revenue opportunities for towercos and mnos now … · 2 mnos in developed markets without dense...

Revenue opportunities for towercos and MNOs now and in the 5G era: small-cell densification and IoT

© Analysys Mason Limited 2016

RESEARCH STRATEGY REPORT

analysysmason.com

REVENUE OPPORTUNITIES FOR TOWERCOS AND MNOs NOW

AND IN THE 5G ERA: SMALL-CELL DENSIFICATION AND IoT

STEPHEN WILSON



KEY QUESTIONS ANSWERED IN THIS REPORT WHO SHOULD READ THIS REPORT

GEOGRAPHICAL COVERAGE CASE STUDIES

Worldwide

Particular focus on developed

markets in Europe and North

America.

Cellnex (Spain)

Crown Castle (USA)

Inwit (Italy)

2

This report analyses how towercos and mobile network operators

(MNOs) can respond to the network densification challenges

associated with 5G roll-outs. In particular, we discuss future

revenue opportunities for towercos, including increasing site

numbers and backhaul provision in preparation for 5G

deployments, as well opportunities in the IoT and smart cities

market spaces. The report also provides recommendations for

towercos and MNOs considering 5G roll-outs.

It is based on several sources:

Analysys Mason internal research (for example, LPWA forecasts)

interviews of stakeholders in the towerco market.

About this report

As networks transition to 5G, how profitable will it be for towercos to

enter the small-cells business?

What potential revenue opportunities can towercos benefit from when

participating in 5G small-cell roll-outs?

When 5G networks begin to be deployed, what opportunities do towercos

have to diversify into supplying backhaul connectivity?

To what extent should MNOs work with towercos for their 5G

deployments?

How much revenue potential is there for towercos entering the IoT and

smart-city market spaces?

Strategy teams in towercos considering how they can grow their

businesses as 5G networks begin to be deployed.

Product teams in towercos examining the extent to which their industry

peers have already developed business lines in new areas such as

backhaul provision, as well as IoT and smart cities segments.

Strategy teams in MNOs examining the extent to which they can partner

with towercos for 5G deployments.



CONTENTSCONTENTS

EXECUTIVE SUMMARY

OPTIONS FOR TOWERCO SMALL-CELL INVOLVEMENT

FINANCIAL IMPACT OF TOWERCO SMALL-CELL ROLL-OUTS

TOWERCO OPPORTUNITIES FOR IoT AND SMART CITIES

ABOUT THE AUTHOR AND ANALYSYS MASON

3



Figure 1: Future opportunities for towercos

4

The densification of 5G networks offers towercos the

opportunity to secure sites and take on additional roles as fibre

backhaul providers. Towercos should begin preparing for this

transition now. In addition, the IoT space in developed markets

represents an immediate revenue opportunity for towercos,

without the need to wait for 5G deployments.

It is increasingly challenging for towercos to grow revenue in their

traditional macrocell tower business (for example, due to

consolidation amongst MNOs). However, future 5G roll-outs may

present opportunities for towercos as they imply an increase in

site numbers and towercos can share resources across multiple

operators, which allows them to pass on cost savings to MNOs.

This report examines how towercos and operators may be able to

collaborate more closely in order to prepare for 5G. Towercos have

opportunities to increase the number of sites and move further

into supplying backhaul connectivity. The report also gauges the

opportunities for towercos in the IoT and smart cities space.

This report recommends that towercos take an active role in

network densification for 5G. Their first step will be to secure

permission from local municipalities for small-cell roll-outs.

Investing in small-cell backhaul is more risky, but initial results

appear promising. Operators that do not already have dense fibre

infrastructure need to build close relationships with towercos as

5G roll-outs begin. The report also recommends that towercos

consider diversifying their revenue by building an IoT business.

Executive summary

Revenue from small-cell densification

2Q 2015

7.8%*

2Q 2016

11.9%*

Small-cell backhaul + equipment/site rental = towerco revenue growth

*Small-cell revenue as a percentage of overall revenue, Crown Castle

IoT and smart-city revenue opportunitiesTowercos can sign partnerships with Sigfox now

USD4.5

billion

Source: Analysys Mason

Towercos can roll out a nationwide Sigfox network at

a total cost of only a few million Euros



Figure 2: SBA Communications site leasing revenue per site, USA and international, 2Q 2015

and 2Q 2016

5

Towercos face increasing challenges to the growth of their

traditional macrocell tower businesses. However, there are

promising opportunities for towercos to diversify their

businesses in future by providing small cells and IoT solutions.

