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TowerXchange Meetup MENA 2019 Post Event Report

Insights from the region’s only event focussed on telecom infrastructure


Our informal network of advisorsAbout TowerXchange

Founded in 2012, TowerXchange is your independent community for operators, towercos, investors and suppliers interested in EMEA, CALA and Asian towers. We’re a community of practitioners formed to promote and accelerate infrastructure sharing. TowerXchange don’t build, operate or invest in towers; we’re a neutral community host and commentator on telecoms infrastructure.

TowerXchange produces a monthly newsletter and quarterly journal, both available to subscribers, which cover industry news and provide deep insights into telecoms infrastructure worldwide. We also host annual Meetups on each of four continents to bring together the leading tower industry stakeholders.

TowerXchange was founded by Kieron Osmotherly, a TMT community host and events organiser with 21 years’ experience, and is governed with the support and advice of the TowerXchange “Inner Circle” – an informal network of advisors. TowerXchange was acquired by Euromoney Institutional Investor PLC on December 1, 2017

TowerXchange’s “Inner Circle”

© 2019 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.

(Chairman) Charles GreenCEO, International DigitalInfrastructure Alliance

Zhiyong ZhangChairman & PresidentMiteno

Akhil GuptaChairmanBharti Infratel

Nat-sy MissamouSharing New Business Program Director, Orange

Nina TriantisManaging Director, Global, Head of Telecoms & MediaStandard Bank

Terry RhodesCEOEaton Towers

Marc GanziManaging Partner & InvestmentCommittee Member, Digital ColonyCEO, Digital Bridge Holdings

Arun KapurCo-FounderIrrawaddy Green Towers

David MurphyDirector - TMT, EMEAStandard Chartered Bank

Dagan KasavanaCEOPhoenix Tower International

Daniel Lee Managing DirectorIntrepid Advisory Partners

Suresh SidhuCEOedotco

Rhys PhillipChief ExecutiveCTIL

Ted ZhongFounder & CEO,Astro Tower

Hal HessExecutive Vice President & Chairmanof Latin America and EMEAAmerican Tower

Nobel TanihahaPresident DirectorPT SOLUSI TUNAS PRATAMA (STP)

Umang DasChief MentorAmerican Tower

Gilles KuntzCEOTowerCo of Madagascar

Maria ScottiCEOTorrecom

Tilak Raj DuaDirector GeneralTAIPA

Dimitris LiouliasGM of StrategySaudi Telecom Company

Kurt BagwellPresident InternationalSBA Communications

Jim EisensteinChairman & CEOGrupo TorreSur

Bimal DayalCEOIndus Towers

Inder BajajAdvisor, Helios Investment Partners & former CEOHTN Towers

Tunde TitilayoVice ChairmanSWAP International

Peter BendallSenior Vice PresidentMacquarie Infrastructure and Real Assets

Jeffrey EldredgePartnerVinson & Elkins RLLP

Enda HardimanManaging PartnerHardiman Telecommunications Ltd.

Adeel BajwaCEODhabi Group

Scott CoatesCEOWireless Infrastructure Group

Carlo RamellaCOO, EI Towersand Chairman, Towertel

Alexander ChubPresidentRussian Towers

Steve WeissCFOProtelindo

Toni BrunetCorporate & Public Affairs Director,Cellnex Telecom

Manish KasliwalVP and Chief Business Development Officer, C&SE Asia, American Tower


Foreword

Dear colleagues,

TowerXchange Meetup MENA 2019 was the first Meetup we have run in the Middle East but it was one of the most warmly received.

With representatives from Zain and IHS Towers – the instigators of what could be the first significant tower deal in the region – as well as key global players from Helios, American Tower, edotco, Enfrashare, Etisalat, Saudi Telecom Company, and many more, this exclusive opportunity to meet and network with the new elite of Middle East and North African towers has become a fixture in the industry’s diary. The Middle East and North Africa is the last global region to be touched by the independent towerco market,

with less than 1% of towers in independent hands. With the sale and leaseback of Zain’s Kuwaiti and Saudi towers imminent and other deals in the offing, this year is a critical turning point for the region and global industry. The region is extremely diverse, with both highly developed markets in the Gulf requiring support for 5G rollout and under developed markets still waiting for 3G network rollout in many areas.

Our first event came at a pivotal time for the industry, and found a small local industry being enthusiastically embraced by the global tower ecosystem. In this fresh territory discussions were wide-ranging across the two days of panels, roundtables and informal tête-à-têtes. As mentioned, we covered both 5G plans and network recovery

in different roundtables, and how towercos can support network development. There was also a live discussion on the best form of independent tower management for the region, whether a complete sale and leaseback, an MNO-captive company or an independent carve-out with a retained minority-stake for the operator. Luckily the region does not need to re-invent the wheel and lessons learned elsewhere in the world are now being applied and adapted to the unique challenges of the Middle East and North Africa.

We look forward to welcoming familiar and new faces back in 2020 and to sharing more of our research and exclusive interviews over the coming months.

Matthew EdwardsHead of Research, EMEATowerXchange


TowerXchange Meetup MENA 2019 at a glance

A packed out agenda and interactive sessions including:

Sponsors and exhibitors benefitted from:

Towercos 33

Mobile Network Operators 26

Investors 13

Energy equipment & services 47

Legal, advisory & Consultants 18

Site management and data

platforms 15

Static assets 11

Managed services 10

Other 8

Access Control 3

Towercos with 247,632 towers under management worldwide

26 representatives from 10 mobile network operators

Attendees from government and national regulators

33 representatives from 11 regional and global towercos

C-level37%

VP/SVP 19%

Director 26%

Manager 15% Other

3%

Interviews and exposure in 200 printed

special edition books

In depth technology

working groups

Access to specialist roundtable discussions

Buyer briefings with active tower

buyers

Branding to 187 attendees over

2 days

30interactive roundtable

discussions

7senior panels and

debates

5technical and strategic

breakout sessions

1exclusive

networking dinner

Industry breakdown

Seniority breakdown


TowerXchange’s analysis ofthe tower market in the Middle East & North Africa

The Middle East and North Africa is the region the least penetrated by the towerco business model globally. With the exception of Pakistan (which TowerXchange has grouped into our regional coverage), there have been no tower transactions of scale, and whilst a handful of build-to suit towercos have emerged, fewer than 1% of the region’s 275,104 towers sit in independent towerco hands.

In North Africa, some operators have embraced infrastructure sharing more readily than their

counterparts in the Middle East, with an active sharing agreements in place in Tunisia and approximately one third of towers in Egypt being shared, but on the whole infrastructure sharing between MENA MNOs has been limited.

Yet the winds of change are upon us.

In Kuwait, IHS Towers have reached a deal to acquire Zain’s 1,700 sites (with the deal expected to close imminently) and on 28 November it was

announced that Zain had reached an agreement for the sale and leaseback of their 8,100 Saudi Arabian towers to the towerco. In Oman, Omantel are expected to announce a tower sale imminently, with approximately 2,900 macro towers and 5,000 rooftop towers up for grabs.

Further MNOs in the region are also understood to be studying tower sales closely, attracting the interest of towercos and investors in this virgin territory. Rumours have circulated that Tunisie Telecom may consider a sale of their tower portfolio, Djezzy (in which VEON are major shareholders) is known to have previously explored a tower divestment and is rumoured to retain that appetite to sell, and should Zain Group’s transactions go ahead successfully in Kuwait and Saudi Arabia, one can expect their tower divestment strategy to spread to other markets.

Some operators have explored different paths. In Iran, number one and number three MNO MCI and Rightel have opted to form a towerco venture – Iranian Towers – in partnership with domestic towerco, Fanasia. In Saudi Arabia, Saudi Telecom Company which had previously looked at both a joint venture and a tower sale has now set its sights on carving out an internal towerco to better manage its portfolio of 16,400 towers, establishing Communications Towers Co Ltd in early 2018. The entity is yet to start commercial operations, with regulatory approvals still pending but observers expect this to be resolved by early 2019. The operator invited bids for a management contract in its new tower venture, although their reluctance


to hand over any equity has deterred most of the major towercos from participating.

The ESCO model is also gaining traction in MENA as an alternative outsourcing strategy. In Lebanon, Alfa has signed an ESCO contract with IPT PowerTech, whilst In Egypt, Orange (which in 2016 under the MobiNil brand had reached an agreement to sell 2,000 towers to Eaton Towers; a deal which didn’t obtain regulatory approvals) has issued an ESCO RFP. TowerXchange has also been made aware of further MNOs on the cusp of announcing ESCO RFPs.

In markets where new build is required, operators who may not necessarily be considering a tower divestment, are opening up to the idea of working

with independent towercos in a bid to rollout new sites in a a less capitally intensive manner. Several major towerco names have been linked to the Egyptian market, where new build requirements are particularly high, both for established operators and new market entrant, Telecom Egypt. New build to suit players are also starting to emerge across the region, some of which have an appetite for tower acquisitions, should towers come to market.

As the region begins to open up to the independent towerco model and infrastructure sharing, there is a pressing requirement for governments and regulators to create supportive legislation. In this regard, progress in many markets has been slow and continued support and education on the merits of shared infrastructure and towercos

remains key. Whilst a small market, with just 1500 towers, Bahrain’s regulator has been one of the most proactive. In early 2018, the country’s Telecommunications Regulatory introduced the Public Radio Communications Stations Regulation, designed to regulate the deployment of new towers and encourage infrastructure sharing in the country.

The advent of 5G and the move towards smart cities is necessitating major investment in densifying telecom networks in many of the most developed countries in the MENA region. How to achieve such densification, whilst often contending with declining ARPU and increased taxation, is causing operators to consider new business models and potential infrastructure sharing strategies.

Figure one: Tower counts across MENA markets

Source: TowerXchange

Saudi Arabia35,500

Iran37,106

Pakistan 34,300

Morocco19,054

Algeria19,000

Oman15,400

Egypt22,704

Iraq14,769

UAE13,000

Tunisia8,383

Afghanistan6,645

Qatar5,000

Jordan6,836

Kuwait4,100

Lebanon 2,600

Bahrain1,500


Whilst the MENA region has a number of common threads including a number of operators active in multiple markets, a central role of government in business, a strong Arabic influence and similar climates and geographies, it is also important to note the stark differences across different markets; From the highly developed GCC countries pushing

towards 5G and decommissioning of parallel infrastructure, through to the war torn countries of Iraq, Afghanistan and Syria where network rollout, restoration and power remain top concerns in operationally challenging markets.

TowerXchange examine the dynamics at play in

16 countries across the MENA region, exploring key MNOs and their tower portfolios, the level of infrastructure sharing and presence of towercos, network expansion required and operational challenges present.

Country analyses

Afghanistan Subscribers: 33.5mn Tower count: 6,645 MNOs: Five Towerco activity: Asia Consultancy Group

Afghanistan has five MNOs, Afghan Wireless (AWCC) which is the country’s fastest growing MNO, Roshan which is funded by the Aga Khan Development Fund and is the country’s largest MNO, multi-national players MTN (which has hinted at exiting the market) and Etisalat, and newcomer Afghan Telecom which is part of the Ministry of Communications and Information Technology. Telecommunications remains an important sector for the Afghan government, with Afghan Wireless understood to be the largest tax payer in the country.

Figure two: Footprints of MENA’s major MNOs

Source: TowerXchangen.b. Lighter colours indicate the company owning a stake in an MNO in the country

Coutry Etisalat MTN Ooredoo Orange STC Vodafone Zain

AfghanistanAlgeriaBahrain

EgyptIranIraq

JordanKuwait

LebanonLibya

MoroccoOman

PalestinePakistan

QatarSaudi Arabia

SyriaTunisia

UAEYemen

On 29-30 January 2019, in response to the momentum in the market, TowerXchange will bring one of their world renowned Meetups to Dubai for the first time; assembling the who’s who in the MENA tower market. If you would like to get involved, please contact Laura Graves, Managing Director, EMEA [email protected]


Each of the operators own pretty much of all of their sites, with the MNOs understood to have between 1000-1500 towers each. The Telecom Regulatory Authority of Afghanistan (ATRA) states that there are 6,645 base stations in the country, and with limited infrastructure sharing one can assume that a rough proxy for the number of towers. As the country’s newest player with just 5% market share, Afghan Telecom’s network is smaller than that of its competitors and the operator has recently inked a network sharing deal with Etisalat. Afghan Telecom currently uses around 60-70 of Etisalat’s towers, with plans to extend this tower sharing arrangement. Networks are better established in Northern and Central regions, although Afghan Wireless is still investing in Southern regions of the country.

Since the MNOs entered the market in the early 2000s, the security situation has deteriorated significantly. The Taliban demanded the shutdown of a significant number of sites to avoid surveillance by national and international security forces; where these demands were not met many sites were blown up. MNOs have been reluctant to invest and so there has been little activity in terms of new tower build or co-location. Frontier Tower Solutions had operated in the market in the earlier days, building, operating and maintaining sites for Afghan Wireless but the towerco has since wound up operations in the country. Afghan managed service provider, Asia Consultancy Group, owns ~100 towers which it makes available for co-location and RANsharing services.

Figure three: Heatmap of tower deals and towerco activity in MENA

Figure four: Tower ownership in Algeria



123456

Towerco activityTowerco activity plus major tower sale rumouredMNOs rumoured to be considering a major tower transactionConfirmed tower sale process underwayNo towerco activity or deal rumours

Mobilis

Djezzy

Ooredoo

7,500

6,000

4,500


99% of sites run on gensets – even in cities – and the biggest challenge is getting fuel delivered to sites. Solar solutions had been examined but the payback period means that MNOs have been reluctant to invest. There are few to no major international contractors operating in the market outside of the military (with foreign troops also having massively reduced their presence, a factor which caused a drop in subscriber numbers) although TowerXchange has heard rumour about one multi-national MSP offering ESCO-like services in the market.

In spite of the challenging conditions, coverage in the market has been described as “fairly okay”. There are 33.5mn subscribers with mobile penetration sitting at 89% (source: ATRA) and 4G coverage is available in major urban areas, where data usage continues to grow faster than expected.

In early 2018, the ATRA agreed to provide US$32.1mn of funding to deploy 250 base stations in rural and remote areas. Roshan will deploy 137 sites, Afghan Wireless 84 sites and Afghan Telecom a total of 29.

Algeria Subscribers: 47.0mn Tower count: 19,000 MNOs: Three Towerco activity: Some colocations on towers belonging to national broadcaster Télédiffusion d’Algerie (TDA); Infrashare registered as a towerco in the country

Algeria has three MNOs, Mobilis (Algerie Telecom)

with 41% market share, Djezzy (Optimum Telecom Algerie) with 31% and Ooredoo (Wataniya Telecom Algerie) with 27%. There are 47mn mobile connections in the country, growing at a rate of 8% YoY and mobile penetration sits at 113% (Source: ARPCE – L’Autorite de Regulation de la Poste et des Communications Electroniques). Each of the MNOs obtained a 4G license in 2016 and rollout is well underway with around one quarter of the population covered as of Q1 2018.

There are an estimated 19,000 towers in the country of which 20% are ground based and the rest are rooftop or alternative site typologies. Mobilis has the largest portfolio with around 7500 sites, followed by Djezzy with 6,500 and Ooredoo with 5,000. State owned broadcaster, Télédiffusion d’Algerie (TDA) has approximately 350 towers. The country needs an additional 2,000-3,000 new sites to be added in the next 18-24 months, and what’s more, a significant proportion of existing sites need

to be dismantled and replaced. Mobilis has long had plans to deploy 1,200 to 1,400 sites but repeated changes in management have stalled rollout plans in recent years.

