[By Duncan McLeod]
Cell C’s decision last year to sell its base stations to US company American Tower Corp (ATC) could smooth the entry of new wireless operators later this year, paving the way for more robust broadband competition and lower prices for consumers.
ATC is taking immediate ownership and control of the “passive components” of 1 400 Cell C towers (everything but the radio network infrastructure mounted on the base stations). It will later take over control and management of a further 1 800 base stations that the operator is building as part of its new national network.
The deal, signed late last year and worth about US$430m (R3,1bn at the current exchange rate), will help Cell C reduce its long-term interest-bearing debt. But the sale could have lasting positive implications for the telecommunications industry well beyond Cell C’s balance sheet.
As competition intensifies in mobile telephony and as profit margins come under pressure, operators worldwide are turning to tower management companies like ATC to help them reduce their capital and operational expenditure.
By selling their towers, operators are able to defray the costs associated with managing the infrastructure. Independent tower management companies are then able to lease space on the towers to other operators, ensuring capacity is shared and in so doing optimising their utilisation.
Cell C’s deal with ATC is the first of its kind in SA, but it’s a growing trend in emerging markets. ATC recently made a deal with MTN in Ghana. It also operates 7 000 towers in the vast Indian market. It’s big business — ATC’s market capitalisation on the New York Stock Exchange is $22bn, making it the third most valuable telecoms company in the US after operators AT&T and Verizon Communications.
ATC’s deal with Cell C comes at an opportune time. Later this year, the Independent Communications Authority of SA (Icasa) will hold a spectrum auction in which it will provide operators, Internet service providers and municipalities with access to valuable frequency in the 2,6 GHz and 3,5 GHz bands.
Both bands are well suited to delivering broadband using third-generation and, later, fourth-generation wireless technologies. It’s expected there will be particularly strong interest from operators in the 2,6 GHz band, which can be used for delivering wireless access to consumers using technologies such as WiMax and an emerging standard known as long-term evolution.
The country’s larger Internet service providers and converged communications operators will be particularly keen to use the spectrum to begin to take on incumbent wireless operators, including MTN, Vodacom and Cell C.
Icasa, too, will be keen to ensure that some emerging operators get spectrum.
But building networks is an expensive proposition, not least because of the cost associated with building towers. It’s fortuitous, then, that ATC has entered the market now. The US company is already actively courting operators and other service providers interested in building their own wireless broadband networks.
Pieter Nel, the newly appointed CEO of ATC in SA, says he has already received keen interest from Internet service providers wanting to utilise the Cell C tower infrastructure to build wireless broadband networks.
With increased investment in undersea cables — two high-capacity systems are now being constructed along Africa’s west coast — and more money being ploughed into terrestrial fibre networks, it appears SA’s broadband boom is just getting started.
ATC’s entry into the market should help grease the wheels.
- Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
- Subscribe to our free daily newsletter
- Follow us on Twitter or on Facebook
