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ISSUE 2 | FEBRUARY 2013 | www.towerxchange.com

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

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

Africa’s New telecoms infrastructure journal

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

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

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

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

Our informal network of advisers:

Alan HarperCEOEaton Towers

Michel FaivreDirecteur Programme Partaged’Infrastructure AMEAFrance Telecom-Orange

Nina TriantisManaging Director, GlobalHead of Telecoms & MediaStandard Bank

Jeffrey EldredgePartnerVinson & Elkins

Torsten EsbjørnRegional Director, AfricaRamboll

Zouhair KhaliqConsultant, Executive DirectorWarid Telecom, Former CEO,Orascom Int’l Investment

Laurentius HumanCEOInala

Chuck GreenCEOHelios Towers Africa

Riana DonaldsonManager: International NetworkOperations SupportVodacom

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

Natasha GoodPartnerFreshfields

Ayman Al AdlAssociate Director – TMTStandard Chartered Bank

Adeel BajwaSenior GM of Legal Affairs andContractsWarid Telecom

Gary StauntonCEOLikusasa Group

Tunde TitilayoCEOSWAP Technologies & Telecomms

Fazal HussainManaging Partner, Deka Globalformer CEOHelios Towers Nigeria

Andrew DoyleManaging DirectorTech & Comms PracticeMott MacDonald

Johan SmithHead – Africa Telecoms GroupKPMG

Rajat MalhotraCEO, Middle East & AfricaHayat Communications

Ahjeeth JaiJaiConsultantInvestec

© 2012 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.

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Cover image courtesy of Camusat

Contents Departments

5 News< African MarketWatch< MTN selling South African towers?< Bharti Infratel’s IPO

10 EditorialHow towercos buy

26 ViewpointWhy tenancy ratios above two will be difficult to achieve in Africa

69 Introduction to infrastructure sharing69 Experiences from the front lines of running a towerco in Ghana103 Booz & Co on how to overcome objections

12 48

827132

Investors’ verdict on the African tower industry

TowerPower – reducing Africa’s reliance on diesel

Who’s who in tower design, manufacture, installation & MS

Leveraging RMS to optimise preventative maintenance

Anatomy of an infrastructure sharing deal

13 Are African towers a bankable investment?16 Standard bank: aggressive bids likely to continue20 Opportunities for new market entrant towercos?22 Perspectives from Hayat Comm’s and Atlas Tower

53 PowerOasis’ “Smart towers”57 Eltek: What hybrid energy can do for Africa’s towers61 How CPS deliver multi-tenant tower power65 How ESCOs can reduce your energy opex by 30-35%

86 Likusasa on connecting the next billion subscribers91 Camusat’s logistics and maintenance best practices96 “What gets measured gets done” at Reime Group100 Leadcom marry passive & active infrastructure

72 From data to intelligence73 Inala’s Laurentius Human on how to identify the smallest capex that yields the biggest return77 Towards just-in-time maintenance with Kentrox

33 Who’s who: lawyers with African tower experience35 Checklist of the data you need buy and sell towers38 Inside the due diligence process with Neil Taylor43 SPAs and MLAs; how to accelerate transactions

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5 | TowerXchange Issue 2 | www.towerxchange.com

News The Libya Herald quotes Malik Shaban of ZTE describing Libya Telecom & Technology’s

strategy to rollout 588 new WiMAX towers to supplement the ISP’s existing 346 towers

Agence Ecofin report that Alpha Telecom Mali has secured the country’s third mobile

licence. Alpha Telecom are believed to have outbid Airtel and Viettel to secure the licence

Tunisie Telecom may be close to selling its majority stake in Mauritanian telco Mattel,

according to Jeune Afrique. France Telecom are believed to be interested

Etisalat, KT Corp and Qtel have confirmed their intention to bid for Vivendi’s 53% stake

in Maroc Telecom

Having completed it’s acquisition of Powercom (Leo) late last year, Telecom

Namibia has awarded a US$46m contract to ZTE to replace Leo’s 2G sites and transfer then dismantle Telecom Namibia’s own CDMA base stations to a new 3G and LTE network

Airtel Nigeria has completed LTE trials in Lagos

Etisalat Nigeria will rollout a further 1,000 base stations with Alcatel-Lucent in 2013 The NCC has given interim approval for the rollout of Capcom, formed from the merger

of CDMA operators Starcomms, Multilinks and MTS Wireless

Angolan market leaders Unitel have launched an LTE service, and have budgeted a $1.35bn

network investment between 2013-15. Rival network Movicel launched LTE in April 2012

Vietnamese operator Viettel has been awarded the coveted third license in Cameroon, beating

Airtel, Monaco Telecom and Korea Telecom. Viettel’s website states “Viettel Cameroon has committed to cover 81% of Cameroon’s territory when it goes operational; and will use 2G and 3G technologies. The domestic experts consider this event as a “big hit for national telecommunications”, bringing a high quality service and cheaper price to Cameroon.”

SMS Mobility has a JV with Camtel to launch a new voice and data MVNO Evatis, mobile brand of Djibouti Telecom, launched a 3.5G service at the end of

December 2012

Africell has raced to over one million subscribers within two months of launch,

leveraging substantial co-locations existing sites operated by Helios Towers Africa

Agence Ecofin reports that Airtel DRC is about to launch 3.5G HSPA+. Tigo, Vodacom and

Africell also acquired 3G licences

France Telecom has rebranded their 2011 acquisition CCT under the Orange brand According to Ahram Online, landline operator Telecom Egypt has sent a release to the stock

exchange expressing an interest in acquiring an MVNO license. Telecom Egypt owns 45% of Vodafone Egypt, who compete with Etisalat Egypt and Mobinil for the Egyptian mobile market

According to Addis Fortune, Huawei and ZTE are bidding US$1.5bn for vendor financed

network expansion projects in Ethiopia, where Ethio Telecom has divided Ethiopia into eleven infrastructure zones and plans to allow only one vendor within each of eleven newly created ‘telecom circles’. The state telco are also finalising negotiations with equipment vendors to introduce LTE in Addis Ababa, with 3.5G HSPA+ in all big cities by 2015

Essar Telecom Kenya’s country manager Madhur Tanejar is quoted in Agence Ecofin

saying they plan to participate in the open access LTE consortium and rollout 4G. Meanwhile local website The Star also quotes Taneja announcing receipt of a US$146.5m capital injection from Essar Group to ease debts and pave the way for a further US$97.7m capex injection in March

African MarketWatch: New licenses, acquisitions and upgrades in briefAngola

Cameroon

Cameroon

Djibouti

DRC

DRC

DRC

Egypt

Ethiopia

Kenya

Libya

Mali

Mauritania

Morocco

Namibia

Nigeria

Nigeria

Nigeria

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MTN selling South African towers?

TMT Finance quote an “unnamed source” that MTN is in “formal discussions” with American Tower to acquire assets in a private sale, rather than through the usual auction process. Tech Central suggests that MTN has “moved to play down the report”. TMT Finance tend to have the ear of certain key investment managers, so there may be enough smoke to suggest a fire, so we’ll explain the obvious reasons why people are putting two and two together in this case. With MTN owning approximately 6,000 towers (and co-located on a further 2,000 towers) in South Africa, if a portfolio of consisting of the majority of their assets did come to market, American Tower may be the only African towerco with immediate access to the necessary capital to partner MTN in such a transaction. That doesn’t preclude Eaton, Helios, IHS or any other new market entrant accessing additional capital of course – we’ve seen many occasions where a winning bid has preceded the announcement of a new tranche of PE. The rumour also makes sense because MTN and American Tower are already working together in joint venture towercos in Ghana and Uganda. In 2010 American Tower paid MTN $218.5m for 1,876 towers and a 51% stake in the joint venture towerco in Ghana. In 2011 American Tower paid MTN $89m for 1,000 towers and a 51% stake in the joint venture towerco in Uganda. American Tower already has a significant presence in South Africa, having acquired 1,400, plus a further 1,800 towers under construction, from Cell C in 2010 for a price of $430m. ATC’s Q3 2012 Quarterly Report suggested they were marketing 1,601 towers in South Africa at that time

Sao Tome and Principe’s regulator Autoridade Geral de Regulacao has invited investors

to tender for the country’s second fixed and mobile telecoms license. National PTO Companhia Santomense de Telecomunicacoes is currently the sole operator

Speculation continues that 8ta’s prized 8.3GHz spectrum might make them an acquisition

target by rival operator Cell C, or a means of Airtel securing an entry into South Africa, who continue to be linked with a move for either 8ta or Cell C

MTN Uganda will deploy LTE in the coming months. MTN currently has 1,100 base stations

in Uganda, where they have a joint venture with American Tower

Sure Telecom tested their first GSM call in December and expects to launch in the first

half of 2013, bringing the total number of operators in Uganda to a dizzying seven

Vodacom Tanzania recently conducted a successful LTE trial in Dar Es Salaam using

NSN’s Single RAN technology

Vodacom were one of more than five operators bidding for the 4th license in Zambia

In local publication TechZim, Telecel Zimbabwe revealed it had 2,582,000 active

mobile subscribers, up 70% year-on-year, and that Telecel had deployed 157 base stations in 2012, with plans to add more in 2013 as well as extending 3G coverage


LTE race is well and truly on in South Africa

MTN South Africa’s LTE network went live on Saturday 1 December 2012 in selected areas of Johannesburg, Pretoria and Durban. MTN are believed to have deployed a total of 1,600 base stations across the three cities. Vodacom reported their 500th LTE base station in early December, adding BSTs at a rate of seven a day. Meanwhile, Cell C have announced the commencement of their LTE trial Johannesburg

Sao Tome & Principe

South Africa

Uganda

Uganda

Tanzania

Zambia

Zimbabwe

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After selling 931 towers to IHS Africa for $151.5m to IHS Africa at the end of 2012, MTN’s long awaited 3G network is launching in Abidjan. Third ranked operator Moov Cote d’Ivoire is also rolling out 3G with the help of Ericsson. Moov’s rollout began in October 2012 and is scheduled to be completed by the end of 2013. MTN and Moov are playing catchup on rival Orange Cote d’Ivoire, who launched 3G in April 2012. MTN and Orange lead Cote d’Ivoire’s market share, with 33-35% of the market each, followed by Moov (Etisalat) with a little over 20% of the market. Comium, Oricel and Café Mobile (Aircom) are also active, with rumours that Maroc Telecom may be interested in acquiring unused spectrum from Warid Telecom.

IHS Africa awarded Middle East & Africa Deal of the Year

IHS, Africa’s largest independent infrastructure tower company by number of towers managed, has won the Middle East & Africa Deal of the Year Award at the TelecomFinance Awards held in London on 30 January 2013. IHS won the award for its US$284 million acquisition of 1,758 mobile network towers in Cote d’Ivoire and Cameroon from MTN Group in October 2012. A member of the independent panel of judges who selected the winners said; “this deal enabled IHS to consolidate its position as a first tier player on the competitive African tower stage.” Under the acquisition terms, MTN becomes the anchor tenant on towers acquired by IHS through a sale- and -leaseback agreement. IHS will manage the mobile network towers and other passive infrastructure. The agreement also included a commitment between the parties for IHS to rollout a build-to-suit programme to support MTN’s future tower requirements in both countries. “The award comes after another strong year for IHS,” said Issam Darwish, CEO of IHS Africa. “We now have over 5,000 towers under management and have raised over $700 million to support our growth across Africa and the Middle East. We are delighted to receive this award and for the team to be recognized for its hard work and dedication to delivering the best value for leading mobile operators in the region.” In a separate interview with Reuters, Darwish said IHS was looking at acquisitions in another six countries on the continent, probably in West or East Africa “Hopefully we can do another 2-3 this year. We plan to own 20,000 sites within the next four years.”

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3G rollouts and a further new market entrant rumoured in crowded Cote d’Ivoire market

Simon McCoy, BBC presenter and host of the TelecomFinance awards ceremony and Steve Howden, M&A and Corporate Finance Director, IHS


Bharti Infratel wasn’t just an important IPO for the tower industry, with potential floats to follow from Viom Networks and Reliance Infratel – it was an important IPO for India as the country’s largest IPO for two years. However, complaints of aggressive pricing made it difficult to draw conclusions from the market’s lukewarm response to the IPO. Bharti Infratel raised $761m (41.7bn rupees) in the IPO, giving the company an initial valuation of $7.6bn, which had fallen 13% by December 28 to $6.6bn.

The aggressively priced IPO at 210 rupees per share

suggested a valuation of $93.6k per tower, which seems toppy compared to the 2010 tower deals between GTL Infrastructure and Aircel at $84.4k per tower and the $78.9k per tower paid by ATC to Essar Telecom – usual qualifiers requiring familiarity of full terms of the deal notwithstanding. Bharti Infratel’s pricing may reflect the realisation of an exit for some existing investors – although when KKR invested $250m in 2008, it valued Bharti Infratel at $12.5bn. Bharti Infratel’s share price rallied through January, trading in the low 200’s and climbing to a high of 220


rupees, before settling back to 190 rupees at time of press. Is Infratel’s valuation symptomatic of investor coolness toward the tower industry, or toward the India economy? According to the Wall Street Journal “Bharti Infratel’s flop on listing shows the fragility of the (Indian) market... The issue price also made the IPO expensive compared to other infrastructure companies trading on India’s exchanges, some analysts said.”

Firstpost agreed: “The primary market in India is teetering. Retail investors are yet to get their confidence back. Bharti Infratel’s almost-flop IPO is another proof of this… Bharti Infratel is priced more than 48 times its earnings even at the lower end of the price band. If the company had expected that investors will make a beeline for the shares at this valuation, it is in a fool’s paradise. Given the turbulent phase the telecom sector in India is going through, it would have been a surprise if the issue elicited a better response.”

An analysis of the subscriptions could be interpreted more positively. While retail investors were reported to have taken only 20% of their allocation, the appetite of tower industry-savvy institutional investors carried demand to 1.3 times the shares on offer, underwhelming but over the finish line nonetheless. Indeed, some analysts suggested Bharti Infratel’s poor business fundamentals compared to international competitors, and Bharti’s focus on the challenging domestic Indian market, may have suppressed demand.