Some towercos that focus on the macrocell tower market (such as

SBA Communications) have experienced stagnant revenue growth

on a per-site basis.

A number of other factors are having a negative impact on

towercos’ prospects for revenue growth in the traditional macrocell

tower market. For example, growth in tenancy ratios (that is, the

number of MNOs per tower) has been slow for a number of

towercos (as is the case in Indonesia). In addition, a trend towards

in-market mobile consolidation in some countries will further

hinder future growth in tenancy ratios.

In most markets, it is unlikely that the number of macrocell towers

will be increased to support expanded 3G and 4G coverage, which

will limit an additional avenue of revenue growth for towercos.

However, as roll-outs of 5G begin, an increase in the number of

small cells will be required to support 5G’s higher frequencies,

which may represent a new source of revenue for towercos.

The need for an increasing number of cell sites to support 5G will

also place severe financial pressure on MNOs. However, MNOs

may be able to share this financial burden by working with

towercos.

Towercos are finding it increasingly challenging to achieve growth in the

traditional macrocell tower market



Figure 3: Crown Castle, small-cells revenue and percentage of total revenue, 2Q 2015 and 2Q

2016

6

Towercos have the opportunity to significantly expand their

businesses by participating in small-cell roll-outs for 5G. There

are also opportunities (albeit less sizeable) for towercos to

increase revenue in the IoT segment.

This report analyses the future opportunities available to towercos

to diversify their businesses away from the macrocell tower rental

segment. It also considers revenue opportunities for towercos in

the small-cell, as well as IoT and smart-city, segments.

The first section of the report examines how towercos can

participate in the small-cell market by finding roles in small cell

site rental and the supply of active equipment and backhaul. In

this section, we also assess how the opportunities in these areas

will change as 5G is deployed.

The second section of the report quantifies some of the revenue

and profit opportunities for towercos that participate in the small-

cell market. It identifies the most-lucrative market spaces for

towercos to enter the small-cell value chain.

The third section of the report considers how towercos can grow

revenue in the IoT and smart cities segment. It discusses

towercos’ participation in this segment to date and gauges how

they can best attract businesses to use their IoT offerings.

Towercos can improve their overall revenue by diversifying into small-cell

and IoT segments


© Analysys Mason Limited 2016 7

Recommendations

1Towercos in developed markets should make preparations for 5G roll-outs by securing permissions for sites.

Towercos risk missing out on 5G opportunities as other players (such as energy companies) begin to provide the

necessary increase in site numbers. Towercos have an advantage in this area as they already have experience of

securing the necessary permits from municipalities for macrocell tower deployments.

2MNOs in developed markets without dense fibre infrastructure should consider partnering with towercos for

5G backhaul roll-outs.

In many markets, there are a number of mobile-only players and towercos may be able pass on cost-sharing

benefits to these MNOs using their backhaul infrastructure. Towercos can benefit from providing small-cell

backhaul, and Crown Castle’s strategy of offering fibre backhaul for its small-cell roll-outs has played a significant

part in the growth of the company’s small-cell segment revenue.

3Towercos should actively explore opportunities in the IoT and smart-city segments.

Towerco infrastructure could be useful for IoT roll-outs as demonstrated by partnerships between Arqiva, Cellnex,

EI Towers and Sigfox. The revenue opportunity for towercos in the IoT and smart-city segments is much lower than

for the small-cells segment, but the capex involved is also low. In order to boost the effectiveness of their entry into

the IoT space, towercos must partner with different players as a channel to market.

