php

Mer Group Telecom Division

Mer Group Telecom Division provides end-to-end Wireless Infrastructure Turnkey Solutions – from network planning, site design and provision of towers, to site construction, equipment installation, network optimization and maintenance. Combining cost effectiveness, short lead times and advanced engineering techniques, we are strongly committed to client satisfaction. With a highly developed logistics chain, advanced tower manufacturing facilities and an extensive network of warehouses, our solutions are flexible and scalable, providing measurable benefits for

customers. Our strong presence in Latin America enables us to leverage the combined in-depth regional knowledge of local partners with our industry acknowledged engineering expertise for our customers’ benefit.

The division leverages its proven global track record, comprehensive knowledge and accumulated expertise to seamlessly deliver technologically innovative and best-of-breed solutions including M2M enablement and vertical market applications, mobile financial services, cloud billing, MVNO enablement, as well as on/off board and remote/contactless payment solutions for public transport operators.

www.mer-group.com/solutions/wireless-infrastructure

HMS Industrial Networks

HMS Industrial Networks is the leading independent

supplier of products for industrial communication and

remote management. Products are marketed under the

brands Anybus®, IXXAT and Netbiter®. Headquartered in

Halmstad, Sweden, HMS is represented by branch offices

in 10 countries plus distributors in more than 50. HMS

employs over 350 people and reported sales of 60+ million

EUR 2013.

Telco site support equipment has become smart, which

offers the opportunity to have full remote control of all

Our sponsors

Bronze Sponsor:Bronze Sponsor:

Bronze Sponsor:

support equipment on Radio and Core sites and benefit

from reducing the OPEX without major investments.

With the Netbiter® concept we have developed a vendor

independent solution that fits into all kind of systems and

takes care of all hassles with different communication

protocols, different sizes of diesel tanks, tampering etc.

www.hms.se

Cummins Power Generation

Cummins Power Generation, a subsidiary of Cummins

Inc. (NYSE: CMI), is a global leader dedicated to increasing

the availability and reliability of electric power around

the world. A trusted name for its market leading diesel

generators, Cummins is also a global provider of state-

of-the-art hybrid power solution to telecom cell sites.

Our wide range of products for the telecommunications

industry serves global telecom operators with access to

energy efficient and reliable power solutions.

Cummins employs approximately 46,000 people

worldwide and serves customers in approximately 190

countries and territories through a network of more

than 600 company-owned and independent distributor

locations and approximately 6,500 dealer locations.

Cummins revenues were $17.3 billion in 2013.

www.cumminspower.com

CLS. Likusasa deploy conventional, modular and light steel

building systems and which include HVAC, fire, BMS and

power systems.

Energy solutions include diesel generator, PV Solar, hybrids,

DC power systems, site utility power up to 33kV and electrical

upgrades.

Telecommunication services include radio, MW, VSAT and

optical networks, WiFi networks, remote monitoring, IBS,

rural communications and transmission solutions.

www.likusasa.com

Leadcom

Leadcom Integrated Solutions Ltd. is an international leading

supplier of telecommunication network deployment services and

solutions. We combine extensive global experience, high level of

engineering and project management and a major Pan African

Vendor with very wide footprint in over 15 African countries.

Acting as a System Integrator, Turnkey Provider and Value Added

Reseller, we provide a comprehensive service offering aimed

at major global and local telecom operators, towercos, vendors

and large enterprises. Our service offering includes design,

engineering, implementation of mobile telecommunication

infrastructure as well as vendor-independent managed services

provider – focusing on reliability, efficiency and OPEX reduction

for our customers.

www.leadcom-is.com


Ganges International Private Ltd.

GIPL (Ganges Internationale Pvt Ltd), started

in 1991 manufactures and supplies Tower for

Telecommunications, Windmills, Power Transmission

& Distribution and Railway Electrification. GIPL has a

reputation for timely delivery, quality and total reliability

of tower supplies. GIPL’s team of committed, skilled and

experience professionals will oversee the A-Z of your

tower supplies.

GIPL has a production capacity of 50,000 MTPA (Metric

Tons Per Annum) and galvanising capacity of 54,000

MTPA.

Expertise:

Tower design, Manufacturing & Supply

100% own manufacturing for all products

ISO 9001: 2000 certified

We provide all types of Towers

Products:

Poles–3m to 9m

Roof Top Towers–9m to 30m

Ground Based Tower/Green Field Tower 20m to 100m

Rapid Deployment Towers & Structures

Palisade Fences

www.gangesintl.com

Clean Power Systems

Clean Power Systems (CPS) is focused on the implementation

of efficient, intelligent power systems for African mobile

networks. Our solutions provide customers with savings

in excess of 60% on operating expenses associated with

maintaining passive networks. In addition to supplying our

proven systems for both on-grid and off-grid (AC and DC)

systems, CPS also provides software solutions to optimize

the power system audit & design process, while providing

cost-benefit analysis, allowing customers to make informed

decisions to maximize return on investment in the shortest

possible timeframe. CPS continues to develop and improve

our systems, software and methodologies to help our

customers achieve their intended results.

www.clean-power-systems.com

Likusasa

Focused on the Sub Saharan Africa market since 1995,

Likusasa is a specialist project service provider offering

innovative solutions to the telecoms, transport and resources

sectors.

Infrastructure solutions include turnkey site build, upgrades

and design&build ICT facilities such as MSC/BSC, DC and

Our exhibitors

Exhibitor:

Exhibitor:

Exhibitor:

Exhibitor:

eSite is a hybrid power system for off-grid and bad-grid cell

sites that cuts diesel costs by up to 90%. eSite is an integrated

single cabinet system for maximum reliability and speed

of installation. eManager, an all-in-one toolbox for remote

management, site power optimisation and KPI reporting, is

an integral part of eSite.

www.flexenclosure.com

Inala Technologies

Founded in 1996, Inala Technologies has achieved an

increasing level of customer satisfaction, and market share,

due to its ability to innovate and to provide trustworthy

solution platforms for mobile networks.

Inala Infrastructure Intelligence is a service designed to

effectively and efficiently optimise, maintain and manage

passive assets. The service correlates technical and financial

data with performance data through the collaboration of

systems, processes and people. The resulting reports allow

for the efficient management of infrastructure which helps

to improve asset availability and utilisation while providing

effective decision support.Inala Infrastructure Intelligence

is independent of hardware or software systems that might

already be in place, such as Inala’s own SAM (Site Asset

Management) solution.

www.inala.co.za

Sagemcom

Sagemcom is a French high-technology group with an

international dimension. Sagemcom concentrates expertise

in telecom and energy solutions enabling the supply of

customized connected systems to utilities, telecom operators

and services operators worldwide.

The Networks & Systems department offers highly efficient

and innovative solutions for Energy & Site Monitoring, Green

Energy production & optimization, Radio Site construction,

Optical fiber rollout, Telecom equipment and associated

services.

Sagemcom employs 4,200 people on five continents, with a

revenue of around 1.3 billion euros

www.sagemcom.com

Enatel Energy

Enatel Energy delivers an expansive portfolio of configurable

systems designed to meet every telecommunication network

power requirement. Solutions offer flexibility and scalability,

by way of hot pluggable combinations of modular Rectifiers,

Inverters, Converters, Solar/Wind Chargers and encompass

advanced energy management.

Telemisis

Telemisis manufactures the SitePro® system for remote

monitoring and automation solution for all business sectors;

our specialisation being mobile operators and tower owners.

We have delivered full site management systems, including

power optimisation, fuel management, electricity metering,

environmental management and machine/equipment control

in harsh and demanding locations since 2000.

Telemisis manufactures the industry’s smallest, most flexible

and cost-effective remote telemetry node “SiteNode®”.

SiteNode® units provide interfacing and data collection

capabilities from a wide range of standard devices and

sensors that may already be deployed or will be added.

Coupled with Telemisis’ back-end server systems we offer

standard or bespoke solutions.

www.telemisis.com/products

Flexenclosure

Flexenclosure is a designer and manufacturer of intelligent

power management systems and prefabricated data centre

buildings for the ICT industry. The company provides

systems that are fully integrated, modular, factory tested for

reliability, adaptable to local conditions and quick to install.

Our exhibitors


Exhibitor:

Exhibitor:

Exhibitor:

Exhibitor:

Exhibitor:


Enatel’s SYNERGi hybrid solutions include unique patented

generator control capabilities allowing dynamic optimisation

to accommodate off-grid site variables so ensure the highest

levels of network uptime, ease of deployment and OPEX

savings. Renewable energy inputs can be integrated simply

and blended intelligently.

Enatel Energy offers renowned support, reliability, and

system efficiencies. Solutions are New Zealand made to

guarantee design, manufacture and process integrity.

www.enatel.net

Geostrut

GeoStrut has developed a unique carbon fiber lattice tower

that achieves the strength and durability of a steel tower at

80-90 percent less weight and 20 percent less cost. Its non-

corrosive, non-rusting towers are easy to install and transport

to remote locations, and have lower maintenance costs than

alternatives. The global ecosystem is in favor of light-weight,

cost effective non-steel towers and GeoStrut is the only solution

today to meet such stringent specifications.

www.geostrut.net

Emerson Network Power

Emerson Network Power, a business of Emerson, maximizes

reliability, deployment speed and operational efficiency for

communications networks and data centers. A trusted industry

leader in smart infrastructure technologies, Emerson Network

Power provides innovative, rapidly deployable solutions that

deliver efficiency and uncompromised reliability regardless of

network demands. Emerson Network Power offers expertise in

AC & DC Power, renewable energy, precision cooling systems,

infrastructure management, integrated racks and enclosures,

power switching and controls. Our solutions are supported

globally by local Emerson Network Power service technicians.

Learn more about Emerson Network Power products and

services at:

www.emersonnetworkpower.eu

Galooli

Galooli is a leading provider of OPEX savings solutions, through

its remote performance, analysis and security technology

for remote assets. The company is well based in Africa and

Latin America, with global commercial implementations in 22

countries, with over 2,000 business customers.

Galooli’s Telecom solutions – Full NOC Solution, Power &

Energy Management, Fuel Management, Generator Diagnostics,

Site Security and Full Site Analysis.

Our approach in business is “Prevent Instead of React”. Our

business perception and technology methodology are dedicated

to prevent negative events from happening.

This way OPEX savings using Galooli’s solutions is significantly

higher.

www.galooli.com

Karam

KARAM specializes in field of Fall Protection & manufactures

the highest quality equipment, leading the way with innovative

products & solutions for safe working at height.

Our complete vertically integrated manufacturing set-up is

spread over a span of around 325,000 square feet area with

work force of above 1500 highly skilled people.

KARAM provides a range of Solution to the user working at

Height on variety of towers, masts, monopoles and lattice

structures that are used in Telecom industry.

Our commitment to quality is reaffirmed by our ISO 9001-

2008 certification. All our products are certified as per EN also

meets American & other International standards.

www.karam.in

Towershare

Towershare is a leading independent owner and operator of

wireless communications infrastructure, focusing primarily

in the Middle East & North African markets. Headquartered in

the UAE, Towershare’s management team comprises telecom

veterans who, between them, have built over 15,000 towers in

Our exhibitors

Exhibitor:

Exhibitor:Exhibitor:

Exhibitor:

Exhibitor:

| TowerXchange Issue 9 | www.towerxchange.com56

MENA and Asia. TS has an operational footprint in Pakistan

where it has completed a few small acquisitions and is on

the cusp of completing a small carve out. It is currently in

discussions in four different markets for sale and leaseback

and build-to-suit opportunities.

www.towershare.com

Camusat

Founded in 1948, Camusat is a French group, specialist

in deployment and management of telecommunications

networks. The group is now present in 5 continents, over 30

countries and owns over 1,700 employees.

Always on the cutting edge of new technologies, we have

been able to convince many telecom operators, equipment

manufacturers, tower companies, integrators as well as

government and local authorities. Our range of expertise has

allowed us to meet the most specific needs around the world:

- Construction and installation of “turnkey” sites (historical

activity)

- Installation and commissioning of customers equipment

- Construction and installation of fiber optic networks

- Construction and installation of energy systems (renewable

energy)

- Complete management of networks on behalf of our clients.

www.camusat.com

Infozech

Infozech is a leading provider of game-changing, technology-

led solutions to Telecom tower passive infrastructure providers

and communication service providers (CSPs). Infozech has

been delivering cost optimization and revenue management

solutions to 80 customers across 25 countries for over a decade

now. Infozech’s innovative offering iTower (Infozech’s Tower

Product Suite) provides solutions for managing and reducing

operating costs through real time tower operations tracking,

monitoring, prediction and analytics.

Infozech’s Energy Tracking Service (iETS) manages energy

costs worth about 837.5 million US dollars across 150,000

towers in India. iETS was adjudged the most innovative

product at The ET Telecom Award 2013.

www.infozech.com

Metalogalva

TELECOM TOWERS MANUFACTURER

Quality products at fair prices. Company with 42 years

experience. Young and flexible team. 400 employees; 30

engineers. 100 000 tons galvanizing capacity (year). 14 welding

and plasma robots. 6.6M€ Investment on new equipments.

Qualifications:

<QUALITY MANAGEMENT SYSTEM ISO 9001<RDI MANAGEMENT SYSTEM CERTIFICATE NP 4457 <ENVIRONMENTAL MANAGEMENT SYSTEM ISO 14001 <MANAGEMENT SYSTEM CERTIFICATEOCCUPATIONAL HEALTH AND SAFETY OHSAS 18001 <SPECIAL CERTIFICATION FOR GALVANIZATION for German Norm DASt - GUIDELINE 022

Verification:

<QUALIFICATION OFMANUFACTURES TO WELD STEEL

STRUCTURES according to DIN 18800-7 Level “E” <EC

CERTIFICATE FACTORY PRODUCTION CONTROL (FPC) EN 1090

- 1/2 - EXC3

www.metalogalva.pt

GS Yuasa

GS Yuasa is a Japanese company formed in 2004 by the merger

of two large 100 year old battery manufacturers, Japan Storage

Battery and Yuasa. At US$3.2B in sales, GS Yuasa is one of the

worlds largest battery manufacturers.

GS Yuasa manufactures a full line of technologies including

lithium, lead acid, nickel metal hydride, and nickel cadmium

for the automotive, industrial, and specialty battery markets.

Especially for Telecom market, we have developed a 48V lithium

ion battery module that has outstanding cyclic life and charge

acceptance that can reduce the runtime of generators and the

total cost of ownership of telecom base stations. With 36 affiliates

in 16 countries, GS Yuasa has a worldwide presence operating

under the GS Yuasa, GS, and Yuasa brands.

www.gs-yuasa.com (GS YUASA)

www.gsbattery.com (GS Battery USA)

Our exhibitors

Exhibitor:

Exhibitor:

Exhibitor:

Exhibitor:

www.towerxchange.com | TowerXchange Meetup | 19

| TowerXchange Meetup | www.towerxchange.com20

The flagship product the “Energy Manager” enables smart

connectivity between different components in hybrid energy

supply clusters, such as batteries, solar panels, conventional

diesel generators or fuel cells, thereby substantially

decreasing the ecological footprint at much lower operating

cost. The company is headquartered in Berlin with branch

offices in Munich, Dubai, Vancouver and representations in

Johannesburg and Yangon.

www.heliocentris.com

WebNMS

WebNMS, the IoT and Telecom Network Management software

division of ZOHO Corp, offers award-winning IoT/M2M

Platform and ready-to-deploy M2M applications.

The WebNMS IoT Platform provides data integration and

application development environment for rapid development

of M2M applications for managing millions of connected

devices in real-time.WebNMS Cell Tower Manager is built on

highly scalable WebNMS IoT Platform that facilitates Remote

Management System (RMS ) by seamless integration with tens

of thousands of devices.

WebNMS IOT/M2M Platform has been declared ‘Best

Application of IOT’ at IOT & WSN Europe 2014, ‘Best M2M

Platform for Service Providers 2013’ at M2M Evolution

Conference, and also recognized as ‘Innovation in M2M’ at

Aegis Graham Bell Awards 2013.

www.webnms.com

PRAMAC

PRAMAC is an Italy-based company engaged in the

manufacturing of the power generation equipment and

materials handling equipment. The Company divides its

activities into two business sectors: Power Systems e Power

Engineering, which comprises generators for electric power,

including low voltage portable generators and medium and

high voltage generators and similar machineries.

It has six production plants: Italy, Spain, France, China, the

United States of America and Brazil. It operates worldwide

through the distribution network of subsidiaries among

which are: Pramac Lifter Afrique Trading Sarl, Pramac Middle

East, PRAMAC France, PRAMAC UK Ltd., Pramac Iberica, PR

Industrial among others.

www.pramac.com

Heliocentris

Heliocentris is a German technology company that provides

Managed Power Solutions and Services for commercial

stationary applications for global Telecommunication

Operators and Tower Companies. Services reach from energy

optimization and solution engineering to implementation of

customized turnkey power solutions and smart operations.

Our exhibitorsExhibitor:

Exhibitor:

Exhibitor:

www.towerxchange.com | TowerXchange Issue 9 | 57

TowerXchange Meetup Africa 2013 audience breakdown

Towercos

of which new market entrants

MNOs

Turnkey infrastructure / managed

service provider

Investors

Energy equipment and services

Strategic advisers

Static asset manufacturers

RMS providers

Site management platforms

H&S equipment and services


Special Feature:

There are rare breed of visionary people who buy-in to the business case for the separation of network telecoms from retail telecoms, and who get excited by the favourable relative multiple arbitrage as passive infrastructure is transferred from MNO balance sheets to towercos’. This rare breed of tower enthusiasts falls into simple categories; savvy MNOs who recognise when the time is right to monetise their towers. Savvy towercos who acquire those towers and add value by selling co-locations and improving efficiency. Savvy investors with an appetite for the long term recurring revenues and diversified country and counterparty risk an emerging market towerco of scale offers. And a shallow pool of savvy advisors who make these deals happen. In this special feature, we’re going to listen in on a debate between a panel of savvy investors at the recent TowerXchange Meetup Americas, and we’re going to introduce you to 18 savvy advisors with experience of helping facilitate emerging market tower deals. This is followed by EY’s deep dive into financial due diligence. Then GBWP introduce us to ‘grass roots’ deals in Central America. But first, we’ll put this in context by explaining the current state of investment appetites and investment opportunities in emerging market towers.

The people who make the money go round

In this special feature:59 Emerging market towers come of age61 What investors want65 The TowerXchange who’s who: advisory and strategic consulting firms73 EY on financial due diligence for tower transactions76 Green Ball Wireless on ‘buying and selling at ‘grass roots’ level

Emerging market towers come of ageIncreasing comfort with the towerco business model and pipeline of opportunities attracts a deeper pool of investors

If you’ll forgive my gross over-simplification, there’s an important point here; emerging market towers are coming of age as an asset class. Where once when a new investment firm created an account at www.towerxchange.com I often had to look them up because they were smaller, pioneering early stage investors that I hadn’t previously encountered, now TowerXchange’s research is being read by Macquarie, Providence Equity, Berkshire Partners, The Carlyle Group, Goldman Sachs and a growing number of sovereign wealth funds. Investors with deeper pockets. TowerXchange’s research into emerging market towers is being tracked by over 200 investment firms, indicative of a growing appetite for African, Latin American and Asian towercos. Only a couple of years ago it was a shallow pool of investors who had an appetite for early stage equity investments in emerging market towers. The application to Africa of a business model that had generated outstanding returns in the US since the 1990s was viewed as an interesting but unproven opportunity. Investors are now increasingly comfortable with the performance of African towercos, and how they have diversified country and counterparty risk as they have scaled. A couple of years ago the towerco business model was still taking root in Asia. Fantastic results were being delivered by Protelindo and Tower Bersama, albeit with restrictions on foreign investor’s access to Indonesian opportunities, but little was happening elsewhere in Southeast Asia.

Read this article to learn:< A deeper pool of investors are being attracted to emerging market towers

< Why investors are feeling more comfortable with this asset class: performance, pipeline and

diversification of risk

< Implications for local investors

< The need for debt finance

As emerging market towercos are getting bigger, as tenancy ratios are growing, as the pipeline of future opportunities is becoming more visible and those opportunities are getting bigger, so the pool of interested investors is swelled by bigger companies able to write bigger cheques.

Keywords: Investment, Bankability, Country Risk, Sale & Leaseback, Private Equity, Debt Finance, Infrastructure Funds, Stakeholder Buy-In, Asia, Africa, Latin America


By Kieron Osmotherly, CEO, TowerXchange

The restructuring of the Indian MNO market after the cancellation of licenses had all but frozen the pipeline of tower opportunities in India. Now the Indian tower industry is reinvigorated, and the pipeline of opportunities is flowing again. The towerco business model is starting to spread across Southeast Asia – towercos will be on the front lines of the Myanmar rollout, we’ve seen activity in Thailand and edotco’s launch will stimulate multiple countries, hence the launch of a TowerXchange Meetup for Southern and Southeast Asia in December. Meanwhile, there has been consistent appetite from international and local equity investors for


tower opportunities in LatAm, where the biggest challenge can be for PE-backed entities to secure assets in competition with trade buyers. It may be tough to win an opportunity up against AMT and SBA in Brazil, but TowerXchange are seeing growing investor interest in other South and Central American markets. In the two years that TowerXchange has been reporting on the emerging market tower industry, investor appetites for emerging market towers have steadily increased. Why? < There is growing confidence in the adaptability of the towerco business model to emerging markets< Emerging market towercos are delivering against the growth expectations suggested by their business plans< There is increased visibility of a pipeline of future opportunities; TowerXchange is tracking over 31,000 towers coming to market in Africa, a similar number in LatAm and Asia, and those opportunities are looking more and more substantial (e.g. Airtel’s African towers)< Towercos are diversifying of country and counterparty risk as they drive toward scale Perhaps the greatest endorsement of emerging market towercos as an asset class is the sustained involvement of early stage investors, who continue to participate in later rounds of capital raising – always a healthy sign. One by-product of the growing appetite of

larger international investors and continued participation of early stage investors is a narrowing window of opportunity for local investors. For example, equity investors probably need to be able to write a US$75mn+ cheque to be of much use to the larger African towercos, which means that local investors may need to form syndicates to participate in these opportunities. I don’t want to make it sound like it’s easy to raise capital for emerging market towers – it’s still a capitally intensive business and there’s a finite amount of leverage that can be used. Below the private equity layer, a shortage of debt finance and an almost complete absence of angel and VC investors, certainly in Africa, represent challenges to new entrants and middle market towercos seeking capital in order to grow beyond opportunistic build to suits and to compete for the larger sale and leaseback opportunities. In summary, while capital may not yet be a commodity for emerging market towercos, bigger cheques are becoming available, larger firms are coming to the table (witness Providence Equity’s recent investment in Helios Towers Africa and AIIM’s in IHS), and a number of infrastructure and sovereign wealth funds are starting to monitor the market, in some cases already actively investing – offloading to such funds might offer a third alternate exit strategy alongside IPO or trade sale. We’ll leave our investor panel report to take on this discussion and delve deeper into those exit strategy options

“ “Perhaps the greatest endorsement of emerging market towercos as an asset class is the sustained involvement of early stage investors, who continue to participate in later rounds of capital raising

What investors wantHow the investment criteria and return expectations vary from early stage VC to later, larger investments in emerging market towers

Tower investment appetites and criteria

This carefully chosen panel represented a breadth of different tower investment appetites and criteria, reflecting the differing maturity of towerco proposition in which each typically invests. For an investor in relatively mature, proven platforms like The Carlyle Group, the key was finding great management talent and working backwards from there to evaluate the specific market and opportunity, in search of returns in the low to mid 20’s. Such later stage investors might be able to write cheques of US$250mn – US$1billion, and they tend to be more patient, allowing a deal to take perhaps seven or eight years to reach the targeted multiple, riding the ups and downs of currency fluctuations, before reaching an exit opportunity. A firm like Madison Dearborn Partners might be interested in opportunities at a slightly earlier stage; in their case smaller towercos in LatAm or Europe that have secured build to suit opportunities and are seeking capital to make early acquisitions. Such pioneering earlier stage investors typically seek returns in the mid-20’s or higher, and are often more interested in certain countries than others, trying to find a happy medium between avoiding high risk countries prone to currency fluctuations, but at the other end of the scale cautious of markets so attractive that valuations have become frothy. In contrast, an early stage venture investor like Alcazar Capital might seek a smaller cheque of up

Read this article to learn:< A comparison of the investment criteria, investment amount and return expectations from VC to equity

< Comparing appetites for investment in BTS vs sale and leaseback

< The drivers of towerco valuations

< A quick look at the investibility of Chinese and European towers

< Exit opportunities: trade sale vs IPO vs offload to an infrastructure or sovereign wealth fund

Six of the foremost minds in telecom tower investments shared valuable insights at the recent TowerXchange Meetup Americas, and we’re pleased to share some of those insights here. Moderated by experienced tower deal-maker Marco Cordoni, Senior Partner at Analysys Mason, the panel included Mark Johnson, then an MD at The Carlyle Group; Ryan Lepene, MD at Peppertree Capital; Zaid Alsikafi, MD at Madison Dearborn Partners; Eric Crabtree, the IFC’s “tower guy”; and Patrick Tangney, Chairman of Alcazar Capital whose subsidiary ASEAN Towers owns Irrawaddy Green Towers in Myanmar and Golden Towers in Vietnam.

Keywords: Meetup Review, Investment, Valuation, Tenancy Ratios, Build-to-Suit, Business Model, First Mover Advantage, Exit Strategy, Bankability, Densification, Country Risk, Anchor Tenant, ROI, Decommissioning, Sale & Leaseback, Private Equity, Debt Finance, Infrastructure Funds, IPO, Infrastructure Sharing, Africa, Latin America, Asia, Analysys Mason, The Carlyle Group, Peppertree Capital, Madison Dearborn Partners, IFC, Alcazar Capital, ASEAN Towers, Irrawaddy Green Towers, Golden Towers, American Tower, SBA Communications


TowerXchange Meetup panel

to US$50mn from angel and ‘B round’ investing through to more substantial institutional capital, seeking returns significantly beyond the 20s.

Ryan Lepene described Peppertree Capital as “less IRR sensitive, more focused on the cash on cash multiple.” One of the reasons for the attractiveness of this asset class is the proven path to ‘sweating the assets’, adding leaseups and ultimately attracting multiple buyers. So it’s seldom a short term hold: “time horizons are less important than value creation and doubling our investment,” added Lepene. The IFC plays a slightly different role in the market, combining debt and equity, but with a different level of flexibility to a commercial bank. Readers familiar with investment trends in emerging market towers will recognise that the IFC has a lot of capital at work in this asset class, with US$400mn invested in towers, another US$400mn secured


through partners, and access to sovereign wealth funds and Asian banks. The IFC are also able to provide local currency, taking currency risk off table. IFC’s Eric Crabtree expressed a personal preference to participate in growth capital over the venture space, and also called attention to an appetite for pure debt opportunities for larger players needing to mobilise significant capital. The prevailing view was that, given sufficient patience, emerging market tower investments could yield similar to returns to those delivered by US towercos in the late 1990s.

To what extent do expected returns vary in different geographies?

In terms of returns, for one investor tower deals fall into three buckets; those delivering high teens, those delivering mid twenties and those in the high twenties. Towers are a well-worn model

that investors can be comfortable with, and the transparency of the tower business model affords towercos and their investors the opportunity to enter geographies and startup environments which many investors wouldn’t as readily enter. In terms of the variation of expected returns in different geographies, it becomes a question of how much compensation the investor deserves for engaging with currency, counterparty and political risk. One investor suggested that Africa may be the only continent where carriers have defaulted to towercos. When counterparty risk is compounded by political instability, it ratchets up required returns. Ultimately, the aforementioned ‘gold standard’ growth in US tenancy ratios and asset values in the late 90s was driven by data growth, and the need for capacity and infill sites. Investors in emerging market towers are buying in to the same effect of evolution taking place in those emerging markets, however long it takes. And there is an ‘escape clause’ offered by the secondary buyouts starting to happen in emerging markets, which also demonstrates the repeatability of the model.

Some of the major investors in this asset class are opening local funds for emerging markets. The Carlyle Group, for example, has a US$1bn Latin American fund, from where they can draw on local knowledge for sourcing opportunities and legal advice. Carlyle have also recently released a fund in sub-Saharan Africa.


Comparing the investibility of build to suit and sale and leaseback How do the risks of backing a larger towerco pursuing substantial sale and leaseback opportunities, which benefit from a degree of co-location from day one, compare to backing a build to suit-centric towerco which doesn’t require transaction funding, but which can be more capitally intensive when operated?

Some investors prefer a mix; a substantial sale and leased back portfolio, which might look more attractive if secured with local funds to avoid currency risk, with a BTS opportunity attached. For others, like Peppertree Capital, “BTS and small acquisitions are our bread and butter – whether we’re building 25 or 50 sites, our objective is to grow with management teams and deploy capital incrementally over time, creating value for a future sale,” said Ryan Lepene.

There are a lot of BTS opportunities in CALA, particularly in Brazil. There is a pool of BTS-centric investors in parallel to a class of BTS-centric towercos. From a certain point of view, they’re playing the same game as the sale and leaseback focused firms, but the growth expectations and timing are different. Later, larger investors in more mature portfolios are looking for towercos with the potential to drive to scale, and to access a less expensive form of capital. From such companies’ perspective, too much focus on BTS can be dangerous and a hindrance to achieving that scale. If the towerco only does BTS, you have small to medium sized business which might perform from an IRR point of view, but there’s a risk of talented management getting bored and leaving. Sale and leasebacks offer the chance to prove a towerco’s ability to execute at scale, attracting share of mind with carriers, especially the big international carriers who represent the most credit worthy anchor tenants.

Investing in BTS-centric towercos is taking a risk on their ability to pick right sites, their relationships with the carriers, and ability to deliver. Credit risk is also critical to operating successfully in BTS. Working with credit-worthy first or second ranked operators is usually fine, savvy firms will shy away from the regular inbound calls from fourth, fifth or sixth ranked operators seeking BTS partners. Unfortunately, carriers have been known to get in trouble going by going haywire investing in BTS, which contributed to the bankruptcy of one Indian towerco for example. BTS investments need to be

While the formation of a major Chinese towerco, China Communications Facilities Corporation was recently announced, with ownership split between China Mobile (40%), China Telecom (30.1%) and China Unicom (29.9%), there remains no obvious opportunity for foreign investors to participate substantially in the entity prior to IPO – “we’ll believe it when we see it” was the prevailing opinion among participants in the last TowerXchange Meetup, albeit that was prior to the announcement. Investors will remain cautious of Chinese towers as long as they feel that the entity is being run solely for the benefit of the operators, rather than as an independent commercial entity.

A contrast was offered to the European tower market, where towercos like TDF have constantly exceeded anticipated topline growth rate expectations. The telecoms landscape in Europe has changed dramatically with both positive and negative implications for the investibility of towercos; there is tremendous demand for

capacity and infill, but many operators are under financial pressure due to macro trends such as the elimination of interconnect and roaming fees, regulators encouraging successful new entrants which take value out of incumbents, and the costs of spectrum and rollout for 4G.

While there are more transactions happening in broadcast towers in Europe, mostly involving infrastructure funds, there has been less deal flow in mobile towers, where the notion that these assets remain strategic is limiting MNO’s appetite to bring towers to market. With saturated operator markets and declining margins, growth opportunities may seem limited in Europe compared to the greater potential upside investing in African towers, for example. To make the independent tower business model work in Europe, one may need to decommission a lot of towers to achieve tenancy ratios approaching three, so the business would take on a different shape

Contrasting the investibility of Chinese and European towers


structured to make financial sense with a single anchor tenant, or have clear visibility of a second tenant.

Valuation drivers

Reviewing the history of tower transactions in LatAm, Africa and Asia, one finds huge variations in cost per tower not just because of the leaseback rate and term, but also because of market conditions. So what are the valuation drivers for investors?

People who have tower experience are more apt to do more deals because they think about valuation relative to construction cost and cost per tower, which itself is influenced by capacity, the credit worthiness of the anchor tenant, the leaseback rate, and the desirability of location – it sometimes seems more of an art than a science. And beware missing the potential upside from non-MNO tenants, which can be easy to overlook and represents a hidden source of value. Of course, the investibility of the towerco business model is very sensitive to tenancy ratios. In the first round of many processes, you often don’t see management’s projections of tenancy ratio, but that’s all the savvy investor wants to know! So, it seems there is a sanctity to the independent towerco business model and how it has been proven in mature markets. So how much tolerance do investors have to adapting that model for emerging markets – how much risk is too much?

“I’m more nervous of low multiple environments than high,” said one of our investor panelists. “Compensating for weak regulatory environments that might have an inability to defend the zone around tower puts the normal functioning of the business model at risk.” Exit strategies “There are a variety of exit strategy options, which makes this asset class attractive,” said one of our investors. The most talked about exit options were trade sale, IPO or offload to an infrastructure or sovereign wealth fund once the tower portfolio had matured. One investor said there was a “higher propensity for strategic exit” in this asset class – the acquisitiveness of the international tower companies offering an obvious exit opportunity, particularly in Latin America where AMT and SBA have both acquired several ‘middle market’ towercos as well as acquiring portfolios from carriers. There isn’t, yet, the same history of towerco consolidation in Africa, while in Asia AMT completed acquisitions in India before the MNO market was restructured, and is rumored to have appetite to bid for Viom Networks. The option for an industry sale means there’s a viable alternate to an IPO exit for late stage infrastructure investors in emerging market towers – one investor noted that five years after the sale and leaseback deals started in LatAm, the big towercos started consolidating. And TowerXchange

expects more towerco consolidation in LatAm before year end 2014.

“AMT and SBA are effectively conditioning public markets to accept that the independent towerco business model works,” added another investor. “I could see a day when a towerco with a diversified interest in multiple emerging market countries could go public because the public markets that see it worked with the three big US towercos.” “It’s more than just a choice between selling to one of the big three US towercos or an IPO,” added another investor. “There are also infrastructure funds, mega family offices and sovereign wealth funds; there could be a dozen people round the table. If you build a nice business with good cash flow and good growth, you’ll find a good exit.” “I don’t see AMT and SBA having the bandwidth to roll up all these emerging market towercos,” added a panelist. “But sovereign wealth funds from Gulf and the Far East want to put long term capital into this asset class in significant volume – there will be options.” Experienced tower owners’ long term a focus on cost reductions can drive as much value as co-location sales. Again, the panel preached the need for patience: “we like to see folks get to a strategic sale or IPO. I’ve stayed for 12 years to get to a good IPO. Investors can take comfort in the transparency of the towerco model – the gains secured by first movers acquiring the best portfolios,” concluded one investor

The TowerXchange who’s who:advisory and strategic consulting firms18 firms who have ‘been there and done that’ advising on tower transactions in Africa, LatAm and Asia

Do you need a proven advisor to conduct commercial, financial and/or technical due diligence on a portfolio of towers you’d like to buy? Perhaps you’re an MNO considering selling your towers and want to invite a third party to evaluate assets or instigate an auction process? Or maybe you need to hire an experienced consultant to review the investibility of a startup towerco or an established towerco in which you’re considering investing? Perhaps you’re the owner of such a towerco and need some help attracting private equity or debt investors… TowerXchange focus solely on the emerging market tower industry, and we’ve been collecting the names of companies and individuals most trusted by emerging market towercos, MNOs and investors to lead such assignments. While everyone featured in this who’s who has been referred by one or other satisfied client, TowerXchange can make no guarantees as to the exhaustiveness of this list, and inclusion does not constitute a ‘recommendation’ – you should certainly ask for and call advisory firms’ past customers and ensure any given advisory firm can meet your needs. TowerXchange are satisfied that the majority of the most prominent advisors to tower transactions in emerging markets are included in this special feature. However, if you’re seeking an advisor you might also consider reaching out to Gilles Tre-Hardy at Lazard, or Tony Worthington and Ayman Al Adl at Standard Chartered. We recommend you also read the companion piece to this article, TowerXchange’s Who’s who of law firms with direct experience of advising on tower transactions at http://www.towerxchange.com/towerxchange-whos-who-2/. If you would like an introduction to any of the advisors mentioned in either article, please email Kieron Osmotherly, CEO of TowerXchange, at [email protected]

Read this article to learn:< Which advisory firms have experience of advising MNOs or towercos on emerging market tower

transactions?

< Which firms specialise in commercial, financial or technical due diligence?

< Who can help me raise capital for tower transactions? Or evaluate the investibility of a given towerco?

< Who might I encounter as advisers to my counterparties?

Evaluating emerging market tower portfolios and towerco business plans is a multi-dimensional ‘black art’ known only to a handful of advisors. In this who’s who, TowerXchange profile 18 advisory firms with African, Latin American or Asian “dirt under their fingernails” when it comes to conducting due diligence on emerging market tower transactions.