Bharti Infratel operates 34,220 towers, and plans to use funds raised from the IPO for dividends and to invest in a further 5,000 towers

The implications of the lukewarm response to Bharti Infratel’s IPOAggressive pricing and challenging conditions in India mean the IPO tells us very little

18028 Dec 2012 07 Jan 2013 15 Jan 2013 23 Jan 2013 31 Jan 2013 08 Feb 2013

190

200

210

220 Bharti Infratel’s share price

| TowerXchange Issue 2 | www.towerxchange.com8

Accelerate your sales cycle and close your next major deal in AfricaAdvertise in the TowerXchange Journal, circulated to a highly targeted community of the 1,868 most influential tower decision makers

To book your advertisement, contact: Kieron Osmotherly | [email protected] | M. +44 (0) 7771 148001

27%

4%

16%

11%11%

10%

10%

9%

3%

OperatorsTurnkey & managed servicesTowercosPower equipment & ESCOsInvestors & advisersPassive equipment providersActive equipment & servicesRegulatorsOthers

Sub-Saharan Africa

MENA

Americas

Europe

Asia

45%

10%

22%

18%

5%

C-level

VP, Exec Director, Partner

Director-level/Dept Head

Senior Manager/Managing Exec

Middle & Junior Manager

24%

17%

13%

2%

44%

stock in order to meet the towercos’ own exacting mean time to repair and installation requirements within SLAs with tenants. Once you get beyond the deal-making / real estate management “top layer” of a towerco, the tower operators are obsessive-compulsive about uptime, yet many outsource much of the O&M process, so they can and should be demanding clients. Selling to towercos is reportedly a case of “slow, slow, quick, quick, QUICK!” One vendor spoke of it taking three years to progress from concept to purchase order with one of Africa’s leading towercos, complicated by requirements for public tendering. He described a procurement process that was stringent and complex, but noted that while towercos are very precise in their due diligence, when a decision is taken towercos move at 100mph – expedience is key, and they involve new vendors in a military-like process to get new equipment installed swiftly. We’ve seen few instances of towercos agreeing exclusive supplier agreements within a given category. One towerco executive talked of having supplier agreements with three of four generator manufacturers, and a requirement that each keep stock on hold for them as towercos don’t like to keep their clients waiting. Despite exclusive contracts being rare, towercos can be high value clients in terms of volume. Towercos know this and will negotiate hard on price. But they all assure us that they try not to squeeze margins to the extent that suppliers business is threatened! If

In this our second issue, TowerXchange starts a long journey to profile proven innovative equipment and managed service providers to Africa’s telecoms infrastructure community, interviewing senior executives at companies with a demonstrable track record of saving energy and maintenance opex, and optimising rollout and retrofit capex. The selection of the right equipment and managed services partners, and the identification of innovations that yield the best opex saving for the lowest capex, are both critical decisions for tower operators, whether MNOs or independent towercos. So this edition seems like a good time to consider

the impact of the entry of independent tower companies on that supply chain, and to ask “how do towercos buy?” Towercos account for an increasing proportion of Africa’s greenfield and retrofit expenditureGiven the significant proportion of new build-to-suit contracts being secured by towercos, together with the pent-up maintenance and capacity upgrade investments a tower transaction can release, it’s clear that tower companies are critical prospects for Africa’s passive equipment, EPC and managed service providers. A new class of energy equipment, RMS and managed services providers vendors has emerged who aspire to be strategic partners “on the same side of the negotiating table” as tower companies. Independent tower companies rightly have a reputation as canny buyersEach towerco operates a rigorous process for the selection of new suppliers, always with in-house procurement teams, often governed by procurement committees that go all the way up to board level. Towercos can be very demanding when it comes to delivery time and maintenance of warehouse

EditorialHow towercos buy

Kieron Osmotherly, TowerXchange Founder


critical to the success of towercos as maximising tenancy ratios, so choosing the right vendor is critical. We hope you find TowerXchange’s exploration of the tower industry supply chain useful. As ever, if you have any comments or want to recommend a company to be featured in a future edition, please feel free to contact me!

All the best,

Kieron OsmotherlyFounder, TowerXchange

M. +44 (0) 7771 [email protected]

O&M service providers are lucky enough to secure a contract with a towerco, don’t be surprised if they tender maintenance contracts annually or bi-annually – this seems to be standard practice. Where do towercos invest first when they’ve acquired a new portfolio of towers? Upgrading capacity, deep cycle batteries, line conditioning and RMS are popular The CEO of one towerco said they focused their initial investments post-acquisition on better mechanisms for refueling, on connecting RMS to the NOC, and on other measures to improve security on sites. The local CEO of a different African towerco said their first priority has been cleaning the energy supply; replacing old copper wires with voltage regulators. A third CEO suggested that the entry of towercos into a new market was a particular opportunity for power equipment vendors because operators had been running sites for a single power user, while towercos would need to upgrade sites with capacity to load more tenants and that means generators need to be enhanced, resized and upgraded. His first measure was to invest in technologies such as deep cycle batteries that reduced run time and associated fuel costs, while he was also installing RMS. Eaton Towers tend to do their own power management, and decide, define and design what equipment to install at sites to improve power efficiency and therefore site level profitability.

Eaton subcontracts new site installation and maintenance. Maintenance contractsThe entry of towercos into a market may herald the consolidation of supplier contracts. Where operators’ legacy contracts might see multiple partners engaged in security maintenance and fuel delivery, towercos are often inclined to bundle this into fewer, longer term contracts. But every towerco takes a different approach. Another towerco cited the importance of managing multiple regional suppliers to operate sites economically. One of the unspoken truths of tower transactions is that MNOs may defer non-essential maintenance when they know they’re going to sell their towers, so the completion of a transaction can release pent up O&M expenditure.

Energy equipment and ESCOsA sensible question energy equipment vendors and ESCOs should ask towercos is whether the structure of their sale and leaseback or operational lease deal includes a power pass through model. If power costs are passed through to the tenant, then the MNO retains full exposure to power opex. If the towerco takes on the risk of energy consumption, they are much more likely to be inclined to invest in energy opex reduction innovations. Towercos create value by reducing opex – primarily energy and maintenance opex. On pages 26-31 of this edition, AT Kearney go so far as to contend that maximising site level profitability is almost as


Thanks Camusat for the use of your images!


Special Feature:

In this special feature, TowerXchange looks at the African telecoms infrastructure landscape, and her emerging tower industry from the perspective of the investor. What constitutes a bankable opportunity in Africa? How do debt and equity investors view the existing ‘Big Four’ towercos in Africa? Are there still opportunities for new market entrants? TowerXchange has spoken to douzens of leading investors to ascertain their views on the market. Some are bullish, some more cautious; this special feature explains why…

Investors’ verdict on the African tower industry

Highlights of this special feature:13 Are African towers a bankable investment?16 Aggressive bids likely to continue, according to Nina Triantis of Standard Bank20 Are there opportunities for new market entrant towercos in Africa?22 Hayat Communications move up the value chain24 Atlas Tower assessing opportunities in Africa

If the African telecoms infrastructure market is restructured to anything like the extent of the Indian market, where 85% of towers are owned by independent towercos, then Africa’s towercos are going to need capital to finance plenty more acquisitions – only 5-10% of Africa’s towers have transferred from operator-captive to towercos to date. Meanwhile, Mott MacDonald predict that twice as many Points of Service are needed in most African markets. Tens of thousands of towers are needed to complete the rollout of mobile networks in Africa. Towercos often secure preferred bidder status on build-to-suit agreements, supplementing the value of sale and leaseback deals. Many installation contractors report that towercos already represent the lion’s share of greenfield site builds in certain markets in Africa. Towercos can access only so much debt finance to back tower, transmission and build-to-suit investments. It takes some serious capital to acquire infrastructure assets, and the risks are high enough that Private Equity is often required. The biggest risk remains that key players become over leveraged, but ultimately these are real assets that investors are lending against. There is some valuation risk in paying premium prices to enter a market, but it’s justified by the need to build a brand as a credible player with towers under your belt – with their aggressive bids to date in Africa, the ‘Big Four’ towercos are buying market share.

Are African towers a bankable investment?US$billions of capital needed as networks expand and towers change hands


Read this article to learn:< Why the African tower industry is attracting US$billions of investment

< How investors evaluate the bankability of tower opportunities

< Where investors see the risks in African towers

< How towercos create value through tenancy ratios above two and by reducing opex

Keywords: Raising Finance, Build-to-Suit, Risk, Private Equity, Debt Finance, Aggressive Bids, Bankability, Tenancy Ratios, Credit Worthiness, Infrastructure Sharing, Africa, CPS, Macquarie, IFC, Investec

American Tower, Eaton Towers, Helios Towers Africa and IHS Africa, the ‘Big Four’ market leading towercos in Africa, are all well financed. All four have the credibility of having completed multiple tower transactions in Africa. But with tens of thousands of towers expected to come to market in Africa, it is clear that US$billions of investment is needed.

How investors evaluate opportunities in African telecom towersInvestment opportunities in African towers look good on paper. “The maths and the market dynamics are right. While we haven’t made any investments in African towers yet, it’s a case of finding the right investment in terms of size and returns,” said a senior director at one Infrastructure Fund. “It’s clear that African Mobile Network Operators are committed to infrastructure sharing, but what we’re looking for is a bankable opportunity with a package of assets that lend themselves to co-location, and a clear path to a profitable business.”

As former CEO of Zain Africa (now Airtel) and current Chairman of Clean Power Systems, Chris Gabriel has extensive experience in African towers from the operator, vendor and investor perspective. Another of Chris’ current roles is as Senior Adviser to Macquarie Bank, with a remit to advise on global telco infrastructure deals and establish an EMEA portfolio of independently owned shared mobile tower and site infrastructure businesses.

We asked Gabriel for his views on the African tower market. “Infrastructure sharing is evolving, predominantly driven by price competition, shrinking margins and shorter technology life-cycles. It is already underway in several African countries including Ghana, Tanzania and Uganda, and has just spread into Cameroon and Cote d’Ivoire. While there’s a good volume of potential deals at discussion stage, this remains a formative market. Not every market in Africa is ready for

tower sharing. Critical factors underpinning the success of tower companies include the number of existing and potential new operator licences, market growth (particularly data), tower lease-up potential (also known as the tenancy ratio), and political and economic stability.” TowerXchange spoke to Andres Millan-Drews, Principal Investment Officer at the IFC. “IFC has supported several players to fund both bids and organic growth,” says Millan-Drews, who continues: “Investors are interested in operational risk, as downtime can incur substantial fines, so it’s not just about tenancy ratios. The margins may be smaller in Africa, but overall EBITDA is higher than Latin America, for example, as rent is more expensive.” Chris Gabriel takes up the discussion: “With the proliferation of new operator licences, new entrants seek to compete predominantly on price - this, coupled with shorter technology life cycles means that the stand-alone network build and capex

models of the past are unsustainable. Sale and lease back of towers makes sense from a financial point of view – freeing up capital to focus on creating customer value and spreading the network cost as an operating expense. In the Unites States we have seen that extracting towers from the telco into a separate tower company has seen resultant valuations three to three and half times greater than that within the telco. The attractiveness of tower companies to potential investors lies in the predictable cashflows, long terms leases and solid tenants – tower portfolios are a very saleable asset.” “A lease up rate approaching 1.8-2.0 sees solid returns for the tower company. A lease up rate above 2 is where you start to see exponential value creation. Succeeding in African towers is also about operating efficiencies – reducing cost of service through streamlined methods and processes; reducing opex and capex through scale logistics; and optimising energy costs (power and diesel) through a combination of alternative energy solutions, including hybrid power, solar and wind energy. Opex savings well above 50% have already been realised by numerous operators through deployment of such alternative energy solutions,” concludes Gabriel.

Overcoming investor concernsSo, what is putting off some investors? “Our interest in telecoms towers has reduced because expectations are tough to realize. Towers are a risky and expensive business in Africa with political and currency risk, tribal issues and at times governments seem to treat telecoms as a cash cow,


with new taxes and fees,” said one investor.Another investor expressed concerns about the credit worthiness of second tier operator anchor tenants, and about the lack of transparency in the market, saying: “we are somewhat risk averse in telecoms. Competition in Africa often means only the number one and number two operators in a market are financially viable, and often it’s only the third, fourth or fifth ranked operators who want to sell their towers. When evaluating these opportunities, a credit assessment of the anchor tenant is critical, as is an evaluation of the market for new towers, for new technology upgrades, and for data growth.” “Can the towerco management generate additional sales?” He continued, “Co-location ratios are critical. One of our biggest challenges is the lack of data about how pioneering deals have progressed – have tenancy ratios been achieved? We don’t

know. Given the huge capital involved in these transactions, and the lack of information, we’re cautious about investing.” TowerXchange spoke to another company with a track record of substantial investments in telecoms in Africa and the Middle East. A couple of years ago they evaluated African tower investments. They felt that valuations were overhyped. They were underwhelmed by the tenancy ratios being achieved at the time. And they felt the 20-25% equity returns they were seeking weren’t possible. They were concerned that profitable African operators were disinclined to entertain the short-term cash-in of their towers, and preferred the long term future proofing and competitive advantage of retaining control of the network. This sounded like a reasonable analysis of some markets where coverage remains a key differentiator. But where coverage is becoming commoditised and QoS becomes the critical differentiator, operators’ are recognising the opportunity to release stranded assets on their balance sheet and share infrastructure. For example, MTN are happy to say that their tower sale and leasebacks in Ghana and Uganda have been a success, and they have subsequently agreed deals in Cameroon and Côte d’Ivoire. As joint venture partners, the deal structures in Ghana and Uganda look as favourable to MTN in the long term as in the short term. Perhaps if the unsatisfied investor repeated their analysis today, they might find a more attractive

tower market in Africa. Bankable opportunitiesTowerXchange spoke to Ahjeeth JaiJai at Investec, who have co-funded a towerco deal in Tanzania. We asked JaiJai how passive infrastructure sharing deals rate on the risk / return scale, particularly in the current economic climate, when investment funds aren’t as forthcoming as they once were. “Equity and debt funding have different appetites. Towerco multiples are very attractive for the equity investor, given that towerco multiples are generally higher than those of Mobile Network Operators. The debt finance option represents access to quality credit at attractive margins.” How do investors determine how bankable an infrastructure sharing project is?“Lendors are looking for a package of assets that lend themselves to co-location. Lenders also have to be sure SLAs are met. Performance and track record are key, as are tenancy ratios. Local knowledge is critical – this is the gap for new market entrants. Ultimately, we’re looking for a clear path to a profitable business,” concluded JaiJai. The investment community has the full range of attitudes toward African towers. Investors familiar with the unique machinations of the tower industry are bullish. For more cautious investors, the lack of transparency in African towers remains a problem – a problem TowerXchange will do our part to ease, whilst respecting the confidentiality of Africa’s tower industry pioneers!


“ “When evaluating these opportunities, a credit assessment of the anchor tenant is critical, as is an evaluation of the market for new towers, for new technology upgrades, and for data growth

Aggressive bids likely to continue as African tower industry maturesStandard Bank’s verdict on the tower operators bidding for Africa’s infrastructure assets

Nina Triantis, MD & Global Head of Telecoms and Media at Standard Bank


TowerXchange: Are Africa’s towercos paying a justifiable premium for first mover advantage? Indeed are first mover operators realising a good price? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: There are significant market differences in the performance of the tower industry. For example, in Indonesia, Tower Bersama has created phenomenal equity value with nearly 80% EBITDA margins, while there are less attractive markets such as India. It’s hard to judge where Africa will end up on that continuum. Tower operators have been keen to establish a footprint in Africa. Helios have certainly benefitted from being first to market, as they’re the sole tower operator in Tanzania and DRC. It’s always difficult to judge tower transactions as so much depends on the fine print that is not publicly available. For example, tower portfolios changed hands for a high price in Uganda last year, but much depends on the terms and Uganda is a good market. The Aga Khan is looking to build out in several countries in East Africa, and as long as the towerco has a good anchor tenant, even if not all lower ranked operators survive, the tower operator still gets a boost of revenue. By all accounts MTN are very happy with their recent deals with IHS Africa in West Africa. Ivory Coast is a highly sought after market, with another one or two additional operators possibly entering the market. Cameroon has two active operators

Read this article to learn:< Are Africa’s towercos paying a premium for first mover advantage?< Comparing the funding, cost of capital, experience, appetite for risk and aggressive bidding of American Tower, Eaton Towers, Helios Towers Africa and IHS Africa< What comes first, the investment or the bid?< Do the ‘Big Four’ towercos have the ‘digestive capacity’ to acquire all the towers coming to market in Africa?