Less than 2% of sites are currently shared, with many lacking the structural capacity for additional tenants and MNOs failing to agree what constitutes a fair swap. In late 2016, the regulator introduced plans for active sharing and in a short period of time, Ooredoo and Djezzy started sharing around 1,000 sites. In mid 2017 however, the regulator did a u-turn, prohibiting active sharing although provisions for active sharing are however laid out in the 4G license conditions.

No tower transactions have been carried out in the Algerian market, although Djezzy, in which VEON are major shared holders, carried out an exploratory study into a potential tower sale (VEON, formerly VimpelCom, has experience in


Figure five: Tower ownership by Egypt’s MNOs

Etisalat

Orange

Vodafone

Telecom Egypt

6,000

2,000

8,500

6,166


tower divestments having previously sold their Italian towers to Cellnex and looked at the sale of their assets in Russia, Pakistan, Bangladesh and the CIS). Limits on foreign direct investment in Algeria (limiting international players to a 49% stake) however meant that there was a lack of appetite from most international towercos to enter the market. Newly established Algerian towerco, Infrashare (headed up by the former CTO of Ooredoo Algerie) keeps a keen interest in tower portfolios in the market and has financing options that enable it to abide by the FDI rules.

In terms of site operations, 99% of sites are on grid with generators used for backup on core sites. With comparably cheap fuel prices the case for hybrid solutions is reduced.

Bahrain Subscribers: 2.2mn Tower count: 1,500 MNOs: Three Towerco activity: None

The Kingdom of Bahrain has three mobile network operators; Batelco, Saudi Telecom Company owned Viva and Zain serving a subscriber base of 2.2mn (source: TRA Q2 2018).

In spite of its small landmass, Bahrain has a total of 1,500 sites of which around 12% are currently shared, leading to significant parallel infrastructure. In 2016, the Telecommunications Regulatory Authority of Bahrain (TRA) commissioned a study to examine the rationalisation of the Kingdom’s total tower count down to a core network of 400

sites. In early 2018, the TRA introduced the new Public Radio Communications Stations Regulation (PRS Regulation) to regulate the deployment of new towers and “rectify existing ones in accordance with best practice”. The new detailed legislation lays out key specifications for new and existing towers, specifying everything from the type of concrete used in the foundations to key health and safety requirements. The rectification plan is to take place over the next 15 years, with more than 90% of the towers requiring modification and the TRA setting out a goal of increasing the percentage of sites being shared from 12% to 40% in the country.

When questioned by TowerXchange on different business models to reach the targets set in place, the TRA stated “Currently there are three operators who are licenced to deploy masts and towers in Bahrain. As a result there are three different mast and

towers networks, i.e. one for each operator. The Authority considers there is room for improvement by merging these different networks into one or at least two. This could be done either by introducing a towerco company, a joint venture between existing operators or other feasible business models.”

Egypt Subscribers: 103.2mn Tower count: 22,704 MNOs: Four Towerco activity: HOI-MEA (plus interest expressed from a number of other towercos)

Egypt now has four MNOs (each with 4G licenses) with Telecom Egypt joining Vodafone, Etisalat and Orange after having obtained a license in 2017. With 103.2mn subscribers (source: GSMA intelligence, Q4 2017) and just over 22,000 towers,


Figure six: Tower ownership in Iran

MCI

MTN Irancell

Rightel

Iranian Towers

Fanasia21,000

11,000

4,000 1,000106


Egypt has over 4,500 subscribers per tower, the highest in the MENA region.

Tower ownership is fairly evenly split amongst the three established MNOs with new market entrant, Telecom Egypt lagging behind with just 2000 towers. Four infraco licenses also having been awarded to Alkan, Mobiserve, EEC and HOI-MEA to enable them to own towers, although only HOI-MEA has built and retained a portfolio of towers with their current site count sitting at 38. Rumours had circulated that HOI-MEA were looking for a buyer for their towers.

There have been no tower transactions of scale in the market. MobiNil (now Orange) reached a deal back in 2016 to sell 2,000 of their sites to Eaton Towers for $131mn although the deal was cancelled and does not look like it will return to the table any time soon. Infrastructure sharing between the MNOs is relatively widespread, with Orange

reporting that over a third of the towers they use are shared with other operators. In early 2018, Telecom Egypt reached a wholesale agreement with Vodafone to utilise its transmission and infrastructure services for a three year period whilst it establishes it network.

Each of the four MNOs were awarded an 4G license in 2016, and whilst 4G coverage is relatively extensive in Cairo, major rollout is still required elsewhere. Collectively, Orange, Vodafone and Etisalat are understood to be adding 300-500 new towers per year, whilst Telecom Egypt has initiated the next phase of their network rollout, requiring the addition of 1,000 new sites (GBTs, rooftops and IBS). Such high requirements for new build and co-locations has attracted the interest of international towercos, with American Tower, TASC Towers, Digital Bridge and Eaton Tower all being linked to potential opportunities in the market.

Grid connection for tower sites is slow and expensive and so generators are widely used, often two per site due to the high loads. Fuel remains cheap by international standards and so the case for hybrid solutions is reduced; although fuel subsidies are gradually being phased out. Orange has issued an RFP for an ESCO to take over power for a portion of their towers in the market, with a goal of improving energy efficiency at sites. At least one of the other MNOs is expected to follow in Orange’s footsteps.

Iran Subscribers: 118mn Tower count: 37,106 MNOs: Three national plus FCP and WiMAX players Towerco activity: Iranian Towers and Fanasia

Iran is the Middle East’s largest mobile market with 118mn subscribers. There are three national operators in the country of which MCI (Mobile Communication Company of Iran) is the largest with 61.3mn subscribers and 43% of the market share. MTN-Irancell, a joint venture in which MTN holds a 49% stake, is Iran’s second largest operator with 45.5mn subscribers and 40% of the market share; and RighTel is the third largest operator with 9.5mn subscribers and around 8-9% market share. In addition to this there are a number of FCP players and WiMAX operators who make up the balance of the market share.

There are currently around 37,000 towers in the Iranian market and with very little infrastructure sharing between the operators there is a significant


Figure seven: Ownership of Iraq’s 14,769 towers

Zain

Asiacell

Korek Telecom

Fastlink

Tishknet

Other 4G LTE players

4,5515,200

3,669850 300

200


degree of parallel infrastructure. In 2014, Fanasia, an Iranian company with a background as a turnkey service provider to the country’s MNOs, started their own towerco business. Their first project on Kish Island, conducted with the support of the Kish Free Zone Organisation, was to rationalise the number of towers on the island. With 110 sites on the Island, each with a single tenant and unsuitable for the addition of further tenants, Fanasia built 27 new sites which the operators were mandated to use, whilst existing sites were decommissioned. The municipality benefited from a revenue sharing model on top of the land rental fee and further benefited from the freeing up of land under the old towers. Following the success of the Kish Island project, Fanasia reached a similar agreement with the municipality of Mashhad, Iran’s second most populous city to develop a core network of 350 sites in March 2016. Fanasia currently owns 106 towers.

In early 2017, in response to the growing trend towards infrastructure sharing in Iran, a new tower company, Iranian Towers, was formed. The three shareholders in the company are MCI and Rightel, Iran’s number one and three MNOs, and Fanasia, Iran’s first towerco. The first phase of Iranian Towers’ operations will be the construction of approximately 1,000 new sites which are capable of accommodating multiple tenants. These sites will be constructed primarily in the major cities in order to accommodate 4G and 4.5G rollout. The new rollout will include both ground based and rooftop sites and will be conducted with the coordination of municipalities who will benefit from revenue

sharing on the sites. Iranian Towers now own around 1,000 sites.

Iraq Subscribers: 36.7mn Tower count: 14,769 MNOs: Three national plus several LTE only players in Kurdistan Towerco activity: None (although rumours circulating)

Iraq has three nationwide MNOs which own 2G and 3G licenses; Zain, Asiacell (owned by Ooredoo) and Korek Telecom (in which Orange has a stake). Zain has the largest mobile market share, with Asiacell close behind, whilst Korek Telecom is the country’s fastest growing operator which is dominant in the Kurdistan region. In addition to the three nationwide operators, there are a host of 4G LTE players in the Kurdistan region, Fastlink being the largest with Tishknet, Goran-Net and

Mobitel amongst the other players. The government had proposed the introduction of a fourth national operator (in which the ruling government would have a stake) although further details are yet to emerge with political issues thought to be holding the process up.

There are 14,769 towers in the market split between the national and Kurdistan operators (figure seven). Approximately 10-15% of the country’s total stock was understood to have been destroyed or damaged during the conflict over the past three years, with power systems particularly damaged, and so major reparatory works have been underway.

There has been significant under investment in networks in recent years with 3G coverage understood to be particularly poor and so significant network expansion is required; Korek Telecom forecast that they need to build a further 2,500 sites. Major investment has been pledged


Figure eight: MNO tower ownership in Jordan

Orange

Zain

Umniah

2,136

2,500

2,200


by international investors and donors in a bid to rebuild Iraq’s economy, with significant funds expected to be channeled into telecoms.

Iraq’s MNOs are struggling with high OPEX, attributable in large part to security and logistics issues across the country. Power remains a major

challenge and whilst figures for power availability vary by region and by time of year (ranging from zero grid to 16-18 hours in Kurdistan in summer), the vast majority of sites are reliant on two diesel generators. Hybrid solutions are yet to have any large scale trials in the country, and whilst fuel is not expensive by a global comparison, the costly

and difficult logistics associated with fuel delivery and generator maintenance means that a switch to hybrid solutions is attractive.

Jordan Subscribers: 11.7mn Tower count: 6,836 MNOs: Three Towerco activity: TASC Towers

There are three MNOs in Jordan; Orange, Zain and Umniah (owned by Batelco) which have a roughly similar mobile market share and as such, the market is highly competitive. There are just over 7,000 towers in the country, roughly split between the three MNOs, and towerco, TASC Towers, owns a modest portfolio of sites.

Jordan’s Telecommunications Regulatory Commission (TRC) is in the process of creating a centralised database of fibre optic networks in a bid to limit duplication of infrastructure and encourage network sharing. Whilst no such scheme currently exists for towers, infrastructure sharing does exist between the MNOs with Orange reporting that just under 15% of the sites that it uses are shared with other operators.

The telecommunications sector is subject to heavy taxes in Jordan with operators having been exposed to increased electricity prices which has had an impact on operator profits. Orange have invested in a 33.7MW solar PV plant to produce the electricity it requires.


Figure ten: Tower ownership by Morocco’s MNOs

Maroc Telecom

Inwi

Orange

10,000

5,000

4,054


Figure nine: Site ownership by MNOs in the Kuwaiti market

Zain

Ooredoo

Viva

1,700

1,200

1,200


Kuwait Subscribers: 7.2mn Tower count: 4,100 MNOs: Three Towerco activity: IHS Towers (pending closure of the Zain tower deal)

There are three MNOs in the Kuwaiti market where intense price competition has driven data costs down drastically, putting pressure on the country’s operators. Decreasing ARPU has made justifying investment in rolling out new sites tough, with each MNO focussing on implementing cost optimisation initiatives.

Market leaders Zain have reached an agreement to sell 1,700 towers to IHS Towers for US$165mn. The deal is expected to close imminently, with just a couple of minor regulatory issues to be finalised. When completed, the deal will mark the first major tower transaction in the Middle East (excluding Pakistan). The entrance of a towerco will provide a more cost effective means to expand networks in a market where infrastructure sharing has been limited to date. There are approximately 4,100 towers in the Kuwaiti market with significant parallel infrastructure existing. Decommissioning is expected to play a significant role in IHS’ business model in the country.

Lebanon Subscribers: 4.6mn Tower count: 2,600 MNOs: Two Towerco activity: None

There are two state owned MNOs in Lebanon, touch and Alfa, for which Zain Group and Orascom have management contracts. The two operators have a roughly equal market share in a country which has some of the highest mobile tariffs in the world. There are approximately 2,600 towers evenly split between the two operators, with no independent towercos operating in the country. Whilst subject to budget approval from the government, plans have been announced to add between 700-800 new towers before the end of 2019. Of the 2,600 towers, approximately 15% are on good grid with 24 hours of availability, 73-75% are on poor grid (with availability ranging from 6-18 hours) and 10-12% of sites are completely off-grid. Alfa has signed an ESCO contracts with IPT PowerTech, with IPT PowerTech taking over management of the operators full portfolio of sites.

Morocco Subscribers: 43.9mn Tower count: 19,054 MNOs: Three Towerco activity: None although two new towercos eyeing the market

Maroc Telecom is the leading MNO in the Moroccan market with 42% market share, ahead of both Inwi (in which Zain has a 15.5% stake) and Orange in a country with 43.9mn subscribers. Data usage continues to grow as 4G rollout progresses, with Maroc Telecom reporting 4G population coverage at 93% (versus 73% in 2016).

Maroc Telecom has the largest tower portfolio with approximately 10,000 sites, whilst Orange and Inwi are understood to have 4,000-5,000 each.


Figure eleven: Ownership of Pakistan’s 34,300 towers

edotco

Telenor

CMPak (Zong)

Ufone

Jazz (Deodar)

700

7,400

7,100

6,100

13,000


Infrastructure sharing between the MNOs exists, with approximately 15% of sites thought to be shared.

Oman Subscribers: 6.6mn Tower count: 15,400 MNOs: Two (plus resellers); entrance of third MNO imminent Towerco activity: Oman Towers Company

Oman has two MNOs, Omantel and Ooredoo as well as two mobile resellers, Renna Mobile and Friendi Mobile. In 2017, the government introduced a tender process for a third MNO which attracted interest from parties including Zain, Saudi Telecom Company, Etisalat and Sudatel. The tender process

was cancelled with the government instead deciding to award the license to a consortium involving local funds (potentially led by a flagship sovereign wealth fund) and a global strategic partner. The stated objective for the change in strategy was to enable the local funds to deploy their assets in Oman as part of an overarching economic diversification vision away from oil. Details are yet to emerge of what kind of commercial model is being proposed for the consortium, similarly no official dates have been announced for when the license will be awarded.

In addition to the threat of a third MNO and existing competition from OTT players, Omantel and Ooredoo have felt further pressures from an

increase in MNO royalty fees from 7% to 12% and a tax increase from 12% to 15%.

There are approximately 4,900 ground based towers and 10,000 rooftop sites in the country, roughly evenly split between the two major MNOs. Omantel are understood to be increasing their tower count by about 4-5% per annum, suggesting an average of around 100-120 new towers are built by the operator each year. For Ooredoo, similar numbers are forecast. Infrastructure sharing has been limited to date but has started to increase as the MNOs aim to execute the rollout of 4G more cost effectively, with current estimates suggesting approximately 10% of towers are shared.

In February 2018, Oman 70 Holding Company, ActivCo and the Omani Government set up a new organisation called Oman Towers Company. The company plans to build approximately 600 towers in the first five years, and has an interest in acquiring or managing the existing portfolios of Oman’s MNOs.

Rumours have surfaced that Omantel are considering the sale of their towers with a formal process expected to be announced by early 2019.

Pakistan Subscribers: 147.8mn Tower count: 34,300 MNOs: Four Towerco activity: edotco and AWAL Telecom (plus several other licenses held)


Figure twelve: Tower ownership by Saudi Arabia’s MNOs

Saudi Telecom Company

Mobily

Zain

16,400

11,000

8,100


Pakistan has four MNOs; Jazz (formed through the acquisition of Warid by VEON’s Mobilink) leads the market, followed by Telenor, China Mobile’s Zong and Ufone (in which Etisalat has a stake). With a relatively low mobile penetration rate of ~73% and a data penetration rate of ~24%, there is significant opportunity for long-term growth in the market.