Keywords: Who’s Who, Lawyers & Advisors, Strategic Consultancy, Investment, Valuation, Due Diligence, Data Room, Bankability, Asset Register, Private Equity, Debt Finance, Africa, South America, Asia, Altman Vilandrie & Company, Analysys Mason, A.T. Kearney, Barclays, Citi, Delta Partners, Deutsche Bank, EY, Ernst & Young, Green Ball Wireless, Hardiman Telecommunications, Intelli Towers, Intrepid Advisory Partners, Lazard, Media Venture Partners, Mott MacDonald, Standard Bank, Standard Chartered, TAP Advisors, TIA Telecom, Wellington Capital Advisors



Altman Vilandrie & Company (AV&Co.) is the leading strategy consulting firm focused exclusively on the telecommunications, media and related technology (TMT) sector. Founded in 2002, AV&Co. has 100+ consultants across its Boston, NYC and San Francisco offices, as well as its European partner – Solon Management Consulting – with 50+ consultants in Munich, London and Budapest. The firm assists leading mobile operators, tower providers, wireless infrastructure OEMs as well as all leading TMT PE investors in fast, high-impact and confident decision making. AV&Co. has extensive tower industry experience spanning tens of engagements (including Latin America, Africa, Asia, N. America, Europe) over 10 years for tower operator strategies as well as tower transaction due diligences. Our 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. Point(s) of contact for emerging market towers:Soumen Ganguly, Director, Altman Vilandrie & CompanyMario Quijada, Principal, Altman Vilandrie & Company

Analysys Mason is a global specialist adviser on telecoms, media and technology (TMT), offering both consulting and research to clients across the TMT sector. We have extensive experience of carrying out commercial and technical due diligence on tower transactions across Africa, Asia, the Middle East, Europe and South America, and have conducted due diligence reviews on more than 30 tower transactions worldwide. We have an excellent track record on the buy side, and have also provided strategic support to a number of operators considering tower spin-offs. Analysys Mason has worked for a large proportion of tower companies worldwide and/or their shareholders and lenders, by advising on M&A, debt and equity raising, and other strategic matters. We have also supported operators globally to develop business cases for network sharing, and its implementation. Point(s) of contact for emerging market towers:Marco Cordoni, Senior Partner, Analysys Mason

A.T. Kearney is a leading management consultancy globally, with a very strong practice in the telecoms industry. In the tower space, A.T. Kearney has been very active in advising some of the leading telecoms operators, towercos and private equity / financing investors. Our focus is on helping telecoms operators define a tower outsourcing strategy and structuring negotiations. For towercos, we have worked both on strategy and operational performance improvement. For private equity and financial sponsors, our contributions focus on commercial due diligence. Point(s) of contact for emerging market towers:Laurent Viviez, VP & Partner, A.T. Kearney

Soumen Ganguly, Director, Altman Vilandrie & Company and Mario Quijada, Principal, Altman Vilandrie & Company

Marco Cordoni, Senior Partner, Analysys Mason

Laurent Viviez, VP & Partner, A.T. Kearney


Barclays is an international financial services provider engaged in personal banking, credit cards, corporate and investment banking and wealth management with an extensive presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs approximately 140,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide. 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. In addition, Barclays facilitates capital raising activities through its leverage finance and ABS franchises, with a particular focus on wireless tower financing. Point(s) of contact for emerging market towers:Diego O. Mahecha, Managing Director, Barclays

Citigroup Global Markets Limited (“Citi”), the global corporate and investment bank, has one of the most preeminent TMT practices and is a leader in M&A advisory and capital raising. Citi has particularly stand out experience in the towers space, where it has advised MNOs and tower operators on a broad spectrum of transactions. Citi has been particularly strong in the emerging markets, where it has an extraordinarily high market share of successfully concluded deals, including multi geography sale and leaseback transactions for single clients. Citi is also considered a leading and innovative arranger of towers financing. Point(s) of contact for emerging market towers:Gulfrz Qayyum, Managing Director, TMT Investment Banking, Citi

Delta Partners is the leading Advisory and Investment firm specialised in Telecoms, Media and Digital (TMD) industry with offices in the Middle East, Africa, Europe, Asia and Latin America. We partner with global and regional telecom providers, tower operators, digital players and other TMD clients to help them address their most challenging strategic issues. 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. With more than 200 professionals, the group operates globally and covers the emerging and high-growth economies with a unique approach that combines strategic perspectives with a hands-on pragmatic approach. Delta Partners delivers tangible results to clients and investors through its exclusive sector focus on TMD. Our unique combination of Management Advisory, Corporate Finance and Investment Services creates unparalleled value for our clients and business partners. Point(s) of contact for emerging market towers:Federico Membrillera, Managing Partner and Head of Corporate Finance, Delta Partners

Diego O. Mahecha, Managing Director, Barclays

Gulfraz Qayyum, Managing Director, TMT Investment Banking, Citi

Federico Membrillera, Managing Partner and Head of Corporate Finance, Delta Partners


Deutsche Bank is a leading investment bank, offering a full suite of advisory, capital markets and structured financial products to its global client base. Deutsche Bank has a leading TMT franchise globally and has participated in a number of high-profile transactions in the TMT sector. In the tower space Deutsche Bank is providing M&A advisory services as well as financing services, 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. On the M&A side Deutsche Bank’s services include transaction preparation and process management, due diligence support, valuation and financial analysis as well as transaction structuring and negotiation. Deutsche Bank furthermore acts as an intermediary between investors and potential private or public issuers of equity and debt products, structuring transactions and facilitating effective capital deployment. Point(s) of contact for emerging market towers:Arnaud Burger, Managing Director, European TMT M&A, Deutsche BankThomas Kratz, Director, European TMT Coverage, Deutsche Bank

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. At EY, we continue to be at the forefront of transactions in the African tower market, successfully completing nine deals on the continent to date and advising on a host of others. We provide our clients the full range of advisory services to ensure a successful transaction from lead M&A advice to commercial, financial and tax due diligence and tax structuring. Point(s) of contact for emerging market towers:Justin Prichard, Director - Lead Advisory, Transaction Advisory Services, EYMatt Carter, Partner - Transaction Support, Transaction Advisory Services, EY

Green Ball Wireless Partners, LLC; based in San Antonio, TX US, specialises in brokering the sale or acquisitions of telecom assets, both domestic and international. We’ve done extensive work in the U.S., with some exposure in Asia-Pacific, presently focused on Latin America. Our expertise includes towers, rooftop installations, and outdoor billboards; with services covering lease acquisition, tower/land purchase, and new site development. We are a boutique broker firm. In some case we are a broker of brokers, assuming a purchase opportunity from another party to find a buyer for a deal, or finding a seller for a buyer. For the past few years we’ve kept a concentrated focus on LATAM, sourcing transaction opportunities across the region at all levels of the industry. From MNO’s, towercos, including down to the individual landowner or private business entity. Our goal is to put a deal together, or broker a transaction, all while establishing a win-win proposition for both seller and buyer over the long-term. Point(s) of contact for emerging market towers:Robert O’Shea, Managing Partner, Green Ball Wireless Partners, LLC

Arnaud Burger, Managing Director, European TMT M&A, Deutsche Bank and Thomas Kratz, Director, European TMT Coverage, Deutsche Bank Justin Prichard, Director - Lead Advisory, Transaction

Advisory Services, EY and Matt Carter, Partner - Transaction Support, Transaction Advisory Services, EY

Robert O’Shea, Managing Partner, Green Ball Wireless Partners


Hardiman Telecommunications Ltd. was established in 1994. We are a boutique consultancy specialised in support of telecommunications investors, telecommunications carriers and governments worldwide. Our clients include leading private equity funds, the corporate finance / advisory and investment functions of leading global banks, major regional and global telecommunications carriers, towercos and national governments. We span investment, business and technical planning, operations, competitive assessment and performance enhancement. We are particularly active in end-to-end support of mergers, acquisitions and divestitures. All of our staff have held senior profit-accountable positions with global telecommunications carriers, manufacturers and systems integration houses prior to joining us. This allows full support of clients across the continuum from technology through to market effectiveness, spanning engineering, commercial strategy, financial structuring and proven operating methodologies. Our towers credentials, buy-side and sell-side, include commercial and technical due diligence, operational due diligence, strategy assessment, portfolio optimisation and strategic planning in Europe, Asia and Africa. Point(s) of contact for emerging market towers:Enda Hardiman, Managing Partner, Hardiman Telecommunications

Intelli Towers provides comprehensive tower services including; asset valuations for buyers and sellers of towers; verification of non-documented towers and foundations; and lifetime expansion and capacity extension with the minimum of investment. Intelli Towers also provides supporting consulting and tower supply services. Intelli Towers Ltd. is partly owned by the Danish engineering design company, KPR Consult A/S, located in Copenhagen – Denmark, a highly competent Engineering group a unique position in Northern Europe as a niche company within the mobile industry serving several of the large operators and vendors as “Owners Engineer” handling Design, Static analyses, Site Sharing / Co-Location Tower Management and Tower supply through approved manufactures. KPR Consult A/S is a 100% independently company within its field having its own comprehensive, innovative tower and foundation analysing software and management system. Point(s) of contact for emerging market towers:Henrik Kamstrup, CEO, Intelli Towers

Intrepid Advisory Partners is an independent advisory firm with a particular focus on wireless infrastructure. Intrepid provides direct senior involvement and also leverages the experience of its senior advisor network to provide clients with a differentiated solution. Managing Partner, Daniel Lee, also serves as TowerXchange’s Chairman. Intrepid has unparalleled expertise in the wireless infrastructure space across the emerging markets. Intrepid principals have advised on most of the tower transactions in Africa to date working with a variety of mobile operators including MTN, Millicom and Cell C. Intrepid principals have also worked with each of the Big 3 towercos in Africa in various fund raising initiatives. Intrepid works with some of the largest tower operators globally as well as very early stage companies. We work across a variety of emerging markets in Africa, Latin America and Asia as well as more developed markets. Point(s) of contact for emerging market towers:Daniel Lee, Managing Partner, Intrepid Advisory Partners

Enda Hardiman, Managing Partner, Hardiman Telecommunications

Henrik Kamstrup, CEO, Intelli TowersDaniel Lee, Managing Partner, Intrepid Advisory Partners


Media Venture Partners (“MVP”), is a San Francisco-based telecommunications, media and technology (TMT) focused investment banking firm. Since our founding 27 years ago, MVP has advised on over $16 billion worth of transactions with hundreds of sellers. MVP’s tower industry experience dates back to 1997, when the wireless tower industry as we know it today was beginning to form in the U.S. As a team, we have closed on nearly 150 tower transactions ranging from private equity-backed tower developers, to wireless carrier and broadcaster sale-leasebacks, to working on behalf of smaller, closely-held businesses in the sale of their tower assets. We are experts in the tower industry and can assist with divesting of business holdings, financing your company’s growth plans, or provide market valuation services for your assets or business. Point(s) of contact for emerging market towers:Clayton Funk, Managing Director, Media Venture Partners

Mott MacDonald is a word-class employee-owned management, engineering and development consultancy with global experience, local insight, and a multi-sector perspective. Our 14,000 staff operate in 140 countries through our global network of offices – with various in Africa including Johannesburg, Durban, Cape Town, Gabarone, Kampala, Lagos and Lusaka. In 2014 we were named overall Global Technical Advisor of the Year for the fifth time in six years by Infrastructure Journal. Our Technology and Communications team offers a unique blend of business and technology expertise; providing an independent perspective on many markets and technologies and successfully delivering projects to leading financial advisors, lenders, operators, equipment vendors, governments and regulators. Our towerco expertise spans, in particular, strategy development, due diligence (commercial and technical) and operational assessment – and we have recently delivered various assignments in these areas. As an example, we have been engaged as commercial and technical due diligence providers for tower asset transactions involving a total of over 20,000 towers across 19 countries in Africa, working with most of the major towerco’s and operators – providing us with unrivalled knowledge and experience. Point(s) of contact for emerging market towers:Dave Tanner, Chris Pollard, Simon Clayton-Mitchell and Ed Siegle, Mott MacDonald

Standard Bank. They call it Africa. We call it home. Rooted in Africa with strategic representation in key sub-Saharan and other emerging markets, Standard Bank is a bank with a global reach. Standard Bank has a footprint which spans 20 countries across the African continent, including South Africa, and 13 countries outside Africa, including China and Brazil, which are key to our cross border strategy and success. Standard Bank has a long history in the telecommunications and media sector, having concluded the first major telecommunications transaction in 1998. We work with major multinational and regional operators across the entire spectrum of TMT as they expand across Africa and beyond, as well as with smaller players that are developing a vibrant industry on the continent. Standard Bank has been active in the tower infrastructure sharing sector since its inception in Africa and has led over 15 transactions across financing and advisory over the past 3-4 years. Point(s) of contact for emerging market towers:Nina Triantis, Managing Director, Global Head of Telecoms & Media, Standard Bank

R. Clayton Funk, Managing Director, Media Venture Partners

Dave Tanner, Chris Pollard, Simon Clayton-Mitchell and Ed Siegle, Mott MacDonald

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


TAP Advisors is a leading boutique investment bank, with particular expertise and focus in the telecommunications sector and a long history of working on mobile and broadcasting tower situations. As an independent advisor, TAP provides our clients with impartial, objective and strategic advice regarding M&A and financing transactions. Our most recently announced tower deal was the sale of AT&T’s US mobile tower portfolio to Crown Castle for US$4.8bn, where TAP acted as AT&T’s lead advisor. We also acted as advisor to Deutsche Telekom in connection with the US$2.5bn monetisation of the TMO USA towers portfolio. With offices in New York and London, TAP’s senior professionals have advised MNOs around the world on the sale of their mobile tower portfolios, have worked on tower transactions in over 25 markets globally to date, and have a unique level of knowledge and understanding regarding the intricacies of such transactions and the distinct regional factors that impact those deals. Point(s) of contact for emerging market towers:David Lowham, Partner, TAP Advisors (for Americas)Bill Kennish, Managing Director, TAP Advisors (for EMEA)

TIA has history in network design and optimisation, facility condition assessment, asset planning and maintenance solutions, asset audits and FAR creation, creating accurate FAR’s for some of the largest operator groups in Africa. TIA focuses on conducting full asset walkdowns of ALL telecommunication assets including RF equipment and sites, switching centres and IT/ Switching equipment and warehousing facilities and inventory. Unique quality checking methods and processes guarantee data accuracy and completeness, allowing the towerco and Operator to be confident in the ssset value in any towerco transaction. A six step process ensures that every data field captured is verifiable and accurate: < Bespoke data collection matrixes< Remote interrogation and verification of active assets< Digitisation of passive information at source and tagging of assets< Centralised data storage, verification and analysis< Automated FAR generation< FAR maintenance and operational maintenance All working together to ensure 4 Sigma asset data accuracy for operators and towercos. Point(s) of contact for emerging market towers:Lance Dickerson, CEO, TIA Telecom

PT Wellington Capital Advisory (WCA) is a privately-held, fully-independent professional services firm, with offices in Jakarta and Singapore We assist clients to develop and leverage significant investments in the TMT (Technology, Media & Telecoms) space within Indonesia and throughout SE Asia, with particular emphasis on opportunities in the rapidly-evolving tower industry. WCA comprises a team of highly-credentialed sector experts, with extensive TMT operating experience including the successful completion of infrastructure transactions totaling 20,000 towers. Our deal origination service combines rigorous market, financial and investment analyses with exhaustive commercial, technical and financial due diligence processes. Working with WCA also provides access to our network of fully-vetted, in-region business partners, professional advisory specialists and investor groups. WCA manages the entire investment cycle on behalf of network operators, tower companies, PE firms and investment banks who are seeking to participate in the rapidly-maturing TMT markets throughout SE Asia. Points of contact for emerging market towers:David Burke and Geoffrey Simms (Jakarta office)Dave Shuker and Paul Hemming (Singapore office)

David Lowham, Partner, TAP Advisors (for Americas) and Bill Kennish, Managing Director, TAP Advisors (for EMEA)

Lance Dickerson, CEO, TIA Telecom David Burke, Co-founder and CEO, PT Wellington Capital Advisory


TowerXchange also presents a matrix tracking which specific disciplines each advisor specialises in. Different advisors are more focused on sellside, buyside, or on raising capital and advising PE or debt investors; while you may need different advisors for commercial, technical and financial due diligence.

Commercial due diligence on emerging market tower transactions

Technical due diligence on emerging market tower transactions

Financial due diligence on emerging market tower transactions

Advising towercos buying emerging market towers

Advising MNOs selling emerging market towers

Advising private equity and debt investors into emerging market towers

Strategy and M&A advice to other stakeholders (such as TI firms and ESCOs)

Capital raising processes for emerging market towercos

HardimanTelecommunications

Intelli Towers

Intrepid Advisory Partners

Mott MacDonald

Media Venture Partners

Standard Bank

TAP Advisors

TIA Telecom

PT Wellington Capital Advisory

Altman Vilandrie & Company

Analysys Mason

A.T. Kearney

Barclays

Citi

Delta Partners

Deutsche Bank

EY Through Partners

Green Ball Wireless

Note: Standard Bank due diligence capability is as part of a financing or advisory transaction, not as a commercial or technical consultant

Financial due diligence for tower transactionsHow to prepare towers portfolios ready for sale – issues and pitfalls MNOs and towercos need to be aware of


In our last article we discussed the different towerco models which are communally operated, particularly in Africa. In this second article we will share some insights into preparing data for, and the approach to financial diligence, both of which are a fundamental part of any tower transaction. The themes are principally around ’Own and Operating’ transactions, where a towerco is acquiring a portfolio of towers from an MNO however, it is applicable to Managed Services or Management and Marketing agreements. Robust financial information is paramount to the success of a deal, ensuring maximum value for the seller by giving the buyer confidence and comfort over the costs and revenues of the towers being sold. In our experience, we often find sellers are not adequately prepared for a transaction with financial information being unavailable, incomplete, inaccurate, or unable to be supported by the underlying financial records or contractual information. When this is the case it adds a significant amount of time and expense to a transaction process. A buyer will try to establish appropriate operating costs and revenue per tower through the use of their internal teams and third party diligence providers, which will be fundamental to its offer price. This takes time, delaying the transaction and can place significant information demands on the seller, as well as eroding confidence over the performance of the portfolio for sale.

Matthew Carter, Partner – Transaction Support, Transaction Advisory Services, EY

Read this article to learn:< Why assembling robust financial data on emerging market towers can be so challenging< Where value and time can be lost< What a buyer wants to see< How financial due diligence can help both buyer and seller

Keywords: How to Guide, Towercos, Managed Services, Strategic Consultancy, Deal Structure, EBITDA, Tower Cash Flow, Rental Rates, Valuation, Due Diligence, Opex Reduction, Tenancy Ratios, Co-locations, Build-to-Suit, Business Model, Site Level Profitability, KPIs, Sale & Leaseback, Operational Lease, Africa, Infrastructure Sharing, Ernst & Young

At EY, we continue to be at the forefront of transactions in the African tower market, successfully completing nine deals on the continent to date and advising on a host of others. We provide our clients the full range of advisory services to ensure a successful transaction from lead M&A advice to commercial, financial and tax due diligence and tax structuring. Our core telecom infrastructure team is based in the UK, drawing on an extensive and specialised network of offices in 33 African countries with 5,500 professionals to ensure that we provide our clients with the best advice possible.


Such issues may lead to a loss in potential value for the seller as a buyer will look to use its own more prudent assumptions in its valuation model, rather than the assumptions put forward by a seller (and which cannot be supported). Certainty is reduced over synergies and cost savings they can deliver to the portfolio post transaction, making it a more risky investment and more difficult to raise finance. Ultimately at an extreme such issues can lead to a transaction falling over.

Why does a lack of robust financial information occur? The cost base and revenues generated from a tower network are not generally a material part of a MNO’s operations, and as such are not normally separately accounted for or monitored in sufficient detail for an MNO to quickly extract the historical costs and revenues information that a buyer is looking for. The operations of the

passive tower portfolio are also rarely standalone necessitating both a degree of carve out analysis as well as “estimation” to derive a set of standalone financial results. Typical carve out issues include maintenance contracts which typically cover work on both passive and active assets, or when rental costs include ground rent paid for the towers being sold and co-location rent paid to third party tower owners. The buyers ability to understand the historical costs of the passive network being sold are fundamental to its assessment of value. Experience shows us, particularly in Africa, that historical financial information is often impacted by timing issues around the receipt of cost invoices and payments from customers. For example, electricity invoices are received irregularly often resulting in a high degree of estimation and significant month on month volatility when estimates are trued up to reflect the actual invoiced amounts. When such timing issues occur significant analysis is required

to understand the actual cash costs, and this analysis should be done by the seller. In our experience, MNOs do not spend sufficient time in advance of the transaction working through all the different considerations in preparing robust historical financial information to potential buyers. Often the approach is just for sellers to provide what is available rather than asking themselves what would a buyer need in this circumstance and how can I provide it to them.

What does a buyer want to see? Most buyers want to see supportable historical monthly opex, revenues (cash received and barter arrangements) and capex for the passive assets being sold for at least two years and the most recent trading period to date. This level of information will provide them not only with sufficient data for the basis of their business plans, but if prepared properly will provide a buyer with the confidence it needs. For this confidence to arise the monthly financial information needs to be supported by the underlying financial records, that reconcile to management and audited accounts or other supporting documentation such as third party contracts, evidence of cash receipts / payments and third party invoices received. A buyer will also need to be made aware of any proposed changes post transactions for example: < When will tenants who currently have a barter arrangement with the MNO move to cash paying

“ “In our experience, MNOs do not spend sufficient time in advance of the transaction working through all the different considerations in preparing robust historical financial information to potential buyers. Often the approach is just for sellers to provide what is available rather than asking themselves what would a buyer need in this circumstance and how can I provide it to them.


and at what rate?< Will agreements with tenants change from a partial sharing arrangement, where the tenant provides their own power, to a full sharing where the tower owner provides the power and bills a higher rental fee?< Where MNO owns land that towers are located on, will this land be included as part of the transaction or will the MNO become a land lord to the buyer with an additional ground rent to be paid?

How does financial due diligence help? To date EY has worked with a number of towercos, to assist them in establishing what the historical costs and revenues of portfolios are and to fill in the gaps often left by what the MNOs provides. Our experience is that MNOs rarely go through a robust process of extracting, preparing and challenging financial information which is to be prioritised as a consequence buyers see significant value in engaging a financial diligence provider to provide the support they need, as well as to give a second opinion on the assumptions to include in their valuation. Often, the initial costs and revenues presented by MNOs are inaccurate and incomplete, a fact which is quickly uncovered as a buyer movers through its due diligence process with MNOs then running the danger of being “on the back foot” during subsequent discussions on portfolio performance and value. Financial due diligence does not however have to be restricted to the buyer. A seller should consider

engaging a diligence provider so that:< The seller will have a clear view on actual costs and revenues of the portfolio, supported by an independent third party. This will put the seller in a more informed and supported position for negotiating transaction price of the sale and any ongoing MSA with the buyer.< Historical financial information will be identified earlier in the process and the seller will be aware of upsides that may have previously been missed (and which would not necessarily be flagged if the buyer was performing the diligence work). This reduces the likelihood of a reduction in offer price as the deal progresses and helps ensure maximum value is achieved.< A seller due diligence report (i.e. a vendor due diligence report) can be provided to multiple potential buyers keeping their transaction costs down and potentially more parties interested in the portfolio, thus increasing the opportunity for a more competitive sales process and a better sales price.< The ultimate buyer gets reliance on the financial due diligence work performed, which can be used to support the raising of finance. Presently, the use of vendor due diligence reports is not common in the sector and especially in Africa. Whether or not an MNO commissions such a report, our view is that there is still a significant amount of pre-deal worth that an MNO can do around financial information to be presented to buyers which will not only help to increase confidence and comfort, but will also make for a smoother disposal process

EY | Assurance | Tax | Transactions | Advisory About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a betterworking world for our people, for our clients and for our communities. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

For more information about our organization, please visit ey.com. Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. EY accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material.

Buying and selling assets at the ‘grass roots’ level in LatAm and APACExperiences brokering small to medium sized land lease, tower, rooftop and billboard deals

TowerXchange: Please introduce us to Green Ball Wireless Partners Partners. Robert O’Shea, Managing Partner, Green Ball Wireless Partners (GBWP): Green Ball Wireless Partners specialise in wireless acquisitions, domestic and International; including towers, rooftops and billboards. We prefer billboards with wireless tenants, however, we have an interest in strong billboard assets as well as other leased assets. We’ll review opportunities in Europe, North America, LatAm and Asia-Pacific. Our focus for the last three years has been in Central and South America, with most success in Central America. With the US market saturated with investor activity and bidding wars, I felt it would be a path of lesser resistance in LatAm, and that seems to have proven itself. We’re doing some acquisitions of some smaller portfolios, with an eye on some larger ones, and in that process, I’m either sourcing the opportunity or being referred to one from associate brokers on the ground in Costa Rica, Panama and Colombia – people whose roles are aligned with the wireless market, enabling them to source ‘grass roots’ opportunities. I then present these opportunities to our investor group associations. As we continue to do deals and grow, and move into new markets, we will acquire towers and other telecom sites, and ultimately fund the build-out of these assets.

Currently we are closing on a nice portfolio of outdoor billboards across Panama and Costa Rica. These sites all have wireless tenants, and the

Read this article to learn:< The criticality of ‘boots on the ground’ to identify opportunities at the grass roots level

< The different buyers interested in portfolios of 25-50, 50-500 or 500+ assets

< The implications for due diligence of tight auction deadlines in South and Central America

< How to sell a ‘grass roots’ level opportunity

< Hints about specific opportunities in Panama, Costa Rica and Colombia

Wireless assets come in many shapes and sizes, from high profile sale and leaseback transactions between multi-national MNOs and towercos, to smaller, regionally focused deals when a couple of dozen to a few hundred towers, rooftops and billboards may change hands. TowerXchange wanted to understand how the market worked at this ‘grass roots’ level, particularly in Central America where the size of many markets is prohibitive to achieving conventional concepts of ‘scale’, so we spoke to Robert O’Shea of Green Ball Wireless Partners.

Keywords: How to Guide, Lawyers & Advisors, Acquisition, Investment, Valuation, Due Diligence, Exit Strategy, Bankability, Country Risk, Rooftops, Billboards, Grass Roots, Sale & Leaseback, Private Equity, Infrastructure Sharing, South America, Central America, Colombia, Panama, Costa Rica, Green Ball Wireless Partners


Rob O’Shea, Managing Partner, GBWP

deal has given us access to a portfolio of the same across Central America. I’m presently looking at several options for it, including a lease-up to other carriers that may need added coverage in these other markets. When I was in Panama this past year to finalise a deal, I had the opportunity to take several meetings, including one carrier, and other commercial groups to discuss their assets and the potential opportunities. That trip proved to be a segue to opportunities in Colombia, which we are very excited about. TowerXchange: How does the tower industry work at the ‘grass roots’ level of owners of individual and small portfolios of sites?

Robert O’Shea, Managing Partner, Green Ball Wireless Partners: We tend to farm opportunities at the ‘grass roots’ end of the market, with an eye out and ear to the ground for higher-level deals.


Many people who own the land under multiple towers, or several buildings with rooftops, or a portfolio billboards, don’t really know the value of these assets from a telecom real estate perspective – they don’t understand the context and the opportunity. We help them explore and discover the opportunity to “cash out”, or “cash in”, whether we acquire the lease, help with lease-ups, or consolidate with other assets to form an investible portfolio.

TowerXchange: What is the structure of the tower industry at grass roots level in Central and South America? Are there a substantial number of small portfolios of assets in the hands of private owners and small firms? Are they generally ‘going concerns’ not looking to sell, or is there a lot of consolidation at the grass roots level?

Robert O’Shea, Managing Partner, Green Ball Wireless Partners: The large publicly traded towercos have substantial portfolios in multiple countries. There are regional towercos with a presence in maybe one or two countries. Beyond the regional level or mid-market groups, we’ve only scratched the surface. There seem to be few micro-market or small-shop companies. We continue to work to connect with those at the grass roots, we want to engage them, and we want them to come to us so we can examine any and all opportunities to work with them.

Our path to connecting with groups in Central America began by identifying locations of some assets and then contacting the party directly, in some cases with boots on the ground introductions. We

found direct, or indirect party associations that got us where we needed to be. The LatAm market does not have the easily accessible data as we have here in the U.S., therefore, resourcefulness and key contacts in-country do pay off both in sourcing and in due diligence.

I believe there are a number of great opportunities there, many waiting to be sourced. I’ve had quite a few conversations, including a few in-person meetings down there. Some that are on-going dialogs, and others in development.

It’s interesting, many people that I’ve spoke with down there have not necessarily been looking to sell, however, we’ve been able to dialog with them, to fully vet any opportunities, and found ourselves

“ “Our path to connecting with groups in Central America began by identifying locations of some assets and then contacting the party directly, in some cases with boots on the ground introductions

Billboard in Panama, brokered by GBWP


in many lengthy and ongoing discussions. As is the case in many businesses, timing is crucial, or it may complicate an opportunity. Some groups have been going through structural changes, acquisitions, et cetera, and so conversations can get put on hold. Some we are circling back to now.

TowerXchange: Talk to us about the different buyers and investors attracted to wireless infrastructure asset portfolios of different scales – are the same parties interested in a small portfolio of 25-50 ground leases, rooftops or billboards as in medium sized portfolios of 50-500 towers? At what scale does an opportunity become ‘investible’? Robert O’Shea, Managing Partner, GBWP: Well, we have the 1,000 pound gorillas as I mentioned, American Tower and SBA Communications, on down to the middle market / regional towercos, some various equity groups as well, all open to listen to a lot of opportunities. The larger regionals may go into a deal of say 50-100 sites, then of course, the gorillas don’t want to touch anything less than several hundred. If a group is already inside a country where there may be a deal on the table, yet it lacks their preferred scale, I may be able to talk them into entertaining it, or consolidating it with a second opportunity to get to scale. Market entry is not an inexpensive proposition, so size-appropriate portfolios and/or the opportunity for subsequent transactions needs to exist. There is a discriminating level of interest below a certain threshold, which is why we need to

work with and develop the grass roots business, or individual shops.

Everyone will take a look but they all want the towers, and usually equally open to rooftops; however billboards are a developing taste. Billboards are still unknown to many or they’ve just been overlooked. So, yes, for the most part the key players are looking at buying the same assets, with the preference on buy and leaseback, or build-to-suit. The other side of this is acquiring the lease on the sites, which is quite common in the U.S., and a more difficult process internationally, compounded when factoring in remote locations. In summary, a portfolio of perhaps 25-50 sites can attract investors, either a towerco or private equity. We will have a regional towerco buyer for a portfolio of 50-100 or so sites. Portfolios of 500+ sites tend to be sold by carriers and brokered by the big investment banks such as Citi, Deutsche and Morgan Stanley. Auction deadlines can be tight in Central and South America, which means you may not have long to complete due diligence. Brokers help the investors to understand the current and potential future yield, and place the opportunity in a global and local context. We’ll work with buyers or sellers – transparently representing one, but I recently represented both parties in Panama, very transparently, albeit compensated by the seller only.My job is to get the best front-side cash for the seller, but also find a win-win to complete the deal. GBWP will do more than the big guys who stop at the best purchase price, for example, we’ll work on scenarios

and negotiate revenue-sharing on any future upside. TowerXchange: Does the pool of prospective buyers change considerably according to perceptions of country risk? Robert O’Shea, Managing Partner, GBWP: Absolutely! I’ve had excellent opportunities in the past in Asia-Pacific and LatAm, where portfolio asset fundamentals were very attractive for any investor, however, in the respective countries the “politics” didn’t pass muster. Whether a country has any foreign investor restrictions or regulations, a decision to move forward can be halted quickly by the over-riding known, or perceived level of risk. While there are some amazing growth opportunities at face value, the reality is that some areas will remain untouchable for the foreseeable future. If you’re in the tower game or looking to be in the game, you’ve got to be in it to win it – you can’t afford to stay idle. From small private equity to institutional buyers, where the larger cash goes, others typically follow – figuring the big players have accurately diagnosed risk.

Chile is a good example. We see Chile as a great opportunity. There are auction blocks coming up, it’s an investible country in an attractive region with stable politics and a large and growing telecom industry. But how does the slowing of exports indirectly impact short term market growth? Chile has taken a big hit on falling sales to China, yet overall we still see Chile as a great opportunity.


TowerXchange: How do you sell a ‘grass roots’ level portfolio of ground leases, rooftops, billboards or towers? How do you call the opportunity to the attention of prospective towerco or investor buyers? Robert O’Shea, Managing Partner, GBWP: First, I have to know all there is to know about the assets and the individual seller or business entity. Transparency at all levels and across all details is critical. Some things are easily missed. The more I know, the quicker I can determine where and how to present a deal. Appetites and risk tolerances are all different.

I personally get on the phone and speak to a potential buyer. We talk fundamentals first. If the buyer or investor can get their arms around the fundamentals, whether it be tower or billboard, Panama or Peru, then we can drill down deep very quickly. If we can’t sell certain assets today, we’ll go to work on a lease-up to increase cash flows, so that when I subsequently am able to bring those assets to market, it’s more equitable for all parties involved.

TowerXchange: I understand you’re working on a current opportunity in Colombia that you can’t say too much about, but can you give us your view of the investibility of telecom sites in Colombia, particularly in the context of the rollout of LTE, commencing in earnest in 2014?

Robert O’Shea, Managing Partner, GBWP: Colombia is a another attractive market. An open trade market

and a big trade partner with the US, and eyes wide open for investment, Colombia offers solid growth potential. Rollout of LTE will create amendment revenue opportunities in Colombia that affects almost every tower owner. We’ve had some dialog with a group that gives us exposure to a very large portfolio in Colombia. My thoughts are that the proposition could go several ways. And because of who we are dealing with we could easily be out in front of others very quickly. I’ve come across some individuals at work at the grass roots level in Colombia. They are setting the framework for a unique business model that we may explore in the near future. This goes to the point; you can’t be a one-answer-only solutions provider.

TowerXchange: Let’s sum-up by asking you your view of Green Ball Wireless Partners’ role in the extension of the independent tower industry into new markets.

Robert O’Shea, Managing Partner, GBWP: Our efforts are focused on bringing asset portfolios to the table that include tower and rooftop purchases, leasehold acquisitions, and potential build-to-suit. The paradigm shift of wireless providers divesting themselves of non-core business assets has more than caught hold, it’s a model that has gone global. In that shake-out, savvy investors are coming to the market, and smaller entrepreneurs are throwing their hats into the towerco model. We are going to be in the front, middle, and back side of this evolving industry.

Where the wireless growth is hot and while the market is good, roll-out will continue, increasingly driven by the investment of the towercos. When the industry slows or the markets cool, we’ll drill down to more individual sites with the individual property owner who “needs” to tap capital.

TowerXchange: Finally, what makes a good broker of a tower deal? Robert O’Shea, Managing Partner, GBWP: A seller or buyer needs a team that has Confidence and Resourcefulness, and not a one-answer-only solutions provider. A good broker is driven by the needs of their client. Your broker has got to know who to call, and be discerning about who to call. And a good broker can’t be afraid to turn over new and old stones. There may still be opportunities with people who passed on previous opportunities because the market changes so quickly

“ “If we can’t sell certain assets today, I can lease them up and increase cash flows, so that when I subsequently am able to bring those assets to market, it’s more equitable for all parties involved

Special feature:

IHS own or operate over 90% of the towers in Cameroon and Cote d’Ivoire having acquired 827 towers in Cameroon and 931 in Cote d’Ivoire from MTN in late 2012, for a US$143mn and US$141mn respectively, to which they added the operation of a further 2,000 Orange towers early the following year. In part one of TowerXchange’s Cameroon and Cote d’Ivoire special feature, we introduce you to the Cameroonian market, share Kenechi Okeleke’s analysis of the tower sharing market in Cote d’Ivoire, and chat with Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA at Orange to understand the operator’s view of trading in markets where a single towerco is dominant. Coming in the next edition of TowerXchange: exclusive interviews with Rhys Phillip, CCO at IHS; Dov Bar-Gera, CEO of metropolitan 4G innovators YooMee, which is well established in Camroon and which recently launched in Cote d’Ivoire. Plus we feature BMI’s analysis of the Cameroon market.

Cameroon and Cote d’Ivoire Case study, part one

In part one of this case study81 Introduction to the tower industry in Cameroon

83 BMI: Cote’d’Ivoire market dynamics good for

tower sharing

86 An operator’s experience of working with

towercos from Orange


Introduction to the tower industry in CameroonIHS acquired or operates 90% of towers in Cameroon; Viettel launches 3G in September 2014

Viettel’s March 2014 launch was recently postponed to September, but the pressure of time to market and shrinking window of exclusivity in 3G, which runs through the end of 2014, may be eased by Viettel signing an agreement to co-locate on IHS towers. While clear market leaders, MTN and Orange are not the sole players in Cameroon. Cameroon Telecommunications is the incumbent operator, launched in 1998. Camtel’s website states that they have about 120,000 fixed line subscribers, plus over 400,000 CTPhone customers using fixed/mobile CDMA technology, with a re-entry into the mobile market pending. YooMee launched in Cameroon in 2011, where it provides 4G service in Yaoundé and Douala. There is huge growth potential in the Cameroonian telecoms market, where penetration is below SSA average at 67.3% and where coverage reaches 85% of the population (stats courtesy of the GSMA). If you’re interested in Cameroon, we recommend you download the excellent (and free!) GSMA Green Power for Mobile “Best Practices for Energy Provision in Telecoms: Francophone Africa” report, released in April 2014, which focuses on Cameroon and Senegal. In that report, the GSMA suggests there are 2,090 towers in Cameroon, of which 533 are off-grid, 34% of which are using solar power (plus two on-grid grid-DG-solar hybrids). Energy opex reduction remains a priority - according to Orange, fuel represents 52% and the grid 48% of the total energy cost in Cameroon.

Read this article to learn:< Mobile penetration and coverage in Cameroon

< The competitive landscape for MNOs

< Viettel’s 3G launch timetable and YooMee’s 4G service

< Current adoption of green power and IHS’s energy efficiency investment timetable

Two major shakeups have brought about a period of unprecedented change and opportunity in the hitherto under-developed Cameroon telecommunications market. The transfer of over 1,900 towers by both market leading MNOs, MTN and Orange, to IHS Africa has coincided with the licensing of new market entrant Viettel.

Keywords: Market Overview, 3G, 4G, Batteries, Fuel Security, Network Rollout, New Market Entrant, Off-Grid, Renewables, Solar, Acquisition, Operational Lease, Sale & Leaseback, Infrastructure Sharing, Africa, Cameroon, GSMA, IHS, Cameroon Telecommunications, CamTel, YooMee, MTN, Orange


Now that they own or operate over 90% of Cameroon’s towers, IHS Africa have become the ‘king buyers’ of telecom power in the country, supported by their local O&M subcontractors. Having concluded their initial site assessments and upgrades of generators and batteries, IHS is now evaluating alternative energy solutions in Cameroon. “IHS tend not establish power pass through agreements – we find our clients prefer a full service price structure inclusive of a standard amount of power,” says Rhys Phillip, Chief Commercial Officer of IHS Africa in his TowerXchange interview to be released in our next edition. “So IHS acquire and upgrade the power assets, absorb the risk of diesel price fluctuations and pilferage, and in return stand to benefit from energy efficiency improvements”


Estimated tower count, Cameroon (before Viettel rollout)

Owned or operated

by IHS

900

1,000

190

Formerly owned by MTN Operated by IHS, owned by Orange Others

Sources: TowerXchange, IHS, GSMASource: GSMA Best Practices for Energy Provision in

Telecoms: Francophone Africa

1,557On-grid

352Off-grid

181 Solar

How many of Cameroon's towers are on-grid, off grid and use green power?

Côte d’Ivoire:Market dynamics good for tower sharingBMI’s tower analyst Kenechi Okeleke bullish about tower market in Côte d’Ivoire

Kenechi Okeleke, Senior Analyst, BMI

IHS Towers, SWAP Technologies and their suppliers are well placed to take advantage of opportunities in the Côte d’Ivoire tower services market; but IHS’ strong funding gives it greater capacity to absorb existing tower assets and build new ones more quickly. SWAP commenced operations in Abidjan in 2009, making it the first major independent tower-services firm to enter the market. SWAP launched its first co-location site in August 2010 in line with its primary objectives of constructing build-to-suit (BTS) towers and providing managed services to support mobile operators in the country. Although some mobile operators have subscribed to SWAP’s services since 2010, SWAP owns only a few towers in Côte d’Ivoire, and tower outsourcing services did not fully take off in the country until October 2012 when IHS Towers reached a deal with MTN to acquire up to 931 towers for US$141mn. IHS reached another deal with Orange in April 2013 involving more than 2,000 sites in Côte d’Ivoire and Cameroon. Competition necessitates tower sharing Côte d’Ivoire’s population of approximately 21.5mn is served by six mobile operators, although competition in the market is a tripartite battle between the strong international forces of MTN, Orange and Etisalat-backed Moov. The three smaller operators - Comium, LAP Green-owned GreenN and Aircom, operating under the Cafe Mobile brand, have a combined market share of less than 10% and have struggled to match the

Read this article to learn:< The origins and scale of independent towerco operations in Côte d’Ivoire

< Market share and competitive dynamics among Côte d’Ivoire’s MNOs

< Forecasts for subscriber, penetration and mobile data growth through 2018

< GDP and consumer spending growth

< Risks: political stability, the potential for MNO consolidation and new entrant towercos

In BMI’s view, the competition dynamics in Côte d’Ivoire’s telecoms market underscore the growth potential of tower outsourcing services in the country. In addition to the likelihood of strong patronage from telecoms and communication providers, firms operating in the country’s tower infrastructure management ecosystem will benefit from a relatively stable macroeconomic environment, which is positive for their overall risk assessment.

Keywords: Research, Market Overview, 3G, 4G, Co-locations, Risk, Market Forecasts, QoS, Build-to-Suit, New Market Entrant, Country Risk, Sale & Leaseback, Operational Lease, Infrastructure Sharing, Africa, Côte d’Ivoire, Ivory Coast, IHS, SWAP, MTN, Orange, Moov, Etisalat, Atlantique Telecom, Maroc Telecom, GreenN, Aircom, Café Mobile, BMI Analysis


financial clout and network coverage of their bigger rivals. The six operators had a combined subscriber base of 20.477mn mobile subscriptions at the end of March 2014, according to BMI estimates based on available data from operators and the telecoms regulator, the Autorité de Régulation des Télécommunications/TIC de Côte d’Ivoire (ARTCI). Côte d’Ivoire also has a number of fixed wireless data service providers, including

YooMee, which launched commercial 4G services in April 2014.

The large number of service providers and overall market dynamics in Côte d’Ivoire’s telecoms sector creates an ideal situation for tower sharing. The country’s mobile operators are under pressure to improve cost efficiencies amid tax increases and regulatory penalties over poor quality of service (QoS). We believe the move by MTN and Orange to outsource the management of their cell towers is mainly driven by the need to relieve the downward pressure on their operating margins. Moov is set to make a similar move in line with Etisalat’s overall strategy. Although Etisalat sold Moov (and other operations under its Atlantique Telecom subsidiary) to Morocco’s Maroc Telecom in May 2014, the change in ownership structure is not to likely alter the outsourcing strategy. As for the smaller operators, we expect them to welcome co-location opportunities if they are to remain competitive in the market.

IHS and SWAP have not published exact figures for key market indicators such as tenancy ratio and revenue per site. However, we believe they are highly competitive by regional standards given the dynamics of the Ivorian telecoms market. Meanwhile, we are forecasting steady growth in the mobile voice and data markets over the five years to 2018. This will see the country’s mobile subscriptions and penetration rate rise from 19.45mn and 92.4% respectively, at the end of 2013 to 23.82mn and 101.4% in 2018. Mobile data services are also growing rapidly with investment


in 3G and 4G networks, a development that will necessitate further network densification. We forecast 3G and 4G subscriptions will account for nearly 24% of total mobile subscriptions by 2018.

Positive economic outlook will rub off on tower industry Côte d’Ivoire is set to be among the fastest growingeconomies in Sub-Saharan Africa in 2014 and overthe medium term, with BMI forecasting that realGDP growth will range between 8.0 and 9.0%annually between 2014 and 2018. This positiveoutlook is underpinned by a combination ofsustained strong levels of development spending bythe Ivorian government, intensifying foreigninvestment into new industries, stable inflation and rising consumer spending levels. Our forecasts are also premised on the Ivorian governmentmaintaining the reform momentum - especially tothe business environment - which will increase confidence in the private sector and act as a catalyst in the expansion of Côte d’Ivoire’s productive capacity. The telecoms sector will benefit from Côte d’Ivoire’s economic growth, mainly through higher consumer spending and the take-up of advanced communications and other enterprise solutions offered by operators. BMI’s Country Risk team predicts that private consumption will be the single biggest contributor to headline GDP growth over the course of 2014-2018 on the back of broad political stability, low inflation and rising living standards. Consumer spending will

Big Three Dominate Mobile Market

Cafe Mobile

GreenN

Comium

36.2%

36.7%

21.6%

4%

1.4% 0.1%

Source: BMI, ARTCI, operators

Moov

MTN

Orange

Côte d'Ivoire Mobile Market Share (%), March 2014


also benefit from a public sector salary increase in 2014. It is interesting to note that mobile ARPUs are holding up above US$5, despite the intense price competition in the mobile market. This is encouraging for tower firms considering the correlation between ARPUs and operators’ procurement strategies. Furthermore, reforms in the country’s business environment, with less red tape, as well as the implementation of the government’s ambitious infrastructure spending programme will have a direct and positive impact on tower firms and their suppliers.