Keywords: Creating Equity Value, Aggressive Bidding, Cost of Capital, Country Risk, Infrastructure Funds, Private Equity Funding, RoI, Tenancy Ratios, Site Level Profitability, New Market Entrants, Infrastructure Sharing, Africa, Ghana, Uganda, Indonesia, Nigeria, Tower Bersama, American Tower, Eaton Towers, Helios Towers Africa, IHS Africa

Standard Bank is Africa’s largest financial institution with a presence in eighteen countries, offering corporate, investment and retail banking. Standard Bank has had a TMT focus since 1998 and has followed the major operators since then to maturity. Standard Bank was an early stage investor in Celtel. Standard Bank has been financing the tower industry in Africa since 2010 and has led a number of the more recent transactions including in Ghana, Tanzania and Uganda. Standard Bank is also an adviser in the tower business, and has an active current mandate in Africa. TowerXchange spoke to Nina Triantis, Managing Director and Global Head of Telecoms and Media at Standard Bank.

with a third license pending. There’s a fine balance to be struck for tower operators gaining a foothold in Africa. While none have reached the scale of 10,000+ towers, 5,000 towers is an interesting scale in Africa. For example, Tower Bersama don’t have 10,000 towers, but they’re in a very good position in a single market in Indonesia, and would certainly be considered a mature tower operator. TowerXchange: Are three towercos in Ghana too many? Would tower operators shy away from having three compete in a single market again? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: The competitive spirit may drive tower operators to bid for any assets even if they are the third operator or are late to market, but a lot depends on the attractiveness of the market, including the number of mobile operators. Ghana is a highly competitive market from an MNO perspective. Whether three tower operators can prosper in a single country also depends on the extent to

which existing networks overlap. Also, if it’s not an aggressive deal, the tower operator can still make a decent ROI on a lower tenancy ratio. There is still considerable investment in 3G to come in Africa, and there are still capacity issues. The aggressive bids we’ve seen in the African tower industry aren’t going to stop, although some tower operators have the luxury of being a bit more measured than others. TowerXchange: I guess you’re talking about American Tower… Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: American Tower has tremendous opportunity – they’re the only true global tower company. They have capital, but they’re disciplined and have the luxury of being able to pick and choose markets. American Tower’s appetite for African opportunities has a lot to do with country risk. They’re cautious where they go, like a lot of other US companies, hence doing their first deals in South Africa and Ghana. American Tower has lots of opportunities in Latin America and they seem to be more comfortable there. TowerXchange: Does American Towers’ cost of capital mean they are best placed to finance deal structures focusing on cash release, or are the other players in the sector well enough funded to compete for such opportunities?


Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: Whilst American Tower may have the deepest pockets and the lowest cost of capital, all tower operators appear to have access to capital, depending on the size of the transaction. IHS, Eaton and Helios are backed by private equity so have a disadvantage in their higher cost of capital as compared to American Tower. However, sizable transactions all need additional capital, and many current investors are already maxed out. Helios Towers Africa has some substantial backers. IHS has a more diverse capital base and Eaton Towers has the backing of Capital International. TowerXchange: Are investors looking for opportunities in the African tower market – or do tower operators have to work hard to find capital? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: There is interest in African towers. A couple of infrastructure funds that haven’t invested may be interested, but for most investors the tower industry is part of the telecoms sector. The majority of the capital accessible to this market isn’t going to come from pureplay infrastructure funds. It’s a difficult task to raise funds. While a lot of investors buy into the tower industry business model, not everyone will take country risk, or accept the seemingly long lead time to earn a

“ “

American Tower’s appetite for African opportunities has a lot to do with country risk

respectable return. This is often a chicken and egg situation as investors do not want to blindly provide capital, equally, tower companies do not want to enter into contracts without financing in place.

TowerXchange: Do the tower operators need to secure the investment first before they can make a credible bid, or do the investors need to see a winning bid before they’ll invest in the towerco? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: Tower operators raise capital in different ways. For example, Capital International invested in Eaton when they only had their deal in Ghana, for which Eaton already had an equity partner, so Capital International took a leap of faith in future deals. In other instances, letters of intent for build to suit orders may help secure investment.

When Helios raised money the first time around the potential of the industry was obvious, but it’s become progressively more difficult to access capital. Investors are concerned about aggressive bids and deal prices, and are concerned about the amount of time it will take to achieve decent return on investment in the mid-twenties or higher. TowerXchange: From an investor’s perspective, what do you see as the differences between Africa’s ‘big 4’ towercos (IHS, ATC, Helios, Eaton)? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: All four are viewed as good tower operators, although it’s quite a simple business. They’re all focused on operational excellence. Some are better institutional buys than others – some are more “corporate”. It’s possible that some may be acquired in the future. And there are differences in how aggressive they may be when bidding for opportunities. We’ve spoken about American Tower, who are in a category of their own. Investors will differentiate between them and players that are PE funded. American Tower were initially the least experienced “African” operator whereas IHS Africa and Helios had a few more years of African experience from where the independent tower model originated in Nigeria, albeit with the CDMA operators as tenants. Whilst Eaton Towers started later in Africa, its principals have extensive experience in the


African cellular industry, and hence are very knowledgeable. IHS Africa was initially focused on managed services and has over time been phasing that business out and building the co-location business. As a result IHS are strong on engineering skills. I wouldn’t be surprised to see tower operators moving toward outsourcing because managed services is a lower margin business with a high cost base. The newer tower operators outsource more, for example Helios Towers Nigeria does more in-house than Helios Towers Africa. As in any business, PE won’t invest if the valuation is regarded as high, or if they don’t think they can achieve targeted returns within a given timeline. Positioning and pipeline are key; whether that tower operator has the opportunity to invest in sensible deals. TowerXchange: Are the business plans targeting tenancy ratios between 2.3 and 2.6 achievable? Can tower operators offset any shortfall by investing in energy opex reduction to improve site-level profitability? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: We’ve seen a lot of reasonable business plans. Tenancy ratios are more or less on target but haven’t exceeded expectations in some instances, in other instances tenancy ratios are reaching or slightly exceeding two. 2.6 might be a bit aggressive, but tenancy ratios

Seemingly long lead time to earn a respectable return

aren’t the only measure of success. Tower Bersama is valued at nearly 17-18 times EBITDA, on a tenancy ratio of 1.6, but with a much higher prospective tenancy ratio. I think tower operators are focused on site-level profitability, particularly on reducing energy opex. While lots of management time has had to be devoted to getting deals and securing funding, tower companies also have to focus on cost and other operational issues. Tower operators will continue to do a lot of M&A, but I suspect many are minded to do a certain number of deals then focus on operational excellence. There are a mind-boggling array of potential energy saving solutions, choosing the right investment remains a challenge, and when tested they don’t always deliver what they promised. TowerXchange: If Africa eventually goes the way of India, in the sense that 80%+ of towers are transferred from operator-captive to independent towercos, do Africa’s ‘Big Four’ towercos have the ‘digestive capacity’ to acquire all the towers coming to market, or is there a gap in the market for additional players? Nina Triantis, Managing Director, Global Head of Telecoms and Media, Standard Bank: I’m conservative as to the scale of opportunity in Africa. There are only going to be so many towers from a logistical and permitting perspective, and some of the numbers suggested are pie in the sky. Africa is a collection of a large number of countries

There is more capital to be raised to do all the deals, but yes I think the existing tower operators are able to do those deals. It seems that the market is accelerating, though is still moving more slowly than originally anticipated. It may be difficult for new tower operators to get into Africa at this stage. Mobile Network Operators are very protective of their towers, and are disinclined to entrust them to a company without experience. New regional tower operators may emerge from strong local relationships, but will find attracting funding difficult. The African tower market is already quite competitive. Rational competition, with tower operators achieving larger scale, is good for investors. We could see operators doing transactions to manage their towers jointly, although this has yet to happen in scale. Some local operators have hived off assets in anticipation of this, but even Airtel has become one of the best tenants on everybody else’s towers!


“ “It may be difficult for new tower operators to get into Africa at this stage. Mobile Network Operators are very protective of their towers, and are disinclined to entrust them to a company without experience

– I don’t think tower operators will go absolutely everywhere, at least not in the short term. There will be focus on the part of sellers and buyers on the countries that make the most sense. If certain transactions involving thousands of towers came to market today, none of the tower operators except American Tower would be able to win the deal without raising substantial additional equity. To clarify that point, American Tower maintains an edge as their capital is immediately available, but the other three major African towercos now all have the backing of large and significant institutional shareholders, so raising the capital required for a big deal will be easier than it would have been at the outset.

Are there opportunities for new market entrant towercos in Africa?Do new entrants have the necessary competence, experience and funding?


TowerXchange are tracking several potential new market entrant tower companies who maintain a watching brief, or who are actively bidding, on Africa’s telecom infrastructure assets. Prospective new market entrants come from three categories:< Turnkey infrastructure and managed service providers moving up the value chain, often fronting consortia that include investors< Niche market towercos building upon localised portfolios< International tower companies diversifying their asset portfolio A fourth alternative category of potential new market entrant is operator-led tower companies such as Airtel’s Africa Towers and TELMA’s TowerCo of Madagascar. TowerXchange will be taking a closer look at operator-led towercos in a future special feature. Competence, experience and funding critical for new market entrantsThe leading tower decision maker at one of Africa’s leading operators is skeptical that there is much room in the market for new entrant tower companies. “It’s a tough market for new entrants,” he said. “These assets are sensitive. The competence, experience and funding of any prospective partner are critical. Why would we trust the crown jewels of our network to anyone but the most proven partners?” With four established towercos already commanding portfolios of thousands of African towers, at least one major

Read this article to learn:< What are the fundamental criteria MNOs use to evaluate towerco partners and how do prospective

new market entrants measure up?

< The credentials of turnkey infrastructure providers as potential towerco partners

< The criticality of tower industry experience in the management team

< Why the “goldrush fever” for African towers may preclude the participation of new market entrants

< The value of first mover advantage which the ‘Big Four’ have paid a premium for

Keywords: New Market Entrants, Towercos, Auctions, Aggressive Bids, Turnkey Infrastructure Providers, Economies of Scale, Infrastructure Sharing, Africa, India, Europe, United States, America Tower, Eaton Towers, Helios Towers Africa, IHS Africa, Hayat Communications, Alcazar Capital, Helios Towers Nigeria, SWAP Technologies, Bharti Infratel, Atlas Tower

Are there gaps in the African tower market for new entrants? Is the aggressive bidding of the ‘Big Four’ towercos pricing would-be competitors out of the market? Would new market entrants satisfy MNO’s criteria for towerco partners with “competence, experience and funding”? TowerXchange addresses these questions and talks to towercos who exemplify three categories of potential new market entrants – turnkey infrastructure providers moving up the value chain, niche market towercos, and international towercos diversifying their portfolio.

operator doesn’t anticipate any more flourishing. Let’s take a look at the characteristics of each of those categories of potential new entrant towercos, consider how they fare against the “competence, experience and funding” criteria, and look an example from each category.

The hero of this category is IHS Africa, who built a reputation for engineering excellence building and selling tenancies on their own towers in Nigeria, while managing towers on behalf of third party owners in Nigeria, Sudan and Ghana. IHS graduated from respected managed service provider to become Africa’s leading towerco (by number of towers owned and managed) by winning a fiercely competitive auction for 1,758 of MTN’s towers in Cameroon and Cote d’Ivoire, and backed by $125m of equity investment from European investment firm Wendel and its subsidiary Oranje-Nassau. IHS are proof that companies can make the breakthrough from managed service provider to credible bidder for African tower portfolios. Prospective new market entrants in this category have the advantage of substantial experience of the logistics of installing and maintaining towers in Africa. They know how to navigate the specific requirements of leasing and permitting authorities in local markets. They know how to deliver steelwork to remote locations within tight delivery timescales. They have the engineering capability to reverse engineer an acquired tower that lacks CAD drawings. They are comfortable taking on the risk of selecting and implementing the right energy equipment and services, and the RMS systems to manage assets from their NOC. They know


how to get maintenance crews to sites during the rainy season when roads are impassable to everyone else. In short, prospective new market entrants with a turnkey infrastructure provision pedigree in Africa have proved that they have the “competence” and “experience” to be trusted with crown jewel assets. All the turnkey infrastructure players might lack is the real estate and investment management skills of the pureplay towerco. Blend in some seasoned tower industry veterans in the management team to tick the “real estate” box, and a private equity investment partner to tick the “investment management” and “funding” boxes, and you might have the ingredients for a highly credible bidder

“ “prospective new market entrants with a turnkey infrastructure provision pedigree in Africa have proved that they have the “competence” and “experience” to be trusted with crown jewel assets

Turnkey infrastructure and managed service providers moving up the value chain

To get a stronger sense of the perspective of players in the “Turnkey infrastructure moving up the value chain” category, TowerXchange spoke to Rajat Malhotra, CEO for the Middle East and Africa at Hayat Communications

TowerXchange: Thanks for talking to us today Rajat. Please tell us a bit about Hayat Communications – where do you fit in the telecoms infrastructure ecosystem, particularly in Africa? Rajat Malhotra, CEO, MEA, Hayat Communications: We design, build and operate networks, providing turnkey services, systems integration and managed services. Our Managed Services include first line, second line, front office, back office, core, as well as running the NOC/Trouble Ticket System. Most of our services are executed in-house, avoiding middle man mark-ups, and more importantly ensuring KPIs and SLAs.

We’re also actively bidding for tower portfolios across Africa, Asia, and the Middle East. The financial backing we have from our partners means we have a good appetite for risk and investment to lower opex. We tend to favour countries where we have a presence on the ground. TowerXchange: What can you tell us about Hayat’s financial credentials, and your experience of acquiring tower portfolios?

Rajat Malhotra, CEO, MEA, Hayat Communications: As a public company, Hayat Communications has

some $30m of paid-up capital, and a market cap that varies between $40-100m.We partner with a number of private equity firms across the region that are interested in making a play in the telecom infrastructure space.

Hayat Communications and Alcazar Capital are currently engaged in a tower transaction in Vietnam. We’ve already established a team on the ground and are in discussions with multiple sellers and tenants. Vietnam is an attractive market for foreign investment and also has enough room for a tower player to grow. Highly fragmented tower ownership allows us a lot of flexibility on how to approach the tower space.

We’re also looking at additional transactions in Asia and sub-saharan Africa. TowerXchange: Do you believe managed services should be delivered using in-house resources, or is it a case of subcontracting to local market experts? Rajat Malhotra, CEO, MEA, Hayat Communications: We find we can deliver quality services faster, meeting and exceeding customer expectations by provisioning most services in-house. We have 1,200-1,500 staff, about 30% of our workforce fluctuates depending on active projects. Around 98% of those staff are technical resources (engineers, technicians and project managers).

Occasionally we will outsource non-core services. For example when we construct a site we would subcontract the concrete foundations, but focus on erecting the tower and installing the equipment with our own teams.