Towercos have been licensed in Pakistan since 2006 but MNO attitudes towards infrastructure sharing only started to thaw in 2011, initially seeing their networks as a source of competitive advantage.

Towershare-owned Tanzanite built a portfolio of 700 sites in the market, built largely from acquisitions, with the majority of towers coming from previous WiTribe assets. The Tanzanite portfolio, 40% of which were ground based towers, secured tenancies from all major operators, reaching a tenancy ratio of 1.6x before being acquired by pan-Asian towerco, edotco Group for US$88.9mn in 2017.

edotco subsequently joined forces with Dawood Hercules, a listed Pakistani holding company conglomerate to acquire the 13,000 Jazz towers which had been carved out into a subsidiary, Deodar. The sale has however since fallen through although rumours suggest that local investors and their partners are working to rekindle the deal, albeit perhaps at a smaller scale.

Whilst several local companies are also licensed as towercos (with 14 license holders currently listed by

the Pakistan Telecommunications Authority), only AWAL Telecom appears to be trading as such.

MNOs Telenor, Zong and Ufone each retain their tower portfolios. Ufone has been exploring the potential sale and leaseback of their towers in Pakistan for some time. The process was stalled by the de facto merger of PTCL and Ufone, and associated management changes, but Ufone could yet contribute over 6,000 further assets to the pool of commercially shared towers.

China Mobile’s Pakistan opco, which trades under the brand name Zong, has around 9,100 sites, of which around 2,000 are co-locations.

Telenor is a keen advocate of all forms of network sharing; towers (sharing primarily with Jazz), fibre (sharing with Zong), and has taken a lead role in exploring active infrastructure sharing. Telenor and Zong undertook Pakistan’s first RANsharing trials across around 30 sites, while the Norwegian-owned MNO has also shared IBS, both under the MORAN model where spectrum is not shared.

There has been extensive infrastructure sharing between operators but significant parallel infrastructure exists, especially in urban areas, implying that decommissioning is likely to be a key part of towerco strategy in the future. TowerXchange estimate the prevailing tenancy


Figure thirteen: Tower ownership by Tunisia’s MNOs

Tunisie Telecom

Orange

Ooredoo4,500

2,500

1,383


ratio (the average number of tenants across all towers in the country) to be around 1.25 in Pakistan, with a clear pathway to 1.5. Of around 10,000 co-locations in the country, most originate from barter arrangements, with some application of commercial lease rates, but more often offset against one another so no cash changes hands. These agreements will continue to be converted to commercial leases as towercos continue to become more prevalent.

Pakistan’s MNOs cite power as the number one operational challenge in the market, followed by security and landlord issues.While Pakistan’s electricity grid remains unstable, and outages can last eight or more hours, the situation has improved notably in recent years. Backup diesel genset runtime is being reduced at sites on the country’s better grid connections, with DGs increasingly being removed from such sites. edotco will offer a full tower+power service in Pakistan, meaning they will lease tower and ground space as well as providing DC energy.

Qatar Subscribers: 4.4mn Tower count: 5,000 MNOs: Two Towerco activity: None

Qatari headquartered Ooredoo are market leaders in their home market, with 3.4mn subscribers versus Vodafone’s 1mn. Vodafone has sold its 51% stake in its opco to former joint venture partner,

Qatar Foundation, with the local opco continuing to operate under the Vodafone brand via a Partner Market agreement.

There is little to no infrastructure sharing in the market, but with both operators now effectively owned by the state the government may start to view infrastructure sharing more positively.

At the end of 2017, Ooredoo launched one of the first “5G speed experiences” at select locations in Doha. Qatar is positioning itself as a front runner in the rollout of 5G, with a world class infrastructure backbone one of the key pillars of the Qatar National Vision 2030.

Saudi Arabia Subscribers: 43.9mn Tower count: 35,500 MNOs: Three Pending towerco activity: Communication Towers Co. Ltd (STC’s carve out - not yet active) plus IHS Towers(pending closure of the Zain deal)

There are three MNOs in Saudi Arabia; market leaders Saudi Telecom Company, Mobily (in which Etisalat has a 27% stake) and Zain. Additionally there are two MVNOs; Virgin Mobile and Lebara.

Between them, Saudi’s MNOs own over 35,500 towers with STC having the largest portfolio. Infrastructure sharing in the Kingdom has to date been very limited, with less than 2% of sites believed to have more than one tenant. In the

major cities, Riyadh and Jeddah, there has been some infrastructure sharing as part of MNO densification plans to meet growing data usage, whilst in some of the country’s holy sites where access to land is limited, infrastructure sharing has arisen out of necessity. These infrastructure sharing arrangements are typically under bilateral commercial agreements and thus far have only covered passive equipment.

With little infrastructure sharing a high degree of parallel infrastructure has developed; 95% of Zain and Mobily’s sites are reported to overlap and as such, the government is keen to promote infrastructure sharing.

Various passive infrastructure strategies have been explored by each of the Kingdom’s MNOs in recent years. As early as 2011, Saudi Telecom Company and Mobily announced their interest in forming a towerco joint venture only for talks to stall; the MNOs revisited joint venture plans in late 2016 but once again decided not to proceed.

The first talks about tower sales emerged in late 2014, when Zain appointed Citi to oversee a potential sale of their towers. Mobily followed suit announcing a tower sale process before STC also weighed in on the action hinting they too may look to sell their larger portfolio. Ultimately all tower sale processes were pulled, leaving bidders with their fingers burnt after so many stop-start discussions.

In late 2017, Zain announced that it had entered


into exclusive negotiations with TASC Towers and Saudi based Acwa Group to sell their portfolio. Talks expired and Zain subsequently entered into exclusive negotiations with IHS Towers and Towershare, with the operator having previously agreed the sale of their Kuwaiti towers to the pair. On 28 November 2018, Zain announced that it had accepted an offer valued at SR2.43bn (US$647.7mn) from IHS Towers for the sale and leaseback of its portfolio of 8,100 Saudi towers, with a new build order for 1500 towers included in the deal.

In Q1 2018, Saudi Telecom Company established Communication Towers Co. Ltd., a fully owned limited liability company, with a share capital of SR 200 million which “will be responsible for owning, constructing, operating, leasing and commercialising telecom towers.” The vast majority of Saudi Telecom Company’s 16,400 towers will be transferred into the entity which is yet to start commercial operations, awaiting the necessary licenses from the relevant authorities. STC issued an RFP for a towerco management partner, but with the operator reluctant to give up an entity in the towerco venture, interest from the international tower community was limited.

Market intel suggests that there has been movement in recent weeks in CITC’s discussions regarding towerco licenses, with such developments expected to spur progress with the Zain tower sale and Communication Towers commencement of operations.

Tunisia Subscribers: 14.2mn Tower count: 8,383 MNOs: Three plus Lycamobile Towerco activity: NATIC and Infrashare (newly formed towercos)

There are 15mn active subscribers (source: INTT Q3 2018) and three MNOs in the Tunisian market; market leader Ooredoo, Orange and Tunisie Telecom. Emirates International Telecommunications (which has a stake in UAE operator du) recently reached an agreement to sell its stake in Tunisie Telecom to private equity firm, Abraaj Group. Rumours had circulated that the transaction may precipitate a sale of Tunisie Telecom’s towers and whilst the takeover has since been called off, leaving the fate of Tunisie Telecom’s towers in the balance, observers expect a tower deal to occur in the future.

There are an estimated 8,383 towers in the Tunisian market, split between the region’s MNOs. In addition, there are two new towercos eyeing up the market, NATIC and Infrashare. Whilst NATIC has an appetite for build to suit (which is understood to be somewhat limited in the country), Infrashare’s interest relates more to sale and leaseback activity should it arise. When it comes to major infrastructure projects, the government has instigated limitations on foreign direct investment, limiting international participation to 49% Such legislation is expected to be extended to towers in

the country, although forthcoming elections may shake things up once again.

Infrastructure sharing exists with Orange reporting that approximately a third of its sites are shared with other MNOs. In addition to passive infrastructure sharing, Tunisie Telecom and Ooredoo have a RANsharing deal in the country into which there had initially been discussions to include Orange.

UAE Subscribers: 19.0mn Tower count: 13,000 MNOs: Two Towerco activity: None

Etisalat lead the UAE’s market where it competes with du (and new MVNO, Virgin Mobile). Emirates International Telecommunications (which has just sold its stake in Tunisie Telecom) is a shareholder in both du and Virgin Mobile in the country.

Whilst two competing entities, both Etisalat and du have a common shareholder in Emirates Investment Authority which has 60% share in the former and a 39.5% share in the latter which creates an unusual situation in the market. The two operators have a fixed network sharing deal.

There are an estimated 13,000 towers in the UAE of which Etisalat owns 8,000.

The country is very much positioning itself to be a front runner when it comes to 5G


Keywords: 3G, 4G, 5G, Afghanistan, C-Level Perspective, Carve Out, ESCOs, Egypt, Etisalat, Etisalat Misr, Hybrid Power, Investment, MNOs, Market Overview, Middle East, Mobily, Network Rollout, Operator-Led JV, Pakistan, Renewables, Sale & Leaseback, Saudi Arabia, Smart Cities, Solar, UAE, Ufone

Etisalat: searching for efficiencyacross a diverse portfolio Etisalat International’s CTO shares insights into key MENA markets

TowerXchange: Please introduce Etisalat’s global footprint and tell us about your opcos worldwide. Can you give us a picture of how far each opco is in terms of technology rollout?

Hatem Bamatraf, CTO, Etisalat International: We operate in 16 countries across the region with approximately 145 million subscribers. Our portfolio of companies differs in terms of scale and technology. In our key markets, our networks are advanced with 4G with large population coverage as well as a very high penetration of FTTH. When it comes to new technology launches, Etisalat Group is always at the forefront, believing that technology opens up new opportunities for the business and operations.

TowerXchange: We’d love to know your thoughts on some of the key MENA markets in which you operate. Can you talk us through the growth potential in the MENA markets in which you operate?

Hatem Bamatraf, CTO, Etisalat International: In Egypt, our focus is on growing the 4G coverage while managing the needs for 3G capacity. We are happy with the progress and we will probably be adding more sites per year in the short term to penetrate new areas.

I think KSA needs more cooperation between operators in terms of sharing. I hope that the degree of sharing will increase, especially as 5G

Read this article to learn:< How the Etisalat portfolio is developing in terms of technology rollout

< An update on Etisalat’s key MENA opcos

< The main operational challenges Etisalat faces across their portfolio

< Etisalat’s current thoughts on selling towers and working with towercos

< How Etisalat is looking to work with ESCOs and why

Etisalat operate across 16 different countries, with an extensive presence in the MENA region including UAE, Saudi Arabia, Pakistan, Afghanistan and Egypt. TowerXchange spoke to Etisalat International’s Group CTO, Hatem Bamatraf, to find out more about plans for their MENA opcos, Etisalat’s current take on selling towers and network sharing and what partnerships and products they’re looking to deploy in order to boost efficiency across the region.

Hatem Bamatraf, CTO, Etisalat International:


rollouts are approaching. What is interesting about KSA is also the future of fixed infrastructure given the ambitious plans of the government to drive fibre adoption.

The situation in Afghanistan is complex mainly due to two reasons: security and fragmentation of the market. We continue to invest in our network to enable traffic growth and extend coverage into remote areas. I think that the market in Afghanistan needs transformation if it is to continue growing and securing investments.

Pakistan is a very competitive and I would say challenging market. We continue to share passive infrastructure with other operators wherever it is feasible and economic. We are also evaluating other forms of network cooperation. I don’t necessarily think of towercos as a requirement for passive

sharing adoption – I see it more as a financial decision on which assets the operators wants to own and which not.

TowerXchange: You operate in a very diverse set of markets – what do you see as the main operational challenges across your portfolio, and what plans do you have to tackle any inefficiencies which may be creeping in?

Hatem Bamatraf, CTO, Etisalat International: That’s true. The markets we operate in vary a lot in terms of disposable incomes, infrastructure and local resources. In terms of operational challenges, we are trying to constantly reduce the costs of providing both data and voice services. In some markets, such as Afghanistan or parts of Pakistan security is a serious issue that adds challenges to our operations.

TowerXchange: You’ve completed one tower deal in the past, in Nigeria. What’s Etisalat’s current stance on tower transactions, how important is it for you to retain control of your assets?

Hatem Bamatraf, CTO, Etisalat International: Our stance has not changed. We look at the situation of the specific opco and the specific market it operates in. We are always in favour of increasing the utilisation of our assets to reduce the cost base. We look at this topic very carefully and evaluate all our options. We also monitor what’s going on in terms of tower deals around us.

TowerXchange: ESCOs are on the rise in the MEA region and have been producing strong results. How open is Etisalat to working with ESCOs?

Hatem Bamatraf, CTO, Etisalat International: The ESCO model is something we are currently evaluating in a couple of our markets and we are open to engaging with ESCO providers. We think that the potential and the attractiveness of such deals depends on the details of the economic model in each market. The key driver of the savings is the deployment of alternative power (solar) meaning the business case improves as fuel prices go up. We need to find ways to make sure that we, as an MNO, also benefit from that upside in the future, especially as ESCO deals are typically agreed for at least 10 years. Another important factor is currency exposure - we believe that the deal should reflect the providers underlying cost base and the non-local exposure should be limited to the capex portion

“ “Our stance [towards tower transactions] has not changed. We look at the situation of the specific opco and the specific market it operates in. We are always in favour of increasing the utilisation of our assets to reduce the cost base


Rethinking the shape, ownership and management of communications infrastructure in a digital economyMENA MNOs’ perspectives on the future of digital infrastructure in the region

The panel opened with a discussion around how operators can misunderstand the towerco business model, often feeling they can do it themselves and that they’re paying too much margin for towercos. Equally, towercos themselves feel they’re paying for first mover advantage and are being held more accountable than their MNO customers while taking on all the risk. Rehan Hassan stated that getting the balance right comes down to more than how the contract is structured: by planning for every eventuality, you can end up ruining a relationship before it has even begun - the foundation of a good working relationship is trust, not a contract.

The panel was also keen to remind the audience that the MENA region is not one homogenous region. There are many languages, cultures and religions across MENA and even travel between some countries in the region is not easy. From outside there can be a perception that the MENA is corrupt but this is often not true and can stem from mistrust in the judicial system, which again undermines the point of an exhaustive contract as the foundation of a working relationship.

Why haven’t towercos entered MENA before now?

The panel discussed how a barrier to towercos entering the MENA region is a misalignment of needs. In other markets, MNOs have been driven to divest their towers due to high levels of debt, whereas in MENA, cash is not an issue for the

Read this article to learn:< How MENA MNOs view the arrival of towercos to the region

< Local variances and challenges to independent towerco penetration

< The market pressures driving MNOs to open up to the towerco model

< Opportunities and roadblocks in 5G rollout in MENA

Keywords: 4G, 5G, C-Level Perspective, Carve Out, Country Risk, Etisalat, Infrashare, Investment, LTE, MNOs, Market Overview, Middle East, North Africa, Regulation, Sale & Leaseback, Saudi Telecom Company, Small Cells, Smart Cities, Tenant’s Perspective, Zain

TowerXchange Meetup MENA brought together some of the most senior and influential players from Middle Eastern MNOs and towercos together in Dubai for discussion about the future of the region’s towers. The opening panel gathered heavy hitters from the MNO community including Hatem Bamatraf, Chief Technology Officer at Etisalat International, Kamil Hilali, Chief Strategy Officer of Zain Group and Dimitris Lioulias, Vice President of Corporate Strategy at Saudi Telecom Company. Rehan Hassan of Enfrashare brought a wealth of regional experience to the panel as moderator and steered the conversation through topics from opex commitments to 5G rollout.


majority of MNOs. Therefore, it is no surprise there hasn’t been a major tower deal so far, but deals will happen – there’s been a lot of education in the last eight years, as towercos have been attempting to enter the area, and everyone has begun to understand the business model better.