Risks will not cause alarm The Côte d’Ivoire market has its fair share of risks. However, we do not believe these are sufficient to cause alarm for tower investors, at least in the short-to-medium term. The most salient risks to macro stability are political in nature. Political tensions continue to flare up and, despite the increased dialogue seen in recent months between President Alassane Ouattara’s Rassemblement des Républicains and the Front Populaire Ivoirien, the run-up to and staging of the 2015 elections will be a key test of the country’s political progress. We also expect former president Gbagbo’s trial at The Hague to heighten ethnic tensions in the country. With regards to the telecoms market, there are a few potential, albeit benign, downside risks for the towers market. The first is consolidation in the telecoms sector, which we believe is inevitable over

the medium-to- long term as smaller operators are likely to remain unable to compete effectively with their bigger rivals. Our view is supported by a statement in May 2014 by the Minister of Information and Communications Technology requesting Cafe Mobile, GreenN and Comium to merge. There is no indication yet of whether any of the operators are taking the suggestion seriously, but we expect such calls to grow louder over the coming months. The second notable risk will have a more direct impact on existing tower operators. We note that the implementation of Etisalat’s tower outsourcing strategy, which seems likely to continue under Maroc Telecom’s leadership, could see the entry of new players into the country’s tower markets if IHS and SWAP are unable to close a deal with

the operator. We would not be surprised to learn other tower operators are assessing the possibility of placing a strong bid for Moov’s tower assets and using it as a platform to enter the Ivorian market. That said, we do not see these risks posing any significant threat to our positive outlook for the towers industry. Despite the heightening political tension in the country, it is unlikely that the security situation will degenerate to 2011-2012 levels. Although it may also be argued that the entry of a new tower operator, possibly in combination with market consolidation, will increase the bargaining power of service providers at the expense of tower operators, we note that some countries in the region have successfully accommodated that level of competition in the towers market. The most notable example is neighbouring Ghana

Outperforming regional peers Cote d Ivoire Vs West Africa GDP Growth

f = BMI forecast Source: BMI

10

2012 2013 2014f 2015f 2016f 2017f 2018f

8

6

4

2

0

West Africa

Côte d’Ivoire

An operator’s experience of working with towercosOrange’s experiences with infrastructure sharing, QoS and BTS in partnership with IHS in Cameroon and Cote d’Ivoire

TowerXchange: What motivated Orange’s decision to outsource your towers in Cameroon and Cote d’Ivoire? Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA, Orange: We usually have the same motivation when outsourcing our towers; to decrease opex and improve QoS, in addition to extending our network without capex. TowerXchange: What has been your experience of the Quality of Service Orange’s towerco partners in Africa? Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA, Orange: Towercos are selling their capacity of raising cash to finance acquisitions and renewal (which is relatively easy for them) – but the proof of the business model will be in the delivery of service. I want to be positive about our towerco partners, but it has to be said that QoS is still a challenge. TowerXchange: What are the main problems with QoS – is it primarily due to interruptions due to power problems for example? Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA, Orange: The countries where we outsourced have neither the worst nor the best grids in Africa. For example, in Cote d’Ivoire, fuel represents 36% of the total energy cost and the grid 64%, while in Cameroon, fuel represents 52% and the grid 48% of the total energy cost.

Read this article to learn:< The three main reasons for QoS challenges

< Adoption of infrastructure sharing in Cameroon and Cote d’Ivoire

< The proportion of total energy cost spent on fuel vs grid in Cameroon and Cote d’Ivoire

< Pros and cons of partnering with towercos for build-to-suit programmes

< Pros and cons of there being a single towerco in a country, from the operator’s perspective

In 2013, Orange outsourced a little over 2,000 towers in Cameroon and Cote d’Ivoire to IHS under a managed services plus build-to-suit programme. The deal followed soon after MTN transferring a similar number of towers to the same towerco, so TowerXchange thought it would be timely to reflect on the first year or so of independent towerco operations in the two West African countries, looking first from the operator’s perspective.

Keywords: Interview, MNOs, Rental Rates, Transfer Assets, Opex Reduction, QoS, Build-to-Suit, Regulation, SLA, Uptime, Skilled Workforces, Operational Lease, Infrastructure Sharing, Africa, Cameroon, Cote d’Ivoire, IHS Africa, Orange


Michel Faivre, Orange

One of our objectives with outsourcing is to have towerco partners that apply innovative solutions to guarantee power for antennas even if the grid is not available; it is probably too early for us to see the result of this opportunity. QoS problems are also often related to three problems. The first is difficult weather conditions which impacts electricity production. The second is operational processes. And the third is the training and learning curve. To negotiate tower deals is one thing – to set up the team and processes takes time. Towercos remain small companies from an operational point of view. TowerXchange: How has infrastructure sharing been progressing in Cameroon? Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA, Orange: Not all the operators are equally enthusiastic about infrastructure sharing. A newly licensed operator initially showed little interest in co-location, preferring to build their own towers, but expediency of getting to market may change their approach.


TowerXchange: What have been your experiences with the build-to-suit component of your programme ?

Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA, Orange: We had trouble initially making the build-to-suit programme fit our budget. Technical teams were requesting large areas to accommodate equipment such as 2.4m microwave backhaul dishes generating significant extra costs when in practice 1.4m or 1.8m dish proved to be sufficient in most cases. We have explained the contractual rules to them and now we have a perfect adjustment. So there is a learning process to optimise the BTS programme. Towerco contracts offer us the possibility to quickly extend our network by renting a significant number of towers made available by the towerco, rather than building new sites. We are also facing another issue for BTS: towercos are reluctant to build a tower where they don’t immediately have a second tenant. TowerXchange: What have been the pros and cons of there being a single towerco in some countries? Michel Faivre, Directeur Programme Partage d’Infrastructure AMEA, Orange: We’ve had many discussions about this. My personal opinion is that having a single towerco for several operators in a country has facilitated the arrival of the towerco and

therefore has been an opportunity to accelerate our programme to share infrastructure, reduce opex and improve QoS. However, there have been lessons learned which we will transfer to any other markets where a single towerco might have a monopoly status. For example, initially we included only the classical radio sites to accelerate the deal and simplify due diligence. Orange retained a small number of 15-25 technical sites, and had intended to negotiate inclusion of those additional sites after the initial deal closed. However, it has so far been proved impossible to transfer those sites to the tower company’s portfolio because the conditions offered do not make sense, and we have no way to create a competitive process for those technical sites. As a result, for tower processes in new countries we will negotiate all the sites up front, even if we have an option to add or not add certain sites to the contract within 12-24 months. At least we still own our historical towers in most countries, but for operators that have sold their towers, in 10 years how will they negotiate new prices and new conditions when a single towerco owns or manages 50%+ of towers in the country?

Michel Faivre is a member of the TowerXchange ‘Inner Circle’ Informal Advisory Board, and will be speaking at the TowerXchange Meetup Africa 2014 on October 20-21 in Johannesburg.

“ “towercos are reluctant to build a tower where they don’t immediately have a second tenant

Special feature:

Southern and Southeast Asia’s telecom industries are swiftly developing thanks to the data demands of a young population and an expanding middle class. From India all the way to remote Indonesian islands, mobile phones penetration is increasing at a very fast pace, with falling ARPUs and rising costs creating the perfect storm for the telecom tower industry proposition to persuade MNOs to divest their towers.

The towerco model is critical to the Myanmar rollout and we foresee the potential for Vietnam, Cambodia, Sri Lanka and Bangladesh to adopt it also thanks to the entrance of newly created edotco in the region. Both Thailand, with its recently formed towerco TRUEGIF, and Malaysia, headquarters to edotco and an array of local towercos, are commencing a transition to an independent tower model.

Indonesia is possibly the most advanced market also thanks the truly independent operational model adopted by its wide array of towercos, ranging from its own ‘Big Five’ all the way to a long list of regional, middle market towercos. Lastly, India represents a case of its own due to the maturity of the industry and involvement of the operators in many of its towercos. Host to nine large scale towercos, the industry is now focused on achieving operational excellence and cost-efficiency, and may be entering another period of consolidation.

Over the next few pages, we offer an initial overview of the structure of the industry and main characteristics of each market, as well as a dedicated analysis of the Indian telecom tower industry.

The state of the tower industry in Southern and Southeast Asia

Don’t miss:90 TowerXchange introduction to the Southern and Southeast Asian telecom

tower industry

95 A snapshot of the Indian telecom tower industry, including TowerXchange’s

Indian tower count


One gathering, coutless opportunities. Take YOUR seat at the table with 200 leaders of the Asian tower industry

Meetup Asia 2014

Silver Sponsor: Exhibitors:

Media Partners:

Bronze Sponsors:

Register online at www.towerxchange.com/meetups/asia. Questions? Call Annabelle on +44 7423 512588

9-10 DecemberSingapore

Created and hosted by:

Introduction to the Southern and South East Asian telecom tower industryFrom newly formed towercos to maturing tower markets: a diverse and yet exciting region


Arianna Neri, Head of Asia and Americas, TowerXchange

An industry in the making

There isn’t a unified Southern and South East Asian tower industry. With an array of single-country towercos and only one, recently established multi-country organisation - edotco - the trend towards large, international towercos is at its very beginning.

While Korea and Japan are mature markets, whose early adoption of 3G contributed to their current high penetration and data consumption rates, emerging markets are now at the heart of the unprecedented mobile growth Asia is experiencing. In fact, mobile subscribers worldwide are expected to reach an astounding 7 billion by 2015 and 65% of it will be from Asia which will become the largest (mega) mobile market in the world.

That said, the entire region has been experiencing a wave of technological advancements, impressive rates of GDP growth, rapid movements towards smartphone adoption and, following a worldwide trend, declining ARPU. With ARPU around US$5 back in 2008, countries like India and Vietnam are now closer to US$4 and likely to reach US$3 by next year.

With declining margins and higher capex requirements as 4G LTE becomes a reality, the time is right for a shift towards passive infrastructure outsourcing and countries like Indonesia and Malaysia are embracing the independent towerco business model, albeit at a different pace.

Read this article to learn:< Can we talk about a pan-asian telecom industry?

< The Indonesian tower industry: mature yet growing

< Is Malaysia ready for large scale towercos?

< edotco’s expansion into Sri Lanka, Cambodia and Bangladesh: three markets at a glance

< Vietnam’s shift toward privatisation: a necessary move

Keywords: Indonesia, Sri Lanka, Malaysia, Thailand, Cambodia, Bangladesh, Vietnam, South East Asia, India, Myanmar, edotco, ARPU, 3G, 4G, LTE, Protelindo, Tower Bersama, Mitratel, STP, Komet Infra Nusantara, IBS Tower, Retower, Telkomsel, XL Axiata, Indosat, Digi, Maxis, Celcom, Common Tower, Instacom, KJS, Sacofa, Metfone, Smart, Cellcard, TRUEGIF, Truemove-H, Viettel Mobile, MobiFone, Vinaphone, Golden Towers, Mobitel, Grameenphone, Banglalink, Robi, MNOs, Towercos, Editorial, Market Overview

As TowerXchange start delving deeper into the reality of the multi-faceted Asian telecom tower industry, we are glad to offer our readers an initial overview of our findings.

The scope of our research is mainly focused on the Southern and South East Asian markets where the tower industry is in some countries established and mature, while in other countries still taking root and yet to reach its full potential. From India to Indonesia, encompassing Myanmar, Vietnam, Cambodia, Thailand, Sri Lanka, Malaysia and Bangladesh, we will provide our readers with initial data and insights into the evolution of these very diverse tower markets.


Indonesia: a multitude of towercos beside the Big Five

Thanks to its scattered geographical landscape made of more than 17,000 islands, the Indonesian market is host to dozens of independent towercos with portfolios ranging from 10 to 10,000 assets.

Indonesia has recently surpassed Brazil and Russia to place itself as the 4th largest mobile market in the world after China, India and the U.S. With 278 million subscribers, or 165 million unique users, owning an average of 1.7 active SIM cards, and one of the world’s top 3G markets, Indonesia’s mobile industry is expected to reach 130% penetration rate and 330 million subscribers by 2015.

According to GSMA, Indonesian mobile subscribers are connected via approximately 90,000 towers which could become as many as 130,000 over the course of the next year. In fact, with a very fragmented tower industry, and a ‘long tail’ of regional players expanding way beyond the “Big Five”, it comes as no surprise that greenfield projects are developing at a swift pace throughout the national territory to reach out to uncovered rural areas and remote islands.

With Protelindo, Tower Bersama, Mitratel and STP leading the way and owning approximately one third of the total national tower count, the country is served by an array of regional towercos

including Komet Infra Nusantara, IBS Tower and Retower Asia.

There are still as many as 60,000 towers in the hands of mobile operators and with three of them - Telkomsel, XL Axiata and Indosat - fiercely competing and expanding their geographical coverage, BTS projects are becoming available throughout the archipelago. In the meantime, mobile operator XL Axiata owns over 8,000 sites and has recently invited bidders to acquire part of its portfolio.

Malaysia: a mature market ideal for infrastructure sharing

With 30 million people of which 70% live in urban areas, and mobile penetration above 140%, the Malaysian market is among the best performing in the region, ahead of Indonesia and Thailand.

Tough competition among three main operators, Digi, Maxis and Celcom, is driving tariffs and devices prices down, compromising the sector’s growth potential and, with as many as eight mobile operators, the industry is likely to witness some consolidation over the next few years.

Infrastructure sharing in Malaysia has been a common practice for some time now, as initiated by Digi and Celcom in an effort to drive their capex down. With shrinking margins and higher capex as the market moves towards 4G LTE, telecom operators are likely to start outsourcing

Protelindo

Tower Bersama

Mitratel

STP

IBS Tower

Komet Infra Nusantara

Retower Asia

Balitowers

2,000 4,000 6,000 8,000 10,000 12,000

Estimated tower counts for Indonesia’s largest independent towercos

Source: TowerXchange, companies’ website, filings, third-party news

10,300

9,382

4,000

3,500

2,079

500

450

208


parts of their operations. Divesting their tower portfolios seems like the next obvious move.

To date, few opportunities remain for urban site acquisition and telcos are increasingly focused on in-building and small cells in order to optimise urban coverage in public spaces and high-traffic areas. Co-locating multiple tenants on scarce urban sites and supporting rollout of IBS is yet another area where towercos could offer

technical expertise and allow operators to focus strictly on their core business.

An array of towercos is available to serve the needs of the Malaysian telecom industry. Along with the newly-formed edotco, a tower company spun out of the Axiata group, which owns 3,400 sites across Malaysia, TowerXchange are tracking a series of regional towercos with portfolios ranging between 100 and 700 towers such as

Common Towers, Instacom, KJS and Sacofa, all of which are involved in BTS projects along with the antenna space leasing business.

Sri Lanka: A regulatory environment favourable to infrastructure sharing

Although with varying scenarios, other countries in the region are slowly getting closer to the independent towerco model. Sri Lanka, Cambodia and Bangladesh are now served by edotco, which has recently started operations in five markets with an overall portfolio of 12,000 towers. Sri Lanka, with its population of 20 million and mobile penetration rate just above 99%, is an ideal marketplace for towercos. In fact, the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) has recently developed the National Policy on Antenna Structures in order to “safeguard the environment and public interests while not unduly restricting the development of telecommunication services.”

Along with it, at the end of 2012, the Sri Lankan cabinet has approved new tower guidelines which will govern the actions of the telecom operators currently active in the country and operating its 2,900 telecom towers. These guidelines include incentive schemes to develop all new telecom towers with additional antenna space to potentially accommodate additional operators - the perfect scenario for towercos to get involved as mobile operators won’t lightly invest extra capex to develop multiple tenant towers. Additionally, the regulation stipulates

Skyline of Kuala Lumpur, Malaysia


the creation of Antenna Structure Farms: specific areas where towers will be grouped together with very detailed limitations in terms of zoning.

edotco enters the young Cambodian market

A very different scenario is found in the less penetrated Cambodian mobile market (69%), where a technology-hungry population of 15 million people can choose from five network operators after a rationalisation phase in 2011, when nine operators were active in the country. Two mergers and one market exit led to Smart Mobile (formed by the merger of Hello Axiata and Smart) and Viettel’s Metfone owning the majority of the market share.

Based on our research, edotco is the only independent towerco in the country where it operates 1,500 sites. Despite frequent rumours of towerco launches and sale and leaseback opportunities, Cambodia’s telecom towers are still mostly in the hands of operators. Cellcard, the third telco of the country, has recently denied any intention to sell its portfolio of 3,000 sites.

Bangladesh booming despite electrification challenges

Strongly positioned thanks to its presence as a mobile network operator - Robi - Axiata group launched its first towerco operations with edotco in Bangladesh as well where it owns and operates 5,300 sites.

With six mobile operators - Telenor’s Grameenphone, Banglalink and Robi leading the market - and subscribers doubling since 2009 (from 45 million up to 114 million as of January 2014), the Bangladeshi mobile industry has boomed over the past few years.

According to GSMA, 25,858 telecom sites provide almost 90% coverage. However, a substantial rural population is concentrated in the uncovered 10% of the national territory.

Privatisation might open up Vietnam to towercos

To date Vietnam is the fastest growing mobile market in the region, leading the way in terms of mobile penetration (150%) and with forecasts that suggest it will reach 167% by 2018.

Military-run Viettel Group, the leading mobile operator, is a state-owned enterprise with over 40% market share. Its two main competitors, Vinaphone and MobiFone, are both owned by the national telecommunications company VNPT although MobiFone is reportedly being privatised by the end of this year in a move to increase competition in the telecom market as ordered by the Vietnamese government.

By creating a more liberal environment for the telecom industry to develop, we can predict more tower companies seizing opportunities in Vietnam but for the moment, Golden Towers is the only active towerco we have identified in Vietnam. Backed by Alcazar Capital, Golden Towers has been active in the country since 2012.

Thailand: The first towerco after years of regulatory challenges

Thailand finally established an independent telecom regulator, the National Broadcasting and Telecommunications Commission (NBTC), in September 2011 after years of near-misses which contributed, along with the 2009 financial crisis, to a standstill of the telecom industry. Since then,

Sri Lanka 2,150 Towers

Cambodia 1,500 Towers

Bangladesh 5,300 Towers

Malaysia 3,300 Towers

Pakistan 12,000 Km of Fiber

edotco portfolio in Asia

Source: TowerXchange, companies’ website, filings, third-party news

“ “the Sri Lankan cabinet has approved the new tower guidelines which will govern the actions of the telecom operators currently active in the country and operating its 2,900 telecom towers


several positive actions have been implemented with the 3G licence auction that took place in 2012 as a highlight.

To date, the mobile market has reached over 85 million subscribers with a penetration rate above 130%.

True Corporation, owner of the third operator in the country Truemove-H, has recently set up the first national towerco, the True Growth Infrastructure Fund (TRUEGIF) with the goal to transfer the operator’s assets into the newly formed towerco over the course of the next two years. The assets include 6,000 telecom towers (planned and

existing) of which 1,800 are in Bangkok and 4,200 in the rest of the country.

As the first mobile network operator to offer 4G LTE in Thailand, divesting its passive infrastructure and lightening its opex was a necessary step for Truemove-H to continue being profitable while being a pioneer in Long Term Evolution.

India and Myanmar: the region’s oldest and youngest tower markets

Left out in this analysis, India and Myanmar represent polar opposite tower markets with Myanmar’s telecom industry and infrastructure

just about to be rolled out, while the mature Indian market is emerging from a period of consolidation and restructuring.

TowerXchange continues our coverage of the role of towercos in the Myanmar rollout in part three of our ongoing “Myanmar tower dossier” later in this journal, while in the next pages we also present our first Indian tower count and market commentary.

Finally, if you’re interested in Asian towers, please join us at the TowerXchange Meetup Asia, December 9 and 10 in Singapore! Contact me for details: [email protected]

Bangkok, Thailand

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True Corporation, owner of the third operator in the country Truemove-H, has recently set up the first national towerco, the True Growth Infrastructure Fund

A snapshot of the Indian tower industryEstimated number of towers owned or managed by towercos in India


In 2007, India hosted about 100,000 telecom towers,

considerably less than the current tower count of

450,000-500,000. Over the past seven years, operators

and independent tower companies have built an average

of 50,000 new towers per year and, as a result, telecom

coverage now extends to 90% of the Indian territory.

From 2010 to 2012, dozens of new mobile network

operators entered the Indian market attracted by its

growth potential and frivolous license regime. In the

meantime, towercos kept themselves busy building

thousands of towers every year. However, fierce

competition among carriers, often relying on cut-throat

offers to attract subscribers, forced several players to

exit the Indian market. In 2012 the highly publicised

cancellation of 122 telecom licenses, wiping out many

smaller players and stalled launches, forced the

restructuring of the Indian MNO market.

To date, India has more telecom towers than China

(420,000) and 800 million mobile connections. A broad

range of tenancy ratios can be found in India. While

residual operator-captive assets account for many

single tenant towers, many of the larger towercos boast

healthy tenancy ratios such as Viom Networks’ 2.2,

Bharti Infratel’s 2.01, GTL Infrastructure’s 1.35 and

Indus Towers 2.06 (tenancy ratios as stated in their most

recent annual reports). With an oversupply of towers,

consolidation of tenants and extremely high operational

costs, at one time it looked like independent tower

industry was stalling. However, the restructuring of

the Indian telecom sector may result in less operators,

but they will be higher quality tenants. Where at the

turn of the decade there was a swathe of acquisitions of

small to mid-sized towercos, helpfully consolidating an

overpopulated towerco market, the tower M&A market

in India stagnated whilst and is only now returning to

life.

Technology, innovation and operational excellence

represent the key for independent towercos to remain

competitive and Indian towercos are shifting their focus

to streamlining their operations and reducing costs.

The shift towards cost saving has already begun and

towercos are implementing drastic changes to reduce

their operational expenditure. Last year, Indus started

reducing reliance on diesel generators by installing

batteries at 20,000 of its 112,000 towers. Saving over 3.6

million litres of fuel a year, when fuel and power costs

account for 30-40% of opex is definitely a wise move.

The tower count we are providing is our best guess

on the current status of the Indian tower industry.

However, we will keep reporting on critical changes as

we believe the current status of the industry is likely to

be reshaped in the near future, as suggested - among

others - by American Tower’s intention to bid for the

acquisition of Viom Networks

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

Viom Networks

GTL Infrastructure

American Tower

Tower Vision

Ascend

Indus Towers

Bharti Infratel

Reliance Infratel

20,000 40,000 60,000 80,000 100,000 120,000

Source: TowerXchange research, quarterly filings, site lists

112,936

50,000

42,000

29,432

11,529

8,400

4,000

34,000 49,368 - 42% equity stake in Indus Towers

Special feature:

TowerXchange paid a visit to Yangon to meet with Myanmar’s MNOs, towercos and their partners, and to get a feel for the realities of the rollout. We’ve summarised our learnings in a comprehensive FAQ and an editorial that combines personal observations on the evolving mobile culture in Myanmar with practical observations on the logistics of the rollout and bureaucratic capacity of government.

But we kick off this edition of TowerXchange’s Myanmar tower dossier with an exclusive interview with Ole Martin Gunhildsbu, COO of Telenor Myanmar, in which he describes the impact of mobile services on Myanmar’s socioeconomic conditions; Telenor’s rollout plans; and how Telenor is planning to achieve 90% coverage within five years.

The Myanmar tower dossier, part 2

In this special feature:97 Telenor’s plans in Myanmar; exclusive with their COO

101 Myanmar needs to accelerate to Internet time

105 The Myanmar tower rollout: FAQs


Internet for all: Telenor’s plans in MyanmarA tough project with an ambitious goal: connectivity as a driver for economic development

TowerXchange: What will it mean to the citizens of Myanmar to have access to mobile services?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: Telenor believes that mobile communication services are a basic necessity for everyone. We see mobile technology as an ‘enabler’ that will create a positive impact on people’s lives and contribute to the overall economic development in Myanmar. Beyond the convenience that mobile communications services will bring to their daily lives – for instance, allowing them to stay in touch with family and friends more easily – mobile phones can also help to transform the lives of individuals in Myanmar by enabling financial inclusion, access to knowledge, and bridging the digital gap.

In addition, mobile technology has the potential to deliver many benefits and create opportunities that support the establishment of vital infrastructure that will spur innovation in other critical industries such as education, healthcare and finance, and contribute to overall socioeconomic development. TowerXchange: What can you tell us about Telenor’s tower rollout in Myanmar?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: We are working hard to reach our rollout targets and will launch our services as soon as the infrastructure and network is ready to deliver the high-quality services that we are committed to.

Our goal is to ensure that we can offer a smooth

Read this article to learn:< The impact of mobile services on Myanmar’s socioeconomic conditions

< Telenor’s plans for the tower rollout in Myanmar

< How Telenor is planning to achieve 90% coverage within five years

< Geographical and technical challenges related to network deployment in Myanmar

< Telenor’s inclusive strategy: Internet for All

Telenor isn’t new to the Asian market and with successful operations in Bangladesh, Malaysia, Thailand, India and Pakistan, its track record indicates sound foundations for the launch of its operations in Myanmar. With challenges such as climate, road conditions and specialised skills shortage, the path towards launching its 2G and 3G offering is a challenging one.

In an exclusive interview, Telenor Myanmar COO, Ole Martin Gunhildsbu, shares his views on the impact that mobile services will have on the country’s overall wealth and development and on Telenor’s sound business strategy for this their newest venture.

Keywords: Telenor, Myanmar, C-Level Perspective, 2G, 3G, Bangladesh, Malaysia, Thailand, India, Pakistan, Asia, South East Asia, Interview, MNOs, New License, Universal Access, Infrastructure Sharing, Health & Safety, Market Entry, Network Rollout, Business Model, New Market Entrant, Regulation, Skilled Workforces


Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar

and high-quality network and services, and we believe that the time we have scheduled for the implementation is sufficient. We are committed to providing network coverage to 90% of the population within five years of our roll-out, and will continuously review our infrastructure needs to ensure that we are able to support the delivery of high-quality mobile communications services to people throughout Myanmar.

Telenor will launch with coverage in the main cities and then gradually expand as we complete more towers across Myanmar. The current plan is to roll-out of up to 8,000 base stations in the country.

We have partnered with telecommunications infrastructure providers Apollo Towers and Irrawaddy Green Towers to build and manage our telecom towers in Myanmar.

TowerXchange: How is Telenor planning to achieve 90% coverage within five years?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: Telenor will launch and expand our network coverage areas from the main cities as we complete more towers across Myanmar, with the goal to provide network coverage to 90% of the population within five years of our roll-out.

An extensive distribution network will be the backbone of our mass market approach. As part of Telenor Myanmar’s network roll-out plan, we will recruit distributors and franchisees in each and every state and region in Myanmar with the goal of


establishing a network of 100,000 retailers within five years of the network and service roll-out. Our business plan for Myanmar is based on our extensive experience in running successful operations in all of the markets where we operate, including five other markets in the Asia region. The plan is also the result of a comprehensive, coherent and consistent planning exercise which encompassed all areas of our business and we are confident that we will be able to deliver on our commitments and support Myanmar in realising its telecommunications goals, while meeting the

objectives of all our stakeholders.

TowerXchange: What are the key technical challenges Myanmar presents in terms of accelerated network rollout? In terms of permitting, climate challenges, transport infrastructure and deployment expertise?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: There are always challenges when establishing a new business, especially in an industry as complex as the mobile telecommunications.

Myanmar Yangon


In Myanmar, many factors need to be considered when building the telecom network including build permits, climate, transport and deployment expertise.

With regards to permitting, we need to ensure we are collecting and verifying all legal documents to ensure we are dealing with the legal land owners as well as understanding and aligning with local authorities and on permit requirements.

Building towers in Myanmar’s wet season, also in light of road conditions and distances, is definitely a challenge we need to always take into account and one where our previous Asian expertise can surely help.

On the human side, there is a definitive shortage of skilled professionals for specialised tasks such as tower erection. We are also very actively involved to ensure local adherence to internationally recognised best practice health, safety, security and environment (HSSE) standards.

As is the case for all telecom operators around the world, building a network requires significant investment in infrastructure, and Telenor will be doing the same in Myanmar where we will invest to build a new and high-quality network.

TowerXchange: To what extent will the network in Myanmar be shared with Ooredoo, MPT and YPT?

Ole Martin Gunhildsbu, Chief Operating Officer,

Telenor Myanmar: We remain open to collaborating with other operators in the market and we support the government’s drive for infrastructure sharing as that is in the interest of all parties.

TowerXchange: How are the operators, towercos and regulators minimising parallel capacity?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: From a tower perspective, 150 metres is the normal regulated distance between towers. The telecommunications infrastructure providers will usually try to minimise parallel capacity since it is in their interest for more than one operator to use their towers.

TowerXchange: How can Telenor offer affordable packages and provide “Internet for All” in Myanmar while balancing its capex and opex?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: Our goal is to provide offerings that are attractive for the mass market in Myanmar and we have developed a clear roll-out plan to build an advanced mobile network that will deliver accessible and affordable services to people across Myanmar. For instance, our pricing plans, developed based on our experience in other developing markets and on the needs of the Myanmar market, will enable the mass market in Myanmar to enjoy Telenor’s innovative and affordable voice and data services. Telenor has a long-term commitment in

developing our operations and growing our presence throughout Asia, as demonstrated by the success of our businesses elsewhere in the region which, collectively, are a significant contributor to our company’s overall revenue. The major investment we are making in Myanmar further underscores our commitment to the region and to delivering the accessible and affordable mobile communications services that the market requires. The total peak funding, defined as the license fee plus accumulated losses until operating cash flow break-even, is expected to be around US $1bn. Telenor targets EBITDA break-even in Myanmar within three years after the license award. We are confident that we will be able to deliver on our commitments and support Myanmar in realising its telecommunications goals, while meeting the objectives of all our stakeholders.

TowerXchange: Who are your target demographics, given your decision to offer 2G and 3G?

Ole Martin Gunhildsbu, Chief Operating Officer, Telenor Myanmar: Telenor’s focus is to provide affordable and accessible mobile voice and data services for the mass market in Myanmar, and we will have a variety of products and services that meet different consumer needs. Our initial offering will be launched simultaneously over a 3G and 2G network, providing customers with high-speed data connectivity and excellent voice quality. In addition, our state-of-the-art network will be 4G-ready for when the time comes for the next evolution

TowerXchange: Please tell us about Telenor’s footprint in Bangladesh, India, Malaysia, Pakistan and Thailand

Glenn Mandelid, Head of Media Relations, Telenor Group: Telenor Group is a leading provider of mobile services in Asia. The Group has been present in the region since we first entered Bangladesh in 1997. Today, Telenor Group has operations in six Asian markets. In four of them, Telenor Group operations is amongst the top three players. In India we have license to operate in seven telecom circles,


covering half the population of the country. Our operation in India, Uninor, is the most successful new entrant and one of the fastest growing operators in the country. Our latest addition is Myanmar, where we expect to launch services later this year. TowerXchange: What is the relationship of Telenor with independent towercos in Asian markets beyond Myanmar?

Glenn Mandelid, Head of Media Relations, Telenor

Group: As a mass market operator it is important to focus on operational efficiency to keep cost low.For example, from our background in India we have learnt that outsourcing the tower operation allows us a more flexible solution that is more cost efficient and scaleable.

TowerXchange: Can you share the key features of Telenor’s Asian Internet for All initiative?

Glenn Mandelid, Head of Media Relations, Telenor Group: The three strategic pillars in our Internet for All ambition are:

< Enable people to use the internet (available network, affordable services, increase smartphone penetration)< Stimulate use (increase awareness, provide relevant content, partnership)< Monetize internet use (portfolios, packages, bundles) TowerXchange: How would you sum up the technology evolution and investment in network infrastructure within Telenor’s Asian operations?

Glenn Mandelid, Head of Media Relations, Telenor Group: Telenor is investing in networks that allow us to provide our customers with high-quality services in a cost-efficient manner. Our main focus is on operational efficiency, also when it comes to network deployment, so that we can deliver on our ambition to be a mass market provider of data services

Glenn Mandelid, Head of Media Relations, Telenor Group

Putting Myanmar in context - Telenor’s footprint in Asia

Myanmar needs to accelerate to Internet timePhone-friendly culture indicates pent up demand for coverage and capacity – the rollout will transform Myanmar, but can Myanmar keep up?


By Kieron Osmotherly, CEO, TowerXchange

Yangon: a smart phone on every street corner Jon Whitty, our designer who makes the TowerXchange Journal look elegant, asked me to get a photo of a citizen using a smart phone in front of a pagoda or some other cultural icon. I didn’t think I had much chance with penetration at 10%, but it seems like every other citizen in Yangon was touting a smart phone – and they weren’t cheap handsets! You also can’t help but notice that every billboard is adorned with adverts for Samsung, Huawei, LG and, most prominent, Ooredoo. However, I didn’t see a single billboard with an antenna mounted on it. Apart from the modern hotels, there weren’t a lot of structures on rooftops either – apparently many sites lack the structural capacity, and lease costs are high in Yangon. You don’t see a lot of towers in Yangon, and most you do see are guy-masts that lack the capacity for additional tenants. There’s not a lot of Wi-Fi here, but locals and visiting businesspeople seek out hotspots – everyone knows which cafés offer the best Wi-Fi, and there’s a culture of using Skype which is going to be difficult to shift even though Telenor and Ooredoo promise keenly priced tariffs. I didn’t have time to get out into rural areas on this trip, but the towercos verified the impression I got – that there is a growing culture of mobile phone use, awareness is high, pent up demand is being generated both for subscriptions and for network densification and extension.

Read this article to learn:< Observations on the shareability of structures in Yangon

< Myanmar’s Wi-Fi + Skype culture

< Stuck in the mud? Rolling out during the rainy season

< Why expendiency demands diesel; when Myanmar will be ready for green power

< The lack of bureaucratic capacity, if not a lack of bureaucratic will

Keywords: Editorial, O&M, Construction, Market Overview, 3G, Loading, Network Rollout, Permits, Greenfield, DG Runtime, Procurement, Logistics, Site Visits, Skilled Workforces, Masts & Towers, Infrastructure Sharing, Asia, Myanmar, Telenor, Ooredoo

My taxi driver is atypical for a Myanmar citizen – he’s in a hurry. Which is nice because I was cutting it a bit fine to catch my flight home. I’ve thoroughly enjoyed my visit to Myanmar, thanks to the hospitality of co-hosts the GSMA Green Power for Mobile Working Group and Ooredoo. One of the reasons this country is so appealing is its calm, laid back attitude. Don’t get me wrong – Myanmar offers great service, a can-do attitude, but everything takes so long! Whether it’s making a sandwich or granting an import permit, there’s one thing Myanmar needs to achieve its self-imposed aggressive telecom rollout deadlines – acceleration!

Maybe we should put my taxi driver in charge of permitting cell sites!


Overcoming challenges on the front lines of the Myanmar tower rollout

The requirement to provide 85% geographical coverage in Myanmar within a tight timescale may have to be moderated, given the logistical challenges of site acquisition and import permit delays, and challenging inland logistics, compounded by a crippling rainy season. While there are good roads connecting the major cities, beyond that paved roads become dirt roads, which become paths alongside rice paddies. Myanmar’s transport infrastructure also relies on a prolific system of waterways. Myanmar’s four towercos may be targeting the deployment of up to 250 towers per month, but sustaining that volume of activity during the wet season may not be possible as they would literally get stuck in the mud.

While Myanmar’s towercos are bullish about tenancy ratios and plan to deploy mostly robust, multi-tenant towers during phases one and two, in which deployment is largely concentrated along the central spine of the Irrawaddy River and delta where the population density is greatest, it remains to be seen if multiple tenant sites will still be required in subsequent phases in more rural locations. Towercos may have to charge a premium on lease prices, and will certainly pass through more energy costs at hard to access, deep rural, off grid sites than they will charge at easy to access, on grid sites.

There would seem to be a conflict between license requirements that both international

operators provide 85% geographical coverage, and the commercial reality of therefore needing both operators to provide coverage in villages with populations of 3,000 or less, where the ARPU generated may make the business case for coverage marginal for a single operator, never mind two competing operators. Ooredoo and Telenor are not taking the same approach either, with Ooredoo focusing on 3G and Telenor rolling out a more traditional 2G plus 3G GSM network, which may ultimately attract a slightly different

demographic. World Bank financial assistance may help, but combine a limited commercial case with logistical challenges and you can see why it’s less clear what the tenancy ratio will be and therefore it’s less clear what typical site design, power and wind load capacity requirement will be in rural Myanmar. Heavier structures are needed for multi-tenant towers, and the last mile(s) of delivery logistics to rural sites may be by oxen, mule and hand


carriage, which means heavy cranes are unlikely to be used, and tower erection may have to be completed by hand. Modularity is going to be key – selecting passive equipment that can be delivered in smaller pieces to allow manual transport and construction, and easy upgrade for additional tenants.

The logistical challenges don’t end at the end of

the capex-oriented rollout phase; post rollout O&M logistics and recurring fuel deliveries (which can literally consist of guys on mopeds delivering soda bottles full of diesel) will be costly. Nobody knows what the delivered cost of a litre of diesel will be in rural Myanmar because there are no cell sites out there now! But the sting will be felt by the MNO rather than the towerco whilst contracts are structured with power pass through clauses.

This may seem to reinforce the business case for renewable energy and energy storage innovations that minimise site visits to top up diesel tanks and swap lead acid batteries with finite lifecycles. However, the reality is that in the short term, pressure of time to market will outweigh pressure to optimise energy efficiency, so a lot of DG backup power solutions will be rolled out in phase one, and phase two, which pushes into more rural areas, is still going to use a lot of dual DG or CDC+DG site designs.

Neither Telenor, Ooredo, nor their multiple towerco partners want to build overlapping networks. The Myanmar government has not formally issued a regulation preventing overlap,

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Modularity is going to be key – selecting passive equipment that can be delivered in smaller pieces to allow manual transport and construction, and easy upgrade for additional tenants

Yangon: not many telecom towers and rooftop sites evident


but has made it clear they’re not going to allow towers within around 500m of each other. This will probably translate into more formal zoning regulation eventually. However, it would be wrong to create an impression of harmonious, synchronised rollout - where once upon a time the operators were jointly negotiating with towercos, each has chosen two different partners and, even at this early stage of rollout, there is a healthy sense of competition among the Myanmar’s towercos. The build versus co-location inclination of incumbent operator MPT, particularly after investment by KDDI, remains unclear.

Ultimately the number one challenge to be overcome in the rollout of Myanmar’s towers remains a lack of bureaucratic capacity. There’s no lack of will at government level – connecting the population could prove very popular come the elections, but the reality is that Myanmar has little history of multiple companies building infrastructure, so they’ve had to create necessary

legal infrastructure and the people on the front lines are stretched thin and are not used to making pragmatic decisions to expedite important processes. The impact of this lack of bureaucratic capacity is being felt at the point of land lease acquisition, checking ownership of land titles, build permitting, equipment import and even the licensing of towercos themselves

“

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Myanmar has little history of multiple companies building infrastructure, so they’ve had to create necessary legal infrastructure and the people on the front lines are stretched thin and are not used to making pragmatic decisions to expedite important processes

The Myanmar tower rollout: FAQs40 frequently asked questions cover Myanmar’s MNOs, towercos, powercos and the relationships between them


1. What is the current state of mobile telecommunications in Myanmar? According to data from the Myanmar Ministry of Communication, Posts and Telegraphs, Myanmar’s existing 5.44mn mobile subscribers (representing >10% mobile penetration), is made up of 66% 2G, 14% 3G and 20% CDMA. The GSMA forecast a rise to 39.9% penetration by 2017; just under 22mn connections. 2. Who are Myanmar’s operators? Recently licensed international operators Ooredoo and Telenor will launch their services in the second half of 2014, joining incumbent operator MPT, which was recently boosted by a US$2bn capital injection from KDDI-Sumitomo joint venture KSGM. The future roles of MECTel and ISP Yatanarpon Teleport (YPT), to be restructured as a private company, remain unclear. 3. What spectrum has been allocated to Myanmar’s two new international MNOs, and have any LTE trials taken place? According to Hardiman Telecommunications, Telenor and Oordedoo each received 2 X 5 MHz in the 900 MHz band, and 2 X 10 MHz in the 2100 MHz band. Both have suggested a future migration to LTE. MPT undertook trials of LTE using 20 MHz in the 1800 MHz band during the course of 2013. YTP currently operates WiMAX, and claims 40 MHz in the 2600 MHz band and has announced plans to migrate to LTE.

Read this article to learn:< Who are Myanmar’s MNOs and towercos, and how fast are they rolling out?

< How many towers are in Myanmar now, how many will there be by year-end 2014 and by year end 2017?

< How many of Myanmar’s towers will be off-grid or on unreliable grids and what power solutions will be used?

< What are the contractual relationships between Myanmar’s MNOs and towercos and is there an opportunity

for an ESCO?

< Does Myanmar have local potential construction and O&M partners for towercos?

Keywords: MNOs, Towercos, Research, O&M, Construction, 3G, Tenancy Ratios, Loading. Network Rollout, Exit Strategy, Pass-Through, ARPU, Off-Grid, Unreliable Grid, ESCOs, Hybrid Power, Renewables, Greenfield, DG Runtime, Dimensioning, Logistics, Skilled Workforces, Warehousing, Rooftop, Private Equity, Debt Finance, RMS, Infrastructure Sharing, Asia, Myanmar, Ooredoo, Telenor, MPT, YPT, MECTel, KDDI, GSMA, Digicel, Myanmar Tower Company, Apollo Towers, Irrawaddy Green Towers, Pan Asian Towers

The Myanmar tower rollout often throws up more questions than answers. Having visited Yangon earlier this year, TowerXchange thought we’d share an FAQ; sometimes answers are simple, sometimes they are complicated, sometimes there are no answers at all! Due credit must be given to the kind folks at Apollo Towers, IGT, MTC, Ooredoo and Telenor, whose insights contributed to this FAQ, and in particular to the GSMA GPM team for their research and their working group, which brought over 100 of Myanmar’s tower and power leaders together in Yangon.