Opportunities for towercos in the age of 5G


CONTENTSCONTENTS

EXECUTIVE SUMMARY

OPTIONS FOR TOWERCO SMALL-CELL INVOLVEMENT

FINANCIAL IMPACT OF TOWERCO SMALL-CELL ROLL-OUTS

TOWERCO OPPORTUNITIES FOR IoT AND SMART CITIES

ABOUT THE AUTHOR AND ANALYSYS MASON

26

Opportunities for towercos in the age of 5G


About the author

Stephen Wilson (Principal Analyst) contributes research to our Fixed Networks and Wireless Networks research programmes. He joined

Analysys Mason as a Senior Analyst in November 2012, having previously worked for Informa Telecoms & Media. Stephen has more than

5 years of experience of covering the telecoms industry and specialises in analysing fixed broadband access technologies and strategies, as

well as developments in European telecoms markets across fixed and mobile sectors. He has produced reports on DSL acceleration

technologies as well as regular updates on European markets, notably in Central and Eastern Europe. Stephen is a graduate in Politics,

Philosophy and Economics from St Catherine's College, Oxford University.



Analysys Mason’s consulting and research are uniquely positioned

Regional

markets

Digital

economy

Consumer

and SME

services

Telecoms

software and

networks

Regulation

and policy

Strategy

and planning

Transaction

support

CONSULTING

We deliver tangible benefits to clients across the telecoms

industry:

communications and digital service providers, vendors,

financial and strategic investors, private equity and

infrastructure funds, governments, regulators,

broadcasters, and service and content providers

Our sector specialists understand the distinct local challenges

facing clients, in addition to the wider effects of global forces.

We are future-focused and help clients understand the

challenges and opportunities that new technology brings.

RESEARCH

Our dedicated team of analysts track and forecast the

different services accessed by consumers and enterprises.

We offer detailed insight into the software, infrastructure and

technology delivering those services.

Clients benefit from regular and timely intelligence, and direct

access to analysts.

Analysys Mason’s consulting services and research portfolio



Research from Analysys Mason

We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors, through a range

of research programmes that focus on different services and regions of the world.

29

www.analysysmason.com/research

PROGRAMMES

Service Assurance

Service Delivery Platforms

Next-Generation Wireless Networks

Network Orchestration

Software-Controlled Networking

Digital Experience

Customer Care

Revenue Management

Analytics

Service Fulfilment

Telecoms Software Market Shares

Software Forecast and Strategy

PROGRAMMES

Digital Economy Strategies

Future Comms

PROGRAMMES

Mobile Services

Mobile Devices

Fixed Broadband Services

Convergence Strategies

Video StrategiesPROGRAMMES

Network Investment Strategies

Network Traffic

Spectrum

Consumer services

Digital economy

Regional markets

Telecoms software

and networks

Network investment

strategies

PROGRAMMES

Global Telecoms Forecasts

Asia–Pacific

Middle East and Africa

European Country Reports

European Core Forecasts

European Telecoms Market Matrix

Enterprise & IoT

PROGRAMMES

Large Enterprise Voice and Data Connectivity

Large Enterprise Emerging Service Opportunities

Small and Medium Enterprise Strategies

IoT and M2M Solutions

IoT Platforms and Technology



Consulting from Analysys Mason

For 30 years, our consultants have been bringing the benefits of applied intelligence to enable clients around the

world to make the most of their opportunities.

To find out more, please visit www.analysysmason.com/consulting

30

Consultingportfolio

Strategy and planning

Transaction support

EXPERTISE

Commercial due diligence

Regulatory due diligence

Technical due diligence

Regulation

EXPERTISE

Policy development and response

Margin squeeze tests

Analysing regulatory accounts

Expert legal support

Media regulation

Postal sector costing, pricing and regulation

Regulatory economic costing

Net cost of universal service

Performance improvement

EXPERTISE

Market research

Market analysis

Business strategy and planning

Market sizing and forecasting

Benchmarking and best practice

National and regional broadband strategy and implementation

EXPERTISE

Performance analysis

Technology optimisation

Commercial excellence

Transformation services

EXPERTISE

Radio spectrumauction support

Radio spectrummanagement

Spectrum policy and auction support



PUBLISHED BY ANALYSYS MASON LIMITED IN JANUARY 2017

Bush House • North West Wing • Aldwych • London • WC2B 4PJ • UK

Tel: +44 (0)20 7395 9000 • Email: [email protected] • www.analysysmason.com/research • Registered in England No. 5177472

© Analysys Mason Limited 2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic,

mechanical, photocopying, recording or otherwise – without the prior written permission of the publisher.

Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any

client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only.

Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the

normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark.

Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for

loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party.

revenue opportunities for towercos and mnos now … · 2 mnos in developed markets without dense...

Documents