According to Rehan, the ‘old’ towerco business model won’t be sustainable for much longer, with exit multiples decreasing and IPOs being shelved. Towercos need a different type of investor, patient capital which is willing to invest for 10-20 years and help towercos to expand their offering across ESCO services, fibre and small cells. Towercos need to go into MENA wholeheartedly, accepting that MNOs are giving them the heart of their operations and developing a trusting relationship to work together. Rehan predicted that by the time the industry reconvenes at Meetup MENA 2020, tens of thousands of towers will have been sold and leased back.

Dimitris Lioulias of Saudi Telecom Company added that commitment was required to push through effective working with a towerco. There are a number of barriers the owner of a sale and leaseback or carveout project needs to overcome internally, with many colleagues from the infrastructure side of the business questioning why they would sell their assets. The first natural reaction for MNOs in MENA is that as there’s no need for cash, there’s no need to carve out or sell the towers, so the owner of the project must remain dedicated to the project or it will grind to a halt.

Is the time right now?

Kamil Hilali said that Zain feels this is the right time due to challenges operators are facing in their core business, that we are coming to a time where MNOs need to separate their core business from their infrastructure.. Zain is making the first move with this and selling towers in Saudi Arabia and Kuwait to IHS Towers has been a learning process for them. He feels that MNOs are more open to transactions now, driven in many ways by the need for infrastructure to change to enable them to make the most of opportunities in 5G and fibre.

We need to clarify the difference between sharing towers and the towerco model, according to Hatem Bamatraf, CTO at Etisalat. Sharing infrastructure is already prevalent in MENA, and many MNOs are already very committed to sharing. If you break down the number of shared sites in the region in some markets it’s already upwards of 30%. This infrastructure sharing model started several years ago, driven by pressure to cut costs and the need to divert capex to growth areas. Hatem Bamatraf was keen to emphasise that the towerco model is different, incorporating the divestment of assets and different operational models. In some markets this is driven by a stress situation, where MNOs can’t fund the expansion of towers needed for 5G rollout and will search for efficiency through partnership with a towerco, but in others the MNOs have invested heavily in their passive

infrastructure and aren’t keen to let that investment be passed to a towerco through a sale and leaseback, raising funds at the cost of their margin.

In terms of the divestment of assets, much is dependent on the situation of the MNO, and the incumbents in the GCC don’t need to divest in order to raise funds. From a strategic point of view, they do need to share infrastructure and there’s a case to say that if towers aren’t strategic to the company, then investment should be limited, but many MNOs still want control of their assets. Hatem Bamatraf stated that it’s important that the P&L looks better after a tower deal, and that if the numbers are convincing the rest will follow.

MNOs’ views on the towerco model

From Zain’s point of view, added Kamil Hilali, the towerco process is a long one, and the process of convincing internal stakeholders can take time. In addition, as it’s a new concept in the region, people have to get up to speed on how it all works, putting in place the whole ecosystem including the right service providers and advisors. The main driver for change now is the fact that there’s no differentiation in terms of coverage, and the pressures of 5G and fibre rollout have created a new rationale for outsourcing infrastructure. In addition, governments and regulators are seeing this rationale as well, meaning the entire ecosystem is more ready for a deal.

When discussing why the region has resisted


the towerco model for so long, Dimitris Lioulias from STC stated how they still view their towers as strategic and don’t want to sell them. In Saudi Arabia the conversations about selling towers began three years ago, when their strategic value was even higher, however due to experiences over the years, the main factor holding up many tower deals is a lack of trust. Cooperation between STC and Zain or other MNOs makes sense as it doesn’t create any tensions, but some operators were still wondering if they can trust the towercos. Having said that, MNOs are starting to see that the benefits outweigh the risks and general acceptance of the towerco model is more widespread.

Which towerco models will prevail?

Speaking about the importance of independence for neutral host operators, versus the trend for MNOs to carve out their towercos into a separate entity, STC has a five year growth strategy which requires both top line and bottom line growth in terms of a valuation perspective. STC has identified several classes of assets and businesses closer to the telco model, in areas adjacent to telecoms such as media and fintech, so investing in the tower space is a value driver for them. STC still believes that independence is important and their towerco will be kept at arm’s length, offering conditions to tenants which make it clear that their interests are protected. Dimitris stated that the STC towerco isn’t being created to squeeze anyone, and STC will welcome their competitors to become their partners in the tower space. They plan to put in place all the

necessary measure to assure their independence will be preserved.

Towers as a class of asset remains attractive in terms of returns and risk profile. STC invest in high risk businesses and they see carving out their towers as taking a portfolio investment in the tower space. Hatem Bamatraf cautioned that the towerco business model is dependent on the number of tenants who will rent a space to, so where there are several towercos in one country competing for the same three or four tenants the business model can become more challenging. A model in which the market is more crowded won’t help the overall value in that market, as the number of tenants will be distributed across a larger number of towercos.

The impact of 5G

The MNOs said that if you look at their investments over the last few years and who has benefitted, the MNOs have come off badly. The beneficiaries have been Netflix, Amazon, Google and OTT players. At some point they need to address this imbalance. Being able to reduce costs by sharing infrastructure is key, and STC is already sharing parts of the network as 5G rolls out.

From a functional perspective, 5G is already a reality. It will start to roll out in 2019, and the challenge for MNOs is how to monetise this new technology. Kamil Hilali called it a ‘burden to invest with no clear monetisation’. Many MNOs feel that sharing infrastructure will remove that burden from telecoms.

When addressing the question of whether one towerco will dominate the region, or if there will be a proliferation of smaller, regional towercos, the MNO executives were undecided. Some felt that many markets are not yet mature enough to attract big international towercos, but that this is developing. On the other hand, we could see regional players springing up but their level of market penetration remains to be seen. One thing they agreed on was that there is a need for clearer regulations and a good picture of the investment appetite in the region.

Hatem Bamatraf of Etisalat said that the introduction of towercos to the region won’t only help speed up the rollout of new technologies, but will also bring value in terms of capital efficiency and saving capex for MNOs, particularly in the case of 5G. However, reaching agreements can be difficult between big MNOs who don’t have the financial drivers for collaboration in the short term. In the longer term it’s likely that once 5G rollout progresses the pressure on costs will be higher and they will become more open to collaboration.

The discussion still needs to centre on use cases, with MNOs still worried that they will invest heavily without the returns. 5G will be critical for the development of the ‘fourth industrial revolution’, bringing AI, virtual and augmented reality, connected vehicles, cloud computing, blockchain and more into use and MNOs are also worried that a lack of infrastructure will prevent them being ready to jump on the opportunity<


The investability and investmentcase for towercos and infracos in MENA How the investment landscape in this developing region is shifting

Setting the scene

The panel started by stating that the industry needs patient capital. There is a tension between private equity investors seeking higher returns when measuring risk in certain markets versus an asset class,which doesn’t produce massive returns. Although the first movers in the market can generate those kind of returns, generally towers don’t meet private equity return profiles. An issue in the larger markets such as Pakistan, Egypt or Iraq is that sellers know the value of what they have and this often comes up against what private equity investors require.

The panel saw the issues split into two parts: one being how the investor sees the investment - for more patient capital towers won’t give a private equity return, but they do offer a tried and tested model. Abu Bakar Chowdhury feels ASMA Capital has been good at doing things in MENA infrastructure in a private equity style, entering Pakistan and Egypt in power where they built assets and were able to get a return. With pension funds and well established capital behind them, they can get into assets, shake them up, take out the inefficiencies and hand them to long term patient capital within the same ‘family’. The second issue is that MNOs, in the GCC in particular, aren’t crying out for cash but increasingly they are considering models like edotco’s, which have worked well, and Abu Bakar Chowdhury sees opportunities for MNOs

Read this article to learn:< Value drivers in MENA towers

< Opportunities in different markets

< Differing investor profiles in the region

< The need for regulation and the role of government in tower development

Keywords: 5G, ASMA Capital, Acquisition, Africa & ME, Carve Out, Deal Structure, Egypt, Exit Strategy, Fibre, First Mover Advantage, IFC, Infrastructure Funds, Infrastructure Sharing, Investors, Iraq, iSON Towers, Market Overview, Middle East, North Africa, Pakistan, Private Equity, Sale & Leaseback, Saudi Arabia, Small Cells, TAP Advisors

TowerXchange Meetup MENA played host to some of the most expert investors from across the region on a panel to discuss how the investment case in MENA towers is developing. Chaired by Yiannis Mavridis of TAP Advisors, the panel brought together Abu Bakar Chowdhury, Managing Director and CFO of ASMA Capital, Eric Crabtree, Chief Investment Officer of the International Finance Corporation and Akshay Grover, Chief Investment Officer at iSON Towers.


to go that way, with partners for governance and capital structures.

What’s going to drive value in MENA tower investments?

Towers can be hard to categorise; they don’t fit neatly into the infrastructure vertical and yet also aren’t a traditional private equity play, particularly in more developed markets. Typically,infrastructure projects have returns which look flattish, with a good IRR and predictable returns. The panel agreed that what’s unique about towers is the equity bump you get when a tenancy ratio hits 1.5x, and when it hits 2x the payoff is impressive, meaning towers deliver the flat line of infrastructure but also additional equity kicks if you can deliver the tenancy.

There are still pockets of activity within towercos where efficiency can be driven, in terms of design, tower build, replacement capex, air conditioning and batteries as all of these elements can drive down the cost for the operator. In addition, sharing in the MENA region hasn’t been where it could be, in a 5G world where small cell infrastructure will be more prevalent there will be a huge potential for a towerco to drive rollout. It’s much harder for operators to share networks belonging to each other than it is to share via a trusted independent party.

Despite the fact that many operators don’t need cash, the region is undergoing a strategic shift. MNOs are still around 60% owned by governments, but governments are reluctant to keep funding capex and to be the financial investor in towers and digital infrastructure. Once towers are carved outand national security issues are addressed, the panel agreed that cautious investors will be more able to get involved, it’s just a matter of time.

Emerging market opportunities

Eric Crabtree said that the IFC is keen to get involved in parts of the region. They are working closely with the Egyptian government on the Digital Africa programme and having discussions about national infrastructure. Egypt needs to deliver more fibre, including FTTT, which represents an opportunity for the IFC to get involved. In markets in this area all parties have to be comfortable with the process, including the government, and in countries like Pakistan and Egypt the governments are well aware of processes which didn’t result in a victory.

Sovereign wealth funds

The appetite of big investors like sovereign wealth funds depends very much on the strategic view. In markets like Saudi Arabia the government is debating a process to unlock the value in their towers rather than an outright sale, so much of

this depends on if the Saudi government wants a strategic shift towards a towerco that would allow an investor to enter the market.

For funds which have invested in the space before, they will want to look closely at the local management team, at what kind of infrastructure they’re inheriting, who their local partners will be and who will manage the towers. In terms of governance, they won’t want the shareholding to be too complicated, as when shareholders try to limit risk they can often end up creating a cumbersome and complicated shareholding structure. For many investors simplicity is key right now, and they will only choose to provide capital where there’s a clear structure and defined goals.

Regulation

MENA governments have a role to play in regulation, it can’t be left to market dynamics alone. Where the tower industry has emerged late, or behind the rest of the world (as is the case in MENA), governments have needed to play an active role in regulating and driving infrastructure sharing. In countries like Bangladesh or the Philippines this may have also started out with governments putting more pressure on using capital in an efficient manner, but this pressure is increasing in the Middle East due to falling oil prices. Logically, whatever their financial state governments should want more efficient use of


capital and should be encouraging infrastructure sharing.

Many of the larger markets have a gap between current infrastructure and what they will need as data consumption grows. In Egypt and Pakistan there are as many as 4,000 subscribers per tower already, with 4G not yet fully rolled out, and in Iraq and Egypt there is limited, if any, fibre coverage. In markets like these infrastructure sharing needs to filter down from government policy on digital economy, and regulators need to play their role.

Exiting tower investments

One of the critical elements raised by the panel was that all stakeholders must be aligned on exist strategy. Everyone needs to understand timeframes and constraints, along with a dose of realism about the likelihood of an IPO as an exit option – IPOs are a valid alternative but are also a timely and costly affair. Consolidation has occurred in other markets, which is probably the most profitable form of exit for a non-strategic towerco, but for strategic investors they need the ability to exit into the liquid instrument.

There’s also a challenge presented if the mobile network operator holds a share of the business, as may well be the case in the first few deals taking place in the MENA region. Shared ownership with a MNO can make agreeing on a suitable exit more complicated, and towercos need to be prepared for that dynamic<

Meetup Americas 20199-10 July, Boca Raton

Meetup Africa 20198-9 October, Johannesburg

Meetup Asia 20193-4 December, Singapore

Meetup MENA 202028-29 January, Dubai

Meetup Europe 202019-20 May, Barcelona

See you at our future events!



Infrastructure for smart citiesand 5G: business models, partnerships and technologies to deliver efficiencies Comments and insights from the panel at TowerXchange Meetup MENA

Is a smart city an evolution of urban networking or a step change?

Gayan Koralage of edotco stated that Millennials want data at their fingertips, and smart city programmes will provide a way to capture data in real time, analyse and understand it. In this context, infrastructure becomes a great challenge as cells need to be densified, a small cell layer needs to be introduced and cloud companies have to enter the arena. 60-70% of the cost of building this infrastructure will be on the ground.

A smart city is an umbrella group of solutions. Firstly they’re supposed to ensure a city’s resources are managed in an efficient way, with things like traffic energy lighting and routes for busses. All this is possible if you add a layer of automated efficiency that’s at the core of smart cities. Secondly it’s about how users interact with those interfaces.

If you break it down, smart cities are a group of use cases, some of which can be satisfied with 4G infrastructure, while others require shorter latency, more bandwidth and more connections and for those we might need 5G to power massive IoT, which will power every trash can or lamppost. For operators who are being compelled to invest capex, there needs to be clear visibility into the use cases which will drive it. Virtual reality, augmented reality, remote factories, healthcare and other use cases are all being pushed as the future of 5G, but is there money to be made

Read this article to learn:< How MENA infrastructure owners view the demands of smart cities

< The decision making process around capex deployment in 5G

< The role of government in helping and supporting 5G rollout

< 5G economics and making the business case for investment

Keywords: 5G, Capex, Consolidation, DAS, Data Centre, Digital Colony, edotco, Etisalat, Fibre, IBS,

Investment, IoT, Middle East, North Africa, Saudi Arabia, Small Cells, Smart Cities, The Future Network, UAE

MENA is such a diverse region, with some countries barely achieving full 3G rollout and others aiming to lead the way in 5G and smart cities over the next few years. We brought together Phil Cooper, Managing Director and Operating Partner EMEA at Digital Colony, Gayan Koralage, Director of Strategy and Commercial at edotco and Wiktor Barcicki, who heads up technology economics at Etisalat International, to discuss some of the more innovative 5G solutions in the region and what the incentives and obstacles are to achieving smart city infrastructure.


in each specific use case, and if yes, what’s the best way to do it? Does each use case support an operator’s investment in a specific area?