4. Who are Myanmar’s towercos? Two towercos each have been appointed by Ooredoo (Myanmar Tower Company and Pan Asia Towers) and Telenor (Irrawaddy Green Towers and Apollo Towers) to lead the rollout. Incumbent operator MPT has not yet appointed a towerco partner; whether they will do so remains unclear. 5. How are Myanmar’s towercos financed? Myanmar’s towercos are well financed. Despite Pan Asia Towers’ (PAT) management DNA in common with Protelindo, Apollo’s links with Eaton

and Myanmar Tower Company’s (MTC) links with Digicel, each towerco represents a distinct investible platform for investors comfortable with Myanmar’s risk profile. There is no shortage of capital being made available from private equity investors excited by the Myanmar green field tower roll out. For example, backed by TPG (Texas Pacific Group), Apollo Towers may be the single largest US direct investment in Myanmar. PAT and MTC are more entrepreneurial ventures backed respectively by telecom billionaires Michael Gearon, who merged his company Gearon Communications with American Tower in 1998,

later becoming Vice Chairman of AMT, and Denis O’Brien. O’Brien made his fortune building and selling Esat Digifone in Ireland before turning his attention to the Caribbean with Digicel. Digicel had bid aggressively but ultimately unsuccessfully for one of Myanmar’s international MNO licenses. The consortium behind MTC also includes Yoma Strategic Holdings, one of Myanmar’s leading real estate companies. There has been speculation that Ooredoo is considering acquiring a 10% stake in MTC, although this has not yet been confirmed. As for Myanmar’s fourth towerco, IGT raised US$150mn in their first round of financing, and their original partners can extend that total to US$300mn. Alcazar Capital and SREI Group have set up IGT as a company not a fund with a given expiration date, in anticipation of a liquidity event within as little as four to five years. 6. What are the potential exit strategies for investors in Myanmar’s towercos?

As international sanctions on Myanmar continue to relax, trade sale options may not be limited to regional players, while a leveraged recap or, perhaps less likely, IPO remain options. TowerXchange are also tracking several infrastructure and sovereign wealth funds with an appetite for emerging market towers. For now, Myanmar’s towercos’ priority is all about driving to scale. 7. Is debt finance readily available? While equity finance may be relatively easy to


come by, Myanmar lacks a sophisticated domestic banking sector, with only a handful of small local banks and until now no foreign banks allowed, making the raising of debt a greater challenge. A pending change to the law will allow foreign banks to have formal subsidiaries in Myanmar.

8. What is the rollout timescale? It’s a race to market. Ooredoo will launch in 68 cities on 15 August. Telenor and Ooredoo have made different commitments during their bids for licenses, and are rolling out different network topographies supporting different services. Their timescales are also slightly different; while Ooredoo’s commitments suggest coming to market perhaps two to three months ahead of Telenor, Telenor will probably try to get to market faster than promised. As with any green field scenario, time to market is critical – and not just for Ooredoo and Telenor – local incumbents MPT, YPT and MECTel could all have a role to play. 9. How fast are the towercos moving? Fast. The site hunters are out hunting morning, noon and night, permits are being granted, land has been broken at the first sites. With as yet informal zoning regulations seldom permitting two towers within 500m of one another, a parallel race to market, and a race to secure the best sites, has been engendered among the towercos. So if you’re a reader with interest in supplying equipment or

services to Myanmar’s towercos, consider this: they may be rolling out 250 sites per month – can you keep up? 10. What tenancy ratios are achievable in Myanmar? Modeling and forecasting prospective tenancy ratios in Myanmar will not be easy, and there are no precedents for a green field rollout using towerco-owned, shareable assets. On the one hand, you have the MCIT’s current policy of refusing to grant permits for towers within 500m of each other. If such strict zoning restrictions are made law, then it may generate near-term location-specific territorial squabbles, but in the long term tenancy ratios should be excellent as Ooredoo, Telenor, MPT, (and whatever role YPT and MECTel play) plus ISPs, broadcast and wireless data tenants are all going to need to co-locate on the same tower if they want coverage at a specific location. On the other hand, how dependent are the tenancy ratio forecasts on the sale of co-locations to incumbent operators MPT? And what impact does KDDI’s investment in MPT have on their appetite to build their own towers? Data demand is another unpredictable variable which will demand drive capacity. The GSMA estimates tenancy ratios of 1.2 to 1.4 in Myanmar by 2017. 11. Can the towercos acquire the land under the

towers in Myanmar? No. All land belongs the government in Myanmar; citizens can only lease land. If foreign companies secure an investment permit they are allowed to enter into long term leases of up to fifty years, with two ten year term extensions.

12. How many towers are needed? According to TowerXchange research, Myanmar’s four towercos have been contracted to build an initial 5,000 towers for Telenor and Ooredoo by 2015, with MPT adding a further 500-600 sites per year for the next three years. The GSMA agrees with and extends the forecast; 17,300 cell sites will be rolled out in Myanmar by 2017, providing 70% coverage. It’s interesting to note that in his TowerXchange interview Ole Martin Gunhildsbu, Chief Operating Officer of Telenor Myanmar talks about rolling out “up to 8,000 towers,” while at the GSMA GPM Working Group, Ooredoo were talking about rolling out 4,500 towers by 2018. Throw in a few thousand MPT towers, and you get pretty close to the GSMA’s forecast of 17,300 by 2017. 13. What do we know about the towers that are already in Myanmar?

Most figures suggest that Myanmar’s incumbent operators own 1,800 towers – whether the total is nearer 1,200, and whether they’re all owned by MPT, or some built by YPT but used by MPT isn’t


clear. What is clear, driving around Yangon and looking at the towers, is that most aren’t robust enough for sharing.

14. What do we know about the first 5,000 towers to be deployed in 2014? Myanmar’s four towercos have been contracted to build the first phase of 5,000 towers by year-end 2014 (see TowerXchange’s “The structure of the Myanmar tower industry”). MTC’s sites for Ooredoo and Apollo’s sites for Telenor are focused on relatively urban areas, whereas PAT’s (for Ooredoo) and IGT’s (for Telenor) are more rural. Subsequent phase contracts have already been secured by several towercos, for example IGT’s Telenor contract now extends from the initial 1,500 sites to a further 500 sites by the end of Q1 2015. It should be noted that all forecast tower counts will doubtless be subject to some rationalisation as parallel infrastructure is not permitted. 15. What technologies will be rolled out? And what are the implications for devices and VAS? Ooredoo will rollout 3G. Telenor will rollout 2G plus 3G. Telenor’s 2G plus 3G strategy invites low cost prepaid handsets at or below US$10, while Ooredoo’s 3G only strategy suggests a keen interest in the availability of sub-US$50 smartphones, and the potential for MNO subsidies. Telenor and Ooredoo’s differing strategies hint at

the possible creation of two overlapping markets; a 2G ecosystem driven by voice, SMS and basic VAS like SMS-based mobile money, and a smaller 3G ecosystem for affluent personal and business smart phone users generating high ARPU. 16. What will be the ARPU in Myanmar? Ignore the current inflated ARPU figures in Myanmar as mobile communication is currently limited to relatively affluent people in Myanmar’s

big cities. While bullish estimates suggest a post-rollout ARPU as high as US$9, the majority of stakeholders I met in Yangon anticipated ARPU around US$4, lowered by a significant proportion of subscribers receiving not making calls. 17. Will microwave backhaul be used? Is there any fibre? And will the Myanmar military play a role in the telecoms rollout? The precise role of MECTel, part of the military-

Forecast Myanmar tower count by end 2014*

Source: TowerXchange research

MPT

Apollo Towers

*Removal of duplicate sites at the request of MCIT notwithstanding

5000 1000 1500 2000

Irrawaddy Green Towers

Pan Asia Towers

MTC

1800

1500

1250

1250

1001


owned Myanmar Economic Corporation which had been announced as a joint venture partner of MPT, remains unclear. Military participation in the Myanmar tower rollout has its advantages. For example, the assumption that many rural towers will need to be built with capacity for microwave backhaul may be incorrect as apparently there are thousands of military bunkers connected by fibre. In addition to possibly making this fibre available as a transmission network, the military continue to own a significant amount of land. 18. What proportion of Myanmar’s towers now and in the next four years will be on-grid, on unreliable grid connections and off-grid? Of an estimated 1,800 MPT towers in Myanmar now, 45% are on reliable grid connections, 25% on unreliable grids and 30% off grid. The GSMA forecast Myanmar will have 17,300

sites by 2017, providing just over 70% population coverage. The GSMA GPM suggested there would be 9,990 potential green power sites in Myanmar in 2017, requiring an investment of US$388.5mn but yielding US$137.4mn in annual opex savings for a 2.83 year RoI period, based on reducing diesel consumption by 83%. For detailed breakdowns of the business model and opportunity, including a forecast that an ESCO could generate US$157mn in Myanmar in 2017 based on an investment of US$465mn, download the GSMA’s excellent “Sizing the Opportunity: Green Telecoms in Myanmar – Market Analysis” report. 19. Put that in context for me; how many green powered sites are there worldwide? The GSMA uses a tight definition of green powered sites, excluding for example the 60-90,000 CDC battery hybrid sites worldwide. Solar hybrids

represent the significant majority. It’s notable that around 4,500 green powered sites are delivered under ESCO business models, the majority of which are in India, and 84.5% of green powered sites are in Asia, with the majority in China. 20. When will green power solutions be deployed in Myanmar? Expediency dictates that the first 12-18 months of the Myanmar tower rollout will be more focused on grid-connected and DG backed up sites, rather than deploying renewables. But that doesn’t mean to say renewable energy equipment providers should

Breakdown of GSMA’s ~38,000 Green Powered Sites Worldwide

Solar

35,000

1,200

1,200

700

Solar+wind Wind Fuel cells

Source: GSMA GPM

Forecast tower site growth and grid connections in Myanmar

2013

2015

2017 9,640

2,850

540 450 810

2,043 2,707

3,498 4,162

5,0000 10,000 15,000

Off grid

Unreliable grid

Reliable grid

20,000Source: TowerXchange


not be on the ground developing relationships and proving they have local after sales service. Myanmar’s towercos are less motivated to invest in energy efficiency whilst power costs are passed through to the anchor tenants under their current contracts with Ooredoo and Telenor, but that power pass through situation could change. While green power solutions may not be rolled out in volume for 12-18 months in Myanmar, substantial contracts have already been secured by firms such as Flexenclosure and Heliocentris. 21. So what are the contractual arrangements between the towercos and operators concerning power? According to the GSMA GPM Myanmar report “Ooredoo… has adopted a mixed deployment model during the first phase of network rollout. The tower assets (in phase one) are owned by the Tower Company (MTC in this case) and leased back to Ooredoo on a tower lease agreement, whereas the power assets are owned by Ooredoo (MNO led CAPEX model). In the second phase of rollouts given to PAT (its second partner Tower Company), Ooredoo is looking at completely outsourcing their power provision to the Tower Company.” The GSMA report continues, “On the other hand, Telenor… has outsourced both tower and power ownership to the Tower Companies (IGT and Apollo towers in this case). However, the power outsourcing is partial OPEX model where the

diesel consumption and electricity costs are a pass through. In this case, both the Tower Cos would be investing and owning the power assets (Tower Co lead CAPEX model).” 22. Okay, that’s the current state – what’s the ownership profile of power assets likely to be in the long term? Myanmar’s operators seem to agree that power sharing is essential in the long term, to avoid the inefficiencies of each tenant needing their own generator and deploying their own maintenance crews. This suggests power assets will be owned and maintained by towercos. Whether contract structures revert from power pass through to a fixed lease rate inclusive of a capped amount of power remains to be seen. Shared power releases significant savings, as high as 20%. 23. So are Myanmar’s towercos likely to become powercos? Maybe. Maybe not. Towercos create more value through co-location sales that they do through energy efficiency, so if they can get away without managing power, they will. In the words of one towerco executive “We dig a hole, we put some steel in it, and watch the revenue grow – investors like the steel and grass model; you get an annuity without risk! However, the predictability of cash flow is impacted by a

towerco’s ability to deliver a reliable network, and most SLA’s are primarily concerned with power availability.” Some or all of Myanmar’s towercos may eventually carve out or outsource power operations. 24. Is there an opportunity for an ESCO in Myanmar? Ooredoo acquired their own power solutions for their first 1,000 or so sites under a conventional capex model, but they have an RFP out seeking to contract a third party power company on turnkey basis (effectively an ESCO). Ooredoo may want to sell the power solutions at those initial 1,000 sites to that ESCO, converting to a pure opex model. Most stakeholders feel the structure of the Myanmar tower market is evolving toward towercos or third party powercos (ESCOs) assuming responsibility for power in the medium term. 25. How have vendors reacted to Ooredoo’s ESCO RFP?

TowerXchange has spoken to some would-be powercos who are unlikely to bid on the Ooredoo RFP, while others are more bullish about the opportunity. The opportunity would seem to suit a lone, credible and substantial vendor partner with access to affordable capital, as an alliance of dozens of different smaller vendors, each trying to eek out some margin, may not prove credit worthy behind the SLAs.


26. How will power be provided at rooftop sites? Rooftop sites represent a challenge for backup power – even if the landlord has a backup generator, is he allowed to sell power to the owners of a rooftop installation? With the structural capacity and permissions limiting the number of rooftop sites suitable for DG backed up power, fuel cells may be an option for many sites. 27. How extensive is the grid in Myanmar? Electrification in Myanmar stood at 29%, growing at approximately 5% per annum, with rural electrification at 25.54% in 2013 according to the Ministry of Electric Power, with load-shedding common during the dry season. 28. What is the quality of grid power in Myanmar? Myanmar’s towercos have yet to measure the quality of the grid in many locations, so most initial plans are being made on the assumption that all on-grid sites will have poor quality grid power. Sites of high importance, such as major transmission sites, will need a good backup generator regardless of grid quality, but tower owners are expected to resist the temptation to install backup generators at all poor grid sites until they have monitored the site. 29. Will off-grid sites be connected to the grid?

The grid is often too distant to for grid connection to be an option. However, one of Myanmar’s operators expressed a preference to connect to the grid if they could, no matter what quality or reliability of power was available: “even if the grid costs US$20-30k, it’s better to connect from a TCO perspective” 30. If grid connection is not an option, what power solutions are being considered at off-grid sites? CDC+DG hybrids, where the DG charges the batteries. “Looks simple, but it’s easy to get wrong if you don’t do it properly,” according to one operator. Solar+DG hybrids, typically relying 60% on the generator, 40% on solar, and anticipating 3-4 hours of DG runtime. Solar only, low power consumption sites only for lower priority sites. 31. How do Myanmar’s operators figure the TCO compares between solar hybrid and CDC hybrids? One Myanmar operator revealed that their TCO comparisons, inclusive of the cost of installation, suggested that at a low power 1.5kW site, the TCO crossover between solar hybrid and CDC hybrid was after two and a half years, pushed out over five years with a 2.5kW load and over six years with 4.5kW multi-tenant loads.

32. How important is vendor finance? Given the multi-tenant, higher load environment likely to evolve in Myanmar, MNOs and towercos will find justifying the funding of renewables difficult, particularly with so many other demands on their finite capex. So vendor finance is critical. For example, Flexenclosure’s access to European export credit agencies provides good interest rates for opex models, which has helped them secure their largest order to date from Myanmar. One Myanmar operator summed it up succinctly: “we’ve got to ensure alignment between technical requirements and financial realities to ensure the best TCO solution is adopted – not simply cheapest capex solution. If we can’t get funding, we can’t do it.” 33. What are the opportunities for RMS and site intelligence solutions in Myanmar? Data on grid availability and quality is non-existent in Myanmar, and is necessary to inform the selection and configuration of power solutions. RMS also provides important data on which to base the optimisation of fuel usage (and reduction of fuel theft); DG start/stop and runtime; battery charge, discharge and replacement; and the efficient use of any renewables. Integrating and aggregating data from different suppliers is key, based on which performance metrics can be generated for the comparison of sites and the evaluation of equipment and service providers.


Ooredoo talk about having a “smart controller at every site to maximise operational efficiency.” 34. How do you dimension cell site energy solutions for multiple tenants, and what are the implications for lease pricing? Dimensioning sites and power solutions in an unpredictable multi-tenant environment is never easy. Do you build for one, two or more tenants? How do you price leases? Do you discount for certain operators whose equipment requires less space and less power? How do you right-size a generator, or lease sufficient real estate to add a substantial solar array, if you cannot be sure how many tenants you’ll have an what their power requirement might be? How pragmatic are tenants prepared to be about SLA terms as these decisions and associated investments are made? Flexibility is going to be key for Myanmar’s towercos. Power solutions must be readily upgradable. As Myanmar’s aforementioned race to market results in stringent delivery schedules, putting pressure in turn on towercos’ supply chain of partners, it becomes critical to be able to integrate multiple vendors. The complexity of planning power solutions for Myanmar’s new towers is exacerbated by the lack of data available on the pattern of grid availability, making it tough to dimension solutions for on grid sites. 35. How should Myanmar’s cell site energy

solutions be made modular to accommodate multiple tenants? The power equipment provider (or ESCO) may have to provide a solution to support a 4.5kW load for three tenants in the medium term, but from day one tenancy ratios are one. So to what extent can vendors modularise? IGT CFO Karim Dakki on modularity: “we spent time understanding the upgradability path of different solutions with our partners from Heliocentris. We wanted to understand how many extra batteries we would need to achieve a given level of autonomy, and whether the batteries would fit in one cabinet or two? Was there enough free cooling? When should we install a 15 KVA versus a 20 KVA generator to avoid having to deploy a new generator to accommodate a second tenant?” The prevailing view among Myanmar’s towercos was that it was better to overinvest initially than re-deploy. 36. What’s the delivered cost of a litre of diesel to a remote cell site in Myanmar? Nobody knows, because there are no remote cell sites in Myanmar. Nobody knows the impact of fuel theft either. 37. Which energy vendors are already on the ground in Myanmar?

Lots. But of particular note are Cummins, Heliocentris and Flexenclosure. Heliocentris offer a


“managed power solution.” Heliocentris has some shareholders in common with IGT and are well positioned to support a significant number of their sites. Flexenclosure are deploying close to 1,000 multi-tenant renewable energy eSites in Myanmar. After sales support is critical to long term success, particularly given the scarcity of skilled local resources. This is where the larger and more

established energy equipment suppliers like Cummins, with local after sales service offices in Myanmar, are going to have an edge. 38. What do companies need to know about importing telecoms equipment into Myanmar? Quoting Polastri Wint & Partners in their recent TowerXchange interview: “Until recently, private telecommunications operators and contractors were not permitted in Myanmar. Only Government-

owned enterprises had the right to import telecommunications equipment – the market has only just liberalised. With an investment permit issued by the Myanmar Investment Commission and an import permit, issued by the Ministry of Commerce, foreign towercos and their suppliers can import telecommunications equipment, with the recommendation of the Ministry of Communications and Information Technology, and where relevant, with the issuance of a telecommunications equipment license issued by the Posts and Telecommunications Department (which list of equipment will be formalised once the Telecommunications Rules have been enacted). Importers will be required to provide detailed information on the equipment proposed to be imported including the volume and specifications of such equipment, as part of the application for an investment permit.” 39. Will Myanmar’s towercos outsource construction, O&M? Does Myanmar have many prospective local partners already in place?

Myanmar’s tower companies seem set to follow lean business models proven elsewhere in emerging markets, and outsource much of the site construction, operations and maintenance work. As such, Myanmar’s towercos need local partners. There are capable local construction companies in Myanmar, although obviously they have finite telecoms construction experience given that


Myanmar only has 1,800 towers. There is also an overlapping ecosystem of local firms offering fuel logistics and O&M services, many of which need more capacity and training. However, the market is not sufficiently organised for towercos to simply float an RFQ, and the limited number of prospective local partners leaves the four towercos chasing a finite number of potential construction and O&M partners. In the meantime, Ericsson, Huawei and ZTE can all take on turnkey managed services contracts in Myanmar. Many towercos are importing project management resources and contracting proven international managed services partners (for example Camusat has opened an office in Myanmar and is working with Apollo Towers) to supplement and train local resources. 40. What is the impact of Myanmar’s under-developed transport infrastructure? Quoting John Stevens, IGT CEO in his recent TowerXchange interview: “Everything in Myanmar flows through Yangon. There’s a decent port with warehousing capacity, and roads from India, China and Thailand. However beyond Yangon, there’s not much infrastructure. The single biggest challenge in Myanmar is the lack of transport infrastructure – there are good roads to Naypyidaw and Mandalay, but beyond that, the roads and bridges often can’t handle heavy goods vehicles, so we have to limit the physical weight of loads, and we expect to use oxen and mules to get construction products to remote sites. In Northern sites where we have site hunters out, it can take a two to four day round trip to get information back to Mandalay!”

Recommended further reading

The GSMA’s Green Power for Mobile’s excellent “Sizing the Opportunity: Green Telecoms in Myanmar – Market Analysis”www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/06/GPM-Market-Analysis-Myanmar-June-2014.pdf

TowerXchange’s introduction to the structure of the tower industry in Myanmarwww.towerxchange.com/the-structure-of-the-tower-industry-in-myanmar/ TowerXchange’s Interview with Ole Martin Gunhildsbu, COO, Telenor Myanmarwww.towerxchange.com/internet-for-all-telenors-plans-in-myanmar/ TowerXchange’s Interview with John Stevens, CEO of Irrawaddy Green Towerswww.towerxchange.com/how-irrawaddy-green-towers-plans-to-rollout-1500-towers-for-telenor-myanmar/

Hardiman Telecommunications’ introduction to the Myanmar tower rolloutwww.towerxchange.com/myanmar-the-last-frontier/

Local law firm Polastri Wint & Partners on the legal and regulatory environment and site acquisition challenges in Myanmarwww.towerxchange.com/site-acquisition-challenges-in-myanmar/ Camusat’s perspective from the front line of the Myanmar tower rollouthttp://www.towerxchange.com/camusat-secures-contract-to-rollout-500-towers-in-myanmar-for-apollo-towers/ A tower manufacturer’s view of Myanmar’s unique requirements, from GSMTPhttp://www.towerxchange.com/how-to-adapt-tower-design-and-packaging-to-the-unique-challenges-of-deployment-in-myanmar/ For an insight into the project management platform used by Ooredoo Myanmar, NeXsysOne, checkoutwww.towerxchange.com/how-one-user-interface-enables-management-of-complex-network-rollouts-and-maintenance/ To put Myanmar in the context of the broader Southeast Asian tower industry, checkoutwww.towerxchange.com/introduction-to-the-southern-and-south-east-asian-telecom-tower-industry/

Meet key stakeholders in the Myanmar tower rollout at the TowerXchange Meetup Asia, taking place on December 9 and 10 in Singapore.

www.towerxchange.com/meetups/asia/

Special feature:

In our ongoing coverage of the Central and Latin American telecom tower industry, we are pleased to offer a variety of insights from key executives who are contributing to the evolution of the market, from Mexico all the way to Chile.

In this issue, we had the pleasure to interview Olivier Puech, CEO LatAm of American Tower, offering snapshots on AMT’s LatAm footprint. Eduardo Dos Santos, VP of Strategy within Everest Engenharia, shared with us opportunities and challenges of the Brazilian market as seen by a leading managed service provider. And Maria Scotti, CEO of Torrecom, opened up about the characteristics of the Central American market.

As part of our editorial research, we have also been focusing on the energy market dynamics in CALA and their implications for the telecom tower industry and associated energy equipment and service providers.

Leadership perspectives on LatAm towers

Don’t miss:116 AMT: Olivier Puech on the BR Towers acquisition

and other opportunities in the region

119 Everest Engenharia: Brazil’s shift from single to

multi-tenants towers

123 Torrecom: The evolution of vertical real estate in

Central America

128 Editorial: Will LatAm towercos take over power?


AMT’s LatAm CEO Olivier Puech on the BR Towers acquisition and other opportunities in the regionPerspectives on further opportunities in Brazil, plus views on Colombia and Mexico

TowerXchange: Olivier, what has been your career path prior to joining AMT? What does it take to be the regional CEO of one of the largest and most established towercos in the world?

Olivier Puech, CEO LatAm, American Tower: My career path includes 11 years in management roles with Nokia in North America, South America and the Asia-Pacific region. Prior to that, I worked with Gemalto, an international digital security company, in Southern Europe and South America.

I joined American Tower in March 2013 as CEO for Latin America. I was intrigued by the towerco business model and the perfect combination of telecom, real estate and Latin America, a region of which I am particularly fond.

LatAm towercos operate in an extremely fast-paced environment and American Tower has been experiencing tremendous growth over the past few years. Therefore, a CEO must find the right balance between patience and creativity, as well as work with a strategic, long-term mindset and have complete trust in his local teams.

American Tower has been in LatAm since 1999, but today the market environment is changing faster than ever and we need to be very flexible and forward-thinking to adapt to new challenges and quickly seize opportunities.

I am always asking myself what is next and how is that aligned with our value proposition.

Read this article to learn:< How the CEO of a major LatAm towerco keeps up with the fast change of pace and the importance

of trusting your local team

< Why Brazil is a priority market for AMT and potential further acquisition and BTS opportunities

< How the acquisition of BR Towers diversifies AMT’s pool of customers and expands its

geographical presence

< AMT’s views on the Colombian and Mexican markets

With its recent announcement of an agreement to acquire over 4,500 towers from BR Towers, American Tower (AMT) will have more than 25,000 towers in LatAm and is firmly established as the region’s largest independent towerco. For a unique insight into AMT’s leadership priorities, and for views on the Brazilian, Colombian and Mexican tower markets, TowerXchange presents this exclusive interview with AMT’s LatAm CEO Olivier Puech.

Keywords: Interview, American Tower, Towercos, Tower People, C-Level Perspective, Gemalto, Nokia, South America, Central America, Mexico, Costa Rica, Panama, Colombia, Peru, Chile, Brazil, BR Towers, Acquisitions, Deals, ANATEL, Spectrum, Auctions, 3G, 4G, Claro, Millicom, Telefonica, Movistar, DirectTV, Due Diligence, Build-to-Suit, Business Model


Olivier Puech, CEO LatAm, American Tower

TowerXchange: What are your top three goals as CEO of AMT in Latin America?

Olivier Puech, CEO LatAm, American Tower: My top three priorities and goals are related to sustainable growth, human capital and the future of AMT.

With a stable presence in seven LatAm countries - Mexico, Brazil, Colombia, Chile, Peru, Panama and Costa Rica - we strive to leverage our existing assets in a sustainable way. At the same time, each new investment needs to be assessed for its future potential and to ensure it proves profitable.

Our regional team is another top priority for me. I want to make sure our people have the competitive skills and right mindset to achieve our long-term goals and share AMT’s values. Being surrounded by people able to operate in such a fast-paced environment is key to me and is at the core of my activities.

Lastly, I am constantly challenged and intrigued by the future. Looking at new opportunities, defining the vision and asking myself where do we want to be next? is a fundamental component of my role.

TowerXchange: Upon the closing of the acquisition of BR Towers, AMT’s portfolio will be the largest owned by an independent towerco in Brazil. How many opportunities for acquisitions are left in the country?

Olivier Puech, CEO LatAm, American Tower: Brazil


is the perfect example of how swiftly the regional telecom industry is changing. Its operating environment is being modified by a data-hungry population, coverage and densification needs, and a reduction in the price of handsets.

The environment for towercos is extremely exciting and we look at opportunities both in terms of acquisition of existing companies and sale and leaseback opportunities.

There are still sizable portfolios potentially

available, and the carriers’ landscape is evolving thanks to the imminent 700 MHz auction, which might result in new players entering the market. With the auction scheduled to take place in August, we are looking forward to the results.

TowerXchange: What are the key due diligence elements you took into consideration with respect to BR Towers? How is the portfolio additive to your existing assets in the country?

Olivier Puech, CEO LatAm, American Tower: Key

An aerial view of Copacabana, Brazil


factors we took into consideration included the size of the portfolio - 4,500+ towers - as well as their locations. The portfolio includes a combination of urban and rural assets that appealed to us.

This portfolio serves various key carriers and gives us an interesting opportunity to diversify our pool of customers. At the same time, we believe the portfolio has very good potential for collocation.

Thanks to this transaction, we will expand our geographical presence, gain new customers and open up new sharing opportunities - all factors we deem fundamental when performing due diligence.

TowerXchange: Brazil has approximately 4,000 subscribers per site while the US has 1,000, suggesting a substantial requirement for densification. What’s your view of the build-to-suit opportunity for Brazilian towercos?

Olivier Puech, CEO LatAm, American Tower: With approximately 65,000 existing towers and the estimated need for well over 100,000, it is clear that Brazil needs more communications infrastructure. Initiatives such as the imminent spectrum auction will intensify this necessity.

Our preferred way to contribute to expanding coverage is by offering existing assets to carriers looking at adding signal in a new location, or adding capacity in a high-traffic location. If the location is covered by towers, there is no real need for new infrastructure and this is where

companies like American Tower are better placed to serve carriers.

However, we recognize that there are areas in need of new infrastructure and greenfield projects are constantly being developed. Along with macro-network solutions, we are particularly active in the heterogeneous networks field, where solutions such as DAS and Small Cells can address needs in areas where towers cannot be erected.

TowerXchange: Beyond Brazil, what are the other top countries in the region for AMT for near-future business opportunities? And specifically, what is your view on the Colombian market?

Olivier Puech, CEO LatAm, American Tower: We concentrate most of our efforts on expanding our presence in those markets where AMT is already active. Generally speaking, they are all stable countries with good macro-economics conditions and favorable penetration rates.

At the same time, we continue to look beyond our existing footprint at new opportunities. Towercos operate with long-term plans and are particularly influenced by the cost of capital. Therefore, we need to ensure political and economic conditions are favourable before entering new ventures. That said, we remain very open to new possibilities and are keeping an eye on the positive evolution some countries are undergoing.

Colombia is our third largest market and is

also the third most populated country in the region. It presents a stable and sound economic environment which goes hand in hand with its industrial growth and the expansion of its middle class. The recent 4G auction has contributed to enhance an already competitive market that features several established telecom players such as Claro, DirectTV, Avantel, Millicom and Movistar.

TowerXchange: The Mexican market could receive a tremendous boost from the new telecom regulation pending approval, how do you foresee the market changing over the next 12 months?

Olivier Puech, CEO LatAm, American Tower: The telecom reform is part of an extensive legislative package looking at amending fiscal, energy, education and telecom policies. It is a long process that requires time but if we look at the bigger picture, we believe the intent is to achieve an outcome that will be very positive for the country as a whole.

We also believe that AMT is in a strong position as one of the the largest independent towercos in the country and we are ready to contribute to the growth of the telecom sector through additional investment and our portfolio of 8,000 assets.

That said, we hope that changes planned as part of the telecom reform will be worked out by all parties involved and implemented fairly and effectively as soon as possible in order to proceed with much needed investments and projects

Brazil’s shift from single to multi-tenant towersA turnkey provider’s story: from site surveys in the jungle to cutting edge solutions in the megalopolis

TowerXchange: What products and services does Everest Engenharia provide to carriers and tower companies in Brazil?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: Everest Engenharia is able to offer full services to carriers, towercos, broadcasting companies and OEMs. We manufacture towers and poles as well as serve our customers as a turnkey provider. Specifically, we offer technical analysis of projects viability which include full analysis of towers and poles design and foundations, civil construction, structural analysis, diagnosis and reinforcement. We are increasingly engaged in the design and construction of rooftops and mobile easel tower projects.

As a turnkey provider, we offer management and construction services such as survey, electrical and hydraulics work as well as grounding. In the field service area, we serve our customers as advisors and consultants and link them with top suppliers to cover due diligence works, preventive and corrective maintenance as well as emergency services.

TowerXchange: In terms of due diligence, what happens when a towerco buys a portfolio? What type of services do you offer?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: Typically, we work with towercos during the due diligence process to collect information on each site such as number of tenants, remaining capacity, structural conditions et cetera.

Read this article to learn:< Everest Engenharia’s experience in the Brazilian tower industry

< How long it takes to conduct technical due diligence on a portfolio of towers

< How many of Brazilian new towers are being designed to host multiple tenants

< Limitations created by the current regulation to the development of greenfield projects

Everest Engenharia has over eighteen years of experience in tower manufacturing and is now offering comprehensive solutions - from site surveys to maintenance - to its wide array of clients in Brazil.

In this exclusive interview, Eduardo Dos Santos, VP Strategy of the company, shares his views on what it takes to be a leading turnkey provider in one of the most exciting and challenging telecom markets in the world.

Keywords: Everest Engenharia, Brazil, Minas Gerais, Oi, Vivo, TIM, SBA Communications, Interview, Managed Services, Passive Equipment, South America, O&M, Construction, Installation, 4G, Due Diligence, Site Surveys, Capacity Enhancements, Regulation, Greenfield, Rooftops, Masts & Towers


Eduardo Dos Santos, VP Strategy, Everest Engenharia

We have done comprehensive due diligence for SBA Communications and for carriers such as Vivo and TIM in the past and hope to acquire the contract for the recently purchased Oi’s portfolio.

Everest offers site survey services to carriers prior to the sale of a portfolio. By collecting up to date information on their sites, carriers will be able to negotiate a better price during the sale process.

TowerXchange: How long does it take to survey 2,000 towers?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: For TIM, we surveyed 2,000 towers in approximately four months. These towers were all located in the Southeast of the country and therefore, were easily accessible and not too far from each other.

Sometimes, we survey portfolios in the North, in remote areas, near or inside the jungle. In these cases, it can take up to a full year to survey 200 sites in light of the severe conditions we have to deal with.

On average, I would say Everest is able to survey 2,000 towers in approximately six months.

TowerXchange: What is your production and galvanising capacity? And where is your factory?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: We have the capacity to manufacture 3,000 ton/year, with one round. With our present


Coastal tower - Courtesy of Everest Engenharia


structure we are able to produce up to 6,000 ton/year. That results in our ability to manufacture approximately 400 towers and poles yearly.

Our factory is located in the city of Mairinque in the state of São Paulo, where approximately 40% of Brazilian towers are installed. The state of São Paulo is responsible for 40% of the national GDP and is at the very heart of the telecom industry.

Being close to two major highways, Castelo Branco and Raposo Tavares, gives us an additional competitive advantage in terms of logistics costs.

TowerXchange: How many of your towers are installed in Brazil (or elsewhere in South America)?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: To date, we have installed 4,000 towers in Brazil and we have sold towers to Argentina. In fact, we are able to support towercos and carriers throughout the region but we are mainly focused on attending the local demand of the Brazilian telecom market.

In preparation of the World Cup, we installed about twenty camouflaged poles near stadiums and other high density areas. And we predict 2015 to be a big year for this type of projects in light of the upcoming Olympics in Rio.

Beside these big events, urban areas are in need of this type of poles to fully support the rollout of 4G LTE, so we are prepared to serve the industry as the

demand grows.

For the future, we hope the Brazilian market will demand an average of 1,000 new sites per month over the course of the next two-three years.

TowerXchange: Tell us about some of the most interesting projects you have completed for clients.

Eduardo Dos Santos, VP Strategy, Everest Engenharia: In an urban scenario, we developed 20 poles for Vivo and Claro to be installed in sites with reduced foundations to reduce their visual impact in the state of São Paulo. This is something that our customers are increasingly demanding in light of the limited space available in urban areas.

“ “For the future, the Brazilian market will demand an average of 1,000 new sites per month over the course of the next two-three years

Vivo tower being assembled - Courtesy of Everest Engenharia

To provide a completely different example, we were able to install 120 meter high towers right in the middle of the Amazon jungle.

Everest has installed towers in every Brazilian state: from deserted regions to savannahs, rocky areas, jungles and megalopolis.

TowerXchange: How do the strict zoning and permitting regulations in Brazil affect tower and site design?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: The current telecom regulation is definitely a bottleneck for the development of greenfield projects. In fact, as each municipality has legislative rights, we have as many as 6,000 different requirements in Brazil, depending on each region.


In order to become a leader in this sector, it is very important to be flexible and highly capable to comply with all different requirements and meet each client’s needs regardless of the difficulties we encounter at a regulatory level.

That said, some states, such as Minas Gerais, are facilitating the process by providing us with clear information about the available locations for sites and speeding up the tower assembly process. These are significant incentives to develop greenfield projects and the demand in that state is definitely growing in light of that.

TowerXchange: How do the requirements of towercos differ from the requirements of carriers?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: Towercos are focused on owning towers fit for multiple tenants, which means more loading capacity. Carriers, on the other hand, tend to specify minimum requirements for each tower to host one tenant only, with the exception of backbone towers.

Over the past few months, we have started working with various towercos to either build or re-engineers towers to host multiple tenants. The situation is different for carriers that still perceive towers as a very heavy expense on their balance sheet and request specifications suitable for single tenant towers, especially when reaching out to rural areas where infrastructure sharing isn’t very likely yet.

The trend we see nowadays is towards the construction of multiple tenants towers which represent 60% of our current production.

TowerXchange: How can towers be upgraded for multiple tenants?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: For existing towers, we tend to reinforce their metal structure and foundations. This type of reinforcement can upgrade the loading capacity up to 30% or higher depending on how deep of an intervention we make.

We always need to keep in mind that loading capacity is a variable factor linked to wind and ground conditions. For instance, a tower designed to load 12 sqm in the South of Brazil could support up to 18 sqm in the Northeast of the country.

Ideally, new towers that are coming to market should be designed with greater loading capacity in order to allow multiple tenants in the future.

TowerXchange: What quality standards do you use when manufacturing towers, and what standards are most commonly used in Brazil?

Eduardo Dos Santos, VP Strategy, Everest Engenharia: Everest is ISO 9001 certified and we have proof of origin of our steel. The most common standards we use in Brazil have been inherited from the U.S. but we also have some specific requirements as ruled by the national telecommunications agency, ANATEL

“ “The trend we see nowadays is towards the construction of multiple tenants towers which represent 60% of our current production

The evolution of vertical real estate in Central AmericaHow MCM diversified into towers then into Nicaragua, Guatemala and Mexico

TowerXchange: Please introduce yourself and your background

Maria Scotti, CEO, Torrecom and Director, MCM: I began in the wireless industry in 1992, as Manager of Engineering with our National Paging Company Message Center Beepers. Due to our network needs we utilised tower and rooftop infrastructure. Although unusual at that time, we always allowed others to rent and utilise our infrastructure which was the beginning of Message Center Management, Inc. In 1995, we divested our paging business, closing the largest paging transaction in history, and continued our focus in all areas of the wireless world and continued to grow MCM as a towerco in the USA.

In 2009, we were approached with the idea to start operating an infrastructure firm in Latin America. We, along with our co-founder, Indigo Capital, LLC created Torrecom and successfully started operations in Central American in 2010 and in 2013 officially launched Mexico.

TowerXchange: Maria, please tell us about Torrecom’s operations in Guatemala, Nicaragua and Mexico. What are the key strategic elements of your operations in each country?

Maria Scotti, CEO, Torrecom and Director, MCM: Torrecom’s primary focus is to develop and operate wireless infrastructure. That development pipeline is fed by carrier build to suit (BTS) projects and sale and leaseback opportunities in all countries where we fly our flag. We are interested in every aspect

Read this article to learn:< Torrecom’s footprint in Mexico and Central America

< Challenges and best practices to create successful management teams in the region

< Key characteristics of the Central American telecom tower industry

< The potential for change in the Mexican tower market

< Opportunities for smaller towercos to co-exist alongside larger entities

Torrecom is an independent towerco active in Mexico, Guatemala and Nicaragua which has been able to successfully apply its expertise and experience in the CALA region thanks to its North American roots, veteran management and fluid approach to change.

In this exclusive interview, Torrecom’s CEO, Maria Scotti, shares her views on the current status and key characteristics of the towerco industry in Central America and Mexico, what it takes to create high performing local teams, and her views on future developments that might impact the towerco business model in the region.

Keywords: Torrecom, Message Center Management, Nicaragua, Guatemala, Mexico, Central America, North America, 4G, LTE, Towerco, C-Level Perspective, Interview, Tower People, Market Overview, Valuation, Investment, Capex, Co-locations, Urban vs Rural, Infrastructure Sharing, Build-to-Suit, Regulations, Densification, Off-Grid, Solar, Private Equity, Debt Finance, Indigo Capital


Maria Scotti, CEO, Torrecom and Director, MCM

of wireless infrastructure space, not only towers but all vertical real estate including in-building solutions, small cell and DAS – any technology that will enable our carrier customers to build and enhance their networks and delivery of services.

TowerXchange: Which capabilities did Torrecom manage to transfer from its U.S. founding partner, MCM? To what extent have you been able to source local management expertise?