We would provide energy management services, but subcontract filling of diesel and the related fleet management of trucks. Similarly, we keep site acquisition in-house much of the time, but sometimes work with local real estate companies in complex markets where they may better access to landlords as well as a larger database. The Service Level Agreements in managed services are tight; we don’t want the risk of outsourcing. Approximately 400-500 of our staff are focused purely on managed services. TowerXchange: Why should operators outsource to specialist infracos such as Hayat? Why can you deliver the same services cheaper than the operators’ own in-house teams? Rajat Malhotra, CEO, MEA, Hayat Communications: In our opinion, the operators role is to finance and envision the network, and once it’s built, to focus on the customer. Just as it is not practical (or necessary) for the operator to manufacture their own telecom equipment, they also don’t need to focus on building networks. Building infrastructure is our actual business model, whereas for an operator, it’s a means to an end – a platform for delivering their core services. As a result, we are more focused on finding ways to be leaner and more efficient in delivery. The same applies to Managed Services. The size of our organisation compared to an operator, allows us to operate more cost-efficiently. Additionally, using the same teams that constructed the network to maintain

Hayat Communications move up the value chain


There are not a lot of small entrepreneurial towercos in Africa, so this is a small category. Perhaps the most historically significant player here is Helios Towers Nigeria, one of the pioneers of the tower industry in Africa. But HTN are not a new market entrant, and their pan-African expansion is fulfilled through a separate entity in Helios Towers Africa. Another example from the niche market towerco category also hails from West Africa. “SWAP Technologies have been in the build-to-suit market since 2005 and did the first towerco deal in Africa with Zoom Network in May 2009, followed by a deal with Starcomms in August 2010,” says the company’s Chief Executive Tunde Titilayo. Helios Towers Nigeria and SWAP Telecoms and Technologies make the ‘Big Four’ a ‘Big Six’ in West

Africa – SWAP’s portfolio extends beyond Nigeria. “Our footprint includes over 700 owned towers in Nigeria, we’re managing towers for MTN and others in Ghana, and we were the first towerco in Côte d’Ivoire.” Where would SWAP seek to expand, and do they have the funding to participate in capital intensive deal structures? “We’ll continue to focus on West Africa and are interested in all types of infrastructure sharing deals,” concludes Titilayo. Niche market towercos building upon localised portfolios have “competence” and “experience” from the front lines of the African tower industry. If they are backed by solid funding, then players in this category can be credible bidders too

Niche market towercos building upon localised portfoliosit allows a quicker and more accurate response. Our teams understand it, because they built it.

TowerXchange: How has the managed services market changed since Hayat first got into the business six years ago? Rajat Malhotra, CEO, MEA, Hayat Communications: The biggest change has been the privatisation of state-owned operators, and the entry of second and third operators into several markets. Those new entrants were more willing to outsource, and when they did, there were dramatic opex savings realized. Then the OEMs started seeing managed services as a growth area. Again, it wasn’t just about reduced headcount; the focus is increasingly on saving energy, and on energy management skills. At first managed services were purely passive infrastructure – civil and electrical – but with the emergence of reliable local service partners, it wasn’t long before the scope of work started to include active, radio, and microwave equipment. While managed services pricing per site is likely a third of what it was five years ago, volume has gone up and has allowed companies such as ours to establish scale. There are still areas that are considered off-limits for outsourcing with some clients, such as core and second line support, but we see these barriers coming down as well. With both operators and OEMs looking to reduce headcount, companies like Hayat are being counted on to absorb high level resources and provide these services directly

The hero of this category is of course American Tower, who in Q2 2012 announced that their international segment had generated higher commenced new business than their domestic segment for the first time in their history. American Tower, and indeed their US domestic market rivals Crown Castle, have been great proving grounds for some of the greatest minds in towers. A lot of their former senior executives are now on the management teams of some of the most successful towercos in emerging markets. Of course there’s Chuck Green at HTA, formerly CFO at Crown Castle. Jim Eisenstein, once ATC’s Chief Development Officer, heads up Grupo TorreSur in Latin America, while former ATC Vice Chairman and President of their international division Michael Gearon is a leading mind behind Protelindo in Indonesia. If you see an ex-ATC or Crown Castle Director on the management team of a new entrant


towerco, you should expect them to be credible players. But this is an article about new entrant towercos, and American Tower is anything but a new market entrant!

What about new market entrants from India? When Bharti Airtel acquired Zain’s assets in 15 countries Africa, many analysts foretold the swift entry into Africa of Bharti Infratel, with many speculating that India’s other towercos would follow. Rumours persist that India’s towercos remain in dialogue about potential partnerships and investments that could see them enter the African market, perhaps by acquiring an existing African towerco or in a joint-venture with an operator. Yet one cannot help but feel they have enough on their plate dealing with the turbulent domestic Indian market. In particular the effects of the recent cancellation of 122 licenses has prompted some commentators to forecast that the Indian tower industry could lose as much as 10-12% of it’s total income. Interest may not just come from India. The strategic links between some of Africa’s leading operators and investors/owners in Europe mean there are transferable relationships between Group Strategy functions in Europe and European towercos. The United States has one of the most mature tower industries in the world – could other American towercos follow ATC into Africa? TowerXchange spoke to one US towerco prepared to admit that they are looking at opportunities in Africa

TowerXchange: Tell us about Atlas Tower’s interest in Africa. Nathan Foster, President & CEO, Atlas Tower Companies: Atlas is interested in opportunities in Africa. We are currently assessing the African landscape for acquisition and Build to Suite opportunities of all shapes and sizes that might couple well with our long-term revenue goals. We’re currently in a due diligence phase. TowerXchange: Do you agree that Africa has been a seller’s market to date, and that towercos have paid a premium for first mover advantage? Nathan Foster, President & CEO, Atlas Tower Companies: As a prospective new entrant, we’re looking for an adjustment from “goldrush fever” to a more tempered and logical market. We’ll put our feet on the ground at a time when we feel the valuations are correct. TowerXchange: Based on your experience in the US, how important is revenue from upgrades to new technologies in driving towerco revenues? Nathan Foster, President & CEO, Atlas Tower Companies: The entry acquisition isn’t where towercos make the money – the business is owning assets in areas best positioned for wireless data growth. It matters less the technology acronym

“ “rumours persist that India’s towercos remain in dialogue about potential partnerships and investments that could see them enter the African market

International tower companies diversifying their asset portfolio Atlas Tower assessing opportunities in Africa

Whether international towercos diversifying their portfolios and considering entering the African market come from India, Europe or the US, they are likely to satisfy all three criteria for “competence, experience and funding,” as in many cases they are managing portfolios of tens of thousands of towers already.

Perhaps new market entrants are simply being “priced out” of Africa? Certainly there are more bidders for most portfolios than just the ‘Big Four’ towercos, but the Big Four continue to win all the auctions – so far at least. Several investors agree with Atlas’ Nathan Foster that there is a “goldrush fever” for African towers that drives acquisitions to a premium that precludes the participation of some classes of would-be participant. Will the “goldrush” end? Not anytime soon according to Standard Bank’s Nina Triantis (see the interview on pages 16-19).

Will the ‘Big Four’ have an unassailable lead in terms of relationships, credibility and scale by that time? That is why they’re paying premium prices for Africa’s towers – to establish market leadership and build portfolios big enough to benefit from economies of scale. It’s going to be tough for new market entrant towercos to compete with the ‘Big Four’.

One investor familiar with the African market told TowerXchange “You’d be a brave soul to enter the African market now and still find the private equity to back you – the existing towercos have such a head start”


and more that the fundamentals of data usage is available to the population. TowerXchange: Is the cell-site densification required as Africa moves from 2G to 3G or in some cases skipping to LTE going to generate the upgrade revenue for towercos that many hope? What has been your experience in the US? Nathan Foster, President & CEO, Atlas Tower Companies: I don’t know enough about Africa yet, but upgrade revenue must be a likely scenario for our investment. In the US, amendment and modification revenue represents more than 40% of our revenue. The question we ask is how soon before Africa can model like that. Still, I believe the appetite for wireless data will continue whether the market is Harare or Houston. TowerXchange: Are there opportunities in Africa for new market entrants? Nathan Foster, President & CEO, Atlas Tower Companies: Ask me again in 6 months, one step at a time

“ “

As a prospective new entrant, we’re looking for an adjustment from “goldrush fever” to a more tempered and logical market

Are the market conditions right for new entrants?

In the tower space, Laurent has worked for several large operators on network transformation and cost-efficiency programmes – structuring many initiatives around network and tower outsourcing. Laurent has also worked with investors looking to invest in towercos in markets such as South Africa, Ghana and Tanzania. TowerXchange: What’s your view of the African tower outsourcing market? Laurent Viviez, VP & Partner, AT Kearney: We’re still in the early stages of tower outsourcing in Africa. MTN is doing tower sharing or tower outsourcing in South Africa, Uganda, Ghana, Cameroon and Cote d’Ivoire, but it’s still early days. Etisalat have tower outsourcing on their agenda, but have not followed it up strongly to date. Orange Group has pressure to reduce its debt level, so there’s pressure to accelerate tower outsourcing. As we know, Airtel has registered tower companies in 16 African countries. Meanwhile Vodafone seem a bit late in the game, having only done a deal in Ghana. But there are lots of deals in the pipeline. TowerXchange: In your recent report “African Telecoms at a Crossroad”, you highlighted potential consolidation of operators as Africa’s major players, MTN, Vodacom, Airtel, Orange (plus in certain markets Globacom, Etisalat and Millicom) have very strong positions in their markets while operators ranked fourth and lower struggle to achieve profitability. Does this illustrate a lack of credit-worthy potential tenants available to independent tower

Why tenancy ratios above two will be difficult to achieve in Africa…


…and what the tower industry should do to create new value by leveraging reduced fuel consumption and providing fibre to the tower

Read this article to learn:< The implications of consolidation among operators for the number of credit-worthy tower

tenants in Africa, and what this means for tenancy ratio targets

< Site-level profitability as an important performance metric for the tower industry

< How consolidation of towers in dense urban areas can increase tenancy ratios

< A call to revise Service Level Agreements that pass-through fuel consumption

< Why towercos should diversify into the provision of microwave and fibre to site backhaul capacity

Laurent Vivez, VP & Partner, AT Kearney

Keywords: Tenancy Ratios, Consolidation of Operators, National Roaming Agreements, Pass-Through, Energy Management, Site-Level Profitability, Fuel Theft, 3G, LTE, Cell-Site Densification, Fibre, Active and Passive Infrastructure Sharing, Africa, South Africa, AT Kearney, Cell C, American Tower, Telkom, MTN, Vodacom, Orange, Etisalat, Airtel

Laurent Viviez has over 15 years consulting experience in telecoms. For the last 5 years he’s focused on Africa, working with most of the major telcos, equipment and handset manufacturers on projects as diverse as pricing, distribution, m-payments, cost-efficiency, and network outsourcing.


operators?

Laurent Viviez, VP & Partner, AT Kearney: Many of the towerco business plans I have seen have targeted tenancy ratios greater than two – in some cases as high as 2.3 to 2.6. I believe tenancy ratios above two are going to be tough to achieve in markets where multiple operators do tower deals. If you’re a market leader and you want to share towers, your most likely clients are smaller players. While African markets might have an average of 3.5 competing operators, the markets with 8-9 competing operators markets like Nigeria and Tanzania are not sustainable. In the context of a consolidating operator market, it will be tough to achieve high tenancy ratios if smaller operators are forced to exit, merge or undertake structural moves like full network mergers, active network sharing or national roaming agreements. In a number of markets it was a smaller, challenger operator who sold their towers first, for example third-ranked operator Cell C in South Africa, and Millicom in Ghana. These moves have triggered market-leading operators to follow and bring their towers to market. Prospective tenants often find market leaders often have most attractive locations, so it will be tough for towercos linked to smaller players to achieve aggressive tenancy ratio targets. For example, Cell C had targeted tenancies from Telkom in South Africa, but when MTN secured many of those tenancies, it forced Cell C and American Tower to revise the business plan and the valuation.

TowerXchange: How should tower companies respond to the lowering of the glass ceiling on their potential tenancy ratios? Laurent Viviez, VP & Partner, AT Kearney: I feel many towercos will need to revisit the assumptions in their business plans around the achievable tenancy ratios, and make them more conservative – tenancy ratios above two are quite ambitious. However there are opportunities to increase

tenancy ratios through the consolidation of towers. Competing operators all have towers close to each other in dense urban areas, which limits the potential for sharing in these high traffic areas – the potential for sharing may be greater in less fashionable areas. In urban areas, there is an opportunity to consolidate and discontinue existing towers, and share remaining towers, achieving higher tenancy ratios. However, this requires considerable co-operation. The costs of decommissioning towers and transferring hardware can be high, but there’s an opportunity to consolidate towers when upgrading to 3G and 4G as operators are installing new equipment anyway. I also feel towercos haven’t maximized opportunities in energy management. Towercos can compensate for any tenancy ratio shortfall by offering to leverage reduced fuel consumption. Fuel can cost as much as 10% of revenues. Tower contracts that pass through power costs are a huge missed opportunity for both operators and tower companies. I recommend that operators task tower companies to achieve fuel consumption by as much as 50%. While the operator may retain responsibility for diesel price changes, volume of

“ “Tower contracts that pass through power costs are a huge missed opportunity for both operators and tower companies


fuel consumption should be part of a towerco’s service level agreement. This incentivises the towerco make changes such as reducing pilferage, which can be up to 30% in some markets, and installing solar panels or hybrid diesel generators with the right capacity – generators have significant over-capacity in some markets. TowerXchange: In the report “African Telecoms at a Crossroad”, two of your calls to action were “drive a step change in operational excellence” and “keep investing in the network”. What practical steps should CTOs, senior network planners and independent tower operators take to fulfill those calls to action? Laurent Viviez, VP & Partner, AT Kearney: Let’s answer this from a capex and opex point of view. Capex budgets in Africa have become compressed over time. Network investments can represent up to 80% of capex. Where capex was as high as 30-40% of revenue two years ago, in some markets capex is now down to 10-15% of revenue. There was a time when opex was not growing as fast as revenue growth, driving free cash flow appreciation and stock valuations. But now operators have hit a wall because traffic is still growing fast, price wars are suppressing revenue growth, and capex budgets have to be squeezed. Yet operators still need to invest to extend networks, they need to invest in 3G, 4G, backbone and backhaul capacity, so there’s a surge in capital investment requirements. For example in Nigeria MTN and Etisalat have had to increase their capex budgets this year. If

you’re a smaller operator, it’s a challenge to match this capital requirement spree, so you need to explore structural ways to reduce opex and capex, considering network sharing and national roaming arrangements. Even market leaders should consider network sharing and roaming agreements to cover rural areas.