Making long term capex decisions for smart city infrastructure

Wiktor Barcicki of Etisalat said that when deploying technology in certain areas, it all boils down to the basic business case. Ideally, operators want to be able to build technology that can be shared across multiple use cases, but in some cases, say when connecting gas meters, a certain capex is required, which the operator won’t be able to monetise in any other use cases. For more general IoT networks, it’s about putting in a layer of connectivity and trying to work with partners to ensure the network is full while developing use cases together and collecting data on how users behave.

Investors need to go back to first principles. If we look at why towers are a popular investment vehicle, it’s because they are similar to real estate with strong, investment grade counterparties and long term leases. When you move this into smart cities and converged infrastructure you have to get more comfortable with how the economics change. For Digital Colony, Phil Copper said they focus on what they can do and invest in and keep the characteristics their investors are looking for in terms of risk and returns.

In the USA Digital Colony has over 30,000 small cell nodes in New York, they are rolling out smart city infrastructure with AT&T in San Francisco and their

venture with Uber in Pittsburgh is pushing forward with automated vehicles. In Europe, Finnish Digita is looking into waste management with sensors on bins and evolving further.

The most important principle is to look at whether they can maintain an economic model with long term leases, steady income and CPI related escalators. Smart cities are moving beyond just having mobile network operators as the counterparty. In building systems will see huge growth, often due to the fact that modern buildings are poor for connectivity and in these cases the real estate operator is the counterparty. For Digital Colony, they feel they can focus on the key criteria which drove them into the market in the first place, treating every small cell like a macro tower from an economic point of view.

Are the key challenges in 5G rollout technical or thrown up by the shift in economics?

The main challenge is working out who will pay for it. Gayan said that edotco’s solutions are closer to the towerco model, creating multi-purpose infrastructures in places like Sri Lanka for real estate agencies or traffic control purposes. They barter with the municipal council for access and offer services based on this. In some cases edotco installs structures on behalf of the local authorities and then the location is available to lease up rent free. The impending 5G infrastructure and densification will result in a bigger role for independent towercos as smart city programmes will need to be driven by independent parties. MNO

financials will make it impossible for them to pay for parallel infrastructure in smart cities, whereas the towerco model is return based and focusses on sharing the infrastructure.

What is the role of government in smart city rollout?

Etisalat owns a very diverse group of companies. In countries like the UAE and Saudi Arabia, there are high ARPU levels and a large share of public sector involvement in the economy, where small cells are more advanced and the government is often quite involved in the process. MENA governments often see the telecoms sector as a powerhouse for rolling out new technology. MNOs are currently tasked with taking on the infrastructure needed for the next generation of technology as there are so few independent infrastructure players in the market at the moment. When thinking about traffic per customer there are two ways of approaching it – either increasing the number of cells or the amount of available spectrum. In some markets it’s possible to obtain more spectrum and in others there are many new sites going in – it’s often a very different discussion market by market, and given the specifics of the region governments tend to take a much more active role than in the US or Asia.

Government involvement (and a push for funding small cells) will stimulate demand. The question will be whether independent players, MNOs or the government themselves will drive the rollout. There are still unresolved questions around regulatory frameworks and the role of the public sector in the


digital economy. It’s feasible that in the Middle East a government could take a large role in developing telecoms infrastructure, or at least will make street furniture available to whoever is willing to roll out the small cell layer.

What kind of towercos will succeed?

The towerco activity in the region will be a combination of local expertise and international independents with processes and backing coming in, each with their own sets of skills and knowledge to share. Phil Cooper from Digital Colony said that, as he sees it, in terms of smart cities and converged spectrum, markets are becoming more similar – edotco in Asia is doing what Digital Colony are doing in London, and towers are evolving in stages. While some towercos will stick to the knitting, others will enter more and more into the converged world. From an investment point of view, this means it’s easier to get into new markets, as long as towercos are prepared to start small and grow as long as there is access to strong counterparties, escalators and long term leases.

5G economics

Much of the challenge of urban infrastructure is that municipalities and local government can view it as a way to earn money, mistakenly assuming that operators have large budgets allocated to smart cities and digital infrastructure. This isn’t just the case in MENA and Transport for London are on their seventh attempt to make the London

Underground a smart transport system while operators are struggling to make the economic case for investment. Governments need to make the journey from seeing 5G as a cash cow to conceiving it as essential for economic development. The benefits for governments aren’t through the rental of street furniture, but through reducing digital inequality and boosting economies. We need to see an increase in partnerships between private and public bodies rather than just form filling for permits if this is going to work.

When you look at the value chain of smart cities, operators have only won a small part of that market, in a digital economy it’s the OTT players, not the mobile network operators, who have captured most of the value. Wiktor from Etisalat stated that when it comes to solutions for smart cities, mobile network operators want to be sure they can play a more relevant role in the value chain before committing huge amounts of capex. They are still trying to see which verticals are the most effective for them, and which models will work.

Statistically 5G will roll out in urban areas first, using existing street furniture to do so. It’s imperative that towercos and MNOs work with government to find a commercial model which stands up, to allow a balance between towercos, MNOs and investors. MNOs need locations to provide speed and towercos must find pricing models which their investors are comfortable with, it will take time to get the balance right<








Reinventing the towercofor the Middle EastHow towercos are redefining their value proposition to play in MENA markets

To date there have been no tower transactions of scale in the region and fewer than 1% of the region’s 275,104 towers sit in independent towerco hands. That is due to change with the announced (but as yet un-closed) transfer of Zain’s 1,700 Kuwaiti sites and 8,100 Saudi sites to IHS Towers, represented on our panel by Ted Manvitz. This will bump independent towerco holdings towards 5% and fire the starting pistol on the nascent independent MENA tower industry. Divesture is not the only horse in town and in 2018 the Saudi Telecom Company created a captive towerco called Communication Towers Co with ambitions to create efficiencies and lease up its own towers. Omantel is expected to announce a tower sale process imminently in Oman.

Why has it taken so long to get here? And why the flurry of activity? Although it is tempting to blame the stop-start decade of the towerco industry in MENA on corporate politics or indecision, our panel agreed with Etisalat CTO Hatem Bamatraf who suggested in the preceding panel that the towerco model needed “tuning” to local conditions before it could be adopted. The IHS/Zain deals show that this tuning has now borne fruit and the STC carve out illustrates that local operators have understood the appeal of the towerco model. Throughout the discussion our panellists returned to this theme and the value add towercos create through efficient operations and enabling infrastructure sharing, downplaying the release of capital; capital many of the government-backed, well-capitalised, credit-worthy MNOs of the region do not need.

Read this article to learn:< How the towerco model is being adapted in the Middle East

< Appetite for tower sales and operator carve outs in the region

< Operational challenges of Middle Eastern tower markets

< Long-term plans for establishing and entrenching an independent tower market

< How to apply lessons learned in Africa and Asia to new markets

Keywords: 5G, American Tower, Bahrain, C-Level Perspective, Citi, DAS, edotco Group, Egypt, Helios

Towers, Hybrid Power, IHS Towers, Infrastructure Sharing, iSON Tower, Kuwait, Off-grid, Operational

Efficiency, SLAs, Saudi Arabia, Small Cells, TASC Towers, Towercos, United Arab Emirates

A keynote panel session at TowerXchange’s 2019 Middle East and North Africa Meetup brought together six towercos to discuss how best to serve the diverse markets of the region. Over the course of an information-packed hour we heard from Ted Manvitz, CSO of IHS Towers, Suresh Sidhu, CEO of edotco Group, Kash Pandya, CEO of Helios Towers, American Tower’s CCO for Africa Keith Boyd, Rajiv Jaitly, CEO of iSON Tower and Iyad Mazhar, the Founder of TASC Towers. The session was chaired by Gulfraz Qayyum, the Managing Director for TMT at Citi.


Fitting the towerco model to local conditionsCiti’s Gulfraz Qayyum began by asking how to apply the fundamentals of the towerco model to the region when releasing capital is not a key concern. Each of the towercos on the panel agreed that the model as applied successfully in Africa or the US could not be cut and pasted into the region. Lessons from the US can be applied in the richer states, and Africa offered lessons for the region’s more difficult markets, but neither offered a straightforward blueprint for duplication.

edotco's Sidhu raised the concern often expressed by MNO CFOs that a tower sale and leaseback would increase opex and decrease EBIDTA, even if it improves their balance sheet elsewhere. MNOs in wealthy areas like the Gulf Cooperation Council – the GCC comprises the regions wealthiest states; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates – needed to be convinced of the tangible benefits before seriously considering a carve out.

Co-location discounts for anchor tenants can be an important sweetener for exploring tower deals, but this adjustment has not proven convincing alone. While there is no ‘standard’ lease pricing practice in the emerging MENA tower market, co-location discounts are widely applied in India and China, but less so in Africa, where there is more energy risk. Likewise, even in the wealthy states of the gulf there are significant pockets of off grid cell sites – in the KSA we have reported that up to 10% of sites are offgrid – so the towerco edge in power management is an important draw, but again, because

alternatives now exist – like power management by ESCOs – that is not motivation enough to close a tower deal. Instead, our panellists agreed, what is now driving deals in the region is the promise of a symbiotic relationship between MNO and towerco in managing network planning, capital deployment and the management of passive assets.

In the same vein, both Manvitz from IHS and Helios’s Pandya agreed that valuations and

associated leaseback rates should begin at an EBITDA-neutral level to reduce the level of capital released. Manvitz particularly emphasised the different approaches suitable for existing assets versus new assets. If the deal structure is correct up front, then existing assets can be EBITDA-neutral from the outset or after only a short time. But because towercos assume the burden of capex and the risk of finding a second tenant on new build assets a different contract structure is

Meet the towercos

IHS Towers is the largest independent towerco in Africa, with 22,833 towers in five countries, and hope to replicate that success in MENA following a deal to acquire Zain’s Kuwaiti and Saudi portfolios of towers. They have completed 14 acquisitions globally, with more pending and will focus on both sale and leaseback and new build in MENA.

edotco own 28,490 towers in six countries across Asia and believe their lessons are relevant to MENA. The towerco is one of the world’s most successful operator-led towercos, originally carved out of the Malaysian telecommunications conglomerate Axiata.

Helios Towers operate in five sub-Saharan markets, having recently entered South Africa. After eight transactions in eight years they own just under 7,000 towers of which 5,000 were acquired and 2000 built.

American Tower is the world’s largest independent towerco, with a market capitalisation of $76bn and is listed on the New York Stock Exchange. It owns 170,000 towers in North and South America, India, Europe and Africa.

iSON Tower, a subsidiary of iSON Group, a major IT company active across Asia and Africa, was recently licensed in Bangladesh and has ambitions across MENA and SSA.

TASC Towers are based in Jordan and have also been awarded a license in Bangladesh. They have previously been active in MENA deploying networks and were involved in a prior sale and leaseback process in the region which did not proceed to completion<


usually necessary. American Tower’s Keith Boyd highlighted the importance of going in at the right valuation to ensure the sustainability of the relationship, as cordial relations are so important to forming a partnership and cooperation. On an ongoing basis this partnership allows risk sharing and new infrastructure development, especially important as Gulf States begin to roll-out 5G.

Infrastructure sharing and new capexInfrastructure sharing is already common in MENA despite the lack of independent towercos. Sharing in the dual-MNO market of the UAE sits at around 15% and increases to 30% in denser, less-developed Egypt. Likewise, significant capital has already been deployed building out networks, although some markets feature significant inefficiencies. Bahrain’s

three MNOs own 1,500 towers and its regulator is in the process of promoting increased sharing with the goal to reduce its tower count to 400. For these reasons our panellists saw significant opportunities for towercos to improve capex deployment by reducing investment in parallel infrastructure throughout the region. IHS's Manvitz explained that one of the benefits of having acquired over 16,000

Towerco / ESCO activity Towerco activity plus major tower sale rumouredMNOs rumoured to be considering a major tower transactionNo towerco activity or deal rumours

ACG operates 100 towers; ESCO?

edotco active, Jazz mayrestart SLB

Iranian Towers 1000 sites

Could towercos help rebuild?

TASC Towers established

Zain-IHS 1700 tower SLB

Tower sale rumor; OTC est.

Zain-IHS 8100 tower SLB;STC 16400 tower carve out

Licensed towercos, HOI-MEA38 sites; Orange ESCO RFP;

BTS opportunities

Tunisie Telecom rumors

Djezzy retains appetite;Infrashare established Alfa ESCO with IPT



towers in Nigeria was the opportunity to remove overlapping sites: IHS Nigeria has decommissioned over 1,000 sites in the last two years alone. The programme requires working with multiple MNOs, incentivised by one time reduced use fees, and yields an excellent return on capital invested, while also improving the environment.

iSON’s Jaitly expressed confidence for improved efficiency in network planning and build out, but said that it would be essential to see more cooperation between towercos and MNOs, something many panellists were far from convinced would be forthcoming in the region. edotco's Sidhu spoke of their experience increasing rollout sped up by 25-30% over the last five years, but only after improving cooperation with their tenants. Similarly, Rajiz Jaitly described how towercos have “cut time to market in half” in Nigeria. TASC’s Mazhar also suggested greater cooperation would help improve tower design, important for the region’s more concentrated markets where the largest towers would be unnecessary.

Mazhar also highlighted another advantage of the towerco’s specialisation they can bring to the region. “Mission impossible” sites are not always the most popular for towercos – Helios Tower’s Alex Leigh was to later discuss a site halfway up a jungle covered mountain which made for some great photos, but which has proved complicated to build and maintain – but high cost/high rent sites could be a source of competitive advantage in a region with tough terrain and difficult operational conditions like the middle east.

edotco's Sidhu was also optimistic about the opportunities for in-building solutions, small cells and semi-active network management in which the towerco manages everything up to, but excluding, the antennae. iSON’s Jaitly was also confident of the opportunity for toweco-led in-building solutions for the region, so long as cooperation was forthcoming from local MNOs. Perhaps because the Zain transaction was keeping Manvitz’s IHS Towers grounded in delivering for Zain today, he was less focused on as yet unrealised 5G infrastructure opportunities than some other panellists, and more focused on opportunities for passive infrastructure build out and efficiently executing their current capex plans.

The towerco operational advantageOn top of the strategic advantages from infrastructure sharing, our panellists agreed the operational benefits of tower sales and carve outs have now been proven in the region, and offered some examples of how operational efficiency has improved in some of the markets in which they already operate.

Pandya discussed Helios Towers’ Lean Six Sigma philosophy and shared the improvements in performance they have achieved in Africa. Helios SLAs call for downtime of between six to nine minutes per week, yet through process improvements 91% of Helios Towers were now achieving a six sigma compliant downtime of six seconds or less per week, with the other 9% averaging one minute. Likewise site visits have

dropped to an average of one per month with a revised target of quarterly site visits. Over the same five year period their tenancy ratio has grown from 1.2x to over 2x. Models for sharing those benefits with operators, and specifying how in Master Lease Agreements (MLAs), makes all the difference to the appeal of a tower sale for operators who are following the trend toward leaner operating business models, enabling them to focus on selling minutes and megabytes.