Maria Scotti, CEO, Torrecom and Director, MCM: The independent towerco business model is still relatively new to the region. We are bringing to market a completely new function which requires specific skill-sets and our U.S. background definitely helps us. We started operating in the U.S. at the very beginning of the wireless infrastructure


industry and experienced a similar initial phase with its challenges and uncertainties. Now, we are transferring our experience in dealing with permitting issues, working with our industry peers on initiating best practices and building long term carrier solutions.

We hired local professionals in both upper and mid-management functions. They provide a unique understanding of the local market and many have a carrier background, which is a plus. However, it is key to ensure our local teams understand the

fundamentals of building, owning and operating our portfolio.

Carriers’ focus today and into the future will be on network enhancements, maximising spectrum utilisation and meeting consumer demands for robust wireless services. Working with Torrecom allows them to focus on their core business.

TowerXchange: Please share your take on the structure and the opportunities in the Central American tower market. What proportion of

“ “Central American towers are still predominantly owned by carriers and I would estimate they retain approximately 70% of them

Granada, Nicaragua


towers are operator captive versus independent towerco owned?

Maria Scotti, CEO, Torrecom and Director, MCM: The Central American tower inventory is still predominantly owned by carriers and I would estimate they retain approximately 70% of them. The trend in the region to move the tower assets to solid tower owner/operators is upon us and moving quickly along. BTS is also on the rise. Our experience and resources complements well their need to use capex for carrier core business growth or any other needs that they may have which fits within our business plans.

TowerXchange: Are there a lot of small local towercos?

Maria Scotti, CEO, Torrecom and Director, MCM: There are a few contractors who acquired small portfolios while working with carriers on the construction side as well as a handful of BTS companies with a larger inventory of assets in both Nicaragua and Guatemala. Although the size of the Central American towerco market is vibrant and growing it isn’t comparable to the scale of Mexico, let alone Brazil just based on sheer size of the countries.

TowerXchange: What’s the prevalent business model? Grass and steel? Tower+power?

Maria Scotti, CEO, Torrecom and Director, MCM: Today towercos are predominately focused on grass and steel and rarely get involved in single

power source/sharing except in very specific cases. Remember tower sharing is new to the region. As the market develops I am sure that will come along as well. It is an area that has been more aggressive in taking advantage of other power sources such as solar. Many areas in the region include off-grid sites. We work with the carrier in developing solar-driven or alternative power solutions on a site by site basis.

TowerXchange: What kind of valuations do towers attract in Central America compared to North and South America?

Maria Scotti, CEO, Torrecom and Director, MCM: Valuations not only vary from country to country

but more importantly from deal to deal. It is difficult to see a consistency amongst valuations versus seeing more of a consistency of xmultiples. What is consistent is that tower cash flows are a main driver in the majority of transactions, you will see different values based on particular deal economics but multiples will begin to look more and more alike as the co-location demand rises, subscriber and data usage growth and demand also rises. This in turn forces more robust networks and infrastructure to host that equipment, et cetera.

If you look at the xmultiples over the past few years in Central and South America you can see the multiples have been on a reasonable rise due to the towerco model. There is still a lot of inventory available for purchase and much to be built in what is considered a young environment for this space. We are excited about the future and I think that the xmultiples will reflect that over the long term.

TowerXchange: Are BTS opportunities substantially outsourced or are operators still building their own?

Maria Scotti, CEO, Torrecom and Director, MCM: Again the trend in the region is to move to a large extent to outsourcing BTS projects. Yet carriers are very particular about who they deal with. Gaining their confidence, showing stability and the ability to deliver is critical to gain and retain long term relationships. In-house projects by carriers do still exist but in general, putting capex to use in network development is becoming a critical factor in their decision making process. Less and less operators

“ “

Tower cash flows are a main driver in the majority of transactions, you will see different values based on particular deal economics but multiples will begin to look more and more alike as the co-location demand rises, subscriber and data usage growth and demand also rises

are comfortable investing in passive infrastructure in light of the growing financial expenditure required for their network demands and potential 4G LTE network rollouts. This is creating an ideal environment for independent towercos to offer alternative solutions such as infrastructure sharing and BTS. If we look at the capex of carriers who still own their towers, it tends to be quite robust but the trend nowadays is to cut tower budgets and shift investment to network deployment and equipment. Highlighting again the similarity to the US carrier/towerco environment in the 90’s, the difference being the speed with which the change is taking place. In the late 90’s the thought of many of the wireless services we as consumers have today were only dreamed of. And it seemed that technology was chasing the consumer. With the adoption and growth of wireless use, today it is the consumer chasing technology. Due to the knowledge of consumers in all countries, including in this region, the services are truly available and exciting. It is forcing the regional carriers to develop, enhance and develop again all while offering these services at competitive prices. Consumers as well as regulators are imploring carriers to provided robust services. This is changing the Latin American telecom industry and carriers are adapting to the evolution of market demand, creating new possibilities for towercos.

TowerXchange: What is the investor appetite for opportunities in Central American towers?

Maria Scotti, CEO, Torrecom and Director, MCM: Investors are generally much more open to Central


America and its telecom industry than four to five years ago. The entire Latin American wireless space is very strong and evolving fast, and investors are increasingly attracted to it. Investments, in the form of both international equity and debt funding from in-country institutions, are increasing and the pool of investors is becoming deeper and more diverse. Money is definitely travelling faster than it used to; a very interesting change to witness.

TowerXchange: Can you achieve scale across Central America – to what extent can you

consolidate operations and expertise, for example under a single NOC?

Maria Scotti, CEO, Torrecom and Director, MCM: We are looking at consolidating certain operational areas and in reality, countries are so close to each other that we can move swiftly across the region.

In terms of achieving scale, yes it is achievable in Central America and the region. Of course what constitutes reaching scale may differ from one company to the next. For me a real win is the

Guatemala City, Guatemala


moment when adding additional tower assets through sale and leaseback or other requires a smaller investment in SG&A while keeping our services consistent. Along with our size providing an ability to be of even better service to our carrier customers. But as we grow, we insist on keeping our creative and entrepreneurial spirit, our ability to turn on a dime to react quickly to market demand, and keeping ourselves deeply in the know of the wireless carrier industry to stay in front and continue to meet our KPIs.

TowerXchange: Do you think that the Mexican market will open further to towercos in light of the reform to telecom regulation?

Maria Scotti, CEO, Torrecom and Director, MCM: There is huge potential in Mexico, but there is still lots to be done. Mexico has the least robust service for a country of its size. The government has been focused on trying to engender more competitive services becoming available in the country and regulatory changes are underway. Although a complex country to operate, we are very excited to see what happens over the next few months to be a part of this very dynamic change and we have been and continue to be ready to offer our services to carriers nationwide.

TowerXchange: What does it mean to be a smaller and faster towerco working in countries where there are larger multinational towercos? What is your competitive differentiation?

Maria Scotti, CEO, Torrecom and Director, MCM:

Carriers simply don’t want their network to reside on infrastructure entirely owned by one towerco. It’s too risky to run their entire operations via one large entity, so it makes sense for them to diversify their pool of partners and sometimes select smaller, nimbler towercos.

Beside our size and goals, competition is very positive for all of us as it ensures we all keep very high standards of service and operate in the best possible way. The telecom network is very complex and requires ongoing investments and passive infrastructure is instrumental to its optimum functionality.

Ultimately, carriers drive BTS projects and select partners whose teams possess the expertise and commitment to fulfil their technical and financial expectations. So it makes sense for them to be able to choose among various options.

TowerXchange: Which changes do you expect to see in the regional towerco model over the course of the next few years?

Maria Scotti, CEO, Torrecom and Director, MCM: There is lots of focus on Mexico and its evolution in light of the ongoing regulatory changes. Carriers now are required to contribute to the change and fulfil the coverage and capacity needs of the country. We are entering a very interesting phase where carriers need to invest in network deployment and offer high quality services throughout the countries in a consistent manner, in both rural and urban areas. As regulatory

reform comes to fruition, this phase will not only be operationally challenging but also financially demanding.

The same can be said about Central America as a whole. The market is driven by the demands of both the population and regulators to achieve improved network services. For example, Guatemala has been growing tremendously over the past three years and is now host to a number of new companies. Nicaragua is following the same pattern and used to be a very different country a couple of years ago. It’s now a more inviting environment for foreign investors, international tourists and business ventures alike

“

“

Carriers simply don’t want their network to reside on infrastructure entirely owned by one towerco. It’s too risky to run their entire operations via one large entity, so it only makes sense for them to diversify their pool of partners and sometimes select smaller, nimbler towercos

Will LatAm towercos take over power?An analysis of the energy market in the region and its implications for the telecom industry


Arianna Neri, Head of Asia and Americas,TowerXchange

South America has excelled in the utilisation of its natural resources compared to other emerging markets and currently produces two-third of its electricity thanks to renewable hydropower. Respectively 99.3% and 98% of the Brazilian and Mexican population have access to electricity and almost every country in continental Latin America reaches fairly high (80%+) electrification rates.

That said, Central America and the Caribbean have a very carbon intense electricity production compared to South America, reported to be higher than North America and Europe. In a recent inter-governmental meeting, seven out of the thirteen Caribbean island nations - including St. Lucia, the British Virgin Isles, Turks & Caicos and Dominica, have committed to generate at least 75% of their electricity from renewable energy sources in an effort to reduce their carbon footprint.

However, it doesn’t come as a surprise that other Caribbean Islands and Central America haven’t committed to any green shift yet. In fact, countries like Haiti, Cuba, the Dominican Republic, Honduras, Suriname and Venezuela are all part of Petrocaribe, an organisation of eighteen countries which was originated by late Hugo Chávez back in 2000.

Under the agreement, Venezuela offers relatively cheap oil - based on a quota of barrels per day - to member countries which in return, must pay 60% of the bill within the first three months with the remaining 40% to be financed over a period of as many as twenty-five years at 1% interest rate. In exchange for oil, countries can also repay with

Read this article to learn:< The status of the Central and South American energy market

< Which countries are leading the way in the green energy revolution

< How can telecom operators meet rural coverage requirements in an off-grid environment?

< Why are operators still in charge of their energy requirements?

< How the telecom industry could become greener

Keywords: Editorial, South America, Central America, Caribbean, Brazil, Mexico, Peru, Chile, Ecuador, Colombia, St. Lucia, British Virgin Isles, Venezuela, Turks & Caicos, Dominica, Dominican Republic, Energy, Fuel, Diesel, Diesel Theft, Carbon Footprint, Renewable Energy, Hydropower, PV Solar, Deep-Cycle Batteries, 3G, 4G, Urban vs Rural, Fuel Security, Unreliable Grid, Off-Grid, Hybrid Power, Site Level Profitability

In a region comprising 47 countries ranging from small Caribbean islands to continent-sized nations such as Brazil, each country presents very particular challenges related to its resources, geographical conditions and electricity needs. Some countries are heavily reliant on fossil fuel to feed their industrial development whereas others are excelling in taking advantage of renewable resources.

In this editorial, we analyse the implications for the telecom industry and outline an ideal scenario for regional telecom operators and towercos to succeed in reducing their energy consumption and streamlining their operational expenditure.


goods such as food and raw material. With low priced oil and convenient repayment terms, it will take some time for these eighteen countries to commit to a green shift and lower their carbon footprint and dependance on diesel.

With over 93% of its electricity produced using renewable resources, 76% of it from hydroelectric generation, Costa Rica represents an exception and is currently working towards meeting its goal to become completely carbon neutral by 2021.

98% of LatAm population has a mobile signalOn the telecom side, the World Bank reports that 98% of the population in Latin America has mobile

signal and 84% of households subscribe to some type of mobile service. A clear sign that substantial progress has been made over the past few years to reach out beyond metropolitan areas and start serving remote rural areas throughout the region, often with both electricity and telecom services.

However, according to the Inter-American Development Bank (IDB) there are still as many as 34 million people lacking access to modern electricity services, mainly concentrated in remote areas such as the Amazons, rural Peru and the Caribbean. Although representing a small percentage of the population, reaching out to remote areas is key to ensure countries develop to their full potential and economic growth is ensured at all levels.

Rural electrification represents a challenge for most countries in the region and local governments - Chile, Peru and Brazil to name a few - have developed several action plans to extend the national grid system or install renewable solutions (mainly solar) in remote areas.

The status of electricity transmission infrastructure is another key problem, with a distribution loss rate of 15.5% - among the highest in the world - due to theft and power outages. The rate of smart grid investments has been constantly accelerating over the past few years and many countries - from Colombia to Ecuador - are deeply involved in the development of smart city pilot projects.

A great driver for the change is represented by the

Percentage of population with access to electricity in LatAm

Source: International Energy Agency, World Energy Outlook

“

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the World Bank reports that 98% of the population in Latin America has mobile signal and 84% of households subscribe to some type of mobile service

Venezuela 99.6

Chile 99.4

Brazil 99.3

Costa Rica 99.1

Trinidad & Tobago 99.0

Uruguay 98.6

Paraguay 98.2

Cuba 97.5

Colombia 97.4

Argentina 97.2

Dominican Republic 96.1

Ecuador 95.5

Jamaica 92.8

El Salvador 91.7

Peru 89.7

Panama 88.2

Bolivia 86.8

Honduras 83.3

Guatemala 81.9

Nicaragua 77.7

Haiti 27.9


need to keep the pace with the expansion of various industrial sectors and their specific power needs. What is the role of the telecom sector in bringing along the change and what alternatives do telecom companies have when reaching out to off-grid areas?

3G and 4G auctions and the expansion of - green - rural connectivityOver the past few years, several governments have issued 3G and 4G spectrum auctions inclusive of license conditions requiring operators to extend their networks.

As an example, when awarding 4G wireless frequencies back in 2012, the Brazilian government set a specific rollout timetable to deliver services in certain rural parts of Paraná, Santa Catarina, Rio de Janeiro and Espirito Santo with the goal of full coverage by December 2015. A rural area is identified by the Brazilian telecom regulator Anatel as a site at least 30 Km from any municipality. Historically relying on diesel fuel to provide power in remote regions, telecom operators - even before the entrance of towercos in the region - started to look at renewable energy systems due to a combination of rising diesel costs, declining solar and battery costs and to limit the financial losses caused by diesel theft. Energy opex represents one of the costliest line items on a telecom company financial statement and the average power and fuel expenditure is reported between 30-40% of its overall OPEX. A figure that can go above 50% in remote areas where transportation costs, theft and labour all add up.

PV solar or other green solutions used to be deployed selectively at key off-grid sites as the required initial capex didn’t justify the investment for sites with low tenancy ratios that would need a very long payback period. However, in recent years, the trend has shifted and many greenfield

sites in remote areas are being built with the use of a combination of deep-cycle batteries and PV solar, rather than diesel.

The entrance of towercos in the global telecom scenario has created an incentive for all parties to look for alternative energy solutions in an effort to reduce network opex. However, whereas this is true in regions like Africa and India, where operators often pay an ‘all-in’ price for a tenancy inclusive of both space and power, the same cannot be said for Latin America.

Mobile operators in Latin America retain ownership of energy equipment and retain responsibility for refuelling and maintenance costs, hence not creating the same incentive to towercos to reduce energy opex. The opportunity to reduce energy opex may not be as great as in markets with unreliable grids and low electrification rates, but some sites in Latin America have as many as three diesel generators installed, one for each tenant, and the opportunities to create efficiencies through shared power solutions in such contexts is obvious.

Financial consequences of poor upfront investments A growing trend worldwide is for tenants to push tower operators to provide fixed power and fuel costs, an ‘all-in’ price as applies in many markets in Africa, hence exposing towercos to fuel price volatility and to risks related to diesel theft. In such scenarios, towercos have greater financial motivations to streamline their operations, reduce O&M costs and seek alternative solutions such as


renewable energy to improve site level profitability.

Such dynamics aren’t very common in Latin America, where local telecom regulators monitor quality of service very closely, and have previously handed out fines to mobile operators for bad connections and dropped calls. Such strict conditions have created additional disincentive for towercos to get involved in the energy game.

For example, Brazilian watchdog Anatel has in the past forced three mobile operators to stop selling new plans in certain states in light of growing complaints by customers over poor service, dropped calls and unreliable coverage. According to Anatel “a growing client base needs to be accompanied by more investments” and power losses are a typical cause of sites going down in remote rural areas. Investments in more reliable, yet capex intensive,

renewable energy solutions could change the way rural sites operate and ensure higher customer satisfaction and quality of service.

There is great potential for towercos to have an active role in the energy game, create greater operational efficiencies by eliminating parallel energy infrastructure, and create value by improving site level profitability. However, this would require towercos to take on many risks related to the quality of service regulators expect. At present, LatAm towercos remain risk-averse and few have any interest in managing power – could this create opportunities for niche towercos targeting off-grid and unreliable grid LatAm regions?

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Brazilian watchdog Anatel has in the past forced three mobile operators to stop selling new plans in certain states in light of growing complaints by customers over poor service, dropped calls and unreliable coverage

Special feature:

With only one towerco active in the sale and leaseback business to date and a few BTS players, Colombia is a relatively quiet market for the tower industry. However, the 2013 4G spectrum auction and the upcoming 2015 auction might contribute to the growth of the sector as cell densification is becoming a necessity in both rural and urban areas.

The Colombian telecom sector still lacks a truly independent regulatory body and its inability to address the dominance of América Móvil, compounded by government stakes in MNOs, compromise the investibility of Colombian towers. But TowerXchange believe companies like American Tower, Torres Andinas and Continental Tower Corp. are all contributing to changing the landscape of the Colombian telecom industry thanks to their international expertise and ability to leverage the utilisation of Colombia’s existing towers while maximising co-location on new sites.

In TowerXchange’s Colombia special feature, BMI offers our readers comprehensive insights into the national telecom sector, its limits and opportunities. We report on the content shared by leading experts during the Colombian roundtable held at the TowerXchange Meetup Americas. And we talk to Torres Andinas, a leading BTS towerco active in the country.

Colombia case study

Don’t miss:133 Lessons learned from the Colombia roundtable at the TowerXchange Meetup Americas136 BMI bearish about the prospects for towercos in Colombia140 Torres Andinas case study: creating a successful build to suit business in Colombia and Peru


Lessons learned from the Colombia round table at the TowerXchange Meetup AmericasBuying, building and adding value to Colombia’s cell towers

LTE stimulates demand for co-locations and amendment revenue

Of five licensed MNOs and six MVNOs, Claro (trading as Comcel) are market leaders in Colombia, and are generally felt to have the best coverage. Movistar and Tigo (trading as Colombia Móvil) also have substantial market share. 4G was launched by Une-EPM as long ago as 2012 and the company already operates LTE networks in several Colombian cities. A successful 4G auction in June 2013 will lead to mid-2014 LTE launches from Claro, Movistar and Tigo. DirecTV recently acquired spectrum and are expected to launch – towercos report that DirecTV have very specific search area requirements. Digital trunking service provider Avantel are also launching LTE – they have achieved finite growth to date but are expanding. ETB are also scheduled to launch LTE in 2014 building its own mobile network, rather than continuing as an MVNO sharing Tigo’s network. Despite the limiting effect of a network sharing deal between Tigo, Movistar and ETB, participants were bullish that the rollout of LTE, combined with demand for sites from new market entrants, would stimulate demand a surge in demand for co-locations on independent towerco sites.

Colombia has an estimated 8,000 towers, including rooftops, of which 3,461 (or 43%) are owned by American Tower. Torres Andinas and Continental Towers also own a few hundred sites in Colombia.

Read this article to learn:< How the rollout of LTE in Colombia, which begins in earnest in 2014, will stimulate demand

for co-locations

< The pros and cons of the regulatory environment in Colombia

< The business case for Colombian (and other Latam) towercos to invest in RMS

< The spectre of RANsharing

< How the build-to-suit market works in Colombia

The recent TowerXchange Meetup Americas featured a round table gathering together 15 different companies seeking information about opportunities in Colombia, including representatives of four different towercos. Respecting the confidentiality of that conversation, certain data and the source of insights has been omitted from this report, but we are still able to share a clear picture of the status of the tower industry in Colombia.

Keywords: Meetup Review, Towercos, Steelwork, Monitoring & Management, Leasing & Permitting, Construction, Market Overview, 4G, New License, Co-locations, Build-to-Suit, Business Case, New Market Entrant, Regulation, Foundations, Fencing, RMS, Infrastructure Sharing, Americas (South), Colombia


Bogota, Colombia

The regulatory environment

A National Law prevents a lot of the most common local blockages around new site permitting. However, in most of Colombia, mayors have a fairly unfettered right to close a site if deemed in the public interest or if there is risk of unrest. As a result, Colombian towercos report that despite securing permissions they have had several sites stopped and sealed – causing delays as negotiations are undertaken with the community to avoid unrest. One towerco reported “we have to put 30 sites into the pipeline to get 20 out at the back end!” Does the time taken to secure a permits vary if the site is designed whether with or without foundations? In some instances you can start earlier with foundationless sites, and the more you have to dig the more worried the community gets, so the faster you can get it done the less risk of community resistance. And of course foundationless towers are more readily relocated in the event of unrest forcing the closure of a site. In comparison, aviation permits are surprisingly easy (perhaps too easy?) to obtain in Colombia, with an online application process typically taking just a couple of weeks.

Cell site monitoring, perimeter fencing and backup power requirements in Colombia

Carriers increasingly want to shift the burden of cell site monitoring to towercos. However, many smaller Colombian towercos prefer sticking to a


simple “dirt, steel and concrete” business model. RMS is currently a quality differentiator, or reserved for priority sites, and is seldom deployed as standard on Colombian sites. However that is changing. A hot topic of conversation at the Colombian round table was the business case for RMS; whether and what to measure (power, access et cetera). One towerco, which does use RMS primarily to mitigate coax theft, reported that remote monitoring paid for itself if depreciated over ten years through a reduction from ~US$70 to ~US$30pcm in insurance premiums.

The designated RMS vendor at the Colombia round table explained the importance of adapting RMS to meet the specific requirements of a given cell site to ensure RoI. Including CCTV, for example, can double the cost of RMS. CCTV tells you when there is an intruder onsite, but they are typically unrecognisable – and how are you going to respond

to a break-in at a remote cell site? Good security requires layers; gate monitors can be inexpensive, then the next layer might be movement sensors and audible alarms – but beware cheap equipment as frequent false alarms will lead to NOC operators ignoring alerts. Our RMS vendor also shared a cautionary tale about potential corruption from the engineers installing RMS trying to disable the system to enable continuation of pilferage – this can be countered with covert backup power systems and tamper protection. “At the end of month towercos need to prove their performance against SLAs, so RMS is about more than just security,” concluded our RMS vendor.

One towerco reported the theft of chain link perimeter fencing material, soon followed by some familiar-looking chain link appearing on local chicken coops! Alternate fencing solutions consisting of solid metal sidings or cinder block perimeters were highlighted, with the cost often passed on to the tenant, typically amoritised over ten years as a ~US$20 uplift in rent. Whether for perimeter fencing or tower structures, Colombia round table participants reported that steel was easily sourced locally, avoiding import costs. However, inland transportation remains expensive in Colombia.

Colombia’s power grid is extensive and generally reliable, with some unreliable areas along the coast. As such, energy efficiency efforts tend to consist of batteries, with few backup generators in use.

“ “Remote monitoring paid for itself if depreciated over ten years through a reduction from ~US$70 to ~US$30pcm in insurance premiums


RANsharing How should towercos respond to the threat to their business model of RANsharing, whereby one set of antennas is used by multiple carriers using multiple different frequencies? If left unresolved, this issue could reduce the total amount of equipment on towers, lowering the glass ceiling on tenancy ratios and tower cash flow. Most towercos use frequency-specific language in their contracts, spelling out the capacity, height, width and depth of equipment to be hung on the tower, ensuring each additional tenant pays a monthly lease whether hanging new equipment or sharing existing antennas. Meanwhile, most regulators prohibit spectrum sharing. However, the towercos on the Colombia round table effectively issued an RFI from any firm able to monitor and manage RANsharing to ensure contractual terms were being followed, and to ensure the towercos receive payment for additional RANsharing tenants. Opportunities in Colombia’s build-to-suit market Building the business case to persuade carriers to outsource build-to-suit (BTS) programmes, rather than build their own towers, is an ongoing battle. Towercos are compelling potential BTS business partners, given their specialist capabilities in acquiring sites, securing permits and building towers, together with a business model that

unlocks economies of scale as structures are shared among multiple tenants. Participants at the recent TowerXchange Meetup Americas reported that each local OpCo in LatAm needs convincing of the business case to outsource BTS in isolation – there was very little sharing of intelligence across borders, and few unified BTS strategies at Group-level. Advocating outsourcing BTS requires engaging the financial team, encouraging the supply chain team to balance cost with quality, and persuading the in-house site acquisition and site build team that you’re not

reducing their status in the business! Asked whether many carriers transferred their site acquisition teams to towercos and shut down their in-house build capabilities, Colombia round table participants suggested that most carriers across LatAm hadn’t committed to fully outsource BTS, and therefore retained the majority of their site acquisition workforce. As such, any talent released to towercos was seldom the best people! The dynamics of the BTS market in Colombia, or just about any country in the world, are significantly affected when major towercos complete substantial sale and leaseback deals inclusive of first refusal options on their anchor tenant’s BTS programmes. With successful tower acquirers, usually larger scale towercos, able to ‘cherry-pick’ the best BTS opportunities – those where additional co-location sales opportunities are obvious – smaller towercos and private developers are often left with sites that are difficult to permit or build, or those with less obvious co-location sale potential. While this explains why the BTS portion of major towerco’s balance sheet looks so attractive, it can make it difficult for carriers to get certain sites built. The volume of BTS opportunities in LatAm means BTS-centric towercos, or turnkey infrastructure firms moving up the value chain, are more investible than in other regions. Many such towercos present at the TowerXchange Meetup Americas were bullish about their ability to drive tenancy ratios and create investible portfolios

“

“

With the major towercos able to ‘cherry-pick’ the best BTS opportunities – those where additional co-location sales opportunities are obvious – smaller towercos and private developers are often left with sites that are difficult to permit or build, or those with less obvious co-location sale potential

BMI bearish about the prospects for towercos in ColombiaGDP growth and 4G, but a dominant market leader and the lack of an independent regular compromise the opportunity for towercos


Since 2010, there have been approximately four major towers sale transactions in the Colombian market, all of which involved American Tower Company as the buying party. In other Latin American countries, there are instances of multiple tower companies, including both international and local players. American Tower is the only third party tower company to complete substantial sale and leaseback transactions, but Torres Andinas and Continental Towers are both also active in Colombia in the BTS side. Despite the ongoing moves towards 4G services, there has been no activity in tower sales since December 2012. American Tower owns approximately 3,200 towers in Colombia as of Q114, largely the result of a large purchase of 2,126 towers from Millicom International Cellular in July 2011. Telefónica has also divested a number of its tower assets, selling 656 towers to American Tower in three separate transactions between 2010 and 2012.

Competitive concerns limit tower sales

América Móvil-owned Claro has not yet participated in the sale of tower assets. The company is the market leader in Colombia, which has posted market share of over 60% for much of 2013, although this has since fallen to 56.6% in Q114. This perhaps helps to explain Claro’s reluctance to sell its tower assets, as it enjoys a dominant position in the market on the back of heavy investment in infrastructure. Divesting towers would therefore remove some of its strategic advantage over its mobile market competitors.

We do not expect to see Claro move towards a sale

Read this article to learn:< 4G auctions boost the need for sites, but network sharing reduces potential demand for towercos

< Why large scale reform would be needed to reduce America Movil’s dominance

< The lack of an independent regulator and spectre of tower nationalisation risk

< How government stakes in Colombia’s #2 and #3 MNOs appears to be hampering network investment

< The potential impact of MNO consolidation

Keywords: Research, Market Overview, Investment, 4G, Capex, Network Rollout, Roaming, Regulation, Country Risk, Decommissioning, Infrastructure Sharing, Americas (South), Colombia, America Movil, Claro, American Tower, Torres Andinas, Continental Towers, CRC, Telefonica, Movistar, Une EPM, ETB, Millicom, Tigo, BMI Analysis, Business Monitor International, BMI

Colombia is an attractive market for third-party tower companies to invest in, however, we note that a number of risks have kept tower companies out of the market, largely stemming from the government’s role in the sector and the lack of an independent regulator.

Colombia is the fourth largest mobile market in Latin America, behind Brazil, Mexico and Argentina, and it had over 51mn subscriptions in the first quarter of 2014. An auction of 4G spectrum took place in June 2013, with five bidding parties gaining frequencies in the AWS band (1,700MHz-2,100MHz) and 2.5GHz band. Another auction of 700MHz spectrum is expected to take place in early 2015, which will further boost the rollout of 4G services in the country. These factors underpin our view that Colombia’s towers market harbours attractive investment opportunities.

Jake Grant, ICT Industry Analyst, BMI

of its tower assets unless large-scale changes to the telecoms sector take place, specifically aiming to reduce the operator’s dominance. Similar reforms have been announced in Mexico, again targeting América Móvil. The approval of secondary reform legislation by the Senate was immediately met by América Móvil’s announcement that it would separate its wireless towers, base stations and passive infrastructure from the service provider part of the business, allowing for the potential of tower sharing with its competitors. Thus far, the Colombian government has taken a fairly soft approach, such as asymmetric termination rates and regulation of off-net/on-net tariffs to prevent ‘club’ effects. Stricter measures are needed if the government wishes to introduce stronger competition in the mobile market and help the towers market reach its potential.

Government involvement a major risk

In addition to the lack of competition, the strong presence of the government in the telecoms sector has stunted the overall growth and development of the industry. This has left Colombia behind many other markets in Latin America, despite its status as an upper middle income country. Instead, there is a regulator lacking independence and large government stakes in telecoms businesses. We expect this has served to curb investment in towers infrastructure from a mobile operator perspective, as well as increased the risks for towercos considering entering the Colombian tower market. We believe this explains why only American Tower has completed substantial tower deals in Colombia,


while SBA Communications, and other major towercos along with private equity groups and local partners, have stayed out.

CRC needs more power

Since the passage of the Information and Communication Technology Law of Colombia (ICT Law) in 2009, the increased power of the regulator Comisión de Regulación de Comunicaciones (CRC) has improved the telecoms sector’s regulatory framework. However, a recent April 2014 study by the OECD, highlighted the many areas in which the CRC remains hamstrung and requires further authority and independence from the government administration. For example, the OECD points out that two of the five board members of the CRC are members of the government, one of which is

the Minister of ICT. This means the CRC is not an independent regulatory body and could therefore be subject to government pressure. It also does not have the power to implement any significant changes to regulation, which has led to the uncompetitive environment in the mobile sector. This creates a level of uncertainty in the business environment, as the government can impose its own agenda on the sector. For example, in October 2013, the Colombian senate considered a proposal that would create a state-owned company to manage the country’s telecoms infrastructure assets. This would have resulted in the nationalisation of Claro and Movistar’s tower portfolios, following years and millions of dollars of investment by the two operators. Although this proposal did not come to pass, the possibility that a towerco in the market could have its entire portfolio nationalised is clearly

Dominant Operator Stunts Market DevelopmentMobile Subscription Market Shares (%), Q114

Claro Movistar Tigo Others

56.5%24%

15.4%

4%


a major risk for potential investors.

Government stakes in operators reduces infrastructure investment

In addition to the government’s dual role in the telecoms sector as policy-maker and regulator, it also has a significant stake in a number of the companies operating in the telecoms market. Through its majority ownership of both Une EPM and ETB, the government has a 30% stake in second

largest mobile operator Movistar and a 49.99% stake in the third largest mobile operator Tigo. With Tigo and Une EPM expected to merge this year, EPM will hold a 50% plus one share in the enlarged mobile business, although Tigo will retain operational and administrative control. These large government stakes have curbed overall investment in the sector from these two players, with investment in towers infrastructure suffering as a result. Figures from the operators and the SIC show that between 2010 and 2012, capital expenditures from market leader Claro

were three times higher than Telefónica, and seven times higher than Millicom/Tigo. While we expect investments to increase for the expansion of 4G networks, the overall low levels among Telefónica and Millicom does not bode well for the towers industry and fall short of the potential.

Decommissioning of sites following M&A and consolidation

One of the major risks for towercos is the possibility of consolidation, mergers and infrastructure sharing between operators, as this activity eliminates some of the demand for third party leasing arrangements. For mergers and acquisitions, it results in operators slowing new infrastructure deployment, while some older sites are decommissioned where there is duplication of assets. As previously mentioned, Tigo and Une EPM are undergoing a large scale merger, which could see a reduction in the number of towers needed by the resulting entity. Further, the Colombian telecoms market contains a large number of smaller companies and could be primed for consolidation over the next few years, with rumours in 2013 suggesting América Móvil was interested in acquiring Tigo, for example. Consolidation would be in line with trends across the rest of the global telecoms industry and would also pose a risk to towercos.

Network sharing reduces tower outsourcing demand

Regulator CRC has sought to encourage passive sharing of equipment wherever possible, including

Claro Outspends The Market Claro Outspends The Market Telecoms Investment (USDmn)

Claro*

1500

1200

900

600

300

Telefónica Tigo* ETB UNE-EPM DirecTV* Figures for Claro (2010) and Tigo (2012) estimated by BMI. Source: BMI, OECD, SIC

in the rules for the 2013 4G tender, which obliged passive infrastructure sharing and roaming agreements. Following the 4G auction, Tigo, Movistar and ETB agreed to share infrastructure in the rollout of 4G networks, in order to cut costs and to quickly establish national coverage. This would have been a huge blow for towercos looking to enter Colombia, as the shared rollout significantly reduces capital expenditure burdens for the operators and creates minimal demand to outsource the assets to a third party. While there were a number of new entrants among the winners of the 4G auction, the obligation of existing players to offer national roaming, again reduces the potential demand for towercos. BMI again attributes the Tigo, Movistar, ETB tie-up to the dominant position enjoyed by Claro in the mobile market, forcing companies to join together against Claro and its larger capital expenditures.

We have a largely optimistic view for the Colombian economy outside of the telecoms sector and expect it to expand at a robust pace in the next couple of years, driven by acceleration in private consumption growth and strong fixed investment. Improving labour dynamics and rising access to consumer credit will support faster household spending growth. We forecast real GDP growth of 5.1% in 2014 and 4.9% in 2015, compared to our previous forecasts of 4.6% and 4.7% respectively. However, due to the heavy government presence, competitive concerns, M&A activity and operator network sharing, we are relatively bearish about the prospects for towercos in Colombia over the next few years


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Torres Andinas: creating a successful build to suit business in Colombia and PeruHow the BTS business works in markets where large towercos have preferred supplier agreements with their anchor tenants

TowerXchange: Eric, as a veteran of the telecom tower industry, please introduce yourself and your background.

Eric Ensor, COO, Torres Andinas: I have been involved in the wireless industry since 1982, when the cellular business was launched in the United States. For the first twenty years of my career, I worked on the carrier side and spent several years with BellSouth as their Wireless Strategy Director for their worldwide operations.

When the FCC released additional spectrum back in 1995, I got involved in the PCS (Personal Communications Service) rollout in the southeast of the country and got exposed to the tower construction business for the very first time. On that occasion, we built 1,000 sites over the course of two years, some for Bellsouth’s exclusive use and some others for co-location purposes.

In 1998, I left Bellsouth and worked in several ventures related to fibre which at the time was at its early stages. Then in 2002, I started my own consulting company, Quiet Water Associates, and helped several telecom players with their operational and strategic planning.

In 2008, my business partner John Hamm and I created a joint venture with SBA Communications and launched SBA Torres, a towerco in Central America with operations in El Salvador, Panama, Nicaragua, Costa Rica and Guatemala. When SBA Communications bought our interests in the company back in 2011, we ended our Central

Read this article to learn:< Torres Andinas’ footprint in South America

< The status of the mobile industry in Colombia: carriers, towercos and regulatory environment

< Investors’ appetite for the LatAm telecom tower sector

< How many towers are needed in Colombia, Peru and Chile

< The vision for the future of Torres Andinas

After an extensive career in the North American wireless sector, Eric Ensor decided to focus on the expansion of the Latin American tower industry so now he dedicates his expertise to the development of build to suit (BTS) projects in Colombia and Peru while exploring opportunities in neighbouring markets.

In this exclusive interview, he shares his views on the potential and characteristics of the BTS market and on the regulatory framework and carriers’ strategic situation in Colombia.

Keywords: Torres Andinas, Towercos, C-Level Perspectives, Chile, Colombia, Peru, Ecuador, Bellsouth, 4G, LTE, Claro, Movistar, Avantel, Tigo, UNE, ETB, El Salvador, Panama, Nicaragua, Puerto Rico, Guatemala, SBA Communications, Regulations, Energy, Central America, South America, DirecTV, Entel, American Tower, Build-to-Suit, Sale and Leaseback, Rural vs Urban, Greenfield


Eric Ensor, COO, Torres Andinas

American venture and decided to work with a Panamanian financial investor, MHC Holdings, to create Torres Andinas.

TowerXchange: Please tell us about Torres Andinas footprint and operations in the CALA region.

Eric Ensor, COO, Torres Andinas: To date, we are active in Colombia and delivering our initial towers to carriers in Peru. In the meantime, we are also exploring opportunities in Ecuador and Chile.

Torres Andinas is mainly focused on build to suit activities, as a result of our own expertise in greenfield projects, rather than sale and leaseback deals. BTS is a growing trend in the countries where we operate in light of the need to expand coverage and increase capacity. Data usage in Colombia, Chile and Peru is increasing by the day and these markets are in need of reliable a BTS provider able to develop new, high quality projects.

As a BTS provider, Torres Andinas covers the whole spectrum of activities from site surveying to land acquisition and permitting. Once the specific location is defined, we design and build multi-tenant ready sites capable of serving multiple carriers.

TowerXchange: Can you tell us about your operations in Colombia and the changing competitive landscape among carriers, with the imminent launch of LTE and entry of DirecTV?


Eric Ensor, COO, Torres Andinas: Colombia is a fairly active market with three established carriers all offering 4G LTE; Claro, Telefonica and Tigo, as well as a few smaller players such as Avantel, ETB and UNE. UNE, which is now planning its merger with Tigo, was the first company to launch 4G LTE services back in 2012 while ETB and Avantel are

both expected to start their 4G LTE services over the next few months.

A few years ago, Tigo sold a approximately 2,100 towers to American Tower and started working aggressively on its network expansion. The company launched 4G services this past December

Bolivar Simon Square in Bogota, Colombia


and gained several points of market share as a result of its investments.

In the meantime, DirecTV is planning to add mobile services to its fixed broadband offering in Colombia.

In this landscape, each player is looking at either rolling out greenfield projects or expanding their coverage by using existing towers. this is a prosperous scenario for both BTS companies like ours and major towercos also involved in sale and leaseback deals like American Tower.

TowerXchange: With the volume of recent transactions in Brazil, and to a lesser extent Mexico, TowerXchange has tended to cover sale and leasebacks in these markets more than in Torres Andinas’ other markets of Colombia, Peru, Chile and Ecuador. Are there substantial sale and leaseback opportunities in the pipeline in these markets? How do valuations and investor appetites compare?

Eric Ensor, COO, Torres Andinas: Colombia, Peru, Chile and Ecuador definitely won’t experience the same wave of large transactions that are taking place in Brazil and Mexico simply because there aren’t as many towers there. However, companies like Torres Unidas and American Tower have closed deals with Telefonica and Tigo in the past.

That said, with both Claro and Entel unlikely to sell their towers in the near future, I’d say there are limited opportunities for acquisitions right now.

Telefonica still retains some sites in Chile and Peru as well as their Colombian portfolio so I’d expect those assets to be the next target of towercos.

Investors understand the potential of these markets as the numbers show constant growth in data usage and coverage demand, factors closely linked to the expansion of telecom infrastructure and, as a consequence, of the independent towerco model.

However, towercos need to be disciplined in order to ensure their business model is successful, especially when rolling out projects in rural areas which is something with which we are increasingly involved. In fact, whereas carriers would prefer to contract towercos to develop BTS projects on the basis of a “one price fits all” model, regardless of the location and characteristics of each site model, regardless of the location and characteristics of each site. Capex is higher when access and energy expenditure become a factor, and towercos need to ensure they are properly compensated.

TowerXchange: Are there still BTS opportunities for other towercos in markets with a large towerco with a preferred supplier agreement with their anchor tenant?

Eric Ensor, COO, Torres Andinas: Tigo is the most active player in Colombia and in the past has developed several projects with American Tower in light of a so-called “preferred supplier agreement.” However, to date, Tigo is working with several towercos such as Centennial and ourselves so I’d say that yes, there are opportunities for qualified BTS suppliers to operate in an environment technically dominated by a larger towerco.

DirecTV is starting to get active but their rollout is proving quite slow, possibly also in light of the potential merger with AT&T. Avantel has recently been recapitalised and is now seeking opportunities on existing towers as well as rolling out new projects.

““carriers would prefer to contract towercos to develop BTS projects on the basis of a “one price fits all” model, regardless of the location and characteristics of each site. Capex is higher when access and energy expenditure become a factor, and towercos need to ensure they are properly compensated

TowerXchange: You recently mentioned that 4,000 subscribers per site is the average in the region, so how many towers are needed in the countries where you operate and how likely is it for existing towercos to fulfil the demand for new sites? How does that compare with the Colombian telecom market?

Eric Ensor, COO, Torres Andinas: It is unlikely that South America will reach the densification levels of the U.S. anytime soon as the capital required would be overwhelming. However, we feel that the situation will improve significantly over time as carriers are heavily involved in the expansion of their networks and bridging the infrastructure gap is a priority for governments.

