Mobile phone towers have become big business across Africa as rising costs mean it is less appealing for network operators to manage and maintain the infrastructure.
A trend to outsourcing them, which started a few years ago, is gaining rapid momentum. And fast-growing tower management companies — or towercos — have emerged as a result.
Kamal Daswani, director at telecommunications advisory and investment firm Delta Partners, estimates that about 45 000 towers in Africa have been transferred from mobile network operators to independent towercos.
“Nearly half of these have been carried out in the past 12 months,” says Daswani.
Independent towercos own and operate more than a quarter of Africa’s estimated 165 000 towers, and the figure is expected to rise by half again by the end of 2016.
There are a number of tower companies operating on the continent, including IHS Towers, Helios Towers, Eaton Towers and American Tower Corp.
Eaton recently disclosed that it had raised US$350m to fund expansion. It recently bought 2 000 towers from Mobinil in Egypt. Helios Towers operates in Ghana, Tanzania and the Democratic Republic of Congo.
Mobile operators in Africa outside South Africa have been more active in offloading their tower portfolios than their counterparts down south. Though MTN has sold towers in a number of the markets in which it operates, it has not done so in South Africa. It has said previously that it continues to evaluate its options in this market.
To date, Cell C has been the only South African operator to sell its tower portfolio. It concluded a $430m deal in 2011 with American Tower Corp to sell more than 1 300 towers to the Boston-headquartered firm.
Earlier this year, Bloomberg reported that Telkom was considering selling its cellphone towers, with an estimated windfall of between $500m and $1bn to the fixed-line operator. The company hasn’t made any formal announcements about a tower sale.
However, Telkom remains locked in discussions with rival operator MTN to share mobile network infrastructure.
Vodacom sold over a thousand of its base stations in Tanzania to Helios Towers in 2013. However, while it does share some towers with other operators, there are no plans in South Africa to outsource tower operations, according to spokesman Richard Boorman.
One of the biggest towerco operators in Africa is IHS Towers, which owns and manages more than 22 000 sites across the continent, with the majority of these in Nigeria.
IHS chief technology and operating officer William Saad says there has been enormous growth in the tower management industry in the past year.
IHS has invested $4bn in recent years and has about a thousand employees. Its clients include MTN and Orange. Operators typically enter tower deals to reduce capital expenditure and to ensure their operational expenditure is more predictable.
Delta Partners’ Daswani says the value tower companies bring to operators lies in their internal teams, which have experience in site management and include strategy consultants, networking experts and even investment bankers that help give them the edge.
“Towercos today play a role in an array of projects ranging from structuring sale and leaseback agreements to actually managing and expanding networks,” he says.
“They manage each individual site through their own dedicated network operations centres, which offer them full control of the network. These are quite relevant in markets across Africa, which are often faced with different challenges such as fuel theft or site vandalisation.”
Saad says operators have realised it is cheaper and more efficient for tower companies to manage and maintain towers on their behalf. “We know what it takes to maintain them, sometimes using diesel generators, batteries or solar technology, or the best combination of these.
“We have developed site monitoring systems to monitor certain alarms on sites and also collect data such as diesel and energy consumption. This gives us an edge.”
Although towercos typically focus on passive network sharing — that is, excluding the active or radio elements of the towers — Daswani believes the next frontier is active sharing.
“A number of operators were initially unsure about the benefits of spinning off passive infrastructure given the strong growth in revenue and subscribers. In the near future … we believe that mobile network operators and towercos in Africa will move towards active sharing.” — © 2015 NewsCentral Media