In fact, one panellist suggested “the worse the power situation, the better the potential improvement” in terms of operational efficiency at towers that could be sold, as it offered all the more opportunities to drive down costs, and improve towerco EBITDA margins. Keith Boyd at American Tower shared their experience from Nigeria where they saw big improvements in reliability even though two thirds of their sites are off grid. He highlighted the contrast in approaches between MNOs and towercos: MNOs want to focus on their networks, customers and enterprise solutions, whereas towercos are happier to focus on the blue collar stuff like power, security and maintenance and it showed in the operational efficiencies towerco bring to passive infrastructure management.

Pandya said that, like American Tower, Helios also always delivered service levels beyond what the MNO was originally achieving, and that meeting and exceeding Service Level Agreements (SLAs) was not only good for the tenant, but also reduced their own costs and boosted their margin. edotco’s Sidhu


discussed one market in which they operate where they have improved uptime from around 90% to 99.8% uptime despite grid reliability worsening across their estate.

Power in MENADespite the fact Gulf States are amongst the most developed in the world, a small but significant proportion of their towers remain off grid, and this provides an opportunity for towercos to deploy lessons from elsewhere. Likewise renewables and hybrid solutions can offer a useful solution in a region with rising energy costs and many markets with unreliable or incomplete electricity grids.

Both American Tower’s Boyd and IHS Towers Manvitz highlighted their capex in Africa to improve reliability and how transferable that was to MENA. Manvitz discussed the $500mn they spent on hybrid power in 2018, this significantly improved uptime but also produced a 30% reduction in diesel usage on upgraded sites.

Regional diversityThe bulk of our panel’s time was spent discussing the developed markets of the gulf, but the Gulf States make up only a minority of the 16 markets TowerXchange are monitoring across the region. While Al-Khobar in Saudi Arabia has already trialled 5G, areas of Iraq have only recently had 2G services restored. Some markets, like Iraq and Afghanistan that were represented at the TowerXchange Meetup, are post-conflict states, and some areas are still conflict states, with highly complex operational challenges.

Just as the state of security and technology varies enormously across the region, so too does the skill level of the local workforce. The last mile skill-level across the region can be excellent, with some markets offering skilled workers, for example those trained in the oil & gas industry, while others have much lower skill levels.

The future of MENA towersOur panellists concluding remarks were optimistic about the region but cautious with respect to specific markets; for example, the UAE only has two MNOs which practically eliminates the potential for decent tenancy ratios, or North African markets with prohibitive limits on Foreign Direct Investment (FDI) which prevent an international towerco from consolidating results. As discussed above, our towerco panellists were still confident in the strength of the fundamental towerco business model, especially now it has been geared to the local needs of the market.

Looking to the future our panellists saw opportunities for 5G, small cells and DAS, as covered in a separate panel on the second day of the TowerXchange Meetup. Redesigning networks, consolidating and optimising tower placement was also high up the list for value add opportunities.

Three key elements for ongoing success need to be established in order for the fledgling MENA tower industry to thrive. Most importantly will be building trust between MNOs and towercos so that towercos can invest in the region with confidence and to create a deep and ongoing relationship to help drive down costs and plan networks. The second essential is building local knowledge, local supply chains and country by country understanding of how business is done. Once the above is in place, MENA increasingly looks like an area where towercos can establish a sustainable business. The third element is a regulatory environment (license conditions, taxation et cetera) conducive to investment by towercos<

Looking to the future our panellists saw opportunities for 5G, small cells and DAS…Redesigning networks, consolidating and optimising tower placement was also high up the list for value add opportunities


If towercos are so great, whywouldn’t an MNO want their own one?With equity stakes and operator-captive towercos common in the rest of the world, Middle Eastern MNOs are still deciding how independent they want their region’s towercos to be

Rabin Sen has had over 30 years of experience in the telecoms and tower business with experience in India, Southeast Asia, South Asia and GCC countries and he is currently setting up a towerco for an operator in the region.

Nihat Narin is the CEO of Global Tower. Global Tower is the first and only standalone tower company in Turkey and was formed in 2006 by Turkcell. With Turkcell as an anchor tenant, Global Tower is also leasing space to other mobile operators, TV and radio broadcasters, public institutions and other service providers, including tower sites, rooftops and in-building systems.

Chuck Green is a non-Executive Director at edotco, Co-Founder of Helios Towers and has experience of independent towercos, MNO-captive towercos with minority-MNO ownership and majority-MNO ownership.

Finally we had Marc Perusat who is Managing Partner of TASC Towers. TASC towers has developed a modest tower portfolio in Jordan but has been involved in potential tower sales in the Middle East for a number of years.

MNO involvement and incentives

If TowerXchange has an editorial evangelical objective, it is to promote that independent towercos offer enormous value to the telecoms industry and regional economies generally. But we don’t align ourselves with any belief that one towerco business

Read this article to learn:< The different tower ownership models being considered in MENA

< What are the drivers for MNOs for retaining a captive towerco?

< How to overcome the governance issues of captive-towerco models

< The financial and operational constraints of MNO-owned towercos

< The likely trajectory for shared infrastructure business models

Keywords: Business Model, C-Level Perspective, Carve Out, Deal Structure, edotco, Global Tower,

Infraco, MENA Research, MNOs, Research, STC, Saudi Arabia, TASC Towers, Towercos

As we know, the Middle East and North Africa is the region least penetrated by the towerco business model globally, and decisions made by MNOs over the next few years will dictate who ends up as the ultimate owner of MENA’s 275,104 towers. Zain has opted to sell and leaseback its towers with IHS Towers, but the Saudi Telecom Company (STC) is exploring the creation of an STC-owned, but independently managed, towerco for the kingdom. In Europe, joint ventures like CTIL are common, with Vodafone and Telefónica sharing their assets since 2012. Our four panellists discuss the advantages and disadvantages of different tower ownership models and what the future holds for towers in MENA. Capitel’s Atirek Gupta chairs.


model is inherently superior to another. Despite being advocates for the independent towerco model, we agree with our panel that there is no one right model for tower sales or carve outs, and that the economic and political case will vary from market to market and from operator to operator.

Chuck Green pointed to Crown Castle’s original sale and leaseback deal with Verizon, where Verizon retained a minority equity stake in their towers. So even back to the early days of the industry there has always been a balance between independent operations and MNO’s retaining an interest in their towers. The same was true for Helios Towers in their early sale and leasebacks with Vodacom and Millicom, where both MNOs retained minority interests. So it is little wonder that MNOs examining tower sales or carve outs are exploring options for retaining an interest in their towers in MENA.

The debate is ongoing at STC about the future of their network. The Saudi government wants to rapidly deploy 5G and that will require new site designs and typographies, with an optimisation of the country’s network. Although MENA MNOs are not as capital constrained as they are in Europe, Saudi Arabia needs to manage its capex for 5G roll-out and network densification and find a way to reduce opex in a network with significant operational challenges. Therefore a dedicated tower manager makes sense, but the debate over the ownership structure of that towerco remains live.

There is a contradiction between MNOs’ desire to professionalise, commercialise and optimise

infrastructure sharing and their desire to still own towers after the sale. MNOs can be envious of the substantial gross margins towercos enjoy, but the question laid down by our panel was not whether these margins were justified, but whether towercos were adding value for MNOs, and the simple response was that towercos do add value in ways which are elusive for MNOs.

The financial pressures MNOs face are real. Competitive pressure on MNOs is coming from new entrants, ARPU remains under pressure, which has pushed their EBITDA down. At the same time regulators are insisting in increased investments to meet coverage targets. That in turn pushes up capex even while the spectrum required for 5G

remains expensive. This leads some MNOs to trade at multiples in the region of 4-5x, while American Tower trades at a multiple north of 20x.

However, MNOs are still well placed to capture consumer demand for digitalisation and for that MNOs need to transition from asset owners to digital service providers. Towercos can add value by taking those passive assets off their balance sheet and by managing them better, and through lease up, add value to the industry. But because MNOs are so competitive and must focus on digitalisation, not tower management, that value add is harder for them to capture. There is a risk that MNOs trying to latch onto the towerco business will kill the goose that lays the golden egg.

Saudi Arabia needs to manage its capex costs for 5G roll-out and network densification and find a way to reduce the opex of a network with significant operational challenges. Therefore a dedicated tower manager makes sense, but the debate over the ownership structure of that towerco remains live


Governance challenges

Broadly speaking MNOs are not good at sharing their infrastructure, which is one of the principle ways towercos have been able to add value. However, MNO ownership itself has never really been the problem, it has been MNO control and the dynamics of competitive markets which held back infrastructure sharing. With the right governance, our panel agreed there was relatively little preventing an MNO-majority owned towerco from acting independently and delivering the benefits of infrastructure sharing to the industry and the benefits of towerco ownership to an MNO’s shareholders.

edotco is majority owned by the Axiata Group, a

Malaysian telecoms conglomerate, but Axiata only takes two of the ten seats on the board. At edotco there are limits on what majority shareholders can see, as towercos are privy to confidential information which could impact competitor plans and Axiata’s own planning decisions. There is also a Related Parties Transactions Committee which helps to keep things clean and inspects transactions which could suffer from any conflicts of interests. These additional governance structures can become cumbersome, but also show that risk of interference can be overcome. Each towerco and MNO needs to find a model that works, and it was suggested that STC might ultimately be following this model.

Turkey’s Global Tower owns 11-12,000 towers in Turkey, Ukraine, Cypress and Belarus and has

increased its top line by 2.5x in last years, it’s EBIDTA is up 2.7x and its tenancy ratio now sits at 1.65x, but it is 100% MNO-owned by Turkcell. It is a completely captive-MNO but has an economic performance to rival many wholly independent towercos. The key is, just like at edotco, good governance, with a focus on communicating the company’s commercial mind-set to customers. They work with VEON, Vodafone, Telenor and Turkcell, and none of these would be happy if the reality of tower management wasn’t creating value for each tenant.

MNO preferences and reduction in flexibility

There is a transition from captive-towerco to independent-but-still-captive-towerco. Initially any carve-out is single tenant, or is at best limited to sites previously shared on an MNO to MNO basis. From a practical level that means that even with the best of intentions a captive towerco will lack the institutional memory of acting like an independent towerco and it will lack the operational experience of working with second and third (and fourth) tenants. But with time this will change and a willing captive towerco can upskill quickly.

However, unlike independent towercos, a captive-MNO may be predisposed to lean towards the preferences of their owner MNO. If the towerco is well managed these differences will be minor, our panel offered the example of a difference of preference over cabinet temperature: if

Few companies enjoy the 20x+ multiple that American Tower enjoys, but many independent towercos still trade at more than 10x earnings. The captive towercos are typically valued around 7x which suggests financial markets and investors recognise that some value is destroyed by keeping the towerco captive


the owning MNO prefers a different cabinet temperature to another tenant then the owning MNO may prevail. That will have operational knock-on effects and reduce the flexibility of the towerco. But the overall effect should be hard to detect.

Valuation and value creation

Chuck Green discussed the valuation differentials between captive towercos, independent towercos, and best-in-class towercos like American Tower. Few companies enjoy the 20x+ multiple that American Tower enjoys, but many independent towercos still trade at more than 10x earnings. The captive towercos are typically valued around 7x which suggests financial markets and investors recognise that some value is destroyed by keeping the towerco captive, for example spending on extra governance is essential, but still increases the cost of doing business or missing out on potential tenancies because your governance quality is not easily marketable.

Access to capital

Another potential financial downside to captivity is access to capital. Of course, a well-capitalised towerco with opportunities for lease up, good quality assets, good governance in place, but MNO-owned will still have access to different capital to the parent MNO. But the capital structure will be limited by what the MNO is comfortable with or capable of carrying on its own balance sheet.

edotco is levered at a ratio of 2.5x because of limitations imposed by its ownership by Axiata, but an optimal leverage level for a towerco is generally thought to be about 4x.

Especially in markets where towercos are in deployment mode, limitations of leverage will negatively affect the scope of strategy. Marc Perusat said that in extremis a towerco might not be able to access capital if its owner had a weak balance sheet. But in Saudi Arabia this is unlikely to be a problem because STC’s sister company Saudi Aramco enjoys a net income of US$111bn per year after having paid taxes and dividends to the Saudi state to the tune of US$159bn.

The future of the emerging MENA tower industry

Our panel agreed that the future of communications

infrastructure will include more sharing, more wholesale models and more neutral host networks. For that reason it is probably both tempting and counterproductive for MNOs to want to play in these markets. It is tempting because the potential returns look substantial, but it could be counterproductive because it is harder for MNO-captive infracos to act in an independent way. Already in North America you see Crown Castle investing in fibre, likewise, in Europe and North America Digital Bridge are betting big on digital infrastructure like data centres too. Nihat Narin argued that in five to ten years all towercos will become multi-asset infracos, operating more infrastructure than just vertical real estate. As these new, diversified infracos develop, MNO-captive towercos will face difficult decisions and will likely become more independent as they also seek to broaden their service propositions and asset portfolios<

Our panel agreed that the future of communications infrastructure will include more sharing, more wholesale models and more neutral host networks. For that reason it is probably both tempting and counterproductive for MNOs to want to play in these markets


Cutting edgeoperational efficiency Insights and ideas from our operational efficiency panel discussion and roundtable

Helios Towers are now active in five markets in Africa and follow a Lean Six Sigma philosophy to drive improvements in operational efficiency which had fed through into a steadily improving operating margin.

Etisalat operates in 16 countries, including UAE, Saudi Arabia, Egypt, Morocco, Pakistan and Afghanistan, and has a wealth of experience of the operational challenges as they vary across the region.

IHS Towers is Africa’s largest towerco and has signed deals to acquire Zain’s Kuwaiti and Saudi towers and have already developed plans to improve the operational efficiency of their new networks.

Beyond outsourcingThe panel began by discussing the different opex challenges of steel and grass towercos, more prevalent in the Americas, contrasted with the power management expertise required for towercos in Africa, Asia and now in the Middle East too. With limited power challenges there had been a tendency to outsource and forget maintenance and other operational expenses, but our panel agreed this that was a mistake and was not viable in MENA. Instead

Read this article to learn:< The key role supply chain partnerships play in reducing operational expenses

< Why data and drones have the potential to revolutionise tower management

< How rationalising equipment and suppliers can help drive down costs

< The importance of local expertise and carefully managing the last mile

< Case studies and real life examples for tackling theft

Keywords: Africa & ME, Asset Lifecycle Platform, C-Level Perspective, Delmec, Etisalat, Fuel Security,

Health & Safety, Helios Towers, IHS Towers, IoT, MNOs, Masts & Towers, O&M, Operational Excellence,

Opex Reduction, RANsharing, RMS, Site Management System, Site Visits, Towercos

Operational efficiency is always an important topic at TowerXchange Meetups, and the theme was covered throughout the TowerXchange Meetup MENA 2019 this January. In this article you will hear from two towercos and one MNO on how they are addressing their operational challenges and how lessons learned elsewhere can be applied in the MENA region. Wiktor Barcicki, CTO of Etisalat, was joined by Alex Leigh, CCO of Helios Towers and Gordon Porter, VP for Operations of IHS Towers. The discussion was chaired by Delmec’s Spencer Crawford-White.

Flash insights

Flash insights are featured throughout this article and are drawn from the TowerXchange Meetup MENA Roundtable on operational

efficiency<


of outsourcing towercos should view operational efficiency as a source of competitive advantage and a key part of their value add.