I’d say Peru, Chile and Colombia all need a minimum of a couple of thousand sites to meet their demands in the near future and that refers to a combination of new and re-strengthened towers as well as rooftops. In fact the Peruvian


government just announced that they believe that carriers will need 14,000 new location over the next 3 years. While the capex available may not allow carriers to reach these levels, it certainly shows the level of potential demand.

To date, there are American Tower, Torres Andinas, Centennial and Continental Towers all serving the Colombian market and Torres Unidas is rumoured to be entering it too. Therefore, I think existing companies can cope with the demand for new sites under the right financing and project conditions.

TowerXchange: How is the telecom regulatory framework in Colombia? And how does that compare with the other countries where you are active?

Eric Ensor, COO, Torres Andinas: In Colombia, the national law regarding towers is technically favourable toward the development of new

projects. However, the law is applied selectively by municipalities especially when an announced greenfield development causes civil unrest among the population. In these cases, we need to be very careful and work closely with the local authorities and the community itself to fully explain the nature of our business and gain their support.

That said, I have always believed that the tower industry is fundamentally a local business and we have local teams in each country where we operate to facilitate the dialogue with local entities - from municipalities to contractors - and ensure the respect of the local cultural environment.

As a result of the fragmented adoption of the national regulation, some projects might not see the light but we take it as part of the game. Some towercos might be more aggressive in their relationship with authorities but we try and solve the problem by becoming part of the local community.

TowerXchange: What is your vision for the future of Torres Andinas?

Eric Ensor, COO, Torres Andinas: We have set ourselves the goal to build an average of 20-25 new sites per month in the next couple of years by working with several carriers. That figure represents a very positive target for us and we expect to increase our business considerably over the course of the next few months as we have both the capability and the financing in place to meet the growing demand for new sites in our markets

“ “I’d say Peru, Chile and Colombia all need a minimum of a couple of thousand sites to meet their demands in the near future and that refers to a combination of new and re-strengthened towers as well as rooftops

Special feature:

The first TowerXchange Meetup Americas took place in May 2014 in Orlando, Florida and gathered more than 200 of the key executives who are shaping the LatAm telecom tower industry. Over the course of two days, we had the privilege to be exposed to a multitude of panel and roundtable discussions, allowing us to deepen even further our understanding of the governing dynamics of the fast-growing CALA tower industry.

In this issue, we report on key findings from the two keynote towerco panel discussions held at the Meetup, which gathered eleven key executives from American Tower, SBA Communications, Grupo TorreSur, Crown Castle, Mexico Tower Partners, Torres Unidas, Torrecom, IIMT, Torres Andinas, Brazil Tower Company and Continental Towers Corp. With over 90% of CALA’s independent towers represented on stage, these reports offer a comprehensive and accurate analysis of the status of the industry as perceived by its key movers and shakers.

P.S. Date for your diary:The TowerXchange Meetup Americas 2015 – April 28 and 29, Hollywood, Florida.

Special report: TowerXchange Meetup Americas

Don’t miss:145 TowerXchange Meetup Americas report

149 C-level perspectives from CALA’s leading international towercos

154 C-level perspectives from CALA’s fast-growing regional towercos


TowerXchange Meetup Americas 2014: Event ReportAll key towercos represented in a highly interactive and informative gathering

The TowerXchange Meetup once more enticed its audience with its unique interactive format, a combination of panel discussions and small group roundtable breakouts structured to offer a complete overview of the LatAm telecom tower industry - from debates among C-level executives of major towercos and carriers to country-focused roundtables.

Roundtable discussions represented the core of the Meetup with 200+ participants engaging in strategic interaction, with the Chatham House Rule protecting confidentiality and enabling forthright exchange of views.

Thanks to its co-location with PCIA Wireless Infrastructure Show, our selected audience of Directors and C-level executives from the Central and South American industry had a unique chance to be exposed to the mature ecosystem supporting the North American telecom tower industry. And our 15 exhibitors and 9 sponsors showcased their solutions and products to a crowd of 2000+ professionals from the American tower industry, as well as our VIPs from LatAm.

Thanks in no small part to the co-location of the TowerXchange Meetup Americas, the PCIA Wireless Infrastructure Show achieved unprecedented 20%+ year on year growth, cementing the two events’ place in the tower industry calendar.

Next year’s TowerXchange Meetup Americas will be once more held in co-location with PCIA Wireless Infrastructure Show, in Hollywood, Florida, 28-29 April 2015 and we recommend you contact us as

Thank you to all the key stakeholders in LatAm towers who contributed to the success of the TowerXchange Meetup Americas, held in Orlando, 20-21 May 2014. 214 of the top decision makers involved in the transformation of the Central and South American tower industry gathered for two days of intensive networking, executive discussions and unparalleled business development opportunities.



soon as possible not to miss the only event of the year purely focused on the LatAm telecom tower industry. In the meantime, we will report and share with you some of the key findings we gathered at the Meetup. Over the next few pages, we are proud to present two editorials on the status of the regional tower industry - respectively focused on the large independent towercos and on the middle-market tier.

The Meetup opened with TowerXchange’s forecast on the status of the LatAm tower industry, featuring a towerco breakdown by country, key transactions to date and an estimated tower count of assets owned by independent towercos. Our overview then focused on Brazil, Mexico and Chile with an in-depth analysis of major trends and characteristics of their tower markets. For our comprehensive research

“ “The Americas Meetup exceeded my expectations in terms of number of participants and the quality of the information that was available during the sessions. I would definitely attend again!- Eric Ensor, COO, Torres Andinas


* (recently acquired by AMT)

(recently acquired by AMT)


on these countries, please download past editions of the Journal here http://www.towerxchange.com/publications/

The presentation concluded with insights on the African and South East Asian industries in order to put the LatAm market into context and to give snapshots on the status of the tower business in key emerging markets such as Myanmar, DRC and Tanzania. If you’ve missed the presentation but attended our event, the slides are on your Acsys-branded pen drive.

As we prepare for the 2015 edition of the TowerXchange Meetup Americas, we continue our in-depth research with executives from the LatAm industry and we are delighted to include an exclusive interview with American Tower’s CEO LatAm, Olivier Puech, a case study on Colombia incorporating an interview with Torres Andinas’ COO, Eric Ensor and an editorial on the status of the LatAm energy market in this issue of our Journal.

In the meantime, TowerXchange’s footprint has reached out to Southern and South East Asia while we are working on the second annual TowerXchange Meetup Africa to be held in Johannesburg, 20-21 October 2014. Visit our website www.towerxchange.com for more information on our regional research and Meetups.

We’d like to thank everyone who trusted in us and joined us in Orlando and we look forward to welcoming you at the TowerXchange Meetup Americas 2015!

Example tenancy ratio growth (American Tower Brazil 2002-13)



American Tower

SBA Communications

Grupo TorresSur

Torres Unidas

Mexcio Tower Partners

T4U

IIMT

CSS

5,000 10,000 15,000 20,000 25,000 30,000

11,411

6,792

6,094

3,496 8,412

1,163 457

498

58

29%


“ “

I found the session content superb and the overall event quite useful for meeting with decision makers throughout the region due to the very high C-level to attendee ratio. - Jonathan Atkin, Managing Director, RBC Capital Markets, LLC

TowerXchange Meetup Americas 2014 Industry Breakdown

Towercos

Carriers

RMS

Energy Equipment

Investors

Managed services Provider

Static Assets

Others15%

18%

9%

7%6%

12%

4%

C-level perspectives from CALA’s leading international towercosInsights from the leaders of AMT, CCI, Digital Bridge, GTS, SBA and Torres Unidas

TowerXchange’s roster of CALA tower industry leaders and their firms’ footprints Respected telecoms infrastructure analyst Jonathan Atkin, Managing Director at RBC Capital Markets moderated the panel. First to introduce himself was Kurt Bagwell, SBA Communications’ International President. SBA Communications is a 25 year old wireless infrastructure firm, active internationally for the last five years. With SBA’s latest acquisition from Oi, the company now has almost 6,800 towers in Brazil and 2,000 across Central America, accumulated through five acquisitions and various build to suit (BTS) programmes. American Tower’s (AMT) LatAm CEO Olivier Puech heads up CALA’s largest portfolio of independent towers. AMT entered Mexico in 1999 as the first of twelve international markets in which the firm now operates, seven of which are in CALA (plus South Africa, Ghana, Uganda, India and Germany). With the acquisition of BR Towers’ 2,530 owned towers plus exclusive rights to an additional 2,110, AMT’s CALA portfolio now totals around 30,000 towers, more than a third of which are in Brazil. AMT also has substantial portfolios in Mexico, Colombia and Costa Rica, just under 500 towers each in Chile and Peru, and 58 towers in El Salvador. AMT has completed acquisitions from carriers such as Nextel and Telefonica, as well as acquiring towercos such as GTP and BR Towers. Phil Kelley, SVP Corporate Development, is

Read this article to learn:< The footprint of CALA’s five largest towercos and how their assets were acquired

< The implications for due diligence and MLAs of accelerated tower auction processes

< The quality of CALA’s towers and implications for augmentation capex

< Why multi-tenant indoor DAS could be a huge opportunity for CALA’s towercos

< The implications of carrier consolidation for the future of CALA’s tower industry

Probably the most influential panel of international tower industry leaders ever assembled formed the keynote panel session at the recent sell-out TowerXchange Meetup Americas. This commentary draws on remarks shared by that illustrious panel, as well as useful tidbits gleaned over coffee or beer during the course of the event! As such, please don’t ascribe any of the commentary contained within this report to specific participants in the panel.

Keywords: Central America, South America, Editorial, Meetup Americas, Towercos, Passive Equipment, Construction, Acquisition, Market Overview, New License, Auction, Valuation, Transfer Assets, Due Diligence, Urban vs Rural, Tenancy Ratios, Co-locations, Infrastructure Sharing, Capacity Enhancements, Network Rollout, QoS, Build-to-Suit, Permits, Regulation, MLAs, Brazil, Mexico, Chile, Peru, Costa Rica, DAS, Small Cells, North America, Who’s Who


Leaders of CALAs top towercos at the TowerXchange Meetup

CALA needs

2xas it has today!

as manytowers

USA 1,000subs per site

densification:Cell site

CALA 4,000 subsper site

Brazil’s leading carrierseach need 10,000+additional towers

+40k 11k

11xMexico needs 11,000more towers for 4G

Chile needs 3,000more towers forcoverage

Peru needs 4,500more sites

4.5k

3k

data growthcell sitedensification

001110101111001001011011010

Carriers need torelease capitalto upgradenetworks

Appetite to invest inPE-backed towercos,listed towercos’cheap capital

$$$$$$$$$$$$

Crown Castle International’s (CCI) go-to guy on International strategy. CCI owns 40,000 towers in the US, mostly accumulated through acquisitions but supplemented by BTS. CCI also owns 12,000 DAS and small cells in the US, 1,700 towers in Australia, and has entered and successfully exited the UK market. Marc Ganzi recently sold GTP to American Tower for US$4.8bn. He now runs Digital Bridge Holdings, which has expansion plans in the US and an interest


in international opportunities. Mark also runs Mexico Tower Partners, which operates 600 towers accumulated through acquisition and BTS. One of the co-founders of American Tower, tower entrepreneur Jim Eisenstein is currently Chairman & CEO of Grupo TorreSur (GTS). GTS has accumulated 6,100 Brazilian towers through six transactions and some BTS. Daniel Seiner, CEO, represented Torres Unidas,

a Berkshire Partners’ portfolio company. Torres Unidas have around 400 towers in Chile, acquired from Telefonica and BTS, and 350 in Peru. Further acquisitions and an entry into Colombia are in the pipeline. Sale and leasebacks and trade acquisitions in CALA Every carrier has its own decision tree governing if and when to divest towers. Macro drivers can

Drivers of tower industry growth in CALA


be important, particularly if they affect towercos access to capital markets and low cost capital, but data demand remains the number one driver, as the upgrade and densification of networks will often motivate a carrier to consider divesting non-core assets. When those two forces come together, low cost capital for buyers and a need for cash release on the part of sellers, you tend to see a spike in the volume of tower transactions. Comparing the functioning of the sale and leaseback and trade acquisitions market in CALA with the neighbouring North American region, the most obvious differences are in the availability of comprehensive data on portfolios for sale, the high speed at which transactions progress in CALA, and the quality of assets themselves. The mature tower industry in the US has accustomed carriers and their advisors to have comprehensive legal and site specific documentation ready for pre-tower transaction due diligence. In contrast, tower companies with experience of tower deals in the CALA region suggest a need to ensure underlying ground leases are in good order, particularly in markets where public registries work slowly – if they exist at all. Ensuring the assignability of contracts with existing tenants is another concern, as is the quality and completeness of permits and drawings related to the assets themselves. Another key difference between tower deals in North and South America is the speed of transactions. Driven by the accretive nature the

sale of non-core assets, some tower deals in Brazil are being completed in just four weeks from start to finish, leaving little time for due diligence. So a lot of work goes into the structuring of deals, such as the inclusion of swap rights and reserved space clauses in the MLA. Organic growth through build to suit The trend for the sale of towers from carriers to towercos tends to be accompanied by a parallel trend toward outsourcing of build to suit (BTS) programmes. BTS opportunities in CALA are sometimes brought to market through formal RFP processes and e-procurement platforms, alternatively personal relationships with carriers can help towercos land BTS contracts. At times, competitive forces function to ensure the independent tower industry delivers an efficient

BTS service at a fair price. At other times, the major towercos accuse the smaller towercos of value destructive discounting (such as offering a free lease for the anchor tenant for a limited period), to which the smaller towercos counter by accusing the larger firms of ‘cherry-picking’ sites most suitable for co-location sales, leaving them only tough to permit, sites with no obvious second tenant. Ultimately there is a role in the CALA tower industry both for major towercos with the technical and financial capacity to deliver large projects, and a role for nimble, efficient smaller towercos able to turnaround projects swiftly. One thing all the towercos could agree on was that investors appreciated the organic growth narrative and margins generated by BTS, deep discounting notwithstanding. There was also some suggestion that the CALA region needed more capacity to execute BTS projects, hinting that opportunities can still be found by new entrant towercos. It’s important to bear in mind that the sale and leaseback and BTS markets are intrinsically linked. If a carrier divests all its towers, then it will usually transfer all it’s skilled staff and organisation knowledge of building and maintaining passive infrastructure to the towerco, forcing that carrier to outsource subsequent BTS programmes. That said, BTS is only ever the second best option after co-location. CALA’s need for simplification of regulation

“ “some tower deals in Brazil are being completed in just four weeks from start to finish, leaving little time for due diligence


One towerco reported that in Brazil it can take up to three years to obtain the necessary licenses and permits to develop green field projects. Many telecom regulators in the CALA region are attempting to simplify the legal and regulatory environment for carriers and towercos, accelerating permitting processes with a goal of making it easier to extend and densify networks. However, the leaders of the CALA tower industry had a mixed verdict on the helpfulness of CALA’s telecoms regulation reform, which in some cases was felt to be instigating laws more complicated than maintaining the status quo. For example in Chile recent regulatory reform was designed with the aim of simplifying procedures, but failed to provide clear implementation guidelines, hence leaving it to local authorities to interpret implementation, leading to unpredictable outcomes and in many cases making it even harder to build towers. Is there a threat from ground lease aggregators in CALA? Ground lease aggregators are starting to pop up in CALA, starting in Brazil and Mexico. The major towercos are on the front foot with full time teams extending and buying out leases in every market, not so much as a defensive measure but because it’s a great use of capital regardless. In many CALA markets, where contracts are structured to pass land lease expenses to anchor

tenants, ground lease aggregators are a threat to carrier margins not to towercos as it doesn’t affect their P&Ls. The quality of CALA’s towers While it’s dangerous to generalise, the quality of towers can sometimes be an issue in CALA. In Mexico for example, most portfolios were developed as turnkey projects by OEMs for a single tenant only. In the worst cases, towers are barely able to handle their existing load, let alone co-locations! Augmentation capex is going to be higher in situations such as this. There are also plenty of robust towers in CALA, for example in Costa Rica most towers have been built to international quality standards. However in some other CALA markets, towercos may at times find themselves deciding whether each tower has the potential for augmentation or whether it is more convenient to decommission and build a new tower. Brazil contains the full range of towers; from new towers equipped to co-locate two to four tenants, to corroded towers that need decommissioning in the near future. The quality of assets accounts for some of the variation in the cost per tower paid for Brazilian towers. The panel concluded that augmentation capex requirements in CALA are often lower on a per site basis than in the US, which can have positive implications for the time lag between portfolio acquisition and the addition of further tenants. The rollout of fibre is releasing valuable wind

loading capacity from towers in rural Brazil and Mexico as it enables heavy microwave backhaul dishes to be removed. Small cells and DAS Like the rest of the world, CALA’s carriers have congested networks in areas of high population density, but in CALA there are few solutions in place to ease these capacity pinches. Carriers often have target lists of buildings, venues and transportation hubs where they want extra capacity, but the few DAS in CALA are mostly single carrier solutions.

“

“augmentation capex requirements in CALA are often lower on a per site basis than in the US, which can have positive implications for the time lag between portfolio acquisition and the addition of further tenants


There are not as many multi-carrier DAS as in the US (where CCI for example has 12,000 DAS). Multi-tenant indoor DAS could be a huge opportunity for CALA’s towercos. Outdoor DAS may be a longer-term opportunity as there is so much demand for macro cells to be fulfilled first. The implications of carrier consolidation for the future of CALA’s tower industry Is carrier consolidation a concern? Not in the long term. To compare again to the US market, where the consolidation from six to four national carriers caused some initial turbulence in the tower industry, but in the long term having fewer, more credit worthy carriers competing against one another drove demand for co-locations while reducing counterparty risk. Both the US and Brazilian telecom regulators are now struggling with the debate as to whether four carriers or three is ideal, but towercos are insulated against consolidation by long term contracts. A degree of carrier consolidation may take place, including in the largest CALA tower market Brazil, however it would be wrong to assume that a merger of two carriers would necessarily result in widespread decommissioning of towers as networks are already overcrowded. TowerXchange commentary on the acquisitiveness of AMT, CCI and SBA in emerging markets

To what extent are sellers of emerging market towers and towercos competing with opportunities

in North America for capital from the ‘Big Three’?An opportunity in emerging markets has to look really good to compete with opportunities in North America, where there is still ample opportunity for value creation through co-location sales and tenancy ratio improvement, and where the ‘Big Three’ (AMT, CCI and SBA) can always deploy capital to buy back more of their own stock.

There is a threshold of perceived country risk below which the listed US towercos will be unlikely to go. This creates an opportunity for local emerging market towercos to benefit from the arbitrage between the perceived and the actual risk of buying and building emerging market towers, particularly as their operational experience deepens and their ability to understand and mitigate those risks improves.

Typically publicly listed international towercos will bid directly only for selected, lower risk, opportunities in emerging markets. When they do bid, established North American towercos bring

with them both cash and the trust of the capital markets, meaning they have a lower cost of capital than private equity-backed towercos. This makes them formidable opponents in an auction. However, the ‘Big Three’ have the discipline to walk away from frothy markets where the premium for being a first / early mover takes the price beyond their valuation - AMT, CCI and SBA have all bid for a lot more international opportunities than they’ve won.

Ultimately, the ‘Big Three’ US towercos, and other potential trade buyers such as Bharti Infratel and Protelindo, may be perfectly content for emerging market towercos to ‘do the hard work’ in cleaning up tower portfolios, establishing market lease rates, and growing a diverse portfolio to mitigate counterparty and country risk, at which point trade buyers may consider paying a fair premium to acquire selected businesses. However, emerging market towerco entrepreneurs should not formulate exit strategies predicated on trade sale - it is unlikely AMT, CCI and SBA will want all the towers

“ “Big Three’ have the discipline to walk away from frothy markets where the premium for being a first / early mover takes the price beyond their valuation - AMT, CCI and SBA have all bid for a lot more international opportunities than they’ve won

C-level perspectives from CALA’s fast-growing regional towercosIntroducing CALA’s smaller, nimble towercos who are creating value ‘from the ground up’ via BTS programmes

Brazil Tower Company: a growing pipeline of BTS opportunities Represented by CEO Dr Chahram Zolfaghari, Brazil Tower Company (BTC) operates exclusively in Brazil and is funded by 1848 Capital and by CAF, a Latin American development bank. BTC’s current portfolio includes 250 towers with a pipeline of an additional 500 sites. Its goal is to reach 1,000 sites within the next 24 months. Originally working with Vivo Telefonica for its build to suit (BTS) projects, BTC is now engaged in dialogues with Claro and TIM. BTC is focused on creating value for its investors and to date, they have found BTS to be the most secure way to generate a constant stream of revenue. That said, BTC isn’t ruling out the possibility of participating in sale and leaseback opportunities, but that may come two or more years into the future. To date, the tenancy ratio of BTC’s towers, most of which were built in the last 12-18 months, is already 1.3 compared to the national average in Brazil of 1.5. Torres Andinas: expanding its BTS footprint from Peru to Colombia and beyond Represented by COO Eric Ensor, Torres Andinas is the first BTS firm in Peru. They also have approximately 100 sites in Colombia. The company is funded by Multi Holdings Corporation

Read this article to learn:< CALA’s ‘middle market towercos’, who they are, how they are funded, and how they create value

< The footprints and expansion objectives of Brazil Tower Company, Torres Andinas, Torrecom, Continental

Towers and IIMT

< How the BTS market works in CALA

< Comparing the risk of deploying capital in sale and leasebacks with the more predictable outcomes from BTS

< The relationships between ‘middle market towercos’ and the multinational towercos

Middle market tower companies in the CALA region represent an important segment of the tower ecosystem, and they are particularly important stakeholders in the BTS game. The leaders of five of CALA’s most innovative ‘middle market towercos’ convened a panel discussion at the recent TowerXchange Meetup Americas, based on which we share the following insights, together with brief introductions to each towerco.

Keywords: Who’s Who, Towercos, Brazil Tower Company, Torres Andinas, Torrecom, Continental Towers Corp., IIMT, Brazil, Colombia, Peru, Guatemala, Nicaragua, Chile, Costa Rica, Panama, 1848 Capital, CAF, Multi Holdings Corporation, Message Center Management Inc., IFC, American Tower, Global Tower Partners, Build-to-Suit, Central America, South America, Investment, Caribbean, Latin America, Portfolio, Telefonica, Claro, TIM, Nextel, Entel, Tenancy Ratio, Telcel, Editorial, Research, Market Overview, Co-locations, Infrastructure Sharing, Network Rollout


as well as by private investors. Eric and his business partner have excellent credentials in CALA having created SBA Torres, a Central American towerco joint venture with SBA Communications which SBA bought out in 2011. With the substantial premium paid per tower in sale and leasebacks deals in CALA, and with major tower companies able to access relatively inexpensive debt, Torres Andinas has found its niche in the BTS market which allowed the company to enter markets like Colombia, which had been considered by some competitors as a high risk market. Although American Tower and Torres Unidas hold the right of first refusal respectively for Tigo and Telefonica’s BTS programmes in Colombia and Peru, both carriers having completed sale and leasebacks with their respective towerco partners, large towercos don’t always have an appetite for certain BTS opportunities due to their locations and other characteristics. This opens the door for towercos like Torres Andinas to acquire more sites, and the company is aiming to scale to 500 towers in Colombia and Peru. You will find a full interview with Torres Andinas’ Eric Ensor in the Colombia special feature of this Journal. Torrecom: flexible and ready for BTS or sale and leaseback Maria Scotti, Torrecom’s ebullient CEO,


explained how her company operates in Guatemala, Nicaragua and Mexico as well as in the US. Torrecom is owned by Message Center Management, Inc. and funded by a combination of U.S. and in-country private equity firms. Active in LatAm since 2010, the company has 550 sites in its pipeline, 400 of which are in Mexico, with the balance in Guatemala and Nicaragua. Torrecom has an appetite for both BTS and sale and leaseback opportunities, and has access to sufficient capital to follow either or both growth strategies. Telefonica was the first carrier to ask Torrecom to develop BTS projects in Guatemala and Nicaragua as well as Mexico, where Torrecom also works with Nextel. Telcel has also been starting to reach out to independent towercos too. Torrecom is a service-oriented, flexible company, able to react very fast to its clients’ demands. These characteristics prove very useful in the CALA region where carriers are extremely price conscious and are used to multi-source BTS providers. Moreover, spectrum auctions often come with clear timelines to achieve coverage in remote areas as well as in metropolitan and suburban areas. These factors combine to create the perfect environment where a towerco able to react nimbly to client requests could find its Eldorado. You will find a full interview with Torrecom’s Maria Scotti in the “Leadership perspectives on LatAm towers” special feature of this Journal.

Continental Towers: Central America and beyond Founded in Guatemala, Continental Towers Corp. is active in ten different countries in the CALA region, including six countries in Central America. Continental Towers is financially supported by the IFC as well as by US banks. The company enjoys contracts with all six main carriers in Central America, and with Telefonica and Entel in Chile. Continental Towers’ expansion beyond Central America is due partially to the difficulties of operating in such a fragmented market consisting of several small countries. Each country has its own jurisdiction, legal framework and permitting process, so the complexity of day to day operations serves as a great driver to explore larger markets such as Chile, explained Jose Paz, Continental Towers’ CEO. IIMT: able to host carriers on existing electricity towers IIMT is a ten year old company formed by executives who originally served as a consultants for American Tower and Global Tower Partners at the time of their market entrance in Mexico, including President William Ritchey, who represented IIMT on the panel. With a portfolio of 300 towers and a pipeline growing on a monthly basis, IIMT works with all the Mexican carriers, although the majority of its business comes from market leaders Telcel.


Uniquely, IIMT has the right to utilise the infrastructure of the state-owned electric utility company, CFE, and install telecom equipment on their towers. Thanks to this deal, IIMT has been able to respond to new tenants’ requests in a matter of few weeks. This provides IIMT with a genuine competitive advantage in the complex Mexican market where tower sales attract the highest prices in CALA, and where carriers are usually better off seeking tenancy opportunities on existing structures rather than building new towers. How does the BTS market work in CALA? Exponents of the BTS model in CALA suggest it’s easier to create value building towers than buying them. “We can build towers at a better price than the prices being paid for existing towers,” said one towerco leader. You know what you’re building, you can design for multiple tenants from the outset, negating the need for augmentation capex. If you have a good relationship with the carrier, and if you do your modeling in advance, you can pick and choose the locations where you know your client’s competitors also need a site, thus creating maximum upside from the outset. Towercos all start with one BTS partner, but in the interest of diversification of counterparty risk, it’s important to secure additional BTS partners as soon as possible. Co-locating tenants impressed with the service they receive may be willing to consider offering BTS opportunities to the owner of that tower.

Different carriers have a different appetite to outsource BTS, and each will find their own balance between price and quality. Telefonica were the first to outsource in many markets, soon followed by Nextel. America Movil is starting to ramp up their BTS requirements.

Large towercos will seldom build towers in areas where they don’t have the immediate prospect of attracting a second tenant. Keen to pursue opportunities in sought after areas and able to pay premiums to ensure they secure the business, major towercos dominate one end of the BTS market. In contrast, middle market towercos may be able to get a foothold in a market by building the towers the large towercos don’t want. The structure and financial engineering of small, lean towercos enables them to build a tower and wait for a second tenant for longer than their larger counterparts. Many of the ‘middle market towercos’ we spoke to at the TowerXchange Meetup Americas actually prefer to operate in markets where there is a big competitive towerco present. Small, lean towercos feel they offer a unique proposition: they can react faster, they can be very service-oriented, they can get tough-to permit sites built. And carriers don’t like to put all their eggs in one market! Multisourcing BTS is essential to ‘hedging your bets’, particularly for carriers who have reduced their internal competencies to build sites.

The CALA tower industry is moving toward a market-led, balanced ecosystem, wherein the larger towercos bid for sale and leaseback opportunities and trade acquisitions, while participating in high volume BTS and participating selectively in smaller BTS programmes. Meanwhile, middle market towercos are comfortably operating ‘from the ground up’ in the BTS arena, able to find value in almost every deal.

Some middle market towercos are driving toward a scale wherein they can attract more substantial capital investments and bid for the larger sale and leaseback opportunities. Other middle market towercos prefer the greater control of BTS, suggesting that sale and leaseback portfolios include towers in good and bad locations, good towers and bad towers, whereas if you’ve built all the towers yourself, you can target sites where there is demand from a second tenant, and you control the capacity and quality of the assets, so there is relatively little augmentation capex. On the question of whether CALA’s towercos had sufficient capacity to double the number of towers in the region, informal discussions with the middle market towercos suggested the question wasn’t just one of capacity, but also of price. CALA’s most price-conscious carriers often release RFPs for BTS programmes at a price so low that few towercos are prepared to bid for the opportunity, whereas other carriers were more focused on quality

Accelerate your sales cycle and close your next major deal in emerging market towersAdvertise in the TowerXchange Journal, circulated to a highly targeted community of the 6,485 most influential tower decision makers

To book your advertisement, contact: Annabelle Mayhew | [email protected] | M. +44 (0) 7423 512588

OperatorTowercoEnergy equipment & ESCOManaged service/ turnkey infrastructureStatic asset manufacturerStrategic or legal advisorActive equipment or IBSInvestorRMS, ILM & access controlRegulator or governmentOther

C-levelVP, SVP or Dept HeadDirector-levelSenior managerMiddle management

100

80

60

40

20

0

SSA

In which region are readers interested?

MENA

North America

Asia

Europe

CALA

76%

59%

40%32%

48%

22%

33.7%

11.7%

9.1%8.8%

7.2%

6.9%

6%

5.7%

4.4%

1.4%5%

39.8%

23.1%

19.7%

14.8%

2.5%

Special feature:

TowerXchange continues our special feature looking at business models for passive, active and wholesale infrastructure sharing.

We start with a uniquely qualified perspective on how to structure a joint venture towerco, provided by one of the world’s most experienced tower transaction advisors, Vinson & Elkins. Interviewee Jeffrey Eldredge draws on his experience structuring a Tanzanian joint venture towerco majority owned by Helios Towers Africa, in which both Millicom and Vodacom acquired minority stakes as their tower assets were transferred.

We follow this with Analysys Mason and TowerXchange’s co-authored article on RANsharing, explaining the different RANsharing business models, and asking how RANsharing should be factored into towerco’s contracts and lease pricing, and how it affects the dynamic between MNOs, towercos, OEMs and subcontractors.

Infrastructure sharing business model innovations, part three

Don’t miss:159 How to structure a joint venture towerco

162 RANsharing: opportunity or threat?


How to structure a joint venture towercoOperational issues should be covered by the MLA, not the JVA

Vinson & Elkins have been advising on tower transactions for decades. Previously they represented American Tower, and more recently they represented Crown Castle during their push into Europe, when a flurry or potential tower transactions was triggered by MNOs’ need to raise capital for their 3G licenses. When the emerging market tower industry started to become active over the last decade, Vinson & Elkins drew on their relationship with Chuck Green from his time at Crown Castle, and some work they had done for Helios Investment Partners, becoming a natural choice to represent Helios Towers Africa in their pioneering transactions. Keen to become more active outside Europe, Africa and North America, Vinson & Elkins are sponsoring TowerXchange Meetups for the Americas and Asia.


TowerXchange: Structuring joint ventures is a complex process, but what are the unique complexities of tower JVs? Jeffrey Eldredge, Partner, Vinson & Elkins: The biggest concern is the tension between Mobile Network Operator’s (MNO) desire to maintain some form of control over what they view as critical assets to their business and operation, and the necessity to retain only a minority interest in the joint venture and make sure the towerco is independent from the MNO and can be marketed as such to potential co-locators.

There can be a tendency for the MNO’s operational control provisions to bleed into the Joint Venture Agreement (JVA), whereas I feel they belong in the Master Lease Agreement (MLA). We take the view that the MLA defines the commercial relationship between the mobile network operator and the towerco, so matters pertaining to the provision of tower space and rights belong in MLA not in the JVA. If you start putting contractual and operational issues into the JVA, those matters become known when other operators participate in the joint venture, and it can also lead to issues about who controls the business and who is responsible for commercial decisions, such as leasing and pricing. For the independent tower company business model to work effectively, it is key that the towerco retains control, not the anchor tenant MNOs, otherwise competitive MNOs may be disinclined to co-locate.

Jeffrey Eldredge, Partner, Vinson & Elkins

Read this article to learn:< How to balance MNO’s need for control with the need for towercos to be independent to maximise

co-location sales

< How to use the MLA to protect MNO’s operational needs, and use the JVA to protect MNO’s investment

< How to add a new party to a joint venture towerco: experiences in Tanzania

< How the management of competitively sensitive information is governed within a joint venture towerco

Keywords: How to Guide, Lawyers & Advisors, Deal Structure, Rental Rates, MLA, Anchor Tenant, Joint

Venture, Stakeholder Buy-In, Infrastructure Sharing, Africa, Tanzania, Helios Towers Africa, Vodacom,

Millicom, Tigo, Vinson & Elkins


If you allow operational matters to bleed into the JVA, you can muddle the business model, and it makes it tougher to sell the towerco as independent. TowerXchange: What’s in it for the seller to structure a joint venture in this manner? Jeffrey Eldredge, Partner, Vinson & Elkins: The legacy tower owners, or anchor tenants, can still secure certain rights that are superior to the rights of co-locators, but they need to relinquish control rights over the assets.

““

Structuring a joint venture towerco becomes more difficult as you bring additional operators into the joint venture, but that should not discourage MNOs from considering joint venture transaction structures when selling their towers

Given the rationale for MNOs to retain a stake and to participate in the growth and economic benefits of co-location on joint venture-owned towers, there are greater co-location opportunities if those towers are no longer seen as owned and controlled by the MNO. TowerXchange: Vinson & Elkins recently advised Helios Towers Africa on the creation of a joint venture towerco in Tanzania, bringing together assets previously acquired from Millicom-Tigo, together with additional assets acquired from Vodacom Tanzania. What insights can you share from structuring that joint venture?

Jeffrey Eldredge, Partner, Vinson & Elkins: Structuring a joint venture towerco becomes more difficult as you bring additional operators into the joint venture, but that should not discourage MNOs from considering joint venture transaction

structures when selling their towers. Again, the priority has to be to balance the control rights of the parties coming together in the joint venture. If you give one MNO control rights, how do you balance that as subsequent MNOs participate in the joint venture? The joint venture has to be run by the towerco, which in most cases means the towerco needs to retain at least 51% equity. So once again, the lesson learned is that if you agree on rights to do with the operation of towers, or even a limited right of veto, put it in MLA, don’t let it bleed into the governance of the joint venture company. The reality is that when you bring in new party, they have a different world view and different priorities. You can’t just impose an existing JVA on them, so there were inevitably some intensive

Helios Towers Africa acquired an estimated 1,149 towers from Vodacom Tanzania. The assets were rolled into the joint venture towerco Helios Towers Tanzania, in which Helios Towers Africa retained a controlling interest and 51% equity, with 24.5% equity each retained by Millicom-Tigo and Vodacom Tanzania.

A reminder of the details of the Helios Towers Africa deals with Millicom and Vodacom Tanzania


Helios Towers Africa acquired an estimated 729 towers from Millicom Tigo for a purchase price of US$60mn. The transaction was structured as a joint venture with Helios Towers Africa receiving 60% equity and Millicom 40% equity in the joint venture towerco, Helios Towers Tanzania.

2010: 2013:


three-way negotiations. TowerXchange: What were the main transferrable lessons learned from that three-way negotiation? Jeffrey Eldredge, Partner, Vinson & Elkins: The ease of completing joint venture tower transactions is largely defined by the extent to which you can keep the JVA and MLA separate. With the help of our towerco client, we were able to work each party’s unique needs into their MLA. Structuring a JVA is tough enough without a bunch of operational clauses clouding the picture!

My advice to MNOs considering participating in joint venture towercos is to work hard to figure out what you need and how to protect yourself in the MLA. The MLA is your hook into the towers, through which you protect your operational needs. In contrast, consider the joint venture as an investment vehicle, and concentrate on protecting your investment in the JVA. The MLA will be around for the full term of the leaseback, sometimes 20 years or more, while the joint venture company in many cases may substantially restructured during refinancing or during a strategic sale. So it doesn’t make sense to put operational clauses in the JVA when the MLA will likely outlast it. TowerXchange: How is the management of competitively sensitive information governed by the joint venture structure?

Jeffrey Eldredge, Partner, Vinson & Elkins: The most competitively sensitive information is the lease rate paid by each party. Under ordinary circumstances, you would share such fundamental revenue information with board members, which may include competitive MNOs. So if towercos are renegotiating a contract and lease rate with one MNO tenant, there may be provisions to exclude the board members from other MNOs. With many towercos securing build-to-suit

programmes, sensitive information around network coverage maps and rollout plans are similarly dealt with. TowerXchange: Finally, why should operators and towercos not be scared of structuring JVs? Jeffrey Eldredge, Partner, Vinson & Elkins: If MNOs are comfortable entering into MLAs concerning co-locating on independent towerco sites or bi-lateral swaps with other MNOs, then there’s no reason to be afraid of participating in a more expansive joint venture towerco. The economic benefits of selling towers are obvious – you take a non-core asset off your balance sheet and release cash and/or negotiate a good lease rate opex, and you remove the operational burden of owning and operating the passive network. If MNOs retain an interest by forming a joint venture, they can benefit from the enhanced value of the towers in the hands of someone who can benefit from the co-location opportunity. Forming a joint venture is a way of MNOs retaining an interest in the success of the towerco, which is in everybody’s interests. Forming a joint venture towerco is complicated, and it takes a lot of work, but if you work with people who know how do it, then win-win-win deals can be agreed. But I would urge MNO’s to let go of control of the joint venture itself, and to protect their operational interests in the MLA. Separate the JVA from the MLA, otherwise it gets messy

““Forming a joint venture towerco is complicated, and it takes a lot of work, but if you work with people who know how do it, then win-win-win deals can be agreed. But I would urge MNO’s to let go of control of the joint venture itself, and to protect their operational interests in the MLA. Separate the JVA from the MLA, otherwise it gets messy

RANsharing: opportunity or threat?


For example, independent tower companies have paid US $billions to acquire passive infrastructure from MNOs. The success of the towerco business model is predicated on tenancy ratio and tower cash flow growth. If antennas are to be shared instead of multiple antennas added to towers, where does that leave the towercos? This article explores different RANsharing business models, and seeks a win-win scenario where MNOs, towercos and equipment manufacturers all benefit from active infrastructure sharing.

Three different flavours of active infrastructure sharing There are different architectures, defined and ratified by 3GPP, representing varying degrees of active infrastructure sharing. < Multi Operator RAN, or MORAN, is a simple scenario without spectrum sharing< Multi Operator Core Network, or MOCN, is a scenario in which both spectrum and RAN are shared< Gateway Core Network, or GWCN, is where the both the RAN and the core network are shared A case study from Asia Active RAN sharing technology has already been standardised by 3GPP and commercial implementations have been successfully launched to exploit real cost savings and optimised coverage and capacity performance. For example, Analysys Mason supported an MNO to examine different

Ensuring all stakeholders share in the efficiencies created by active infrastructure sharing

Read this article to learn:< The three different RANsharing architectures

< The need for a regulatory environment conducive to active equipment and spectrum sharing

< Should lease pricing be tenant-driven or antenna-driven?

< RANsharing case studies from Analysys Mason’s recent engagements in Asia

< How RANsharing affects the dynamic between MNOs, towercos, OEMs and subcontractors

RANsharing could be the next generation of infrastructure sharing, unlocking even greater capex and opex efficiencies than tower sharing. In order for the adoption of RANsharing to progress as swiftly as possible, every stakeholder should benefit from those efficiencies.