With prices dropping dramatically, for example Nigeria saw a drop from $20 to $6 in the last two years, operators need to accelerate cost efficiency initiatives, given that the network consumes up

to 50% of spend. Operators’ internal optimisation teams are looking at sourcing programmes to reduce equipment costs, power reduction, and the outsourcing of network management, O&M and towers. The opportunities for cost reduction are simply massive. However, operators need to be clear about what they’re expecting from tower outsourcing. There is a trade-off between reducing opex and releasing cash when structuring these deals, and I’m not sure all operators have might the right decision,

Traditional Power Optimization Levers

Alternativeenergy

Site sharing

Optimizegeneratorloading withdeep-cyclebatteries

Energy efficient BTS

Outdoor sites

Fuel server device

Increaseelectrification rate

Pilferage control

Hot-air exhaust pipes

Use daily batterycapacity

Increase batterycapacity

NetworkSwap

Hightolerancebatteries

Timed start-up

High

Medium

Bu

sin

ess

Imp

act

Ease of Implementation

Low

AC from DG: BTS from battery

Use quick-chargingcycle batteries Right DG confirguration

Heat exchangerPreventive regulardischarge

Globalize Fuelprocurement

Adapt Electericitycontracts

Dynamic Temperaturesettings

Temperatureincrease

Not quantified

QuantifiedLow Medium High

Source: AT Kearney


particularly in cases where capital release has been favoured over opex reduction. CTOs have an array of options to reduce capex and opex: tower outsourcing, network outsourcing, energy management services, national roaming, and managed capacity deals like we’ve seen in India. CTOs need to take a long term perspective, and ensure decisions taken now don’t create blocking points to long term opportunities. For example, if an operator outsources towers and their towerco secures substantial tenancies from operator A, yet the anchor tenant subsequently wants to share infrastructure or even merge with operator B, that outsourcing deal becomes a blocking point. This is why many CTOs hesitate to initiate outsourcing deals. TowerXchange: Your report also calls attention to the rising levels of data usage forecast in Africa. With the introduction of 3G and eventually LTE, what are the implications for the densification of cells – will this drive infrasharing? Or usher in a small cell era? Laurent Viviez, VP & Partner, AT Kearney: Small cells don’t mean operators stop building new towers. For example, Orange in France had about 10,000 sites in 2000, now they have more than 22,000, and it could rise to 35-50,000 including small sites. Growing traffic and the use of higher frequency means further network densification is needed. 3G and 4G will drive significant densification – Africa

sharing, for example Telkom does national roaming on MTN’s network with Cell C on Vodacom’s network in South Africa. I wouldn’t be surprised if smaller African operators were keen on active infrastructure or national roaming deals, but it’s a question of whether will the market leaders will accommodate them. TowerXchange: To conclude, how would you summarise your recommendations to participants and investors in the African tower industry? Laurent Viviez, VP & Partner, AT Kearney: there’s huge growth potential for towercos in Africa because it’s still early days for most operators. But towercos need to be careful about their assumptions around potential tenancy ratios. Energy management services, the rollout of 3G and 4G, small sites and small cells, and fibre to the tower could also be an attractive opportunity for the tower industry, but diversifying their businesses beyond towers will make them more complex and will require new skills. At a macro level, I’m optimistic and positive about the African tower business. On a micro level, I would make a more qualified recommendation. Investors need to be careful and look at opportunities on a deal by deal basis. Are tenancy ratio assumptions realistic? You’re dependent on the deal structure and competitive environment, and you need to be able to walk away from a bad deal

will need new sites, so this is positive news for towercos. I’m not sure how much attention African towercos have for small cells – it’s further down the road in Africa. There is a potential infrastructure play around small sites, for example in the UK Virgin Media is building a wholesale offering for small sites where they’ll manage sites, radio equipment and use their fibre to provide backhaul. I can see a play for towercos around small sites, but they need backhaul capacity as backhaul is such a big chunk of the cost of small sites. So a parallel growth opportunity for towercos is fibre to the site. Fibre is costly, and again operators will need to share, creating an opportunity for towercos to provide microwave and fibre to site backhaul capacity. TowerXchange: Will active infrasharing play a role in African telecoms infrastructure in the next 3 years? Laurent Viviez, VP & Partner, AT Kearney: I don’t see many African operators proactively pushing active infrastructure sharing today. 3G was the trigger for active infrastructure sharing in Europe, and it’s easier to implement active infrastructure sharing on a greenfield network as opposed to merging brownfield networks. I have seen an active infrastructure sharing deal in Gabon between Moov and France Telecom, in which Moov used Orange’s network in suburban and rural areas. There are some national roaming agreements in Africa, which are a form of active network


business knows there are several opportunities to optimise diesel spend (monitoring and supervising consumption, managing pilferage, ensuring you have the right spec site configuration and DG et cetera), but we feel there is an over-emphasis on technical solutions and that implementation is the key. Vendor management and managing costs on the ground is critical. Significant improvements can be made by getting the simple stuff right: getting the air conditioning settings right, controlling and ring-fencing pilferage, using the TOC to understand what’s going on at sites and scheduling preventative maintenance. You also can improve security – dedicated security guards can be very costly and might even be correlated with pilferage. Patrolling models should be considered. And of course you can act to bring down real estate costs.

These solutions are all known to tower companies and operators, but it is critical to apply the right management concepts and tools to drive those improvements. TowerXchange: Is site-level profitability as important in less mature African markets where there isn’t the oversupply of sites we see in countries such as India? Nikolai Dobberstein, Partner, AT Kearney: The importance of site-level profitability holds regardless of the environment, particularly in urban areas, where even in less mature markets there will be a high number of existing towers.

TowerXchange: Are tenancy ratios over-emphasised as measure for the success of the tower business? Nikolai Dobberstein, Partner, AT Kearney: Until now, the focus has been on tenancy ratios as a measure of success for the tower industry. With many costs still passed through from the tower company to the operator, there has been less incentive to reduce fuel, O&M and security costs. Cost-focused, smart operators, are realising that it may be better for tower companies to handle power and fuel, O&M under fixed cost arrangements, especially as they seek to penetrate rural areas with low electrification. This has the benefit of stabilizing charges, avoiding disputes and empowering the tower company to really manage operations. Under such arrangements, site-level profitability is a key performance indicator. TowerXchange: How can the tower business improve site-level profitability? Nikolai Dobberstein, Partner, AT Kearney: Power and fuel cost savings remain the most important, yet the most difficult opportunity to create value and improve site-level profitability. The tower

TowerXchange recommends readers download a copy of AT Kearney’s excellent report, “The Rise of the Tower Business”. We spoke to Nikolai Dobberstein, Partner at AT Kearney and co-author of the report.

The importance of site-level profitability as a performance measure


As my colleague Laurent suggested, tenancy ratios over two are going to prove difficult to reach in Africa, despite the fact that there may be four or more operators in some markets. While extending networks into new rural areas often yields immediate demand for additional tenancies, there is a limited opportunity to drive co-locations and tenancy ratios in urban areas, where several operators have already built out their own tower

networks.

So site-level profitability is also important for less mature markets. TowerXchange: Are there other sources of revenue and value add for the tower industry beyond operator tenancies?

Nikolai Dobberstein, Partner, AT Kearney: We’ve seen towers co-located with internet kiosks, retail outlets and ATMs, or used to provide electrification for rural irrigation.

The income stream is limited compared to the tenancy rental income, but they can provide good opportunities for corporate social responsibility

Typical Tower company P&L

Grossrevenue

Power& fuelpass-

through

Netrevenue

Rent O&M &Security

Others includes penalties, under-recovery in power & fuel costs, and provisions

Source: AT Kearney

Illustrative P&L with a pass-through power and fuel model

HR andG&A

Others EBITDA Depreciation Interest Profitafter tax

146

46

100

45-55

20-25

20-25

5-8

18-20

12-15

7-10 8-

10

Special Feature:

TowerXchange gets under the skin of the due diligence processes and examines the contractual frameworks that form the spine of a tower transaction. We’ll take you inside the data room to look at the permits and paperwork, engineering and commercial analyses needed to realise the best valuation of your towers. We’ll introduce you to eight law firms with hands on experience of advising on these deals. We’ll examine the finer points of SPAs an MLAs and we’ll tap into Neil Taylor’s unique experiences of these transactions from the perspective of both the operator (Millicom) and towerco (HTA).

Anatomy of an infrastructure sharing deal

Your legal “how to guide” includes:33 Who’s who: lawyers with experience of advising on African tower transactions35 A checklist of the data you need to buy, sell and share towers38 Neil Taylor takes us inside the due diligence process43 Vinson & Elkins examine the SPAs and MLAs 45 Webber Wentzel explain how to accelerate infrastructure sharing transactions


TowerXchange Who’s Who

The TowerXchange Who’s Who provides a guide to the most experienced practitioners in a specific field of expertise; introducing you to the individuals you need to have on speed-dial to help you achieve your objectives in infrastructure sharing. In this special feature, we look at the lawyers who have advised both operators and towercos on tower transactions in Africa. In order to buy or sell telecoms towers, do you need a telecoms lawyer? A real estate lawyer? Or an M&A lawyer? The answer is yes – to all three! There’s a small universe of lawyers with ‘hands dirty’ experience of tower sharing transactions in Africa – in fact, TowerXchange generally finds ourselves referred to one of eight practices, listed here in alphabetical order, each of which has impressive credentials.

Keywords: Lawyers, Regulation, Due Diligence, Deal Structuring, Passive and Active Infrastructure Sharing, Africa, MTN, Cell C, Airtel, Vodafone, Millicom, American Tower, Helios Towers Africa, IHS Africa, Clifford Chance, Freshfields, Herbert Smith, Linklaters, Paul Weiss, Simmons & Simmons, Vinson & Elkins, Webber Wentzel

www.towerxchange.com | TowerXchange Issue 2 | 33| TowerXchange Issue 2 | www.towerxchange.comXX

Clifford Chance John Graham, Partner at Clifford Chance has worked on all of American Tower’s bids in Africa, including the deals closed with MTN and Cell C. John recently

returned from Abu Dhabi where he advised a number of regional operators regarding their infrastructure and M&A activity. TowerXchange has spoken to John at some length, and he clearly has considerable expertise in infrastructure sharing and is spending a lot of his time advising on bids in Africa and the Middle East.

Freshfields Bruckhaus DeringerNatasha Good, Partner at Freshfields Bruckhaus Deringer has been found on the opposite side of the negotiating table

from John, representing MTN in negotiations with American Tower and other towercos. Natasha has an impressive telecoms pedigree: subsequent to a year on secondment to Offtel (now Offcom, the UK telecoms regulator), Natasha built up extensive experience advising telecoms infrastructure transactions, initially in Europe where she aided Hutchinson and T-Mobile’s 3G network sharing. Natasha is now increasingly focusing on Africa where she has advised MTN in Ghana and Uganda. Natasha is a member of the TowerXchange “Inner Circle”.

Herbert Smith Freehills Nick Elverston, Amanda Hale and their telecoms team at Herbert Smith Freehills have done a lot of African work, including advising Bharti on the acquisition of Zain’s African telecoms business in 15 countries, being part of the team representing Cell C on aspects of the American Tower transaction and associated 2G/3G roll-out, and advising the banks in relation to the Seacom undersea cable project. Most

recently, Nick and Amanda advised on the biggest active infrastructure sharing deal in the world – the Cornerstone joint venture between Vodafone and Telefonica (O2) in the UK, in which over 18,000 towers are being shared as well as the rollout of LTE active assets.

Linklaters IHS Africa referred TowerXchange to Linklaters’ Vincent Ponsonnaille who handled IHS’ recent work in French speaking Africa. Vincent is joined in Linklaters’ TMT team by Julian Cunningham-Day among

others. Linklaters’ experience in Africa includes advising Zain, IHS and other operators on local tower sharing projects in Tanzania, Kenya, Cote d’Ivoire, Cameroon and Uganda as well as a variety of pan-African tower sharing initiatives between the continent’s largest operators. Linklaters’ experience of

Lawyers with Direct experience of advising on African tower transactions


telecom towers began with advising large UK incumbents such as BT and National Grid on the sharing of their infrastructure. Linklaters has subsequently advised on various European infrastructure sharing

projects, as well as Vodafone Essar’s formation of the massive Indian tower JV Indus, while they also advised on Bharti Infratel’s recent IPO. Linklaters recently announced a strategic alliance with Webber Wentzel.

Paul, Weiss, Rifkind, Wharton & Garrison Bruce Gutenplan, Partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP, works closely with his partner, Mitch Berg, on tower transactions. “For more than 15 years, we have represented leading investors,

telecommunication carriers and tower companies in some of the largest, most innovative and precedent setting transactions in the U.S. and around the globe. In Africa, we have represented Millicom in its Ghana, Tanzania and DRC transactions with Helios Towers Africa and Cell C in its deal with American Tower in South Africa, and we’re counsel to Soros Fund Management, the lead investor in Helios,” Bruce said.

Simmons & SimmonsSimmons & Simmons advised MTN during their 2012 tower transactions in Cameroon and Cote d’Ivoire, culminating in the agreement to sell 1,758

towers to IHS Africa. M&A Partner Christian Taylor co-heads the firm’s Africa growth markets group and came to Simmons & Simmons from Freshfields. He has advised MTN on many of their transactions in Francophone Africa. Christian was joined in leading the Cameroon and Cote d’Ivoire deal team by ICT Partner James Cotter.

Vinson & ElkinsJeffrey Eldredge, Partner at Vinson & Elkins is joined by colleagues Robert Dixon and François Feuillat. “We have 15 years’ experience in tower transactions, principally in Europe and Africa,” says Eldredge. “We have advised on over ten sale and leaseback transactions in the last couple of years in countries such as the DRC, Ghana, Nigeria, South

Africa and Tanzania. We have also advised on various investments in the sector.” Jeffrey Eldredge is a member of the TowerXchange “Inner Circle”, and you can read an interview with Jeffrey and Robert on page 43 where they explain the Sale Purchase Agreements and Master Lease Agreements underpinning infrastructure sharing agreements.

Webber WentzelWebber Wentzel is a truly African law firm, with over 500 lawyers in South Africa. Through their involvement in the Africa Legal Network and their network of “Best

Friend Firms”, Webber Wentzel can provide clients with a unique expertise of local jurisdictions and cultures, and a deep understanding of the ‘on the ground’ challenges companies can face. Webber Wentzel’s experienced telecoms practice does a lot of work for MTN and Africa specialist Steven De Backer, who’s worked on some landmark transactions throughout the African continent in different sectors, has helped IHS Africa secure finance and make bids in Tanzania and the DRC. Steven shares his views on how to accelerate infrastructure sharing transactions in an interview on pages 45-47.

Would you recommend any other lawyers with telecoms infrastructure experience in Africa? Write to TowerXchange at:[email protected], and we’ll verify their credentials and add their profiles to the archived version of this article.

It wouldn’t be a legal article without a disclaimer: while TowerXchange has spoken with all the lawyers referred to in this article, and received third party testimonials endorsing their efficacy, this article should not be considered “advice” and you should undertake your own due diligence to select a legal adviser.

A checklist of the data you need to buy, sell & share towersFrom accurate co-ordinates to permits, leases, designs, drawings and information on the generator, TowerXchange explains the data you need to maximise the valuation of your towers


What’s the biggest challenge to closing infrastructure sharing deals? “The main challenge is that tower sharing is an asset deal where the assets are not always transparent. The risks are around the preparedness of sites – is the structure in place? Are all the permits and clearances secured? Is there a risk of ground lease disagreements?” Said Gilles Tre-Hardy, Vice President at Lazard. Lazard served as advisers of France Telecom-Orange in their recent deal with Eaton Towers in Uganda, so Gilles has some familiarity with gathering the data needed to sell towers.

The quality and comprehensiveness of data of on the network included in an operator’s RFP and data room can directly affect the valuation of the towers. “We inspect at least 10% of the sites and if the data’s not right, the valuation is reduced,” asserts Chuck Green, CEO of Helios Towers Africa. When TowerXchange spoke to one active bidder on African telecom towers, they complained “data on the physical network is terrible! Bid documents are not great, and we like to check everything.” Another towerco recalled an instance where the operator’s co-ordinates of their cell sites suggested six towers were at sea! That particular transaction wasn’t in Africa, but the anecdote illustrates that tower location information isn’t always accurate. “It’s a very bureaucratic process to build cell sites in Africa,” said a senior executive at an operator. “Government agencies are slow – if you waited for everything, you’d never achieve the rollout deadlines set by the government when they

Read this article to learn:< The specific data you need to maximize the valuation of your towers

< The impact of missing data on valuations

< The practical reasons why operators data may be incomplete, and what can be done

Keywords: Data, Permits, Ground Leases, Tower Location Information, Designs and Drawings, Load Valuation, Safety, Due Diligence, RFP, Tower Valuation, Risk, Generators, Air Conditioning, ARPU, Infrastructure Sharing, Africa, Lazard, Helios, Clifford Chance

issue the license. So when you come to sell your towers, you discover there were things you needed and didn’t get – missing documentation, lost documentation due to staff turnover or a change of contractor. It’s a complex process to trace all that evidence, and in many cases you have to start from zero.” TowerXchange has heard reports that in some African countries the issue of environmental permits is backlogged by five years. Under such circumstances, inevitably some operators have taken a pragmatic approach to rollout, and their documentation may never be complete. Clifford Chance’s John Graham is familiar with the data problem: “The biggest frustration when dealing with tower transactions in Africa can be the slow deal cycle and difficulty in assembling the necessary information to commercialise a carrier’s sites.” “Timing is slowed by the challenges carriers face collating information about their towers, getting that information to a state of preparedness where towercos are ready to buy them,” continues Graham. “Ultimately, we’re talking about selling assets that weren’t designed to be separated and sold, and in many cases the state of a carrier’s records are poor. Matters can be complicated by the fact that carriers frequently outsource site acquisition and passive infrastructure construction and may never have had occasion to ‘lift the lid’ on the record keeping of their contractors – it’s not always all there in terms of paperwork & permits.”