Critical to making opex a key part of the a towerco service proposition is a close and collaborative partnership with suppliers. This idea of team work between towercos and their vendors and suppliers came up repeatedly throughout the panel discussion. Alex Leigh pointed to Helios Towers’ experience. Downtime had been reduced from an average of 22 minutes per site per week to just one minute of downtime per site per week. This is outperformance relative to the service level agreements (SLAs) agreed between towerco and MNO is good for the relationship and good for towerco margins as less downtime means fewer visits and lower opex. The aim will be to reduce the current average of one site visit per month to one site visit per quarter.

Building partnerships The first thing which needs to be eliminated is any “us versus them” attitude. There are commercial relationships and contracts signed between towercos and their supply chain, but managing actual working relationships strictly through contracted obligations and duties is a recipe for disaster. If you want to experiment with new ideas or new technologies you have to be open to working together, and be open to potentially making mistakes together. One solution for literally breaking down walls between the towerco and the supply chain is the colocation of offices; Helios Towers have had success in doing this in some markets. Sharing

office space makes sharing data and sharing ideas more natural.

Another strategy that was widely supported by our panel is concentrating suppliers. Of course it can be tempting to optimise each site and customise each capex deployment but that leads to a proliferation of suppliers and that makes collaboration more complex and relationships harder to monitor and manage. Committing more heavily to a smaller number of suppliers makes firm-specific and relationship-specific investments safer and easier to justify. Once you work with fewer suppliers, it makes sense to invest more in training each one to cultivate best practice.

Another important partner is your tenant, the MNO. Building a trusted relationship with an MNO allows for greater honesty. Our panel discussed the

advantages of working with MNOs to understand evolving power requirements and helping the MNO understand the energy opex implications of their decisions. Likewise, the antennae configuration can affect the wind load of the tower greatly. Too much equipment might mean having to reinforce a tower and without clear two way coordination between MNO and towerco, neither party may know about the knock-on effects of the decisions they make. Working together means win-win solutions can be found that keep costs down.

The advantage of greater honesty and openness that comes from building partnerships up and down the supply chain comes in many forms. If your suppliers feel they can be honest you with you about problems they are experiencing then they will tell you, and you will be able to be honest with an MNO about necessary planned downtime. The

Flash insights: Rent

One of the largest contributors to your opex on your balance sheet will be made up of something no

engineer can fix: your rent and ground lease. That not to say there is nothing to be done about it; get a

property team set up on day zero and engage your landlords and local communities. Finding the best

financial settlement from the beginning of a tenancy is key to keeping your ground lease economical,

and locking in lower opex for the long-term<

Flash insights: Crying

One panellists remarked that improving operational efficiency was a lot like peeling an onion: each

time you remove a layer of cost you reveal another and discover something new that needs fixing

too….and the entire time you want to cry<


panel felt that although mistakes cannot be avoided, the way you communicate and manage expectations can make a huge difference to how those mistakes are perceived. Being told a few weeks in advance that a problem is likely to occur causes much less friction than discovering a problem as it happens.

Local expertise You have to take the rough with the smooth when it comes to relying on local expertise. The panel agreed that often it was in the last mile of operations where problems occurred, often the

last man. The last man needs to be the best man: resourceful, thoughtful, and able to respond to the challenges as they come. However in some markets, many in Africa, the level of skill of the workforce leaves something to be desired. Sometimes, rather than fixing an issue, things will get worse if an unqualified technician attempts to “fix” something in the wrong way.

Luckily, there was agreement across our panel that the level of skills in the MENA region are generally higher, indeed, thanks to the oil and gas

industry’s dominance in many markets, there is a ready supply of trained engineers, used to working autonomously at remote locations on mission critical infrastructure. IHS Towers’ Gordon Porter highlighted the higher skills of the workforce and the longer average tenure which had been revealed in their due diligence work. Turnover is often a sign of poor quality workers.

There is also no substitute for having a good local team when it comes to working with regulators, engaging with communities and knowing the local ‘lay of the land.’ Without local knowledge it is hard to effectively execute due diligence on new deals or projects. Using local knowledge doesn’t mean outsourcing to locals, it means a more collaborative approach to bring that local knowledge in-house, such that permitting, planning and execution can be successful.

Diversity The panellists thought local knowledge was especially important for MENA. You have a diversity of markets like almost no other region on earth. Syria and Yemen are both conflict markets, and unrest remains commonplace in both Iraq and Afghanistan. On the other hand the states of the gulf are some of the most developed in the world. Rolling out 2G connectivity in rural Afghanistan is synchronous with 5G deployment in Saudi Arabia, both markets in which Etisalat operates.

In markets like Iraq, Syria, Yemen and Afghanistan you have security problems which bleed into power problems. A lack of law and order means that power infrastructure for sites is poor, necessitating

Flash insights: Augmented reality

Our roundtablers offered inspiration from the offshore wind industry for the use of augmented reality (AR) goggles. Like the tower industry, the range of installed components on each wind turbine can vary greatly. When maintenance crews reach each wind turbine AR goggles display the relevant information on the specific make and model of each installed component, as well as the schedule of necessary maintenance. This accelerates the execution of maintenance tasks and reduces the incidence of mistakes. Although our roundtablers loved the idea, there was widespread acceptance that low hanging fruit like access data, and genset rationalisation should be picked first and that AR goggles were unlikely to be adopted soon<

Flash insights: Drones

One area of cutting-edge technology which is being employed in the towers industry is drones and remote asset monitoring. Previously the surveying and auditing of towers was a two man job, involving several man-hours of travel between towers, risky ascents and manual counting of assets. A lengthy process of data entry and validation was also required. Unmanned aerial vehicles with camera and scanning technology enables one man to do the work of two, in less time, without the risky climb and with more accurate counting of assets and automatic logging of asset information. The process seems especially useful for towercos acquiring a large, new estate of towers which need auditing<


the use of generators but that same lack of law and order makes fuel delivery expensive and fuel theft a problem. On the other hand, in Saudi Arabia there is no security profile to deal with, but the country is absolutely enormous, hot, dry and dusty which increases the cost of services in other ways. In contrast Egypt’s population around the Nile delta and valley is very dense, making it easy to find service labour but increases security problems like fuel theft.

Big data overloadOur panel, like most professionals in technology or operations, are dazzled by the volume and potential of the data being produced on their assets. The frequency and specificity of readings now available far outstrips our capacity to use all of the data produced, but all of our panellists were confident that they would continue to find a lot of value in the data being produced – although recognising that the tower industry remains a long way from making full use of data.

The most straightforward place to start is with access data, something which improvements in access control systems has made easy to collect and manipulate. Access data can help you pinpoint staff who are stealing fuel, having naps or skipping jobs. It is the low hanging fruit of data analysis and all our panel were enthusiastic about it. Alex Leigh of Helios Towers recommended taking a deep breath, simplifying the streams of data coming in, and working out where your easy wins are for value add. Gordon Porter of IHS Towers agreed that getting the basics right first was the most important thing.

Etisalat’s Wiktor Barcicki offered the MNO perspective and discussed the data avalanche that MNOs face: they have data on their customers’ usage, on their demographics, live information on their network performance and information on their towers. Sadly, the passive assets probably come last in the hierarchy of value add for a MNO’s data team, who are typically more focused on the radio network or with their customers’ experience. The key advantage for towercos when it comes to using tower data to optimise operations is that nobody cares about towers quite as much as a towerco. Wiktor also circled back round to discuss the importance of long-term partnerships with

suppliers if you are going to be optimising your operations based on a ‘single source of truth’ set of data. He also suggested other datasets which could provide useful data but with less frequency; satellite and drone imagery for example can help direct partners on the ground to the best places to work.

Active infrastructure Our panel spent some time discussing the potential for active sharing to reduce operational costs. Active sharing involves MNOs sharing the radio network (and sometimes sharing other parts of the network) rather than deploying multiple antennae on towers. This of course changes the revenue

Flash insights: Aligning incentive

A major driver of opex inefficiency is fuel theft. Key for many strategies for dealing with fuel theft is to realign incentives to make fuel theft the problem of the vendor or maintenance contractor on the ground. The method, at its simplest, is to offer a fixed fee on genset run time and pay a very small premium relative to that run time’s cost in fuel. This means that a vendor which eliminates fuel theft makes a little extra margin, and will monitor local communities and employees closely to eliminate fuel theft. Around 85% of fuel theft is believed to originate within the tower value chain and so their employers are well placed to policy and punish this.

Despite this being a strategy with good heritage it proved controversial at our roundtable. There were two elements to the controversy over passing on the costs of theft to vendors. The first was the risk of bankrupting your service provider if they also can’t get on top of the fuel theft problem, with obvious knock-on effects for operational costs. Secondly, and more fundamentally, delegating the problem to your supplier doesn’t actually solve the problem and unless you eliminate the theft you will still be left with opex inefficiencies and inflated costs. Improving law and order, and campaigning locally to turn around the image of diesel theft as a “victimless crime” were mentioned. Also mentioned was the creation and maintenance of a blacklist of fuel thieves to keep them out the industry, although the practicality of this in large countries with poor bureaucracies was questioned<


potential of a tower, but it also reduces the power consumption of a tower and helps improve the economics of rural coverage. The trend towards network virtualisation splits the hardware from the software used to manage radio networks and makes it much easier for MNOs to share active equipment.

Both Helios Towers and IHS Towers said they were exploring opportunities in semi-active infrastructure, in many ways in-building solutions are already close to active infrastructure sharing models. But overall there was some scepticism about the likelihood of the adoption of widespread active sharing as spectrum regulation usually blocks using spectrum without the correct licence. Of course, the creation of an independent netco to roll-out a shared 5G infrastructure is one option being explored around the world, as well as reducing opex it would also reduce the substantial capex required for the much denser network required for 5G. However, such ventures continue to prove highly complex from a political and competitive perspective.

The future of operations The panel also spent some time discussing what would come next for operations excellence. They were all optimistic that there were major wins available for towercos using existing technologies and learning from each other and other industries too. The internet of things offers an alternative to regular site visits by allowing direct monitoring of assets and maintenance only being scheduled for when it is necessary. This has at least three benefits, firstly it reduces site visits and directly

reduces costs, secondly by reducing site visits it reduces opportunities for mistakes to be made, and thirdly by keeping maintenance crews off the road it reduces the chance of traffic accidents, a major hazard in Africa.

Spencer Crawford-White, of the tower experts Delmec, discussed the possibilities for accelerometers and improved monitoring of towers. Weather information and access logs can be compared to actual tower behaviour so that

monitoring structural integrity becomes easier and more automated. Eventually being able to monitor tower structural performance in real time will eliminate catastrophic failures and reduce site downtime even further. There was also optimism that increased use of drones can reduce costs. Optimism for the internet of things and other monitoring advances were tempered by the realisation that it will take a couple of years before we really see these new technologies bedded into processes<

Flash insights: reducing theft

One participant offered an inspirational story of active engagement and campaigning which eliminated 100% of previously endemic tower back-up battery theft. At one point battery theft was costing US$1mn a year, tearing a big hole in opex budgets of a 1,500 tower market. Instead of delegating the problem, or writing off the assets, or exiting the market, behaviour changed and the problem was eliminated.

This was a multi-pronged attack, but initially it was unsuccessful. Trackers were fitted to batteries so battery thieves could be caught. However, as the crime was non-violent the local judiciary refused to heavily punish those caught, theft was not discouraged despite thieves being caught.

To make the strategy work the reality on the ground had to be changed. The government defined telecom towers as critical national infrastructure, and this pushed it up the priority list. But top down solutions don’t work alone, so a media campaign was launched involving the police, TV and local newspapers explaining why battery theft mattered; the police set up a battery hotline; lawyers were sent to argue to judges the seriousness of the damage done.

Eventually convictions increased and battery thefts decreased to nothing, removing $1mn annual from opex costs and reducing lawlessness locally. This would have been impossible were this problem delegated to local vendors as is often the case with diesel theft. Ambitious solutions to theft can’t be delegated, they need leadership<


How the telephone tower helpeddefeat ISIS (and other success stories) The inspirational work reconnecting conflict zones and bringing modern communications to rural areas

In our panel at the 2019 TowerXchange Meetup MENA we brought together Iraq’s Korek Telecom, Afghanistan’s Asia Consultancy Group and telecoms and power engineering experts i-eng to discuss practical next steps for expanding connectivity. The session was chaired by Spencer Crawford-White from the tower-experts Delmec.

Zardasht Khalid is the Site Management Director for Iraq’s Korek Telecom. Korek Telecom was founded in 2000 and has been responsible for rolling out and rebuilding and rerebuilding infrastructure in Iraq ever since. It was particularly active in reconnecting communities which had been disconnected by ISIS. In Iraq Korek Telecom has 18% market share, while Zain has 44% market share and Ooredoo, operating as AsiaCell, has 38%. There are another four Kurdistan-only 4G LTE operators, Fastlink, Tishknet Goran-Netand Mobitel, which are excluded from our marketshare figures.

Hussein Abdulkader is the Chief Operating Office of the Asia Consultancy Group, who are a towerco active in Afghanistan. They own around 100 Afghan towers, out of a country total of 6,645, and offer both traditional co-location tenancies and RANsharing services. The security situation in Afghanistan has fluctuated since the 2001 war and it is expensive, not to mention dangerous, to operate across large parts of the country.

Salah Medawar is Chief Operating Office of ieng Group. ieng Group provides end-to-end engineering infrastructure solutions to the telecommunications and power industries across Africa, the Middle East

Read this article to learn:< Low cost strategies to connect hard-to-reach locations< Meeting power challenges with innovative solutions < How temporary solutions can become permanent profit-makers< The conflicting role of government in rural connectivity < How Korek Telecom underminded ISIS’s efforts to cut-off populations from the world

Keywords: 3G, ARPU, Afghanistan, Africa & ME, Air Conditioning, Asia Consultancy Group, Capex, Country Risk, Delmec, Energy, Energy Efficiency, ieng Group, Iraq, Korek Telecom, MNOs, Masts & Towers, O&M, Off-Grid, RANsharing, Towercos, Unreliable Grid, Urban vs Rural

There are nearly 4bn people offline around the world, and nearly 250mn of them are in the MENA region. This represents a huge untapped resource for humanity and a tremendous social and financial opportunity for the telecoms industry. However, it is difficult both practically and economically to connect the unconnected. The offline population is disproportionately female, rural and poor and, while connecting them is of vital importance to global development, the illiterate cannot use mobile data and the elderly all too often never learn, so expensive solutions are unviable. That is why infrastructure sharing, as championed by towercos, is so important.


and Southeast Asia and are operate in eighteen countries: Afghanistan, Algeria, Cameroon, Chad, Congo, DR Congo,, Ethiopia, Ghana, Guinea, Kenya, KSA, Lebanon, Liberia, Myanmar, Nigeria, Pakistan, Uganda and Zambia. They manage over 11,500 sites for Africa’s largest MNOs and all four towercos and have extensive experience in working in rural, hard-to-serve markets.

Low-cost rural sitesOur panel began by discussing options for reducing the cost of a rural cell site. There are many costs to connecting the unconnected, most of which need to be covered by subscription revenues of low ARPU customers, so reductions in roll-out costs are essential to transform these lower revenues into investable margins. Towers typically cost US$80-120,000 in MENA and SSA, so reductions in tower cost can make or break marginal sites. Salah Medawar of ieng group discussed two solutions they had developed for MTN for their rural Africa sites. They developed low-cost rural sites (LCRs) and ultra low-cost rural sites (ULCRs), which were brand new solutions aimed specifically at rural areas.