Keywords: Beyond Passive Infrastructure, Active Equipment, Investment, Capex, Tenancy Ratios, Co-locations, Loading, Business Model, Active Infrastructure Sharing, Site Visits, RANsharing, Stakeholder Buy-In, Infrastructure Sharing, Analysys Mason

Co-authors: Mike Pearson, Partner, Analysys Mason and Kieron Osmotherly, CEO, TowerXchange


RAN sharing models in Asia. Analysys Mason undertook TCO analyses of different technologies to define a costed business case and a technical implementation plan, leading to the creation of a RAN share joint venture between two established MNOs. This RANsharing joint venture has been running successfully for circa 12 months. Sharing to ensure more efficient usage of spectrum Antenna and radio technology has progressed rapidly in the last few years, such that a single antenna can be multi-band or broadband, so a single unit can serve 700MHz to 2.6GHz spectrum. While engineers report that such antenna can be tough to fine tune and optimise performance, if the operator implements Software Defined Radio (SDR) within the NodeB or eNodeB, then they can dynamically allocate spectrum across multiple bands to multiple service providers therefore cost-effectively maximising the usage of what can be scarce and costly pooled spectrum.Conducive regulatory environment Not all telecommunications regulators permit active equipment and spectrum sharing. In situations where there would be a monopolistic RAN share market situation, then regulatory instruments may have to be put in place to manage competition effectively. An analogy can be made with the copper access networks of incumbent fixed network operators where regulators have mandated accounting and/or physical separation of vertically integrated PTOs

and introduced regulated pricing for wholesale access services e.g. BT Openreach in the UK and Chorus in New Zealand. Comparing the appetite and opportunity for RANsharing in Europe and Africa An almost 30 year old legacy of fragmentation in European mobile markets can make some stakeholders reluctant to explore RANsharing. However, European operators faced with

flattening ARPUs in highly penetrated markets with minimal subscriber growth and forced investment to satisfy burgeoning data traffic demand are motivated to explore any strategy that can unlock significant cost savings potentially including RANsharing despite historical inertia. In contrast, operators may be more willing to collaborate and engage in RANsharing in Africa. In Africa the prime incentive is again cost savings as well as the additional benefit of cost-effective

Serviceplatforms

Serviceplatforms

HLR HLR

MOCNMORAN

Serviceplatforms

Serviceplatforms

HLR HLR

MSC/SGSN

BSC / RNCBSC / RNC

BTS/ Node BBTS/ Node B

First stage of active RANsharing where spectrumis not shared

Operator A Operator B` Shared e lementLegend

Second stage of activeRAN sharing wherespectrum is also shared

BSC / RNCBSC / RNC


MSC/SGSN

MSC/SGSN

MSC/SGSN

Backhaul Backhaul

Serviceplatforms

Serviceplatforms

HLR HLR

GWCN

BSC / RNCBSC / RNC


MSC/MSC/SGSNSGSN

Backhaul

Third stage of activeRAN sharing where CSand PS core elementsare also shared

Source: Analysys Mason


and rapid coverage gains, but this time motivated by a need to make mobile communications more affordable and drive penetration rates by economically serving more low ARPU subscribers. Energy opex savings through shared antenna Especially in an emerging market context, where many cell sites are on unreliable grids or located off the grid, every kWh of load on a site matters. As base stations are updated with more power efficient next generation technology e.g. shared RAN, and dynamic power control, networks become more energy efficient, and sharing active network can have a multiplying effect on those efficiencies through power scale economies. Should lease pricing be tenant-driven or antenna-driven? In a RAN sharing scenario single physical antennas can be shared by multiple service providers. In order to futureproof themselves against RANsharing, towercos should adopt a business model driven by usage, for example, the number of service providers using a tower, not only driven by the physical space those service providers need. Other physical design factors that need to be considered are the increasing use of tower mounted remote radio units that provide the MNOs with the benefits of reduced power and/or increase coverage as well as any typical tower mounted combiners, power amplifiers and the potential removal of point-to-point microwave equipment as fibre backhaul develops.

TowerXchange spoke to one African towerco which defines a tenant as “a standard amount of space and a standard amount of power.” This seems to be the prevalent approach; rental rates are defined by a standard configuration of equipment, with a rate card for non-standard configurations according to which specific equipment is hung on the tower, or it can be determined by a combination of wind load and vertical height. At the recent TowerXchange Meetup Americas, towercos spoke of adding frequency-specific language to their contracts, ensuring each additional tenant pays a monthly lease whether hanging new equipment or sharing existing antennas. If they can agree mutually beneficial contractual terms with MNOs, towercos could become even more investible as a result of RANsharing as the load and space required on a tower is obviously less for a one shared antenna than for having three to four antennas doing the same job, freeing up finite capacity to sell to broadcast, Wi-Fi and ISP tenants. Governance of RANsharing at towerco owned sites Ensuring strict compliance with the agreed configuration of a cell site has always been an issue, whether between tenant and tower owner, or between tower owner and landlord, so mechanisms must be put in place to protect the tower owner from unauthorised RANsharing. One typical approach is to have a schedule in Source: Analysys Mason, 2013

Single operator lattice with multiband antenna, remote radio units and microwave backhaul


the tenancy agreement which governs access rights and processes, and site visitors (service provider) may have to be accompanied by the site owner (towerco), while there should already be strict guidelines to avoid wind loading or other design rule constraints. Towercos now need to be vigilant to ensure that the NOC is aware of which active equipment, as well as passive equipment, is on any given site. It is usually possible to tell whether an antenna is shareable by its physical appearance, but remote monitoring may be another option. There seems to be no standard approach to lease pricing in the event of RANsharing, indeed there is no standard model towerco-tenant ‘industry best-practice’ contract, which would provide transparency in terms of what is acceptable and would bring mutual commercial and operational benefits to the towerco and service provider. The infrastructure investor mindset The motivation to transfer infrastructure assets from MNOs to towercos and their investment partners is clear when your consider, firstly, the immediate cash release for the MNO and secondly the differing RoI horizon expectations for each party. While specialist infrastructure investors readily incorporate towers into a mindset that typically invests in transport and mining infrastructure, and might calculate RoI over anything from 10-25 years, MNOs will seldom deploy capital unless the RoI horizon is within 3-5 years.

Analysys Mason recently conducted a project on behalf of mobile operator group to develop the business case and operational model to establish a green field towerco. The project considered the potential synergies of augmenting the business of an already established fibre-based wholesale service provider by offering a portfolio of managed active network services as well as traditional towerco services. However the challenge was to identify a complementary investment profile to add shareholder value and define the operational demarcation between the two entities considering the different technical skill-sets needed and customer requirements. This illustrates that different investment models are attractive to different stakeholders and skill sets are not easily transferable between active and passive operations. In recent years MNOs have tended to move away from long-term investment opportunities by either setting up separate infrastructure entities, as in the Indian mobile telecommunications market, or by divesting infrastructure altogether through a sell and lease back arrangement to independent towercos that have a longer term investment view.

RANsharing and the dynamic between MNOs, OEMs, towercos and subcontractors One other option for MNOs to minimise cost and to improve quality is to outsource, typically to the leading equipment vendors such as Ericsson and Huawei. In the last 18 months Analysys Mason has supported the strategy to outsource the network

management of fifteen MNOs in both Africa and South America. Assuming the towerco retains ownership of tower assets and that there’s a shared active RAN, with the established trend toward outsourcing managed services, could the shared RAN be outsourced to equipment vendors? And if O&M on passive and active equipment is subcontracted to the same local firms, how does it add value for a new layer, making another margin, to be added to the ecosystem? And what should be the dynamic between equipment vendors, towercos and service providers? Does the OEM become the de facto anchor tenant, and in cases of shared antenna equipment, sometimes the sole tenant? If everyone is seeking to decrease costs yet make some margin, efficiencies must be shared so there is an incentive for all parties to engage in RANsharing

Marco Cordoni, a Senior Partner at Analysys Mason with considerable experience of advising MNOs and towercos on tower transactions and strategy, will be speaking at the TowerXchange Meetup Africa, taking place on October 20 and 21 in Johannesburg.

For further information, please visit: www.towerxchange.com/meetups/africa/

Special feature:

Who should get their hands dirty managing energy logistics for emerging market cell sites? The need to engage with energy logistics represents the biggest difference between the developed and developing market towerco business models. Some towercos tackle the problem directly and provide energy to anchor and subsequent tenants, some pass through energy costs to their tenants, in other instances they may back-to-back energy SLAs to distributed energy specialist partners. But we’re yet to see a specialist ‘powerco’ of scale outside of China and India. In this new special feature, we examine a number of different stakeholders who could fulfill the energy requirements of emerging market cell sites and becomes ‘powercos’. Our first three contributors represent contrasting perspectives. We start with the views of one of the global leaders of telecoms energy, Cummins – how would they leverage their 6,000 points of service if they wanted to develop a ‘powerco’ play? How about a pureplay ESCO like Applied Solar Technologies, already proven through the operation of 2,800 sites in India? And what role can community power initiatives play? We chat with GIZ about their successful pilot in Uganda.

Towerco or powerco?

Don’t miss:167 Cummins on the maturation of the telecom power

ecosystem toward power as a service

169 Reliable turnkey energy services from the world’s largest

RESCO – AST

174 How GIZ are leveraging mobile towers as anchor tenants

in their Ugandan community power pilot


The maturation of the telecom power ecosystem toward power as a serviceHow Cummins provide reliable power with the lowest TCO and optimised capex

Alan Zhao, Director – Telecom Business, Cummins Power Generation

TowerXchange: Where does Cummins fit in the telecoms infrastructure ecosystem? Alan Zhao, Director – Telecom Business, Cummins Power Generation: To better define where Cummins fits in the telecoms ecosystem we must first understand what makes up that ecosystem: Active equipment, which includes revenue-generating infrastructure such as electronics, antenna and controls; Passive or enabling infrastructure, which includes real estate, tower structures, power equipment and utilities. Cummins is a global leader in power generation. We leverage our tradition of reliable, dependable power in partnering with MNOs and towercos to better understand their specific KPIs, providing a unique value proposition; achieving the lowest Total Cost of Ownership (TCO). Traditionally Cummins has been associated with our market-leading diesel generators, but we also have a complete range of hybrid product offerings specifically designed for telecom site application. This wide range of product offering allows us to provide the right solution for our customer’s specific capability requirement. TowerXchange: How do you see the role of power companies evolving if one end of the spectrum is pure upfront capex sales, and the other extreme is a pure opex business model where power is provided as a service? Alan Zhao, Director – Telecom Business, Cummins

Read this article to learn:< Evolving toward a situation where MNOs and towercos don’t have to think about power< The trade-off between energy efficiency, capital cost and time to market< The need for greater transparency on towercos’ TCO criteria and multi-tenant business models< Cummins’ appetite to provide ‘power as a service’

As a trusted name in the power generation industry for its diesel generators for a wide range of industrial applications, Cummins Power Generation also provides state of the art hybrid power solution to telecom cell sites. Alan Zhao leads Cummins dedicated global team serving the telecom cell tower industry. In a career spanning 28 years, Alan held various technical and business roles at Cummins and at Motorola where he managed their 2.5G, 3G and 4G advanced technology development programmes. Currently Alan is Director of Cummins’ Telecom Business, a role which he says combines his passion for telecoms and growth segments in energy industry.

Keywords: Who’s Who, Energy, Opex Reduction, Capacity Enhancements, Business Model, Uptime, Off-Grid, Unreliable Grid, ESCOs, Hybrid Power, LPG, Retrofitting, Dimensioning, Procurement, RMS, Spare Parts, Infrastructure Sharing, Africa, North America, South America, Asia, Ooredoo Myanmar, Cummins


Power Generation: From the perspective of companies like Cummins and our peers, the pure capex model is the lowest risk approach. But the critical question is what does the end customer want from a power perspective? As a provider of power equipment, Cummins finds itself in a unique position to be able to assist our customers in optimising capex to reduce opex. Again, at Cummins we don’t see ourselves to be aligned to either extreme. We have relied on our vast experience in designing, engineering and manufacturing superior power products to align to the needs of our customers and their KPIs, whether their focus is on capex or opex. As the industry and our customers continue to evolve, it is incumbent upon providers such as Cummins to evolve along with them. However at this stage, I don’t think the telecom power industry have fully understood or agreed on the real operational risks and challenges in providing that basic, reliable power infrastructure. Because of that lack of agreement and understanding, you get a very different view from different players in the telecom power industry. So at the moment I don’t believe we have a healthy ecosystem to go to the extreme energy service company (ESCO) end of spectrum of where end customers don’t have to think about power and ESCOs provide it as economically as possible. TowerXchange: Coming back from studying the rollout in Myanmar, it seemed to me that energy efficiency is being traded off against time to

market – is that a familiar scenario? Alan Zhao, Director – Telecom Business, Cummins Power Generation: Yes, we’re very familiar with that scenario. Given the maturity of the business cycles and economies in certain geographies, optimising energy efficiency and time to market may be conflicting priorities. It’s something which we’re experiencing right now in Myanmar. Even though renewable hybrid is more energy efficient, traditional power sources are taking priority in some cases owing to their fast deployment.


We have to understand that Myanmar is a country where first hurdle is to make the power available. Only after power is accessible does having higher efficiency solution become relevant. The tradeoffs of energy efficiency against expediency is a complex one. But our success is measured by a simple question: do I have power? We know that our customers and their subscribers want a communications vehicle that is ubiquitous. Reliable power is vital to maximising availability and ubiquity. TowerXchange: Tell us about Cummins’ footprint in emerging markets – do you have any idea how many cell sites are using Cummins solutions for backup or primary power? Alan Zhao, Director – Telecom Business, Cummins Power Generation: Cummins is usually number one or two in market share in each of the regions in which we operate. We understand telecom customer’s needs, and traditionally have been very strong in larger applications such as BSC, MSC and data centres. In last few years, we have made big strides in lower power load scenarios like cell towers. Our customers, like Huawei, now rely on us as their one-stop shop for all their power needs including for cell sites, MSC, BSC and data centres. Our footprint in emerging markets is substantial. For example, we’re a preferred vendor for Ooredoo Myanmar – we’re shipping several hundred generators. We have invested significantly in Africa and as a result we are currently executing

““So at the moment I don’t believe we have a healthy ecosystem to go to the extreme ESCO end of spectrum of where end customers don’t have to think about power and ESCOs provide it as economically as possible

high volume orders to be deployed for Ethiopiatel. We have always led the market in LatAm and we have a growing presence in Asia Pacific Our generators have been installed at cell sites for MNOs like Telenor, Vodacom and STC, and we have also done several projects globally with Huawei. I can’t give you the exact number of sites; it’s hard to get to that level of granularity at our volumes. But I can say that we work through 6,000 service locations, with distributers in 190 countries.


TowerXchange: How has the entry of independent towercos into Africa, LatAm and Asia affected your business? Given their aggressive SLAs, how do towercos’ requirements differ when in comes to UPS? Alan Zhao, Director – Telecom Business, Cummins Power Generation: Not all towercos have the same business model. For example, some towercos may have traditionally considered power as a potential vulnerability for their business, which may lead them to operate in markets where grid power is more reliable. On the other hand, others who operate in emerging economies where a reliable grid may not be available, power is a much greater concern. Therefore Cummins offers different solutions and strategies to meet those differing business models. Towercos are all fundamentally looking for the same thing – reliable, dependable power delivered in the most economical way. Towercos that operate in areas with reliable electricity grid generally use Cummins’ solutions for standby power and emergency use only. Others who operate in regions with unreliable grid or no grid, are seeking the most efficient solution for their given capex budget against their definition of TCO. However, the definition of TCO is not consistent and clearly agreed upon by different stakeholders like towerco, opcos and their equipment vendors. In particular, the time horizon over which energy equipment investments are evaluated is seldom clear, which creates problems for power solution

providers. Much of the information around cell site power is very proprietary, which I understand, but the lack of transparency creates inefficiencies as we attempt to move the industry to a healthier ecosystem. As an industry we need to be more standards driven, and more transparent about how we define the “Total” in TCO, in a given context. TowerXchange: How do you efficiently upgrade the power solution at a single tenant site to accommodate multiple tenants? Alan Zhao, Director – Telecom Business, Cummins Power Generation: Looking at today’s radio technology, adding one more BTS may not create much of a power rating issue – we can easily deal with that.

Again, this all goes back to understanding the customer’s business model. Tenancy ratio generally is a key indicator of profitability as it relates to revenue generated per tower site. As a provider of power solutions to our customers, we must understand the customer’s business today, what are their current and future power requirements, how they intend to grow and at what rate, and then size a solution that operates efficiently, both in the short term and future. TowerXchange: Is the in-built RMS capabilities of your solutions an alternative to third party RMS sensors, or a complimentary data feed to be integrated into a consolidated view of different systems at a cell site?

““

The definition of TCO is not consistent and clearly agreed upon by different stakeholders like towerco, opcos and their equipment vendors. In particular, the time horizon over which energy equipment investments are evaluated is seldom clear

Alan Zhao, Director – Telecom Business, Cummins Power Generation: Cummins provides hybrid energy solutions with a built-in remote monitoring capability. We offer flexibility to integrate with existing sensors in the case of brownfield sites. Additionally we offer a complete Cummins solutions with new sensors for Greenfield sites. As an example, we integrated a third party data feed with our solution per request of our customer in Myanmar. In my view, sensors are just enablers of RMS. Remote monitoring may lose its value if it is not leveraged as a toolset for opex reduction. Remote monitoring offers little value in its own right; people don’t want 20 more emails, they just want reliable power! So Cummins differentiates our solutions by leveraging remote monitoring information, and combining it with local service

support to enhance our ability to provide reliable power. TowerXchange: Finally, please sum up how you differentiate Cummins from other solution providers in telecom power? Alan Zhao, Director – Telecom Business, Cummins Power Generation: I’d like to sum up Cummins’ differentiation in three broad categories: 1. Cummins’ superior product and features: The reason we’re number one or two in most markets is simply because we have a better, more reliable product, and our customers vote with their pockets. You can count on Cummins to continue to provide that level of product differentiation. 2. Cummins’ value add: Cummins offer the best


warranty on the market; it’s longer and it offers better coverage. The customer has a single point of contact with Cummins and can avoid confusion over accountability of service and warranty issues. Power relies on strong service and parts availability, and Cummins’ global service network helps telecom companies in 190 countries, from over 6,000 service locations. Cummins has achieved unrivalled success in international markets because we know what it takes to support our customers. 3. Cummins’ financial stability and scale: Almost all telecom companies are global in nature, with a need to serve customers globally without having to add 50-100 suppliers to manage all this complexity. A global company like Cummins can leverage our financial strength to help give OpCos peace of mind. It’s hard for smaller regional companies to match the stability and financial scale Cummins has, which enables us to deal with the maturation toward power as a service at a global level. Too often there is a mismatch between what aspiring ESCOs want to be and their financial strength. Cummins don’t take risky steps we can’t stand behind; if we do something we have the strength and scale to stand behind it. Cummins look forward to continuing to work with TowerXchange to provide the information necessary to transform the telecom industry and the telecom power industry. I feel the challenges are less at the level of exciting new technologies, but more work needs to be done at an operational business level

“ “we must understand the customer’s business today, what are their current and future power requirements, how they intend to grow and at what rate, and then size a solution that operates efficiently

Reliable turnkey energy services from the world’s largest RESCOAST manage almost 3,000 remote cell sites in India, and are seeking to expand into Africa and Southeast Asia

Sanjay Deshmukh, President, AST International

TowerXchange: Please introduce Applied Solar Technologies (AST) to our readers. Sanjay Deshmukh, President, AST International: AST is an integrated renewable energy service provider. We’re probably the largest energy service provider outside of China, where equipment is sold on a capex basis, whereas AST is an ESCO. The primary renewable we have deployed to date is a solar PV based off-grid hybrid power solution for telecom towers. AST builds and operates these solar installations and takes over the power supply management of each site. It uses a combination of solar PV, battery back-up and diesel generators making it a hybrid energy solution that optimises the usage of various sources through the AST power controller. The optimal usage of these sources results in decreased diesel consumption, increased battery life and reduced diesel generator maintenance and replacement costs, resulting in savings for AST’s consumers. AST offers a fixed price solution to its customers after having factored all these savings and the price is indexed to inflation and to diesel price as both are not in AST’s control. So our customers see the savings from day one without having invested money in the site from their side. AST was founded 2008 and is headquartered in Noida, India. TowerXchange: The first question our readers

Read this article to learn:< How AST structures long term, fixed fee contracts to ensure investibility and release 10-20% economic benefit for customers< AST’s funding and ‘digestive capacity’ for up to 10,000 further towers< How AST scaled their ESCO and built customers’ trust< The investibility challenge for community power given the unpredictable and variable capacity requirement< A view on the timelines, challenges and opportunities for ESCOs in Myanmar

Applied Solar Technologies (“AST”) may be the largest RESCO in the world. They have provided hybrid energy equipment and manage over 2,800 cell sites in India, where they have an uptime SLA > 99.9%. AST have commenced a pilot with Helios Towers Nigeria. AST is also exploring opportunities to offer an energy service proposition in Myanmar, where TowerXchange met Sanjay Deshmukh, President of AST International.

Keywords: Who’s Who, Energy, O&M, Investment, Deal Structure, Opex Reduction, Fuel Security, Business Model, Bankability, SLA, Uptime, Off-Grid, ESCOs, Hybrid Power, Solar, Skilled Workforces, Microgeneration, Community Power, Africa, Asia, India, Myanmar, Nigeria, Bharti Infratel, Helios Towers Nigeria, Applied Solar Technologies


usually have is “how proven is the solution in emerging market telecoms”? Tell us about AST’s track record as an ESCO. Sanjay Deshmukh, President, AST International: AST has been designing, deploying and managing energy services over the last five years. We have our solar hybrid systems installed on nearly 2,800 cell sites in remote areas of four different states of India namely Bihar, Uttar Pradesh, Rajasthan and Jharkhand, with an installed capacity of 12MW of solar panels. AST has over 70% market share in off-grid telecom in India. We have consistently delivered site uptime SLAs on the cell sites managed by us. Successful deployment of AST solar hybrid systems at our customer’s cell sites has enabled our customers to receive awards for their initiative in adoption of green energy. We also serve banks, petroleum retail and dairy industry with off grid distributed renewable energy services and are serving commercial and private enterprises utilising rooftop solar applications. Our customers include blue chip companies such as Helios Towers and TOTAL PLC in Nigeria and Bharti Infratel, Indus, Idea Cellular, American Tower Company, Punjab National Bank, Bharat Petroleum and Indian Oil in India. AST recently expanded into Nigeria and has successfully commissioned a solar hybrid system at a flagship petrol filling station of TOTAL PLC. This system has leak proof canopy designed by AST at the filling station, which is covered fully with Sunpower solar panels of 77.8 KWp capacity.

This filling station has been operating with no DG, since April 2014. We have also commenced a pilot with Helios Towers Nigeria, for whom we’ll have sites up and running in a couple of months. Our priority target markets for international expansion are Africa with initial focus on Nigeria, Ghana, Uganda, Tanzania and Myanmar and Indonesia in Southeast Asia.


TowerXchange: What is AST’s ESCO proposition? Sanjay Deshmukh, President, AST International: Our mission is to offer highly reliable, turnkey energy services. We offer a fixed price contract that releases an economic benefit over customers’ current cost structure. Our customers don’t have to worry about cost overruns, and we provide a performance SLA, with penalties for non-performance. Working with AST means you don’t

AST - Service Capabilities

Confidential and Proprietary. Not for Distribution.

SLA commitment

O&M, fuel services - AST system as

well as other power system elements

Monitoring, Management and Control of power system

Design, Engineering, Installation, Integration, Project Management

Full Range of Renewable Energy solutions Off grid, grid tied, ground based, roof top Hardware

Engineering

System Management

Comprehensive O&M

System performance

We provide comprehensive energy managements services to our customers. Our solutions enable AST customers to reduce OPEX and improve performance.

We customize our offering to suit the customer needs.

have to worry about how your sites are managed, it’s all our responsibility! The risk of the initial capital investment and ongoing operations (including diesel refuelling) are taken by AST, in return for which we ask for a long term bankable contract with customers, with duration of at least ten years in the case of telecoms, with a fixed monthly fee plus escalators linked to the price of diesel and inflation. TowerXchange: How is your ESCO business model funded and what is AST’s ‘digestive capacity’ – for example, could you take on power for one of the larger Nigerian portfolios currently for sale consisting of 9,000 towers?


Sanjay Deshmukh, President, AST International: We are adequately funded for around 10,000 additional sites. Taking on large scale projects in Nigeria would not be a problem as we have a local partner in Nigeria with experience of managing telecom sites. We bring the technology and the know-how, our partner brings local knowledge and on the ground operations. Given AST’s performance and track record, raising new funding is not a challenge. AST is funded by three clean tech funds; IFC, Bessemer Venture Partners and the Capricorn Investment Group as equity and debt funding is primarily by IFC and OPIC. We recently secured US $150mn of debt finance from the Overseas Private Investment Corporation (OPIC) of the USA. The keys to our investibility are that AST’s business model generates long term recurring revenue from blue chip customers such as TOTAL PLC, HTN, Bharti Infratel, Indus Towers, IDEA Cellular and American Tower, enabling us to make plans for substantial expansion. Also, no-one else has as much experience with the managed energy service business model as AST – nobody has deployed and managed so many hybrid sites, so we have unique experience of designing, deploying and managing off grid, hybrid solar energy solutions for telecom sites enabling us to deliver value to our customers. TowerXchange: Speaking to emerging market towerco CEOs, one of their concerns about partnering with ESCOs is entrusting critical

frontline O&M responsibilities to companies that sometimes don’t have frontline people on the ground to fulfil those responsibilities. How did AST scale your business and win your customers’ trust? Sanjay Deshmukh, President, AST International: Our first customer in India was Bharti Infratel, for whom we initially managed 500 sites. We took over the entire operation of those sites, including maintenance, diesel refuelling and security – there was no need for Bharti Infratel to attend the site for anything to do with passive infrastructure or energy. We managed the diesel generator, rectifier, grid connection – we don’t only take care of our systems, we maintain third party equipment too. We have created a dedicated team on the ground to manage operations and have consistently delivered performance leading to repeat orders from existing customers and enabling business from new customers. Currently we manage nearly 3,000 sites in India, we have manpower of 2,500 on the ground, 150 of whom are our employees. We built this substantial ESCO in India brick by brick. When we started out, we replaced all the people who had been managing the sites because they were used to operating in a certain fashion, and there were ‘vested interests’ that contributed to diesel theft, so we brought in an entirely new team, even down to the site security guards. This meant from day one the boundaries within which the site operates were clear.

“ “We are adequately funded for around 10,000 additional sites and, given AST’s performance and track record, raising new funding is not a challenge

In terms of selecting our partners, we identify companies that have experience of managing telecom sites at scale. They must have their own staff, not outsourced, and they must share AST’s belief in renewable energy and the managed service model – this ensures AST’s, our partners and our customer’s objectives are aligned. We work with our on the ground partners to build their operational capability, which leads to confidence that they know the job and have a commitment to performance. As a result, we are able to offer a 99.8% uptime SLA on the 2,800 sites we manage in remote and most difficult to operate areas of India, which we think represents performance excellence. TowerXchange: Tell us about your preferred contract structure. Sanjay Deshmukh, President, AST International: Our contracts are fixed fee contracts with indexation to increase in fuel price and inflation with commitment from customer to avail our services for the period of 10 years. This structure is key to securing to investment and delivering returns over the period of the contract. To determine our fees, we evaluate investment required in hybrid solar system, diesel consumption after installation of solar hybrid technology based on the load on site, solar irradiation, PV installation capacity, with additions to cover manpower for operational management and diesel fuelling. Once we have added the margin we need to survive and attract financing, we typically release 10-20% of economic

benefits compared to our customers’ current cost structure. We don’t work on a revenue sharing basis as operation of such contracts is extremely complicated and is impacted by many other factors. It’s important that at sites where there is no economic benefit of installing solar hybrid technology, we transparently tell the customer that those sites are not suitable. We can still take on the burden of managing such sites, and still offer an opex model, but the economic benefit will not be as large as where solar can be used. TowerXchange: What’s your view on the potential to extend ESCO business models and other distributed generation programmes for telecom to provide community power? Sanjay Deshmukh, President, AST International: AST have some experience of community power


initiatives. In addition to cell sites, banks, ATMs and petrol stations, we also run two hybrid energy powered community centres in India. One is based on a microgrid, another supplies home lighting kits that are charged every day, and has space on the plot where small entrepreneurs can use power. We feel it’s a good idea to integrate telecom energy systems with the community, but the challenge is that you can only sell surplus power, and someone needs to invest to create capacity for that surplus power. When operators look at the economic benefit of installing remote cell sites with surplus power, it’s often not an economically viable concept. One of the biggest challenges is estimating the power requirement of a community, which can be surprisingly large and therefore expensive to fulfil. The variation in load increases the investment you need. While a telecom load is relatively consistent, the energy requirement of a community varies substantially across the day. Deploying a distributed energy solution capable of delivering peak demand community power throws the economics haywire. In my experience working for Reliance Communications in the mobile business, later heading business development for Reliance Infratel (which owns 50,000 towers), and now as an ESCO, I have fair understanding of the way stakeholders in telecom industry think. Telcos want to have community power projects

“ “Once we have added the margin we need to survive and attract financing, we typically release 10-20% of economic benefits compared to our customers’ current cost structure

running alongside remote cell sites, it’s good for their reputation and it can drive consumption of minutes and megabytes, but the reality is that there is a finite amount of funding for CSR-motivated initiatives – the economics and the investibility of community power must be improved. TowerXchange: Having met you in Yangon, I should ask your view of the rollout in Myanmar and the opportunity for the ESCO business model to work here. Sanjay Deshmukh, President, AST International: The reality is that currently people are struggling to meet rollout obligations in Myanmar. As a result, the first priority is just going to be to meet rollout obligations, so renewables and energy efficiency will not become a priority until a


6-9 month timeframe. The first towers must be installed and stabilised first. Nonetheless, every operator or towerco will be looking at the energy as a service model here, so AST see huge potential in Myanmar. Many energy equipment suppliers are interested in the market, but how many are proven in providing energy as a service? For energy as a service to work and be investible in Myanmar, the technical design specifications have to be practical and it needs to be possible to implement whilst delivering economic benefit for all stakeholders. The challenges in Myanmar are that to deliver service, you need to be well connected with the community, and communication is a challenge in rural areas, where English won’t help. We’ve been meeting with prospective local partners here in Myanmar. There are companies with relevant experience, who need little training. It is just beginning and it will take some time for ESCOs and potential local partners to understand each other and build a level of trust. Once people work together for some time it will evolve. The people of Myanmar are systematic, willing to learn and hard working. The reality is that a lot of jobs in a complex service operation need minimal technical skills but efficient communication and so communication skills are the greater obstacle. TowerXchange: To sum up the interview, when

selecting an energy service provider, what factors need to be considered by MNOs and towercos? Sanjay Deshmukh, President, AST International: When selecting an ESCO partner, MNOs and towercos should consider four factors: 1. The experience of the ESCO in designing customised energy solutions for each site and selection of good quality components2. The optimal design of solar hybrid systems, including installation and project management capabilities3. Monitoring capabilities – not just RMS because that is easy – how quickly they react to alarms is key4. Your energy service provider’s commitment to supporting your SLAs If the Energy Service Provider is not strong enough or proven on any of these four factors, they’re not good enough. Critically, ESCOs are partners not vendors – if you try to negotiate a deal where you maximise all the benefits yourself, your ESCO partner will not have sufficient margin to be investible and they will not be a stable, long term partner. In order for ESCO business models to work, the economics of the deal have to be value accretive for all stakeholders in the value chain. Your ESCO’s operations on ground make all the difference – understanding each other and taking a partnership approach needs to be learned over a period of time

“ “In order for ESCO business models to work, the economics of the deal have to be value accretive for all stakeholders in the value chain

Leveraging mobile towersas anchor tenants to accelerate rural electrification in UgandaAirtel, GIZ and Kirchner Solar Group expand successful pilot

Markus Exenberger, Programme Director, Energy Programme, GIZ

TowerXchange: Please introduce our readers to GIZ - where do you fit into the telecoms infrastructure ecosystem? Markus Exenberger, Programme Director, Energy Programme & Key Account Manager – Mobile Towers: Energy supply in off-grid regions, GIZ: GIZ is an international enterprise owned by the German Federal Government. We assist the German Government in achieving its objectives in the field of international cooperation as well as sustainable development for developing and emerging countries. In Uganda, as in many other countries, energy is one of the priority areas of German Development cooperation. Rural electrification is a particular challenge; according to the REA, rural electrification in Uganda is currently at 7%, up from 1% at the beginning of this decade. The government has set a target to improve rural electrification to 22% by 2022. Villages in remote areas of Uganda might not be connected to the national grid, but many have a mobile mast close by. Most of these isolated masts are powered 24/7 by noisy, often oversized, diesel generators, which contribute significantly to pollution. TowerXchange: How is GIZ help to improve rural electrification whilst reducing the carbon footprint of rural communications? Markus Exenberger, GIZ: It is against this

Read this article to learn:< The challenge of rural electrification in SSA

< The ABC-strategy; Anchor customer, Business and Community power supply

< The opex model: PPA with the anchor tenant, tariff for villagers cuts the cost of phone charging by 90%

< Results of the Kabunyata pilot: zero DG runtime, 99.96% uptime, 40% opex reduction

< Plans to scale to 100 more villages in Uganda and to other countries in SSA and beyond

In the small village of Kabunyata, in the middle of rural Uganda, 100 households and 20 small businesses have electricity for the first time. The kids have light so they can study in the evening. Fresh water is being pumped in from the local reservoir. It’s a good place to be. This project is the result of a co-operation between the German government’s Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Kirchner Solar Group and Airtel, which uses the mobile phone tower as anchor tenant. It’s working not just for the community but also for the telecommunications industry – opex has been cut by 40%, uptime statistics are impressive, and GIZ is keen to scale the initiative.

Keywords: How to Guide, Energy, Opex Reduction, Business Model, Bankability, Anchor Tenant, Uptime, Off-Grid, ESCOs, Hybrid Power, Renewables, Solar, DG Runtime, Microgeneration, Community Power, RMS, Stakeholder Buy-In, Africa, Uganda, Airtel, Kirchner Solar Group, GIZ


background therefore that a new operating concept, the ‘mobile communication with solar energy’ concept, was initiated in 2012 to help mobile network operators reduce carbon dioxide emissions by 90% as well as cut their operational costs. In Uganda, GIZ developed a business oriented operating model of solar electrification in collaboration with German partners. With this model, thousands of mobile towers in sub-Sahara Africa could be transformed into ‘solar beacons’, bringing light to remote villages. We call our approach the ABC-strategy; which means Anchor customer, Business and Community power supply.

By offering turnkey power supply solutions to mobile network operators and tower companies, whilst at the same time selling excess power to communities, we fulfill our development mandate and foster the private sector. Additionally, we contribute to a reduction of carbon footprint by using renewable energy instead of diesel generators. TowerXchange: What were the origins of your concept? Markus Exenberger, GIZ: We started with a public private partnership project in Uganda about two years ago. Together with our partner Kirchner


Solar Group, a German solar industry pioneer, we were commissioned by the German Government to provide an innovative energy solution for rural areas, using a photovoltaic-battery hybrid power supply. The result has been improved business development in rural areas, while private households have been able to access affordable, modern energy, which in turn results in higher usage of mobile services. Payments, notifications and information are made via a mobile money payment platform. TowerXchange: What are the next phases for GIZ’s project in Uganda and elsewhere in Africa?

“ “

By offering turnkey power supply solutions to mobile network operators and tower companies, whilst at the same time selling excess power to communities, we fulfill our development mandate and foster the private sector. Additionally, we contribute to a reduction of carbon footprint by using renewable energy instead of diesel generators


Markus Exenberger, GIZ: After the successful implementation of pilot sites in Uganda, we want to expand our activities. We believe that we are able to manage a significant number of sites in a reasonable timeframe; for example, ten sites per customer per country.

Soon we will move to the second phase of the project, with 100 sites in Uganda, which should take us less than one year to finish. At the same time we use ODA resources (Official Development Assistance) to set up modern mini-grids according to international standards to distribute the power to SMEs and households. TowerXchange: Talk to us about the importance of engaging local stakeholders.

Markus Exenberger, GIZ: We have learned that the key to a successful implementation lays in including community members in our activities. Their ownership is crucial for success and security, making pilferage and theft issues less challenging. In order to build capacity, we are training local solar technicians, as well as providing training on the productive use of energy and energy saving. Villagers around the tower benefit from access to affordable modern energy, allowing them to take part in public life via multimedia, allowing their children to read in the evenings, and providing electricity to pump water centrally stored in nearby reservoirs. It is crucial to cooperate with government and local districts. One has to approach ministries and electricity regulation authorities, and we have to prepare, sensitise and support communities on the way. Being active in the field of development cooperation, GIZ has a lot of experience in cooperating with all kinds of authorities.

TowerXchange: What is your rollout plan now, what are the next steps and what is your long term vision? Markus Exenberger, GIZ: We are engaging with a number of capable investors, power utilities and Power Supply Unit (PSU) manufacturers to be able to satisfy any demand in a reasonable timeframe. We intend to cooperate with a significant portfolio of partners. Our anchor tenant Airtel Uganda has a further 180 off-grid sites where they want to deploy hybrid or solar power, and we’ve identified 100 in the vicinity of villages in which a similar solution can be installed. We are also approaching mobile

“ “Our anchor tenant Airtel Uganda has a further 180 off-grid sites where they want to deploy hybrid or solar power, and we’ve identified 100 in the vicinity of villages in which a similar solution can be installed

network operators and tower companies elsewhere in East and Southeast African like Kenya, Tanzania, Rwanda, Zambia and Malawi, but we are always open to all other countries within sub-Saharan Africa and even beyond. TowerXchange: What is GIZ’s business model and how does it differ from other renewable energy service companies (RESCO) solutions in the market? Markus Exenberger, GIZ: Our business model is a pure opex model in which we provide the entire initial investment for a turnkey power solution, including security, remote monitoring systems and operations & maintenance. The mobile network operator pays for the power supplied on a defined PPA (Power Purchase Agreement) rate per month subject to a long term contract. Depending on the local diesel prices, there will be significant reduction in opex costs made possible by decreasing diesel fuel and transport costs. We can also create economies of scale for renewable energy components and battery manufacturers by addressing many African countries at the same time and identifying and supplying to as many site locations as possible. In fact, this is a classical win-win situation for all stakeholders involved and we believe this is the way to a large-scale energy development. We deliberately chose PSUs with enough capacity to also feed into the mini-grid, so that local businesses and households benefit too. Tariffs will

differ depending on power required. For example, households for example pay a so-called lifeline tariff, which is below what is spent on energy costs per month for kerosene, dry batteries and candles. This tariff allows them to have enough power for up to three energy saver bulbs, a radio and a cell phone charger. The charging costs for mobile appliances can be cut by more than 90% compared to the current situation in which people have to walk to a charging shop using small generators. Automatically, this leads to more usage for mobile services. And customers can conveniently pay via mobile money. TowerXchange: Tell us about the power solutions you’ve used. Markus Exenberger, GIZ: Kirchner Solar Group owns and operates the solar solution, selling power to Airtel and to the community. Our pilot site has an installed capacity of 10kWp of solar energy at the mobile tower, plus 20kWp for the electrification of


the village. A mini-grid was installed in May 2013, requiring 5.5km of transmission lines (100 masts) costing around €10k per km. As we rollout the initiative, we are currently thinking of using energy containers using a PV/Battery Hybrid. Depending on load demand and the number of tenants on the site, there can be ground-mounted solar arrays as well as other renewable energy sources. A diesel backup has to be installed for redundancy purposes only. TowerXchange: Finally, what is the value proposition for the telecom tower industry to partner with GIZ and accelerate the rollout of this initiative? Markus Exenberger, GIZ: Having a mobile network operator as an anchor customer makes each site ‘bankable’, and we feel the initiative provides a compelling proposition for MNOs and for independent tower companies. Fourteen months into our pilot in Kabunyata in the Luwero district of Uganda, we have: < Incurred zero diesel expenses< Cut anchor tenant Airtel’s opex by 40%< Achieved 99.96% uptime (the only outage was when an inverter got wet during horizontal rain last Christmas!) Most importantly, we have provided power to 100 households, 5 social institutions and 20 SMEs in the village, including the local school and maize mill

“ “Most importantly, we have provided power to 100 households, 5 social institutions and 20 SMEs in the village, including the local school and maize mill

Special feature:

Could the wind power proposition for remote cell sites have taken a huge leap forward? That’s the hope of Turbina, a German developer and manufacturer of a unique vertical axis small wind turbine that functions independent of wind direction and can generate power at wind speeds as low as 1.5 m/s. Have a look at their profile, including an impressive RoI period for wind power of 2.9 years. What are the benefits of replacing diesel with hydrogen? TowerXchange spoke with ReliOn, whose fuel cell solutions have been proven at over 1,900 customer locations in 36 countries. Fuel cells are a compelling solution for rooftops, as many landlords and authorities don’t permit liquid fuel on rooftops, and for shared sites as they are designed to be modular and scalable. Finally, we also check in with Evelin Petkov at Schneider Electric in Myanmar, where they have already established a local presence, partnerships and manufacturing.

TowerPower - reducing energy opex for emerging market telecom tower operators, part eight

Read all about it!

167 Turbina’s vertical axis small wind turbines

172 ReliOn ask “Which fuel is the best choice for your location?”

178 Energy efficiency in Myanmar – Schneider Electric


Vertical axis small wind turbines perfect to reduce opex at remote cell sitesTurbina’s innvoative wind power solution produces power at wind speeds of just 1.5 m/s and functions independent of wind direction

Martin Frey, Director Sales Telecommunications, Turbina

TowerXchange: Please introduce our readers to Turbina - where do you fit in the telecoms infrastructure supply chain? Martin Frey, Director Sales Telecommunications, Turbina: Turbina is a young wind solution developer and manufacturer, offering a unique vertical axis turbine which is now being installed at remote cell sites. Turbina’s CEO Aleksandar Vucak and his uncle had a dream of the most efficient design of wind turbines. They founded Turbina in 2006, in which year they won a World Bank award for Most Innovative Technology, later followed by the Energy Global Award and the Energy Innovation Award in 2010. Turbina’s previous focus had been on solutions for the mining, agriculture and real estate industries, but we broadened our strategic focus to telecommunications, launched a new dedicated division this year, and we’re already in discussions with leading infrastructure suppliers, as well as reaching out to MNOs and towercos, in recognition of the trend to transfer ownership of passive infrastructure to towercos. Turbina’s solutions are perfect for off-grid cell sites, often deployed in combination with backup diesel gensets and/or solar. We all understand that the logistical complexity and cost of diesel means that MNOs and towercos are increasingly looking to harness natural resources as a solution to reduce opex.