Data Room Wish List, Version 1.0

Permits and paperwork< Reliable list of sites with accurate co-ordinates

< Building, environment and civil aviation permits

< Local authority approvals

< Proof of payment of taxes

< Ground leases, ideally extended where required

< Copies of rights to land collated and ready to assign

Engineering analyses< Tower designs, drawings and calculations

< Any available reverse engineered data on towers for which designs and drawings are missing

< Load valuation: up to date database of equipment on towers, ideally with location

< Foundation evaluation including dimensions and the quality and reinforcement of concrete

< Up to date health & safety compliance

< Uptime data, including a differentiation between DC and AC power

< Generator model, age, installation and anticipated decommission date

< Grid connection and diesel generator run time information

< Shelter space, air conditioning system and load

< Accurate maintenance record

< Transmission bandwidth

Commercial analyses< Subscribers per Point of Service and associated ARPU

< Current traffic and forecasts for future demand

< Demand for any different technologies at the site (2G, 3G, LTE if applicable)

< Partnering status

One of the reasons why these deals are so long and complicated is because there are so many stakeholders involved in the tower sites for each of the operators. From Group-level strategists to local shareholders, the CTO and existing network management team, and that’s before you get into layers of contractors and sub-contractors past and present. If everyone hasn’t ‘bought in’ to the concept of infrastructure sharing, getting people to retrieve essential documentation can be a lengthy process.

“Preparing even a modest data room can take months - some of our transactions took over a year to close for this reason,” adds Clifford Chance’s Graham, who goes on to conclude “despite the slow timelines, the track record of transactions in Sub-Saharan Africa is very good – most towers that come to market close – that’s not always the case in the Middle East.” Different markets may require different dataData requirements will differ from market to market, and you should use this checklist as a starting point only. This is also a “wish list”, and we wouldn’t want to discourage operators from exploring infrastructure sharing if their data sets are incomplete, although spending a couple of months compiling data before sending an RFP to towercos can be a worthwhile investment of time. “Need to have” and “nice to have” dataData in the “permits and paperwork” section is typically “must have”, much of the rest of the wish

list may only be “nice to have” data at the outset. Detailed engineering and commercial analyses might follow after negotiations with towercos have started, and indeed they may be initiated by the towerco, but operators equipped with some or all of this information are better positioned to maximise valuations and accelerate deal closing. For example, conducting a full load valuation on several sites can be expensive, but it can yield significant returns by revealing hidden capacity in over-engineered towers, which has a positive impact on valuation


“ “““

“If the data’s not right, the valuation is reduced”– Chuck Green, Helios Towers Africa

“carriers frequently outsource site acquisition and passive infrastructure construction and may never have had occasion to ‘lift the lid’ on the record keeping of their contractors – it’s not always all there in terms of paperwork and permits”– John Graham, Clifford Chance

Comments and suggestions on our data room wish list?

This list is based on several research conversations with experienced practitioners, but does not derive

from any specific individual or organization.

If you have suggestions for additional data required, or please share your recommendations with the

TowerXchange LinkedIn group at www.linkedin.com/groups/TowerXchange-4536974 or contact

Kieron Osmotherly at [email protected].

Inside the due diligence process from both the operator and towerco perspectiveWhy having an acceptable database of towers is important, but why knowing your organisational goals is even more important

Neil Taylor, Helios Towers Africa


TowerXchange: Once an operator has decided to investigate selling their towers, how do they invite bidders? Is it simply a case of calling the investment bankers with experience in this market? What information is needed to determine the market for your towers? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Investment bankers would once have been the first calls to make, and I’ve got tremendous respect for them, but now everybody knows that Helios, ATC, IHS and Eaton Towers are the main players to talk to. In terms of the information needed, ultimately it’s a real estate business, so it’s about location, location, location. Where are your towers? Are they secure? Are they in locations desirable to other prospective tenants? If your rollout plan was to put another tower next to competitors’ sites, then you may have a less valuable portfolio as overlap obviously affects desirability and value. You need to know the condition of your towers and take a realistic view of their state of maintenance and capacity to add other tenants. And of course a lot depends on the demographics of the market – five competing operators means there are more prospective tenants than in markets with one or two license holders. But the most important thing is to figure out your organisational goals from infrastructure sharing, as the sale value of your towers depends heavily on the lease rate you’re willing to pay. This is why in the

Read this article to learn:< Millicom’s objectives when structuring infrastructuring deals with Helios in Ghana, Tanzania and DRC

< How to prepare a tower database that is “acceptable” for negotiation with towercos

< The “lumpy” road to achieving target tenancy ratios

< How to novate and transfer hundreds of leases

< Helios Towers Africa’s appetite for country risk

Keywords: Real Estate, Organisational Goals, Maintenance, Rental Rates, Structuring a JV, Towerco Valuations, Transfer of Assets, Novation of Leases, Permits, Government, Due Diligence, Regulation, Pass-Through, Country Risk, Infrastructure Sharing, Africa, Ghana, Tanzania, DRC, Helios, Millicom, Vodafone

Neil Taylor joined Helios Towers Africa in May 2011. Neil has a unique perspective on leading due diligence processes for infrastructure sharing transactions as he’s sat on both the buyers and seller’s side of the negotiating table; Neil was previously General Counsel at Millicom and part of the core team that structured joint venture towercos with Helios in Ghana, DRC and Tanzania. He has been practicing for over 20 years, starting out as a commercial litigator before increasingly specializing in M&A transactions, including over 20 deals with leading electronic component distributor Avnet before moving to Millicom in 2008.

same market you might see similar towers changing hands for $230k per site in one transaction, yet $70k per site in another – it’s a function of differing goals; balancing maximizing cash, minimizing opex, or finding a sweet spot that protects and stabilizes opex while releasing some cash. TowerXchange: What were Millicom’s objectives in the deals with Helios? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Millicom saw the value of getting into tower game, perhaps because Millicom shareholders Kinnevik from Sweden had in the past “sold the paper mills but kept the forest” – they understood that it’s okay to not own a piece of the value chain. I was part of the team that did Africa’s first substantial infrastructure sharing transaction between Millicom and Helios, and we realised that because towercos typically trade at higher multiples than Mobile Network Operators, if we moved assets from one balance sheet to the other, it meant benefitting from that higher multiple. Of course, if operators want to retain a stake, it’s important that the terms of the transaction aren’t so harsh as to kill the value for the towerco. Millicom knew our objectives for each deal. With so many different moving parts, the deal team could have easily got confused, so it was important to decide what we cared about in advance. The Ghana deal, and the Tanzania and DRC deals were definitely separate. We were confident enough

to tether the latter two together as we knew what we were doing by then. So while we signed the Tanzania and DRC deals within three weeks of each other, we certainly didn’t wrap one up then start the next and finish it that quickly – much of the work was done concurrently. They turned out to be good deals for both parties, hence I’m able to sit on both sides of the transaction. In fact there’s a bit of a running joke about it; when Helios come across any challenging points in the Master Lease Agreement and ask why they were included, I usually say “because I made you sign it!” It helped that Millicom took a stake and had an interest in the towerco being a success, and both sides are pretty happy. Most M&A transactions are a one-off; you’re most likely to not see the buyer or seller again after the


transfer, whereas tower deals have same intensity of negotiation, but you’re married at end of it, so you need to enter into it with the right spirit.

TowerXchange: One towerco, that shall remain nameless, complained “data on the physical network is terrible! Bid documents are not great, and we like to check everything.” What data does the towerco need to conduct it’s due diligence and, remembering back to your time on the operator side, why is assembling complete data such a challenge for the operator? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Assembling complete data is a challenge because when Africa’s networks were being built, operators weren’t measuring compliance against objectives for a future asset sale, they were measuring against fast rollout objectives. In some African countries it’s even written into the law that if you apply but don’t receive a building permit by a certain time, go ahead and build anyway. What a towerco wants is a ground lease that’s transferable, and terms that that don’t allow the landlord to terminate or renegotiate every time a different operator’s installation or maintenance team shows up at the site. Towercos will expect the required aviation, building, and environmental permits to be available. It’s also good to have a sense of what the operator thinks is on each tower, available space, hub sites and MSC. Other nice to know information might be the age and model of the generator, anticipated decommissioning date, and an accurate maintenance record that reflects

“ “Most M&A transactions are a one-off; you’re most likely to not see the buyer or seller again after the transfer, whereas tower deals have same intensity of negotiation, but you’re married at end of it, so you need to enter into it with the right spirit

whether scheduled maintenance actually was undertaken. The reality is that sometimes operators only discover what data is required when they’re putting together the due diligence package. I have brought in third parties to help put the due diligence package together, but in my experience the learning curve for those outside resources is too steep – it’s better for operators’ Group headquarters to send people. While data doesn’t need to be complete for operators to start exploring infrastructure sharing opportunities, in the end somebody has to get all these pieces of paper, and towercos are usually happy to second people to help operators get everything together, although operators are sometimes reluctant to accept our help.

No towerco will walk away from a deal because documentation isn’t perfect, but on the other hand towercos aren’t going to pay until the documentation has gone from “not perfect” to “acceptable”. Ultimately we’ve got to make it clear to our investors that the portfolio has the value we ascribe to it. TowerXchange: The most common complaint about infrasharing transactions doesn’t seem to be that deals don’t close, but that deals take so long to close – how can operators and towercos accelerate transactions without compromising the quality of due diligence? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Operators should spend a month or two, even if it’s at expense of first mover advantage, getting database together and knowing what they do and don’t have. But data isn’t the only reason for delays. Adjustments based on what comes out on due diligence inevitably take time. For example if an operator claims their opex is $2000 per site, yet we see there’s been no maintenance on several sites because they fired the contractor several months ago, then the real opex might be $2400. The cost of maintenance is never zero, towercos will figure this out and adjust accordingly. Another cause of delay can be the time taken to secure infrastructure provider licenses. The Tanzania transaction took longer to close for no other reason than that the infrastructure license


took eight months rather than the four months it should have taken to issue. It doesn’t have to be a long drawn out process. But it does require focus on details on a tower by tower basis. It’s not launching the towerco that is time consuming, in fact our CEO Chuck Green developed a hundred day launch plan to start a towerco from which we have implemented three times! TowerXchange: Much of the work post-deal consists of the novation and transfer of hundreds of real estate contracts – tell us how the legal teams on both sides get to grips with all these leases, assessing what they’ve got, the right to extend and the terms to extend? Neil Taylor, Chief Legal Officer, Helios Towers Africa: The MNO and towerco do this together as the MNO has established relationships with their landlords. It’s a big task, but it’s not complicated and it can be completed surprisingly quickly. There are simple, easy to explain things: we need to be able to add additional tenants without landlord consent, we need to be able to borrow against the tower, and we need to avoid terminations. The towerco and the MNO will establish the extent to which payments under the ground lease may increase as a result of the process. The conversation starts with “we’d like to make changes and we’re willing to pay you something to make those changes,” so it’s not the worst conversation the landlords have ever had! The only complications might be if you can’t find a landlord, or a

“ “No towerco will walk away from a deal because documentation isn’t perfect, but on the other hand towercos aren’t going to pay until the documentation has gone from “not perfect” to “acceptable”

government entity might be the landlord, and if they’re not responsive to change. TowerXchange: In the case of privatized national operators, where the government might retain a stake or at least have a political interest in the ownership of infrastructure assets, is the range of options in terms of deal structure limited – could sale and leaseback be too complex, forcing a preference for operational leases? Neil Taylor, Chief Legal Officer, Helios Towers Africa: In many cases there are ways round that obstacle. The challenge facing Vodafone Ghana was a one-off. Vodafone had just completed the acquisition from the State and everyone knew what they’d paid for it. There were all these discussions going on in the press, and the local opposition were suggesting that the crown jewels had been undersold. If Vodafone had sold all the towers so soon, you could forsee an argument that they were selling it for more than they paid for it! Government involvement isn’t necessarily a problem for every deal. TowerXchange: What regulatory conditions make countries more favourable to telecoms infrastructure investments? Are there any red flags that make countries less attractive for infrastructure sharing investments? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Some regulators have more to say about and actively support infrastructure sharing than others. We’d be concerned about any regulations that

Neil Taylor, Chief Legal Officer, Helios Towers Africa: Well nothing’s ever completely ‘fixed,’ there’s always going to be an escalator on CPI or on unit price. However, at Helios we believe in a model where we invest to reduce fuel opex, giving some certainty about costs for the operator. It’s probably the biggest difference compared with the Indian model. On the other hand, if an MNO wants a power pass through clause because they don’t want us to make money on energy so be it, but under such circumstances we’re not incentivized to invest in saving power. There’s enough value to go around for everyone in these deals. TowerXchange: What are the main risks that operators can choose to pass on to towercos in tower transactions? Neil Taylor, Chief Legal Officer, Helios Towers


effectively prohibit sensible business – but we don’t see that in Africa. Part of my job is to understand the regulatory environment; the license regime, the costs of the license, what regulations have been written for infrastructure sharing or that apply to infrastructure sharing. In many cases we’re going to find ourselves driving regulations that are still being drafted, but we don’t shrink from engaging with regulators. As far as I know, only one market in Africa regulates the pricing of co-locations, and we’d certainly want to be involved in the conversation if any other countries were thinking of following that lead. TowerXchange: So is it preferable to let markets set pricing? Neil Taylor, Chief Legal Officer, Helios Towers Africa: I think operators should be allowed to prioritise different things; their organizational goal might not prioritise cash release or maximizing equity stake over negotiating the lowest possible rental rate, or they might want to pay a premium for optimum uptime rather than building a low cost network. TowerXchange: Why would either an operator or towerco want to pass through energy opex? I can understand passing through exposure to diesel price changes, but why disincentivise the towerco to maximize energy opex savings by passing them all through the the MNO?