LCRs used 18m monopole rather than free standing lattice structures in three, four or six legged varieties. ULCRs used 12m monopoles which reduced the towers’ coverage but further reduced cost. These were off-grid sites, so rather than install, fuel and maintain a diesel genset these sites relied solely on solar and batteries. A solo-solar system is much cheaper to install than a hybrid system and also offers lower ongoing opex

costs. Of course, the gensets are there for a reason, and this choice sacrifices reliability for lower capex, reduced site visits, reduced theft-risk and lower maintenance costs. The installed systems had lower power consumption than conventional sites, using only 0.15-0.35kW per day versus circa 2kW a day for a conventional site.

The result was a radically cheaper solution. The capex cost for the LCR solution was US$45k and for ULCR is US$35k, compared to a minimum cost of US$80k for a conventional tower in these markets. By using cheaper passive infrastructure, reducing O&M costs, eliminating fuel and therefore security costs, the opex for these sites was reduced from a typical US$1,500 a month bill to only US$500. Importantly, these sites are upgradeable; gensets can be added, towers can be strengthened, and tenants can be added, so initially low-cost, low-revenue sites can become normal-cost, normal-revenue sites. The panel emphasised that the

major barrier to marginal telecoms sites are not technological but a lack of investment prioritisation from MNOs.

The Afghan experienceThe sorts of ultra-rural, off-grid sites which ieng is working to connect are present in MENA, but are far less common than in SSA, where the solutions were developed. But there are many sites which are difficult to reach due to poor security situations or which have yet to be connected or had had their connection severed due to recent conflict.

Afghanistan has security issues which make grid power very unreliable. Security issues also make it difficult to deliver fuel and to keep it secure. The lack of a fibre backbone means that additional power and tower space is required for microwave transceivers. All of this makes reducing a power a key concern for operators and towercos and ACG has responded by providing active sharing services

The capex cost for the low cost rural solution was US$45k and for an ultra-low cost rural is US$35k, compared to a minimum cost of US$80k for a conventional tower in these markets


which reduces power demand, even if it reduces possible tenancy revenue. In addition to active sharing, ACG also has some sites reliant on pure solar, doing away with diesel gensets and associated maintenance and expense, as described earlier by ieng.

Hussein Abdulkader of the Asia Consultancy Group (ACG) discussed his experience in bringing towers to Afghanistan’s rural areas. ACG works with Aghanistan’s number one operator Roshan, and there is government support for rural sites. Payments are collected from the country’s MNOs

and redistributed through tenders for rural site construction. At present ACG owns and operates around 100 sites, but it aiming to add around two a week to reach 300 by mid-2020, against a total organic growth target of 500. As is often the case in difficult markets, diversification is key to ACG’s plans. ACG are investing in a fibre to improve the security, cost effectiveness and quality of Afghanistan’s telecoms backbone and have won a contract to direct Afghanistan’s airspace communications infrastructure, the first time Afghanistan will ever control its own airspace domestically.

Rebuilding IraqFollowing the capture of 30% of Iraq’s land by ISIS from 2014, much telecoms infrastructure has been destroyed or degraded in Iraq. ISIS targeted telecoms towers in order to cut off captive populations from the outside world, and from 2014 as ISIS expanded its territory and in subsequent years as it was gradually pushed back and defeated, telcos like Korek Telecoms have been working to rebuild towers and bring back 2G and 3G services to populations that have lost them. Our panellist Zardasht Khalid revealed that communities which were cut off from the outside world after the destruction of their telecom towers now see higher rates of voice and data usage than populations which were not cut off, once towers were rebuilt and service restored.

Hearing about the work to connect captive populations was a highlight of the conference, and a reminder of the important work our industry does. From 2014-2019 the focus in Iraq has been on rebuilding the 1,000-2,000 towers destroyed deliberately during the conflict, many as permanent sites, but also through a host of temporary sites. Mosul was captured early in the conflict with ISIS and for two years through its occupation, Korek Telecom provided semi-temporary towers on the surrounding hillsides to enable a weak 2G service in the city as a vital lifeline.

From 2016 onwards as the liberation progressed the degradation of Iraq’s telecoms infrastructure went into reverse with further temporary towers required to follow the train of military units, NGOs

At present ACG owns and operates around 100 sites, but is aiming to add around two a week to reach 300 by mid-2020, against a total organic growth target of 500. As is often the case in difficult markets, diversification is key to ACG’s plans. ACG are investing in a fibre to improve the security, cost effectiveness and quality of Afghanistan’s telecoms backbone and have won a contract to direct Afghanistan’s airspace communications infrastructure, the first time Afghanistan will ever control its own airspace domestically


and media which chased ISIS out of Iraq. Dealing with this surge of demand was vital for the war effort and our panellists paid tributes to the crews who spent the last years of this decade building towers in a warzone. It was during this time of liberation that Korek Telecom first deployed 3G.Even today, the security situation in Iraq makes it a difficult market to operate in, with battery and fuel theft creating an operating environment with expensive opex challenges. That said, international donors having promised funding to invest in new towers to reconnect Iraq’s population, which will ease the economics of connectivity. Korek Telecom has estimated it will need to build 2,500 towers over the coming years. For four years the focus has been on reconnection and recovery, but there is now a new cabinet, and the government is issuing national 4G licences at last.

LTE catch-upIt will be no surprise that our panellists agreed that 5G was some way from being viable in low ARPU, hard-to-reach rural sites, not least because of the technology’s required density and short propagation distances. However, all discussed the options for 4G technology in the markets in which they operate. Korek Telecom have begun to fibreise their network and discussions to share infrastructure in the country to reduce the capex cost of a 4G roll-out that is underway. Afghani telcos have 4G licences and roll-out in urban areas is happening at the same time 2G is only just reaching rural areas. However, due the minimal extent of fibreisation in the country 4G feels more like 3.5G in the cities where is available.

Government help and hindrance Governments almost without exception claim to want to improve rural connectivity and often have licence conditions and active programmes to promote it. However, what is given with one hand can be taken away with another. Governments in the developing world often find it difficult to raise revenues through traditional forms of taxation and can turn to high licence fees, compulsory charges of direct MNO taxation which all discourage investment in marginal sites.

There was some debate at the TowerXchange Meetup about how successful or important government incentives were for improving rural connectivity. ACG receive essentially all of the capex for many rural sites from the government’s rural build out fund, and argued that without direct support many sites they serve, with their opex costs, those sites would not be viable. Likewise, Iraq’s telcos will receive significant outside investment to rebuild their towers but cannot use components for those towers specified to global standards because local standards are different.

Future proofing marginal sitesReducing the cost of site installation and operation is vital for bringing connectivity to hard to reach groups and areas. However, costs are only one side of the equation and the potential for healthy revenue upside is also important. Initially sites will usually only have one tenant, significantly reducing potential returns. If a low site cost is achieved by minimising the leasable space on a tower then the

site may never become economical and so never be built in the first place. Likewise, despite reducing opex and capex, active sharing also reduces prospective revenues for towercos and reduces the appeal of marginal sites. ieng’s Salah and ACG’s Hussain both discussed options for transitioning temporary sites into permanent ones. The session chair Spencer Crawford-White from Delmec was also confident that reinforcing temporary or smaller towers will be easy to enable expansion from two tenant to four or more tenants if planned for from the start.

Commitment The tower industry has long horizons and is used to thinking in 10-15 year tenancies, and making capex investments which will take years to pay off, so it makes sense that commitment was a critical requirement for our panellists. If the commitment to delivering low cost but flexible sites is real, then it offers a huge potential market and firms like ieng. But engineering firms can only invest in developing and producing cheap to install and easy to maintain sites if the demand for them is there. But that, in turn, requires commitments from telcos and from government. Both Korek Telecom and ACG want to invest in larger and better networks, but without a top down commitment to bringing connectivity to difficult to reach areas it won’t be possible for MNOs or towercos to invest and reach people are rapidly as theoretically possible. There is lots of good work and innovative strategies already being pursued to connect the unconnected, but as always, more can be done<


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www.bladonmt.com

Gold sponsor:

Delmec Delmec has been a primary component in the telecommunication industry, not only within the infrastructure area but also providing state of the art telecom solutions for Ireland, UK, Africa, Europe, America and the Middle East for over 30 years. With the company’s headquarters based in Ireland, Delmec provide structural and network solutions, infrastructure builds, steelwork, renewable energy and fibre network builds. Our expertise has led us to become a renowned provider of engineering services to the telecom and utility sectors, specialising in full turnkey solutions from design concept to live on air. Delmec’s reputation can be witnessed in over 40 countries where key services have been provided to a wide range of clients whom many have continually sought the expert knowledge of Delmec for their telecom’s needs. Delmec strive to provide services ensuring the client is given the best customer service, maintaining a high efficiency and always to a quality that is highly regarded in the telecom industry with many of our clients stating that Delmec are; The best in the world at what we do. www.delmec.ie

IPT PowerTech

IPT PowerTech Group delivers specialized solutions to the power, industrial and telecom sectors in Africa, Middle East and South-East Asia. Combining power expertise with telecom infrastructure specialization, we are market leaders in providing energy solutions, telecom services, and managed maintenance services. The group is recognized as the global Leader of the Guaranteed Savings and T-ESCO models. Our self-manufactured enclosures allow us to create customized energy efficient/hybrid and renewable energy solutions, and to implement new concepts in site renovation.

With offices in 11 countries, our solutions are delivered to more than 60 operators, tower companies and vendors in more than 50 countries.

www.iptpowertech.com

Vinson & Elkins RLLP

Vinson & Elkins is one of the oldest and largest international law firms, with approximately 700 lawyers located in 15 offices around the world.

Our global telecommunications team has extensive experience advising on international telecoms

Bronze Sponsor:

Bronze Sponsor:

Silver sponsor:


2020 exhibitorsOur highly specialized and international team of engineers develops world-unique and patented solutions–from the Code Generation System (CGS) and Keypad Key to remote staff management via the mobile App. This modular, and solution-oriented approach sets Acsys International apart from other security solution provider in the market. With presence in 64 countries, our clients are global leaders from different industries, including telecommunications, power, mining, logistics and more.

www.acsys.com

Byrne Equipment Rental

Byrne Equipment Rental is the largest plant and equipment rental company in the Middle East and after listening to the market on the challenges of CAPEX demands in acquiring generators, batteries & rectifiers has developed a managed power solution for the market, which is underpinned with fuel delivery all in a flat monthly fee, with a single point of communication and billing.

The Hybrid product on the initial launch will provide the telco market with the first true deliverable managed power solution and will support 10Kw, 24Kw & 48kw load demand which is purposely designed to support the Tele-communication tower market.

https://byrnerental.com

EnerSys

EnerSys® is the global leader in stored energy solutions for industrial applications. We complement our extensive line of motive power, reserve power and specialty products with a full range of integrated services and systems. With sales and service locations throughout the world. Headquartered in the United States, with regional headquarters in Europe and Asia, EnerSys employs over nine thousand people and operates 32 manufacturing and assembly facilities world-wide. This vast infrastructure and over 100 years of battery experience positions EnerSys at the forefront of both manufacturing capabilities and new product development.

www.enersys.com/GlobalLanding.aspx

Crowd SiteIntel by M2Catalyst, LLC

Introducing Crowd SiteIntel, a new business intelligence tool available through TowerXchange, which enables towercos and MNOs to better understand the locations, performance, and technologies of the towers and small cell sites in a given country, and which MNOs are tenants on each.

The new service is driven by M2Catalyst’s crowdsourcing platform, which provides trillions of

Exhibitor:

and telecoms infrastructure transactions. We have significant industry experience, advising on telecoms transactions in numerous countries, including across Africa and the Middle East. Our telecommunications advice includes acquisitions and disposals, debt and equity financing, infrastructure development, operational arrangements, regulatory matters and dispute resolution.

We also have significant experience in the negotiation and drafting of sale and purchase, debt and equity financing, master lease, build-to-suit, site management and service level arrangements; and have played a prominent role in complex fibre transactions.

www.velaw.com

Acsys International Ltd

Acsys International is a global technology company specialized in security and access management of critical infrastructure through the emerging field of remote access

management solution. Instigated in 1999 from the technologies of two French defense contractors, Acsys International provides remote access control using both smart-key and keyless solutions. The signature Intelligent Access Management System (iAMS) is a platform that brings together smart-padlocks, smart-keys and management software to provide a powerful means to control who goes where and when, indoors and outdoors.

Exhibitor:EQUIPMENT RENTAL

Exhibitor:

Exhibitor:


2020 exhibitors

NorthStar Battery NorthStar is a global leader in designing, manufacturing and deploying a wide range of batteries and energy storage solutions. Our mission is to deliver reliable and sustainable power to the world.

Using advanced technology, our products have been built to ensure longer battery life, lower operating costs and reduced environmental impact. We maintain a global presence with major operations in Sweden, USA, China and the Middle East and distribution and service centers in Latin America, Europe, Africa and APAC.

Visit our booth for more information about our new innovative products including NorthStar ACE® - Wireless Battery Management!

www.northstarbattery.com

Asentria

Asentria provides solutions for mobile network and tower operators to manage power, security, and environmental issues at remote cell sites from their network operations center.

Telecom sites are evolving to include many new intelligent subsystem controllers for DC rectifiers, generators, cameras, access controllers, and HVAC.

Asentria securely integrates these sub-systems into our hardware based site controller to present a single interface for management of power, security and environment at remote sites.

Beyond simple alarming, Asentria generates data for comparative site analysis and provides remote access to the underlying systems for OPEX reducing cell site optimization.

www.asentria.com

Hardiman Telecommunications

Hardiman Telecommunications Ltd. was established in 1994. We are a boutique consultancy specialised in strategy development, due diligence assessment and valuation support. Our clients include major TowerCos, private equity funds, corporate finance / advisory and investment functions of leading banks, and telecommunications carriers. We are particularly active in end-to-end support of mergers, acquisitions and divestitures. All of our staff have held 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.

www.telecoms.net

network measurements across 200 countries and 800 carrier networks, enabling Crowd SiteIntel users to identify opportunities to improve coverage and capacity, including in-building.

www.m2mobileinsights.com/blog/a-r-evolution-in-how-towers-are-valued-and-how-co-locations-are-sold/

NEXSYS-ONE

NEXSYS-ONE is a true telecom industrial software platform with over 18 year’s experience deploying and maintaining mobile network infrastructure. We serve Tier-one operators, Tower companies and System integrators with innovative software solutions to improve efficiencies and performance whilst eliminating unwanted costs due to operational process failures or visibility.

We take pride in our software that its built around our experience of building & operating over 350 networks since 2001. We capture network requirements around quality assurance, project management, tower sharing, IFRS compliant lease management, work force management, procurement & supply chain processing, warehouse & asset management, health & safety, access & RMS supply, Fiber/TRS/RF tracking and risk management.

www.nexsysone.com

Exhibitor:

Exhibitor:


ieng Group

i engineering Group provides end-to-end engineering infrastructure solutions to the telecommunications and power industries across Africa, the Middle East and Southeast Asia. Employing a dynamic team and personal approach, we’ve grown rapidly since our inception in 2007 and are now operational in eighteen countries: Afghanistan, Algeria, Cameroon, Chad, Congo, DR Congo, Ethiopia, Ghana, Guinea, Kenya, KSA, Lebanon, Liberia, Myanmar, Nigeria, Pakistan, Uganda and Zambia. We do managed services (active & passive) on one hand; procurement, site build and commissioning on the other; as well as fiber optic. We manage today over 11,500 sites for Africa’s largest MNOs and all 4 towercos.

www.ieng-group.com

MeetupMENA 202028-29 January 2020, Dubai,UAE

www.towerxchange.com/meetups/meetup-mena








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