Read this article to learn:< Launching a dedicated telecoms business unit and securing deals with Telekom Slovenia and T-Mobile

< Can small wind solutions be added to existing telecom masts?

< The advantages of vertical over horizontal axis turbines in terms of low wind resource requirements,

noise, vibration and safety

< TCO comparisons: wind+solar versus dual DG

< The financial stability of Turbina

Turbina have enabled the wind power proposition to take a massive leap forward with their small vertical axis wind turbines that function independent of wind direction and generate power at wind speeds as low as 1.5 m/s. Turbina recently launched a dedicated Telecoms Business Unit and secured landmark contracts with Telekom Slovenia and with T-Mobile’s OpCo in Croatia. They are also in negotiations with few others MNOs. To learn more about Turbina’s proposition, TowerXchange spoke their new Director of the Telecom Business Unit, Martin Frey.

Keywords: Who’s Who, Energy, Opex Reduction, Loading, Health & Safety, Off-Grid, Hybrid Power, Renewables, Solar, Wind, DG Runtime, Masts & Towers, Telekom Slovenia, T-Mobile, Turbina


TowerXchange: I appreciate that Turbina has only just started your telecoms division, but the first question our readers always have is “how proven is the solution in telcoms applications?” Please share some of your early successes. Martin Frey, Director Sales Telecommunications, Turbina: Telekom Slovenia gave Turbina our first engagement in telecoms in 2010. Our vertical axis turbines have been installed at cell sites on two remote islands in the Mediterranean, in one case enabling the complete removal of the backup DG, in the other case significantly reducing DG runtime. In 2012 one of the T-Mobile OpCos knocked on our door. If your readers are familiar with T-Mobile’s tough evaluation process, they will appreciate the accolade it represents that Turbina’s solutions had no problems being approved.

We’re exploring several opportunities in Africa, and are in process of a deployment in Indonesia, but we’re not at liberty to name our client yet. We are also seeking reliable partners in Africa, Asia and Latin America, with a view to forming joint ventures to manufacture and support locally and price aggressively. TowerXchange: One of the questions most asked by CTOs and power equipment solution providers is whether any small wind solutions can be mounted on existing masts? Martin Frey, Director Sales Telecommunications, Turbina: On one cell site in Slovenia, we were able to mount our 4kW turbine on the 30m tower that had already been setup with antenna, without needing to strengthen the structure. However, such cases are unusual as our 1kW turbines weigh 230kg, and our 4kW units weigh 1.1 tonnes, so you need a robust tower with plenty of capacity to add one of our turbines. It’s not impossible of course because our unique vertical axis turbines generate no vibration. But in many cases we do need to have an additional tower build. TowerXchange: Why use vertical rather than horizontal axis wind turbines? Martin Frey, Director Sales Telecommunications, Turbina: We can generate power at lower wind speeds – in our case 1.5 m/s is sufficient for power production. And we overcome the common wind


power problem of noise – our units generate a noise level below 34dB, which is roughly the equivalent of a songbird! I’ve already mentioned that our turbines don’t generate any vibrations, which can be a big issue with horizontal turbines. Our turbines also work independent of wind direction, with no alignment of rotor blades, as needed by horizontal axis design. Vertical axis wind turbines are also safer – there are

“ “We can generate power at lower wind speeds – in our case 1.5 m/s is sufficient for power production. And we overcome the common wind power problem of noise


no exposed rotating parts, and birds perceive it as a solid object and fly around it. We’ve tested our vertical axis turbines in up to 200kph storms, and with reinforcement they can handle 280kph. TowerXchange: What is the typical wind resource requirement for your turbines? Martin Frey, Director Sales Telecommunications, Turbina: The wind resource requirement depends on many factors, particularly the load on the site (primarily influenced by the number and age of antennas and other active equipment, air conditioning load) plus any losses in energy storage conversion. Assuming a 1.5-4.5kW site, even with a wind resource of 3-4 m/s we would generate on average energy in a range of 1,000-2,000kWh annually. At ideal sites with 6-9 m/s of wind resource, we can generate over 14,000 kWh annual energy output. Our hybrid solution consisting of wind and solar is able to cover 100% of the load. Some of our competitors claim they can produce energy at 3-4 m/s, but horizontal axis turbines have to adjust rota angles and rotation, needing battery power to move, so really they only become viable with at least 5 m/s of wind resource. TowerXchange: What’s the ‘sweet spot’ in terms of the energy load on a site for Turbina’s solution to be a viable option?

Martin Frey, Director Sales Telecommunications, Turbina: We’ve built turbines for cell sites with 1.2 to 4kW loads, but we can handle higher demand. At loads above 5kW we can probably cover 20-50% of the power needed, so again much depends on the age and number of antennas and wind conditions on the site. TowerXchange: Does the falling cost of solar adversely affect demand for wind power? Martin Frey, Director Sales Telecommunications, Turbina: The first step into renewable energy for MNOs and towercos might be to use solar to reduce diesel expenses – given the low price of PV this is logical, but I think the logical next step is to include wind to reduce diesel consumption completely. When people ask about the benefits of wind compared to solar power, I respond “does the sun shine at night?” And as the climate changes, sun conditions are changing. The combination of solar and wind is perfect to replace diesel generators in most cases. TowerXchange: How does the TCO and lifetime of wind power compare to the more commonly used dual diesel genset solution for off-grid cell sites? Martin Frey, Director Sales Telecommunications, Turbina: In most regions of the globe solar+wind is going to be competitive with a dual DG model for off grid cell sites.


We can generate power at lower wind speeds – in our case 1.5 m/s is sufficient for power production. And we overcome the common wind power problem of noise. Using one of our 4kW wind turbines in a region with an average wind speed of 4 m/s, supplemented by 7kW of PV, compared to 12kW of DG will breakeven in around two years. And our turbines have a lifetime of twenty-plus years. TowerXchange: Finally, please sum up how you would differentiate Turbina from other small wind companies. Martin Frey, Director Sales Telecommunications, Turbina: Our technology represents a massive leap forward and has been recognised globally by several awards. What is unique about Turbina’s small wind solution is that it generates power at wind speeds as low as 1.5 m/s, and it’s wind direction independent. We have the typical quality characteristics you would expect of a German manufacturer, and we work with the best partners to deliver a product you can rely on. Similarly we have a very selective hiring process, so our team consists of dedicated personnel with substantial experience. Unfortunately the small wind segment has suffered a number of companies filing for Chapter Eleven bankruptcy, but Turbina has a strong financial background, including a recent investment from eCapital AG, which guarantees ongoing innovative development

Which fuel is the best choicefor your location?ReliOn’s fuel cell solutions are proven at over 1,900 customer locations in 36 countries

Joe Blanchard, General Manager, Stationary Power, ReliOn

TowerXchange: Please introduce ReliOn – where does your company fit in the telecoms infrastructure ecosystem? Joe Blanchard, General Manager, Stationary Power, ReliOn: ReliOn has been delivering hydrogen fuel cell products to the telecommunications industry since 2003. We have significant experience on our management team in telecom with several industry veterans of over 25 years. ReliOn was recently acquired by Plug Power, Inc., a publicly-traded fuel cell company whose products are used by a number of Fortune 500 companies in material handling applications for their warehouses. ReliOn continues to serve the stationary fuel cell market, including its largest market, telecommunications. The proton exchange membrane (PEM) technology we use is the mainstay for fuel cell applications in telecommunications. While ReliOn don’t provide PEM technology for cars and buses, the fact that it is also the primary fuel cell solution for automotive has positive implications from a volume and cost point of view. ReliOn has shipped fuel cells to more than 1,900 customer locations in 36 countries. We count among our customers several tier one telecommunication companies: AT&T, Sprint, Verizon, and Hutchison (Indonesia) as well as numerous smaller carriers. We serve applications ranging from various sizes and types of base stations, point-to-point microwave sites, as well

Read this article to learn:< The benefits of hydrogen over diesel in terms of maintenance, pilferage, spill abatement and emissions

< The latest on the integration of Acta’s electrolyzer with ReliOn fuel cells

< The impact of air quality and robust energy storage on fuel cell performance and longevity

< Are fuel cell projects in telecoms eligible for carbon credits?

< How modular design principles minimise capex whilst enabling power solutions to scale for multiple

tenants

Sometimes it seems like members of the TowerXchange community are engaged in a war on diesel. Reliance on diesel makes energy opex unstable, it opens up risk of pilferage, spillage, and it tends to result in hefty maintenance bills and a substantial carbon footprint. In what use cases could hydrogen be a compelling alternate fuel? Is LPG ready for use at emerging market cell sites? To learn more, TowerXchange spoke to fuel cell technology veterans ReliOn.

Keywords: Who’s Who, Energy, Opex Reduction, Batteries, Capacity Enhancements, Fuel Security, SLA, Renewables, Fuel Cells, LPG, Hydrogen, DG Runtime, Site Visits, Rooftop, Acta, Plug Power, ReliOn


as push to talk LMR sites. Though commercial telecom is our largest customer base, we also provide solutions to customers in the railroad, utility telecom, government communications and security sectors.

TowerXchange: The first question our readers always want answered is “how proven is the solution in emerging markets?” Tell us about some of your deployments to date. Joe Blanchard, General Manager, Stationary Power, ReliOn: Most of ReliOn’s installed footprint is in North America and Europe; however, we have had some traction in emerging markets. In Southeast Asia our solutions are in use on 200 Hutchison sites through our partner, Consistel, plus 20 sites in Thailand. We are engaged in other trials throughout Southeast Asia and China, plus have completed extended market trials in India. In some of these countries, we have localised production of certain product components. This both provides a lower total cost to the customer than shipping overseas and supports the local economies. With Open Mobile, ReliOn fuel cells are in use at 15 rooftops in Puerto Rico, with a further 30+ sites throughout the Caribbean. The issue in emerging markets often comes down to the feasibility of the selected fuel. ReliOn has, to this point, been mainly focused on hydrogen-fueled product. In many cases, hydrogen is the

best option for a few different reasons: < It offers the simplest technology: connecting a hydrogen cylinder to the fuel cell via piping provides very little opportunity for malfunction or breakdown. < It offers the lowest emissions, though methanol fuel processors have much lower emissions than diesel generators, they still do emit some pollutants. < Much less standby energy is required compared


with a fuel processor which needs to be kept at a temperature to be ready to quickly produce hydrogen when called upon. Recently, our focus has widened to include alternative fueling options in order to better serve our customers in some emerging markets where a hydrogen model is not feasible. In early 2014, ReliOn and Acta signed an agreement whereby both companies promote two

Acta products that integrate the Acta electrolyzer with ReliOn’s fuel cells: the Acta Power HT (2,500W and 5,000W) and Acta Power Cube (200W – 1,100W). These products open markets in emerging countries where fuel of any kind is logistically difficult. Acta promotes the products outside the U.S. Additionally, ReliOn has been developing a methanol fuel processor and currently has implemented initial customer trials in North America. Understandably, it is easier to work through early product installations closer to home. ReliOn anticipates introducing a commercial product more widely in 2015. Because ReliOn’s products were developed to meet requirements in the North American telecom market, we’ve complied with rigorous quality standards. So the performance of our fuel cells, their energy conversion efficiency, and environmental footprint are all outstanding. Our units perform autonomously in temperatures from -40°C to +50°C, and from sea level to 15,000ft. This means the inherent design of ReliOn’s solutions makes them resilient to extreme conditions in emerging markets, from monsoons to deserts. TowerXchange: Why are fuel cells particularly suited to powering rooftops? Joe Blanchard, General Manager, Stationary Power, ReliOn: Many rooftop owners and permitting authorities do not allow liquid fuels on rooftops, which makes siting generators difficult or


impossible. Because hydrogen is lighter than air, it does not pose the environmental and safety issues a liquid fuel poses and can be much easier to permit. As many rooftops represent comparatively low energy loads, fuel cells can provide significant runtime, whilst overcoming the challenges caused by the architectural integrity of buildings leading to strict weight limits, which also make the installation of batteries for more than 4-8 hours problematic. Our solutions are in use at 40-50 sites across the Caribbean and LatAm, particularly in urban areas with unreliable grids. Fuel cells are a good fit for these fill-in base stations. TowerXchange: Do ReliOn sell direct or via channel partners? Joe Blanchard, General Manager, Stationary Power, ReliOn: While we sell direct in the U.S., we use channel partnerships worldwide, with representation in Southeast Asia, South Africa and India. We train and enable local partners, and we won’t go around them and sell direct once relationships are established. We think native language and time of day support is critical, and that local methods and procedures are understood. We also work with several OEMs – we have either formal or informal relationships with Huawei, Ericsson, Nokia and Alcatel-Lucent, as well as working with the major power system providers

like Delta, Alpha and Emerson, enabling them to have detailed knowledge of our products to coach the customer to engage with us if fuel cells make sense in a given context.

TowerXchange: When discussing fuel cells as a power solution for remote cell sites, one concern expressed has been that replacing a diesel logistics model with a hydrogen logistics model does not significantly reduce cost and complexity – how do you address such concerns? Joe Blanchard, General Manager, Stationary Power, ReliOn: Replacing a diesel logistics model with a hydrogen logistics model is essentially a swap out, rather than an upgrade. However, replacing diesel fuel with hydrogen fuel offers many benefits: < Pilferage: Hydrogen and other alternate fuels have much less chance of being a target of theft.< Spill abatement: Hydrogen is lighter than air and dissipates when leaked, whereas diesel saturates the ground when spilled or even enters lakes and streams. Diesel spills lead to costly cleanup procedures and fines.< Availability during storms: During a weather event like 2012 U.S. Hurricane Sandy, diesel can be in short supply and may be diverted to “more critical” needs. Currently, hydrogen is less frequently used and may be in greater supply during a crisis event.< Emissions: Hydrogen has no emissions at the point of use – diesel used in an internal combustion engine emits particulate matter, carbon monoxide,

nitrogen oxide and carbon dioxide. Even at strict Tier 4 levels, these emissions lead to an increase in smog, hazardous air quality and greenhouse gases. We recognise that whether you’re in rural Zimbabwe or the most populous location, fuel logistics are a common challenge. We can help establish an operational Service Level Agreement with your own staff or with a third party fuelling company to support them in normal operations or in providing coverage during storms. We can take the same team that handles diesel and train them how to deliver hydrogen. We have also been using methanol-water reformers, which produces hydrogen from a higher energy-density fuel, thus reducing site visits for refueling. TowerXchange: Is LPG a compelling alternative fuel resource for off-grid cell sites? Joe Blanchard, General Manager, Stationary Power, ReliOn: Because of ReliOn’s acquisition by Plug Power, we now have had access to significant LPG and natural gas based solutions. If refueling logistics are comparable whether you use diesel, hydrogen or LPG, and availability of fuel is not ubiquitous worldwide, then the optimum selection of fuel depends on the availability and cost in a given location. For example, there are areas where everyone can get LPG yet diesel is tough to come by. Telecoms energy solutions must fit into different models depending on customer need.

We think there may be pent up, untapped demand for LPG based solutions. However, we don’t think LPG solutions are ready for commercial deployment in telecommunications power this year, but we’re looking at them for the future. Additionally, some companies are working on fuel processors that use Ammonia (NH3) as a fuel source. Ammonia is widely used in agriculture throughout the world, so it is another option as a source of hydrogen.

TowerXchange: How do fuel cells compare with more widely used diesel generators as backup power solutions, in terms of complexity and therefore reliability?


Joe Blanchard, General Manager, Stationary Power, ReliOn: Diesel generators have many moving parts. It is a stretch to claim diesel generators consistently reach about 70% reliability; we have seen start-up data (which may not be the generator’s fault) in the high 20% range. In order to keep diesel generators functioning properly, so that they are ready for use in an outage event, monthly or quarterly maintenance of multiple components is suggested. Ultimately there are different classes of DG equipment – we’ve seen some very robust DGs and others that barely last 500 hours in a remote cell site context! Much depends on the manufacturer and the technology that you’re using, for example using a 3,600rpm or an 1,800rpm model changes life expectancy dramatically. Hydrogen fuel cells have very few moving parts; just fans that circulate air. The maintenance requirement for a fuel cell is an annual inspection of air filters and possible cleaning or replacement of the filters if needed. Third party verified reliability of hydrogen fuel cells reaches up in the high 90s – from 96 to 99.7% depending on the manufacturer. TowerXchange: How can the performance and longevity of fuel cells be optimised? Joe Blanchard, General Manager, Stationary Power, ReliOn: In markets like India, air filtration is critical for the longevity of fuel cells. Dusty air will degrade performance; we have sites that have

“ “Third party verified reliability of hydrogen fuel cells reaches up in the high 90s – from 96 to 99.7% depending on the manufacturer

not needed filter changes for 3-4 years, others that might perform optimally with a filter change every six months, so replacement regimes for filters are highly dependent on climate and air quality. Like a DG, a fuel cell still needs a small amount of energy to startup, so using robust energy storage solutions optimises reliability. I believe


fuel cells augment the use of good batteries on remote cell sites – ideally one should use batteries during short outages, with fuel cells operating during the longer outages that would otherwise be particularly harmful to availability and the Customer Experience. Operators that have used fuel cells have shown significant improvements in reliability and uptime, especially where there

are long periods of time between usage of backup power systems. TowerXchange: Are buyers of fuel cells eligible for tax exemptions and carbon credits? Joe Blanchard, General Manager, Stationary Power, ReliOn: One carbon credit is awarded for every ton of CO2 either removed, avoided or sequestered (via carbon trade exchange). Carbon credits can be generated from various types of projects including: < Renewable energy: a switch from fossil fuels to a ‘clean’ energy e.g. wind and solar energy.< Forestation and afforestation: the planting of new trees as trees sequester and store CO2 e.g. forest regeneration.< Energy efficiency: reducing emissions though an increase in energy efficiency e.g. installation of energy-efficient machinery.< Methane capture: avoiding methane emissions through capture and burning to create energy e.g. landfill methane capture. Project eligibility for carbon credits depends on whether a project follows one of the Kyoto Protocol’s project-based mechanisms or an independent voluntary standard. While there do not appear to be current fuel cell projects in telecom that are receiving carbon credits, it does appear they are able to do so, if a company were to take the time to develop a project

through one of the carbon credit registries. Tax exemptions outside the U.S. come under a variety of programmes and names. Admittedly, it is more difficult to find applicable programmes in developing nations.

TowerXchange: Talk to us about the modularity and scalability of fuel cell solutions as additional tenants and additional load is added to cell sites? Joe Blanchard, General Manager, Stationary Power, ReliOn: ReliOn fuel cells are designed to be modular and scalable. We encourage customers to buy what they need in terms of power, knowing that they can add more power in the future if their needs change. ReliOn offers several products that we use as building blocks to meet a customer’s

power requirements. We can cover microwave applications needing 75W as well as multi-tenant cell sites reaching up to 20kW and everything in between. Our fueling solutions are also modular and scalable, so that we can meet the runtime needs of our customers. Modular design principles minimise the initial capital cost for the customer while leaving room for future upgrades.

Another key advantage of fuel cells is that because they provide DC power, fuel cells can be used as backup power for other DC components including rectifiers. Also, with a DC power solution, there is no need for a transfer switch, as would be required with an AC solution like a diesel generator.

TowerXchange: Finally, please sum up what differentiates ReliOn from other fuel cell solution providers. Joe Blanchard, General Manager, Stationary Power, ReliOn: It’s really the combination of three things: Innovation: ReliOn’s continuous innovation in core fuel cell technology has made us a leader in the development and marketing of modular, scalable fuel cell products for customers seeking solutions to critical backup and grid-support power applications. Many fuel cell companies are more like integrators, using core technology purchased from other fuel cell developers and wrapping electronics and sheet metal around it. ReliOn uses our own technology, and are organised into


focused industry verticals bringing our product to market – we use our own ideas, own product, own R&D and a combination of outsourced, localised and in-house manufacturing. Collaboration: Just like our customers, we want to get it right the first time, every time. Their input and our experience together guide us to the optimal solution for each application. We’ve worked with our customers from the telecom space and other markets to fit our products to their needs… not the other way around. When they offer feedback, we listen and then use their comments to improve our next product iterations. Results: 5.7MW of fuel cell power sold & shipped. 1,900+ customer locations in 46 U.S. States and 36 countries. ReliOn is the leading supplier of fuel cell products to the top three telecom carriers in the U.S

“ “ReliOn fuel cells are designed to be modular and scalable. We encourage customers to buy what they need in terms of power, knowing that they can add more power in the future if their needs change

Energy efficiency in MyanmarSchneider Electric’s involvement in the development of a sustainable local power industry

TowerXchange: Please tell us about Schneider Electric’s operations in Myanmar and how your energy management solutions can support the development of the country’s power industry.

Evelin Petkov, Strategy and Business Development Director, Schneider Electric: With quality electrical products and innovative solutions Schneider Electric (SE) contributes to the reduction of energy consumption in Myanmar. It is what we define SE’s negawatt contribution - where a megawatt is a negative megawatt of power saved by increasing efficiency or reducing consumption. It benefits the consumer by reducing the bill and benefits the society as a whole by providing the surplus of energy to be used by those in need. In addition, our solutions are safe for all stakeholders and the environment.

We have successfully implemented our products and solutions in Myanmar in a variety of sector such as government buildings, hydropower facilities, hotels, residential complex and oil and gas projects.

TowerXchange: What has been Schneider Electric’s specific experience of supporting energy solutions for cell-sites on unreliable grids or off-grid?

Evelin Petkov, Strategy and Business Development Director, Schneider Electric: We have successfully implemented off-grid solutions for base transceiver stations for telcos in Indonesia, Thailand, Greece, Spain.

Read this article to learn:< Schneider Electric’s negawatt contribution

< The status of the local electricity grid in Myanmar

< Renewable alternatives to provide power to the country

< CSR activities Schneider Electric is developing in Myanmar and internationally

With an ageing electricity grid and several mega-projects under way but years from completion, Myanmar is in need of energy efficiency solutions and expertise to meet its growing power need. Schneider Electric is a global specialist in energy management and through its office in Yangon is helping individuals and organisations to streamline their operations and save energy.

In this interview, Evelin Petkov, Strategy and Business Development Director for Schneider Electric’s operations in Myanmar, shares his views on alternative solutions and local projects that can support the swift industrial development the country is experiencing.

Keywords: Schneider Electric, Myanmar, South East Asia, Interview, Energy, Unreliable Grid, Off-Grid, Hybrid Power, Renewables, Solar, Logistics, Power, Remote Areas, Maintenance, Local Workforce


Evelin Petkov, Strategy and Business Development Director, Schneider Electric

TowerXchange: How extensive and reliable is Myanmar’s electricity grid?

Evelin Petkov, Strategy and Business Development Director, Schneider Electric: The Myanmar grid is generally operating over capacity, which means that it is difficult for the operator to deliver reliable power in quality and quantity. And being quite old, despite some maintenance, substantial repairs are necessary.

TowerXchange: It seems likely that time to market pressures will result in phase 1 of the tower rollout in Myanmar being focused on on-grid sites with DG backup power – does the case for renewable energy become more compelling in phase 2-3 as the rollout extends beyond the spine of the country along the Irrawaddy River?

Evelin Petkov, Strategy and Business Development Director, Schneider Electric: Yes, renewable energy solutions will be needed to cope with the needs of remote areas not connected to the grid and with no easy access for operation. Quality solar solutions are a perfect match for the specific needs of cell sites in those areas.

TowerXchange: What are the implications of Myanmar’s challenging transport infrastructure for the design or remote cell site energy solutions?

Evelin Petkov, Strategy and Business Development Director, Schneider Electric: Challenging


transport infrastructure in Myanmar requires the companies to find smart solution. Local service teams can be trained to maintain solar energy solutions, such as cleaning the panels and conducting repairs.

TowerXchange: What do other energy equipment and service firms need to know

about establishing local operations on the ground in Myanmar - what are the principal challenges and how did you overcome them? Evelin Petkov, Strategy and Business Development Director, Schneider Electric: In order to succeed, equipment and service firms entering Myanmar market need to show strong long-term

One of Schneider Electric’s sites in Thailand


commitment towards the country, namely by development of partnerships with the Myanmar local partners, investment in training of human resources, and education of the customer.

TowerXchange: Finally, please sum up how you would differentiate Schneider Electric from other energy solution providers seeking to enter Myanmar?

Evelin Petkov, Strategy and Business Development Director, Schneider Electric: Schneider Electric has already established presence in Myanmar with 95% local employees and our technical and support services are available to companies already operating or planning to enter the local market. Our Myanmar distributors are trained for Schneider Electric’s products and solutions. We have started local manufacturing of type-tested solutions for medium voltage switch gear. In addition, we have implemented a series of CSR activities such as the Schneider Electric Lab within the Yangon Technological University, village electrification projects and vocational training for electricians. Lastly, the Go Green in the City is an international team competition funded by Schneider Electric for university students. We collect their submissions of case studies illustrating their ideas for viable energy management solutions and winners will then travel the world with Schneider Electric staff to visit various facilities, meet employees and high-level management and will be offered employment

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Tower Xchange

Special feature:

Just one new profile for you in this edition as we introduce the NeXsysOne platfrom from LEC Consulting. This may be the most proven and mature software platform which you’ve never heard of as it started out as the in-house platform of Lemcon Networks, and has been refined over 200 projects! The modular NeXsysOne platform can be used to manage network deployment, mass network integrations, NOC services, field maintenance and asset management.

Over the nine editions of TowerXchange, we’ve profiled 20 different RMS, ILM, access control and Site Management System solution providers. Here’s an index for your reference:

From RMS to ILM and Site Management platforms, part eight


Accruent in issue 7Acsys in issue 4AIO in issue 8AKCP in issue 6Azeti in issue 8Broadnet in issue 3Caryon in issue 8Galooli in issue 4HMS in issue 5Inala in issue 3

Infozech in issue 7InfraSTAT in issue 6Invendis in issue 4NAAP in issue 7NeXsysOne in this issueQowisio in issue 4Quintica in issue 4Tarantula in issue 5Telemisis in issue 3Westell in issue 7

Download FREE back issues of the TowerXchange Journal at www.towerxchange.com/publications

How ONE user interface enables management of complex network rollouts and maintenanceSince inception NeXsysOne has been used at 200 projects, including Ooredoo’s ongoing rollout in Myanmar

Jorgen Laustsen and Jim Prosser, CEO and COO of LEC Consultancy JLT

TowerXchange: What is NeXsysOne, who are LEC Consultancy JLT and what role do you play in the telecoms infrastructure ecosystem? Jorgen Laustsen, CEO, LEC Consultancy JLT: NeXsysOne is the software platform to support network deployment, mass network integrations, NOC services, field maintenance, asset management services et cetera. LEC Consultancy JLT and the product NeXsysOne was purchased by Intelli Group Holding Inc in April 2014 after having identified the tremendous potential in the product and supporting team. We offer customers a single user interface, an advanced, customisable and modular software solution to help improve efficiencies whilst reducing operating costs. To enhance this we also offer network analytics, NOC, site management and professional services. NeXsysOne has been created out of the best practices working closely with a number of customers – it’s not just the product of internal thinking. The solution has been developed from day one with an extreme focus on internal efficiency – to make network rollout and management more profitable. And we are able to adapt the platform to comply with different processes to fit customers’ requirements. TowerXchange: The first question our readers always ask is “how proven is the solution?” Tell us about the evolution of NeXsysOne, and give us a few hints about current and future users of the platform?

Read this article to learn:< Advanced project management, asset management, spare parts, competency and change management,

together with a superior RMS and smart phone based network performance monitoring, all in ONE UI

< How NeXsysOne is integrated with clients’ existing hardware, software and processes

< Synchronising work tasks to manage peak volumes and improve resource utilisation across multiple NOCs

< How Ooredoo Myanmar is using NeXsysOne to co-ordinate multiple stakeholders and create a live view

of the evolving tower and transmission network

The NeXsysOne software platform has been refined and proven in more than 200 large scale, complex network rollout, integration and maintenance projects worldwide. Originally developed as an internal competitive differentiator for Lemcon Networks Oy, NeXsysOne is now being made available to external customers: towercos, MNOs and SIs by LEC Consultancy JLT out of Dubai, who also provide parallel service offerings. TowerXchange caught up with the creator of NeXsysOne Jim Prosser, and Jørgen Laustsen, whose Intelli Group Holding Inc. recently acquired the platform.

Keywords: Monitoring & Management, Site Management Systems, O&M, Opex Reduction, Network Rollout, KPIs, Change Management, NOC, Asset Register, RMS, Site Management System, Asset Lifecycle Platform, Job Ticketing, Spare Parts, Asia, Myanmar, Ooredoo, 3GIS, Lemcon Networks, , LEC Dubai, NeXsysOne


Jim Prosser, COO, LEC Consultancy JLT: NeXsysOne is a spin-off from the LNT platform (Lemcon Network Tracker) that was first introduced back in 2001 for mass UMTS deployments and network integrations. Lemcon decided to create it’s own software because we needed to improve our service delivery and to reduce costs for network integration, network operations, rollout management, asset management and project management. It enhanced our services for large mobile network operators such as AT&T, T-Mobile, Cingular, Econet, Globe Telecom, Telkomsel, Ooredoo and 3GIS. The system is stress-tested over multiple large scale deployments, and captures the full end to end processes for complex deployments and network operations. In 2013, the NeXsysOne product became a separate stand-alone unit, now sold directly to tower companies, network operators, technology vendors and systems integrators. TowerXchange: Tell us about the capabilities of NeXsysOne. Jim Prosser, COO, LEC Consultancy JLT: Some clients require just the project management module for complex network upgrades, turnkey deployments or to capture site information. Others expand to include also asset management or remote site management (RMS) solutions. We’re able to adapt the modules we have to any customer requirement. NeXsysOne has eight integrated modules:

ProjectOne: Project management software, cost control, lease management and payments, quality management, transmission visibility, powerful maps view to help build networks, SAQ to final network operational acceptance. AssetOne: Site asset management, warehousing, refurbishment, monetising old assets. One of the biggest problems for operators is that they have booked a certain value of assets, which in many


cases is significantly different from the actual value of the assets – AssetOne helps operators accurately assess and track the book value of all assets, which is key for tower transactions, for example. RepairOne: Spare parts management and warranty control. SiteOne: Passive infrastructure monitoring,

Build

ProjectOne TaskOne

StaffOne

AssetOne

RepairOne DataOne

SiteOne

Maintain One

Ma

inta

in

Operate

Manage

Preventive Maintenance

Reactive Maintenance

Change Management

Work order Management

Site Monitoring

Energy Management

Access / Theft control

Environment Monitoring

data performance

RF real time Visualization

Repair & warranty

Spare parts Management

Competence Development

Contractor QA assurance

Localizing resources

Training verses job profiles

Asset Management

Refurbishment of Assets

Monetize old assets

Lifecycle Management

Work force Management

Task tracking Project tracking & reporting

Cost control, QMS, Links

NXO overview

2003 2004 2005 2006 2007 2008 2009 2010

2004 USA AT&T LNT RIC version brought to USA for west coast project

2006 Wind & Telus Canada USA LNT expanded to include competence development and staffing .

2008 BellTel Philippines Turnkey project implemented from Site acquisition to final acceptance

2010 American Tower Projects in Zimbabwe, and South Africa

2003 Sweden 3GIS, Network Integration LNT version started for UMTS Int project

2005 T-Mobile USA RIC Service LNT expanded to National including Dallas, NY and LA. Alarm monitoring added. Managing up to 4000 sites per month

2007 Telkomsel Indonesia NSN Latin American RIC Comsel Colombia expended to include PM, SEC, RIC and network monitoring projects .

2009 Econet Zimbabwe Turnkey project implemented Various Site management projects

2011 SiteOne projects Colombia .

2011 2012

2013 All modules consolidated into NeXsysOne STP towers Uganda telecom Likusasa Lemcon projects Millicom Globe WiFi TeleSite Africa .

2013 2014

2014 Ooredoo Myanmar Several companies using tool for fasting turnkey rollouts globally Zain Sudan Asset Management services.

2012 Digicel Malaysia Asset lifecycle management. Various TI Projects Africa. Globe Philippines Asset lifecycle Management. Multiple TI projects for LTE swaps


control, security, energy management, cost analytics and environment control.

StaffOne: Competence development, training and quality assurance, SLA control. DataOne: Real time network performance monitoring through an application on field engineers’ smart phones. TaskOne: Work force management, trouble ticketing, preventive and scheduled maintenance.

MaintainOne: Network change management and NOC alarm monitoring. We co-ordinate massive network changes, such as software upgrades and transmission changes, in MaintainOne, which ensures all tasks are completed on time during maintenance windows and synchronises all tasks in the NOC. TowerXchange: Can you talk about some of the use case scenarios from NeXsysOne ’s early deployments?

Jim Prosser, COO, LEC Consultancy JLT: With the massive GSM and UMTS boom in the nineties, Lemcon became a strategic and trusted partner to Nokia globally. Over 200 networks were subsequently deployed with Lemcon involvement and our software was the foundation of our deployment services across all continents.In parallel we worked with AT&T, T-Mobile and Cingular in the US and were executing up to 6,000 integrations per month, and managing network rollout and expansions of up to 40-50,000 sites per

““

We managed the rollout of the first shared radio network in the world, the 3GIS network deployment in Sweden. This involved three different operators, each with their own core network, and with proprietary networks in each major city, but with a shared radio network across the rest of country

History of NeXsysOne deployments (formerly “LNT”)


year. In Brazil for example, twelve countries and various operators were supported by one regional operation center located in Rio. We managed the rollout of the first shared radio network in the world, the 3GIS network deployment in Sweden. This involved three different operators, each with their own core network, and with proprietary networks in each major city, but with a shared radio network across the rest of country.

All these experiences and best practices are now built into the NeXsysOne platform. TowerXchange: Where does software end and services begin? How does LEC Consultancy JLT help integrate the platform with the core processes of the tower operator? Jorgen Laustsen, CEO, LEC Consultancy JLT: Software and services must run hand in hand. The software is the platform allowing the services to be more efficient, improving communications and driving the processes. It must be the central beating heart of the project and single source of data. Each deployment of NeXsysOne has been tailored to meet the needs of the customer and we don’t always deliver every module and feature. For example some customers already have an effective RMS, and might only want AssetOne and TaskOne to improve asset register accuracy and to take advantage of the work force

management system, TaskOne, for scheduled and preventive maintenance. Tower operators utilise the SiteOne RMS module to monitor and control the usage of energy, using generator control to optimise the use of batteries over diesel, or they might only use the software for lease payment management or colocation handling. NeXsysOne provides deployment visibility from search ring identification through the SAQ processes, design and permitting, asset management, cost control and construction to documentation, quality management and acceptance. As built drawings and site details are made available for potential customers to view immediately, NeXsysOne accelerates time to market in making the site facilities available for co-location.

Jim Prosser, COO, LEC Consultancy JLT: We have an application called AdminOne which allows our customers to create their projects using their

existing processes – it’s a tool to quickly capture and adapt to existing processes by customising fields, comment and setting rules and alerts (SMS or email) for specific milestones.. TowerXchange: Take us on a verbal ‘tour’ of a NOC powered by NeXsysOne and tell us how the platform synchronises management and maintenance of the network. Jim Prosser, COO, LEC Consultancy JLT: The software and LEC Management and senior technical engineers have been responsible for several large regional Network Operation Centers (NOCs) across several continents. By utilising our unique web based ticketing system, we can synchronise work tasks between different operations centers to manage peak volumes or specific tasks if and when needed. We did this for example in Brazil utilising the operations center

“ “By utilising our unique web based ticketing system, we can synchronise work tasks between different operations centers to manage peak volumes or specific tasks if and when needed. We did this for example in Brazil utilising the operations center in Rio as well as in Dallas, US. This allowed us to better use our resources whilst reducing costs in a more efficient manner across regions


in Rio as well as in Dallas, US. This allowed us to better use our resources whilst reducing costs in a more efficient manner across regions. LEC Consultancy JLT has a resource pool of people with experience of project management, deployment and O&M. We don’t just sell the software, we help with integration, or we can provide full professional services to run a NOC or take on the complete scope of rollout management. TowerXchange: How would you differentiate NexSysOne from other platforms designed as an ‘ERP for towers’? Jørgen Laustsen, CEO and Jim Prosser, COO, LEC Consultancy JLT: There are many good ERP systems available to tower companies or mobile operators. However, what NeXsysOne offers via its eight modules is the complete platform that covers the full spectrum of deployment and operation. NeXsysOne is configurable to integrate with previously installed ERP systems, or can provide its own. But NeXsysOne is more than an ERP for towers. The critical factor and differentiator of NeXsysOne is that it offers the bigger picture to our customers from ‘’ONE’’ user interface. It has been developed with an operational focus whilst many typical ERP system have been build from financial requirements. Another advantage of NeXsysOne is that as your business evolves, the capability of the system can evolve with you

When undertaking a major greenfield rollout as currently underway in Myanmar, it’s not simply a case of outsourcing to a single turnkey infrastructure vendor or towerco – the process is complex and much more fragmented. In Myanmar, as in its other markets, Ooredoo works with multiple towercos, powercos, transmission deployment subcontractors and turnkey infrastructure vendors, with network planning and antenna assembly services also provided by several different companies. While many of these companies use Ooredoo’s platform, others have their own software, giving rise to significant synchronisation challenges. Systems such as ProjectOne provide a solution to this challenge, creating a common language and ‘single source of the truth’ throughout the complex supply chain, while others such as AssetOne pull together data and input into transmission planning. For example, when a towerco has a new site acquired and permitted ready for installation, we use ProjectOne to synchronise notification to the turnkey infrastructure partner and to the antenna assembly company, letting them know that the site is ready for civil works and, soon after,

antenna installation, so that all the stakeholders come together in a timely manner. Major rollouts like Myanmar are ‘organic projects’; you need to understand the impact of every decision on network connectivity, and a lot of the network integration depends on the transmission network. If a particular permit is delayed or denied then you need to know what other sites are affected, and you may need to amend the transmission network and tell all the stakeholders. NeXsysOne, an advanced, one-stop telecom project management solution enables the user to view sites and the fibre backbone of transmission connectivity, and to see live updates as the network evolves. This makes NeXsysOne more of a real time enabler of Rollout Management (ROM), rather than a mere ‘system of record’ that documents actions after they have been taken. We know where processes can fail because we’ve learned best practice on over two hundred projects worldwide. NeXsysOne has revolutionised project management in the Telco sector, its many modules combine to help operators like Ooredoo Myanmar build world-class networks, not just track and report on existing networks

How Ooredoo is using NeXsysOne to project manage the Myanmar rollout

Tower Xchange

Meetup Africa 2014October 20-21, Johannesburg

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Accelerate your sales cycle and close your next major deal in emerging market towersAdvertise in the TowerXchange Journal, circulated to a highly targeted community of the 6,485 most influential tower decision makers

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OperatorTowercoEnergy equipment & ESCOManaged service/ turnkey infrastructureStatic asset manufacturerStrategic or legal advisorActive equipment or IBSInvestorRMS, ILM & access controlRegulator or governmentOther

C-levelVP, SVP or Dept HeadDirector-levelSenior managerMiddle management

100

80

60

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20

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SSA

In which region are readers interested?

MENA

North America

Asia

Europe

CALA

76%

59%

40%32%

48%

22%

33.7%

11.7%

9.1%8.8%

7.2%

6.9%

6%

5.7%

4.4%

1.4%5%

39.8%

23.1%

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2.5%


5 HTA acquires 3,100 Airtel towers

15 IHS acquires 2,136 Etisalat Nigeria towers

20 African tower market analysis

25 Africa news

27 Hal Hess joins Inner Circle

28 Mott MacDonald Share Square: Malawi

30 Towershare’s appetite for MENASA

35 Asia news

37 Launch of China’s towerco

39 LatAm news

42 TowerXchange Meetup Africa

59 Investor editorial

61 What investors want

65 Who’s who of advisory firms

72 Matrix of advisory firm capabilities

73 EY on financial due diligence

76 GBWP on ‘grass roots’ assets

81 Introduction to Cameroon

83 BMI on Cote d’Ivoire

86 Orange’s experience of working with towercos

89 TowerXchange Meetup Africa

90 Introduction to S and SE Asia

91 Indonesia tower count

95 India tower count

97 Telenor Myanmar interview

101 Myanmar editorial

101 Myanmar FAQs

116 Olivier Puech, CEO LatAm, AMT interview

119 Everest Engenharia on Brazil

123 Torrecom on Central America and Mexico

128 Will LatAm towercos take over power?

133 Colombia round table report

136 BMI on Colombia

140 Torres Andinas on Colombia and Peru

145 TowerXchange Meetup Americas report

149 Views of CALA’s leading towercos

154 Views of CALA’s regional towercos

159 How to structure a JV towerco

162 RANsharing: opportunity or threat?

167 Cummins on power as a service

171 AST: the world’s largest RESCO

176 GIZ’s community power initiative

181 Turbina’s vertical axis small wind

186 ReliOn on fuel choice

192 Schneider Electric in Myanmar

196 NeXsysOne enables rollouts & maintenance

201 Diary of Meetups

202 TowerXchange Journal demographics

IndexPage Article Page Article

towerxchange-issue_9

Documents

towerxchange towerxchange

towerxchange issue

towerxchange journal

towerxchange meetup

towerxchange whos

towerxchange inner circle

emerging market towers

menasa towerxchange