Africa: The risks that they can pass along with selling what they recognize to be non-core assets includes uptime, of which a subset of that is maintenance, power provision and security; foreign exchange; and not having to put capital into passive infrastructure. TowerXchange: How does attractiveness of a deal alter in countries with higher country risk? Neil Taylor, Chief Legal Officer, Helios Towers Africa: We’re in the DRC, so Helios certainly isn’t adverse to operating in countries that are perceived to be higher risk. In some ways, country risk opens up more opportunities to the towerco in that we’re

not as visible as the MNO brand. MNOs are on every billboard reminding you that they’re there and doing a lot of business. In comparison we’re very dispersed. If rebels wanted to take over a towerco, they’ve got 700 sites to take over, and then they’ve got to run them! We’re recognized as doing something you want to have done, so whether you like the government or not, towercos are not an obvious target. Of course we look at political risk, and ethics and compliance programmes need to be robust, but we wouldn’t say we don’t want to do business in countries with higher political risk, as long as our employees are safe. TowerXchange: In this second edition of TowerXchange, Laurent Viviez from AT Kearney challenges whether the tenancy ratios targeted in the first round of deals in Africa are achievable – what do you think? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Helios are on track to do what we set out to do in Africa, but the honest answer is it’s too early to tell. Tower leasing is an extremely “lumpy business” – it’s never a straight line to achieving your objectives, some times you’re sitting “fat, dumb and happy” above your target tenancy ratio, while at other times you find yourself in a trough below target. Factors that can push a towerco into one of those troughs below target tenancy ratios include variations in Group capex budgets, unanticipated


consolidation, different bidders winning a new license than expected, or a new operator entering markets where there’s a supposed moratorium on new builds, yet still building hundreds of new towers! Ultimately it comes down to location – if a tower is in the location you need, if space is available, and if there are enough subscribers around, then more than one tenant is going to want space on that tower. They’re unlikely to build. I don’t think any of the towercos see a big gap between targeted tenancy ratios and what is proving to be achievable, but we’re not jumping for joy at realizing cheap acquisitions either – operators are getting good value for African towers. TowerXchange: Could an operator-led towerco model work in Africa? Neil Taylor, Chief Legal Officer, Helios Towers Africa: Every operator seems to have been been in conversation with one of Indus’ partners, yet it never seems to come together. Why? It may be because Africa is not one country, it’s 53. Maybe an operator-led model will happen in a big country such as South Africa or Nigeria, but there are established independent towercos in both those countries, so what would be the driver? Operators worried that they’re giving away too much value should be worried about missing the boat in the value creation opportunity – and consider retaining a stake

“ “

Tower leasing is an extremely “lumpy business” – it’s never a straight line to achieving your objectives, some times you’re sitting “fat, dumb and happy” above your target tenancy ratio, while at other times you find yourself in a trough below target

The Sale & Purchase Agreements & Master Lease Agreements that underpin tower transactionsA closer look at two important parts of the contractual framework for infrastructure sharing

Jeff Eldredge and Rob Dixon, Partners at Vinson & Elkins

TowerXchange: What are the key components of a Sale and Purchase Agreement (SPA) in a tower transaction?

Rob Dixon: There are of course many components common to all SPAs, but let’s concentrate on those components which are unique to towers deals. A key example is the structure and content of the conditions to closing. First, we’ll typically have a set of transaction conditions precedents that need to be fulfilled before the deal can happen at all. These would include any over-arching regulatory requirements (for example an operating licence or a competition approval). Secondly, we’ll typically have a set of conditions precedent that need to be fulfilled (or waived) before a specific tower can be transferred. These would normally include good title, satisfactory ground lease arrangements (for example, the right to sub-lease the tower to third party co-locators and to assign leasing arrangements in security) and compliance with regulatory requirements (for example, building permits and environmental consents)…it’s potentially a long list!

The buyer will require a certain number of towers before the deal is economically viable. Typically, therefore, the deal will be structured so that closing does not happen unless and until a certain number of towers are ready to be transferred (i.e. the tower-specific conditions precedent are satisfied or waived).

Jeff Eldredge: One key point in the process is

Read this article to learn:< How a minimum number of towers must be included for a deal to be viable

< The conditions precedent that need to be fulfilled before assets are transferred

< What happens to towers that aren’t transferred in the first close

< How the MLA defines the rights of the Anchor Tenant

< How critical towers are sometimes treated differently

The devil is in the detail – the detail of painstakingly constructed and hard negotiated Sale and Purchase Agreements (SPAs) and Master Lease Agreements (MLAs) that define the main terms in any tower transaction. Jeff Eldredge and Rob Dixon, Partners at Vinson & Elkins, have advised on over ten sale and leaseback transactions in the last couple of years in countries such as the DRC, Ghana, Nigeria, South Africa and Tanzania. Rob and Jeff kindly agreed to meet with TowerXchange and to provide us with an overview of tower sharing SPAs and MLAs.

Keywords: SLA, MLA, Transfer of Assets, Regulations, Novation of Leases, Due Diligence, Anchor Tenant Privileges, Service Level Agreements, Infrastructure Sharing, Vinson & Elkins


the extension of ground lease terms. Towers deals can involve thousands of different parcels of land. Different ground leases will expire at different times, giving uncertainty on future costs. The buyer will therefore seek to have the ground leases extended for a reasonable period.

Rob Dixon: As a result of that and certain other conditions taking time to satisfy, there are typically a number of closings as the tower-specific conditions are gradually satisfied. In the interim, the buyer might take over the operation of the non-transferred towers on a managed services basis. Different deals are of course structured differently – some deals go further to synthesise the buyer’s ownership of non-transferring towers from first closing. TowerXchange: What happens to any towers for which the CPs cannot be satisfied?

Rob Dixon: The treatment of ‘stub sites’ depends on the deal. The operator is unlikely to have

the ongoing capability (or desire) to maintain and operate the sites so the towerco may agree to manage the sites (with the operator retaining ownership). The buyer is likely to conduct legal diligence on a sample of sites before signing the SPA so it will have a reasonable idea of the position before signing the deal. The SPA is, of course, only one part of a sale and leaseback deal. It’s relatively short-lived compared with the MLA which will often govern the parties’ relationship for many years.

TowerXchange: So tell us about the critical consideration when drafting Master Lease Agreements.

Jeff Eldredge: The MLA is where the real value is for the tower company and where most of the real complexity lies in a deal. It’s a long term contract (perhaps 10-20 years) and a large value contract. The operator needs sufficient flexibility to manage its needs to deploy and maintain equipment, while the towerco needs sufficient control to maximise the co-location opportunities – that’s how they build value. Thus, there’s a natural tension that needs to be resolved to everyone’s satisfaction.

The MLA is an umbrella agreement which defines the operator’s rights as anchor tenant in terms of leasing space and capacity (windload) on the transferring towers and the towerco’s obligations to the anchor tenant in terms of such space and capacity (including the service levels which apply). Different rights and obligations typically apply to different towers. For example, network planners can get very nervous about sharing particularly critical towers with other operators and therefore a small number of the towers might be identified as exclusive to the anchor tenant. The service levels for different classes of towers is also likely to vary and be closely negotiated. These will typically be set out in a service level agreement, which may form part of the MLA.

Rob Dixon: There are of course other agreements which are important in most towers deals – for example the Build to Suit Agreement – but perhaps that’s for another time!


“ “The MLA is where the real value is for the tower company and where most of the real complexity lies in a deal

It’s common practice to have at least two phases of closing a sale and leaseback transaction, giving extra time to finalise documentation for troublesome towers. As Alan Harper, CEO of Eaton Towers explained “With Warid, 90% of the towers were included in the first close, but we take over 100% of the towers whilst the last complicated paperwork is finalized.”

Operators err on the side of caution when it comes to reserving capacity on towers for future upgrades. But every square meter the operator reserves is a square meter less for the towerco to sell, and that goes directly to the value of the tower. When it comes to the Master Lease Agreement, “it’s important to help operators avoid reserving more capacity than they really need for upgrades”, to use the words of one senior towerco executive.

Phased close Capacity crunch

How to accelerate infrastructure sharing transactionsDue diligence, regulatory uncertainty, tax and deal structuring considerations slow deals

Steven De Backer, Director, Webber Wentzel

TowerXchange: Why does it sometimes take so long to close infrastructure sharing transactions in Africa? Steven De Backer, Director, Webber Wentzel: Most of the tower deals in Africa seem to have taken longer than expected. It’s not really a problem with the basics of the contractual framework: Tower Purchase Agreements, Master Lease Agreements, Build To Suit and Service Level Agreements become more standardised these days, also in Africa. You obviously still do get a small amount of variation because of differences in approach between American and European standards for example, but tower companies generally know what Mobile Network Operators expect to see in these agreements. Also, the tower companies I worked with are very sophisticated, they know their business, and the technical negotiations tend to go smoothly. The reasons why closing infrastructure sharing transactions in Africa sometimes take longer than expected to close often relate to due diligence issues, regulatory uncertainty and tax and structuring considerations of the deal. One needs to understand the local laws and structure properly to mitigate potential risks and this really is one of Webber Wentzel’s biggest strengths. TowerXchange: Tell us about the due diligence.

Read this article to learn:< The ‘homework’ operators should undertake to prepare a proper data room

< The tax qualification of tower leases

< How delays can occur in the licensing of towercos

< Whether tower transactions should be structured as an asset transfer or as the acquisition of a newco

< Are MNOs willing to sell assets to towercos part owned by their competitors?

Most potential tower transactions that come to market in sub-Saharan Africa eventually close. But the most common complaint is the amount of time it takes to close the deal. Webber Wentzel, a truly African law firm, has considerable knowledge of African towers having, amongst others, secured finance and advised on bids for IHS Africa. TowerXchange asked director of the Africa Group at Webber Wentzel, Steven De Backer, how to accelerate infrastructure sharing transactions.

Keywords: MLAs, SLAs, Due Diligence, Tax, Deal Structuring, Renewing Leases, Regulation, Licensing of Towercos, Infrastructure Sharing, Africa, Webber Wentzel


Steven De Backer, Director, Webber Wentzel: Conducting due diligence on hundreds of underlying leases – whether looking at every tower and underlying lease, or just a sample of 10-15%, takes time. Obviously there are many other issues to be considered as part of the due diligence process and some of those issues may impact the value of even the feasibility of the transaction itself. It’s imperative that these issues are identified and managed as early as possible in the transaction. Much depends on whether the Mobile Network Operator have done their homework as a seller by for example previously looking at their leases, renewing them up front where necessary, and preparing a proper data room.

TowerXchange: Is it a straightforward process to secure a license for a tower company? Steven De Backer, Director, Webber Wentzel: Many regulators are only now waking up to the advantages of having independent tower companies

in their markets, so the law is not always as clear yet as to whether or not tower businesses fall under the existing telecommunications regulatory regime. If they do, approvals may be lengthy to obtain. This can be compounded if the vendor’s lawyers feel that the tower infrastructure business doesn’t need a license, while lawyers representing the tower companies might take a more conservative approach. Other authorities such as competition authorities might also increasingly become involved as there’s a further consolidation in the tower business in a country.

Another delay is dealing with the tax qualification of tower leases. At a fundamental level, we’re dealing with a sublease of the land, but the land, tower and equipment might each be treated differently, and different tax advisers often have a different reading. TowerXchange: Where do the delays occur in structuring a transaction? Steven De Backer, Director, Webber Wentzel: It really depends whether it’s a straight sale of all towers like Cell C did in South Africa, a sale of


“ “my advice to Mobile Network Operators is to involve potential bidders as much as possible in the structuring of the transaction

shares or if you’re setting up a joint venture newco. TowerXchange: Should tower transactions be structured as an asset transfer or the acquisition of a newco? Steven De Backer, Director, Webber Wentzel: We have seen different structures being used in recent transactions on the continent. Obviously, much depends on the intention of the Mobile Network Operator and what it wants to get out of the deal. Is it mainly looking at a cash consideration or rather a strategic partner? However, whatever the driver for the transaction might be, my advice to Mobile Network Operators is to involve potential bidders as much as possible in the structuring of the transaction. Look at it this way, proper structuring, taking into account potential tax benefits and investment protection mechanisms, can increase the consideration that towers company are willing to pay. TowerXchange: What can be done to accelerate transactions? Steven De Backer, Director, Webber Wentzel: Again, my advice would be for Mobile Network Operators to do their own sellers due diligence to pre-empt problems that might impact on the price they’re able to realise from the towers and to properly consider the structure of the transaction, which not only suits them but is also beneficial for the Tower companies If bidders have a problem with any discoveries

rates for the anchor tenant. I’d also be concerned whether additional Mobile Network Operators would be prepared to sell their assets to towercos partly owned by an anchor tenant competitor

made during their due diligence, for example standard terms of the underlying leases which don’t suit them, they will use that to push down the purchase consideration. Investment banks, often Citibank or Standard Chartered for deals in Africa, are engaged to structure the transaction and solicit and shortlist bidders, but I feel it’s best to also have your lawyers involved from the outset to assist with identifying pitfalls, structuring the proposed deal and draft up term sheets for each of the agreements based on the proposed structure. You want to provide bidders with all necessary negotiation instruments from as early stage as possible. TowerXchange: Do you anticipate the continuation of the transition from operator captive to an independent towerco business model in Africa? Steven De Backer, Director, Webber Wentzel: I think operators will be under even more pressure to sell towers due to continuous price pressure and increased competition, confrontation with regulators pushing to push down prices and ARPU decreasing. In this respect, it’s interesting to note that in several of the African tower sales, the Mobile Network Operators have retained a stake. There is a risk that the towercos might be unable to unlock the full value of towers by offering the competitive lease rates to additional tenants, particularly if the Master Lease Agreement secures particularly lower lease


“ “I’d also be concerned whether additional Mobile Network Operators would be prepared to sell their assets to towercos partly owned by an anchor tenant competitor

Special feature:

TowerXchange profiles and learns from the leading power equipment and ‘energy as a service’ providers serving Africa, examining their capabilities and experiences, and asking each the capital outlay required and anticipated RoI to retrofit or rollout their solutions. This special feature, which will extend across the next three-four editions of TowerXchange, will explore quick fixes to improve energy opex; how to evaluate sites for solar and wind hybrid energy; and we’ll examine installation, monitoring and maintenance practicalities and TCO models.

TowerPower – reducing Africa’s reliance on diesel

Featuring five insightful articles:49 How to minimise the number one source of

opex: energy consumption

53 PowerOasis’ “Smart towers”

57 Eltek explain what hybrid energy can do

for Africa’s telecom towers

61 How CPS deliver multi-tenant tower

power

65 Orun Energy on How ESCOs can reduce

your energy opex by 30-35%


grid innovations, sometimes blending renewable energy sources into hybrid solutions with a 8-24 month RoI, and sometimes simply looking for the “quick fixes” that yield the quickest and best opex reduction for the lowest possible capex. “Infrastructure sharing in Africa has a unique dependency on generators due to the lack of a reliable grid in many countries,” commented Andres Millan-Drews, Principal Investment Officer at the IFC. “So infrastructure sharing becomes more of a logistics than a real estate play with Service Level Agreements (SLAs) around downtime critical.” Unreliable grid and costly backup DGIt’s axiomatic to say that Africa has a rural electrification challenge, while city centres suffer from an overloaded grid and resultant brownouts. The challenge of meeting SLAs targeting 99%+ uptime on intermittent grids delivering poor quality mains power (under or over voltage and/or under or over frequency) leaves Africa’s cell sites dependent on expensive diesel, and exposed to the risk of pilferage. The cost per delivered litre of

diesel has risen as high as $2 in certain countries, particularly in West Africa, with some estimates suggesting fuel theft could be as high as 30-40% in some markets. While line conditioning systems can be used to clean up poor quality power, could hybrid power solutions be the ultimate answer to reducing reliance on diesel? Hybrid energyAn estimated 10% of Africa’s cell sites use hybrid power, with the majority using CDC (Charge Discharge) batteries to reduce DG runtime. Upgrading to CDC batteries is often the first step to integrating renewable energy sources, with the cost of solar panels having better than halved over the last four years, and wind turbines being trialed on several cell sites in Africa.

Selecting the right power solution to achieve the best possible energy opex reduction at each cell site is a critical decision. TowerXchange presents part one of our ongoing TowerPower series, profiling proven energy opex saving innovations and interviewing the senior executives behind them. We’re looking for on-grid, unreliable grid and off-

How to minimise the number one source of opex: energy consumption

?


Image courtesy of Camusat

Selecting which sites require investment in hybrid energyNot all cell sites are created equal of course. Some simply serve more customers, more ARPU, others handle important backhaul and transmission traffic. Or towers might be in locations more attractive to potential tenants. And of course if some sites go down, the majority of their subscribers can be picked up by over-lapping base stations. Different energy solutions are needed according to the requirements of any given site. For example, it may be a priority to eliminate diesel consumption at remote sites that are difficult to refuel, or at sites where pilferage or watering down of diesel is a recurring problem. For guidance on how to evaluate of cell sites for hybrid energy, check out the advice of PowerOasis (pages 53-56), Eltek (pages 57-60), and CPS (pages 61-64). Futureproofing cell site energy for the additional of multiple tenantsA modular approach is critical to futureproofing a site, for example installing only sufficient rectifiers required for the current tenant(s), while leaving shelf space for additional equipment. Once multiple tenants are using a tower, the use of a central power system, combined with distribution and metering systems to charge each tenant on consumption, can be the most energy efficient solution. Space is at a premium at all cell sites, shared sites even more so, which means power equipment must have the minimum footprint. It’s also critical to have the right size generator for the number of

tenants on a cell site. TowerXchange hears common complaints that inefficient, over-sized generators and shelters have been installed at many cell sites in Africa. Energy as a serviceIt’s not unusual for SLAs to transfer energy opex from mobile network operator to towerco, passing through to the towerco responsibility for energy efficiency and reducing diesel theft. A new class of power specialist subcontractor is emerging, Energy Service Companies (ESCOs). Towercos can back-to-back their energy risk exposure to ESCOs. Ultimately, every passive infrastructure sharing or outsourcing deal and every SLA will be structured according to the objectives of the parties involved, so it’s important to understand the structure of the deal in order to understand which party is responsible for which risk. Fazal Hussain has a unique perspective on cell site energy. Fazal served as CEO of pioneering towerco Helios Towers Nigeria before becoming Managing Director for the Middle East and Africa at leading hybrid telecom power manufacturer Eltek. He’s now Managing Partner of Deka Global. TowerXchange met Fazal for a coffee and a chat about the evolution of the energy as a service business model. Fazal spoke of a presentation he’d made at a telecoms infrastructure conference in 2009 back in his Helios Towers Nigeria days. “While the equipment manufacturers were pitching opex savings of 10%, I was saying we could make savings

as high as 50%! Energy is the bulk of the cost, and that can be slashed using hybrid technologies and through economies of scale.” Fazal felt that ESCOs would be the future of telecoms energy. “Most companies serving the energy management needs of telecommunications sell kit rather than solutions, hardware rather than service. There needs to be a new class of energy management service providers that have core competencies, can localise services, and can customise solutions for each site.” So how do you make energy as a service work? “Keep your solution simple so you can achieve reductions in energy opex using local maintenance skills. At the same time, be aware of when you might need to bring in specialist skills – for example


“ “There needs to be a new class of energy management service providers that have core competencies, can localise services, and can customise solutions for each site – Fazal Hussain

RecommendationsI needed to use an expert team to work in remote desert conditions,” concluded Fazal. On pages 65-68, TowerXchange interviews the founder of Orun Energy, a ground-breaking ESCO that can reduce energy opex by 30-35%. How Africa’s leading towercos manage energy opexWhen MNOs agree deal structures with towercos that transfer power responsibility to the towerco, they are also transferring the responsibility to select and invest in the right energy equipment upgrades. For a view from the bridge of a towerco, TowerXchange asked Chief Executive Chuck Green how Helios Towers Africa measures and manages power opex. “To understand opportunities to improve your power opex, you need common benchmarks such as the weighting of power costs relative to grid quality, reliability, and availability of other options.” “Power costs have a significant impact on performance as they can be up to 50% of a towerco’s opex. Generator run time can vary tremendously from market to market. When making comparisons across markets you’ve got to take into account differences in tenancy ratios, generator efficiency and theft. And of course we’re exposed to diesel price volatility as well as currency changes,” concluded HTA’s Green. IHS Africa agree that power scarcity and security is the number one challenge for towercos in Africa,

and they are in the process of converting 90% of towers in rural Nigeria to Solar hybrid. Where do towercos start with their energy equipment investments? It varies on a case by case basis, but if the deal structure includes batteries, installing deep cycle batteries can be the quickest way to reduce reliance on diesel. If the most urgent issue is combating pilferage, installing Remote Monitoring Systems might be an early priority – certainly most towercos will want comprehensive dashboards of power consumption available at the NOC, enabling them to profile grid availability and energy consumption at each site in order to prioritise the capital investments that yield the best opex reductions. Be sure to check out TowerXchange’s special feature on “How to leverage RMS to optimise preventative maintenance” on pages 71-80. Energy equipment upgrades, and upgrades to strengthen towers, add capacity for additional tenants on a tight timescale after those tenancies are sold, but typically not before the co-location sale. But towercos are very quick to bring newly acquired towers to market, so capacity investments will also be a “quick fix” in many cases. Another quick fix comes from cleaning the energy supply – replacing old copper wires with new voltage regulators. Another towerco spoke of how the sale and leaseback of towers in Ghana provided a new impetus to invest millions of dollars in swapping

out generators. If the tower sale and leaseback (or operational lease) is structured appropriately, then towercos have more flexibility to improve power efficiency using hybrid solutions. MNOs combating poor power quality and unreliable grid, countering with power efficient base stations Taking you to the front lines of the power problem, TowerXchange spoke to an experienced energy management practitioner at one of Africa’s leading


Would you like to recommend an energy equipment manufacturer, ESCO or power efficient base station developer to be profiled in TowerXchange? We’d love to hear from readers about solution providers with proven experience of reducing energy opex in Africa. If you founded, work for, or partner with an interesting solutions provider, please contact: [email protected] Please note that none of the companies profiled in TowerXchange have “paid for” their coverage, although we’re grateful for the support of those who chose to advertise as it helps keep TowerXchange free to over 1,000 African tower industry decision makers.

MNOs. He complained that power availability was a challenge in pretty much every country in Africa, with demand outstripping supply, resulting in poor quality power, with regular total loss of power in cases where the energy utility tries to limit demand by rationing the supply to particular geographic areas. MNOs and towercos alike are engaged in quest to reduce diesel consumption, and increase the interval between service visits. Of course, there’s a balance between up front capex and reduced opex, with expectations of RoI in 24 months or less.

According to our MNO energy management practitioner, limiting the energy requirement of active equipment is critical in designing and operating a truly green power solution with as small an opex requirement as possible. We’re starting to see MNOs evaluate and rollout power efficient base stations. TowerXchange will explore power efficient base stations in our next edition


“ “Power costs have a significant impact on performance as they can be up to 50% of a towerco’s opex” – Chuck Green

Smart towersHow to halve diesel consumption and O&M costs while improving reliability

John O’Donohue, CEO, PowerOasis

TowerXchange: What is PowerOasis’ value proposition? John O’Donohue, CEO, PowerOasis: PowerOasis has a three level value proposition: developing power architecture at cell sites to reduce energy consumption by 50%; network management and control systems that cut O&M costs by 50%; and ensuring 97% reliability at the site. Unlike many of our competitors, PowerOasis develops power solutions exclusively for the telecom industry. We offer holistic site monitoring and control to achieve the same reliability in energy as operators have come to expect from the radio network. PowerOasis have a transformational meantime of failure (MBF) of in excess of 250k hours. Our low cost, volume manufacturing partner Jabil produce equipment to meet industry quality standards, and PowerOasis is agnostic to subcomponents, so we can integrate batteries and generators that suit clients’ objectives and budgets. We put in the architecture necessary to introduce renewable components such as solar, wind, hydro or hybrid power, integrated to optimise economic performance and uptime. We’re able to treat each site differently, for example if a hub site has a power problem we can sequence which elements are shut down, temporarily suspending the local site but keeping the critical transmission traffic. And of course we’re able to alert the NOC to fuel shortages and pilferage.

Read this article to learn:< The immaturity of the “energy as a service” business model

< How to evaluate a cell site’s suitability for hybrid energy solutions

< The cost and RoI in diesel hybrid solutions at new sites

< How to reduce power costs and ensure network power resilience at cell sites on smart grids

< How power requirements change when moving from single to multi-tenant shared sites

The PowerOasis team came out of Motorola, where they spent 20 years building three generations of mobile networks. PowerOasis CEO John O’Donohue noticed that development was focused on radio architecture (2G, 2.5G, 3G & 4G) while cell site power solutions hadn’t fundamentally changed in 20 years. With the next billion mobile subscribers to be found in emerging markets, with limited electrification and unreliable grid connections, John saw an opportunity to transform the power infrastructure at cell sites, reducing power consumption by 50% and increasing site uptime & reliability.

Keywords: Reducing Energy Opex, Uptime, Off-Grid, Unreliable Grid, DG Runtime, Service Level Agreements, Energy as a Service, RMS, RoI, Smart Grid, Africa, PowerOasis


?

TowerXchange: How would you characterise the unique challenges in cell site energy management in emerging markets? John O’Donohue, CEO, PowerOasis: Cutting diesel consumption and O&M costs while increasing reliability is critical. CTOs may be drawn to the excitement of upgrading to to 3G or LTE and rolling out exciting VAS like mobile money, yet in emerging markets power can represent 50% of network opex. Too often there’s a legacy of rollout teams having purchased a bag of power components under a tight deadline, handing over to the operations team components that work for a while, then fail. No one person “owns” power. There has seldom been a holistic strategy for cell site design to optimise power consumption. In the context of flattening revenues, declining ARPU and fierce tariff competition, operators have got to take cost out. TowerXchange: How do operators respond to the need to reduce energy opex?

John O’Donohue, CEO, PowerOasis: I see three typical responses. First they might take the view “power is too hard to manage, I want to outsource power to companies offering energy as a service”. ‘Energy as a service’ is largely theoretical at the moment; many operators just want to pass on risk under a Service Level Agreement. I’d liken ‘energy as a service’ today to the early days of IT outsourcing contracts, when early contracts ran into litigation – it’ll take five years to form a stable business model.

PowerOasis are a product and service company. We install the products, and provide an after service contract, putting people in the NOC, or training the client’s people to operate the system. While PowerOasis has the crown jewels to enable energy services, we’re not an ‘energy as a service’ company. The second response is similar: “power is too hard to manage, so I want to outsource energy and all passive infrastructure management to a towerco”. The tower industry is more competitive in Africa than in Asia, and the four market leading towercos are bidding aggressively and investing substantial sums just to acquire portfolios, so they are going to need to grapple with delivering operational efficiencies, taking operational cost out, and increasing service levels to achieve profitability. Ultimately I feel there will be consolidation in the African tower industry, and the best valuations are going to be realised by towercos that can demonstrate the operations and asset value

they have created. Software control and remote monitoring systems may help demonstrate the value they’ve added to their expensive network acquisitions. The third response is “I’m going to transform the value of my network, differentiate through superior uptime, and tackle the power problem myself – so I


“ “In emerging markets power can represent 50% of network opex

PowerOasis tower and enclosure

get the benefit of an increased valuation whether I retain my towers or transfer assets to a towerco in the future.” TowerXchange: What data does the MNO or towerco need to evaluate a site’s suitability for hybrid energy solutions? John O’Donohue, CEO, PowerOasis: We can forecast potential savings to Total Cost of Ownership based on energy consumption and cost, inventory on site, and the load on a site. An operator has a pretty good handle on energy costs if they know the cost of delivered diesel, and understand the extent of fuel theft, but too often they don’t have that data. It’s also useful to know if they are paying an aggregate grid electricity bill, or whether they know the energy consumption per site. It’s surprising what some operators don’t know – I recall a 1kW site in Asia being billed for 17kW. When we dug around near the site we found a wire leading to the village! TowerXchange: What kind of capital outlay should operators and towercos anticipate to upgrade each site, and what’s the timeline to ROI? John O’Donohue, CEO, PowerOasis: All our solutions deliver an ROI within 18 months. We develop each business model using the operator’s real cost base, and offer a range of solutions to suit their Total Cost of Ownership objectives. For example we can use lower cost batteries that last two years, or make a

higher capital investment in batteries that last five years. Our solutions offer a warranted performance level, so the investment is protected. In terms of capital outlay, for remote monitoring it’s $2-5,000 per site, depending how many elements the client wants to monitor. We can stop fuel theft and help them get operationally smart with payback based on saving with just five site visits. Incorporating diesel hybrid solutions at a new site costs anything from $12-30,000, depending on the choice of batteries and desired level of cell site autonomy, but payback is achieved within 18 months. Off-grid new build cell sites running on solar only would cost in the region of $10-15,000. TowerXchange: What proportion of your business comes from new sites compared to upgrading existing sites? John O’Donohue, CEO, PowerOasis: It’s about fifty-fifty between new builds and upgrades. Towercos are driving the upgrade market as they acquire portfolios and replace energy equipment to support multiple tenants, while there are still major rollouts going on in Africa. TowerXchange: What’s the timeline for smart grids to have the capability to offer demand response pricing in Africa, thus maximizing the potential cost savings from active power management solutions?

John O’Donohue, CEO, PowerOasis: I expect smart grids to become a factor within two years in South Africa and some North African countries. While the smart grid is driven by the green agenda in Europe and North America, in Africa the main practical driver is being able to put up peak energy prices to price people off the network and release capacity. PowerOasis’ own smart grid platform was inspired by our experiences managing sites on an unreliable grid in Bangladesh, while in parallel we were seeing how operators in California were being asked to take their cell sites off grid in high summer when as energy demand peaked due to air conditioning use. We launched the world’s first smart grid platform, enabling operators to reduce site power costs and ensure network power resilience. We deploy a controller on telecoms sites that intelligently decides when to power the site from grid or battery. The controller can be pre-programmed or adjust to real time or forward price trading platforms, optimising energy consumption from the grid and reducing


“ “I expect smart grids to become a factor within two years in South Africa and some North African countries

total power operating costs. TowerXchange: Is the transfer of towers from operator-captive to specialist towercos good news for companies like PowerOasis? John O’Donohue, CEO, PowerOasis: Optimising power operating costs, and installing software that reports on site status and fuel consumption, increases the value of towers for independent towercos and operators alike. Our solutions make an immediate impact and can take just 90-180 days to make start making

a difference to operators. For towercos, the assimilation of newly acquired assets and transformation of the network can take 12-18 months. TowerXchange: How do requirements change when moving from single tenant to multi-tenant shared sites? John O’Donohue, CEO, PowerOasis: Operators and towercos have a different focus because they each have a different end customer – for the operator it’s all about the subscriber, for the towerco it’s all about the operator. Operators focus on uptime and

energy consumption reduction. For example MTN Nigeria market the most reliable network, and with 50% of outages in Africa caused by power, their competitors have to respond. Tower companies are looking for the flexibility to manage multiple tenants, possibly offering different service levels to each. We can manage the power consumption of each tenant, for example sharing power according to Service Level Agreements in the event of disaster. And towercos want to know whether any outage is due to power going down – they don’t want penalty clauses coming into effect when the base station was really the problem!


PowerOasis Hybrid & Solar Systems TCO

$100,000

$1 2 3 4 5

Year

Hybrid Payback, 14 months

6 7 8 9 10

Source: PowerOasis

$200,000

$300,000

$400,000

Cat 1 Baseline

Cat 1 Hybrid

Cat 1 Hybrid + Solar

PowerOasis hybrid cell site

What Hybrid Power can do for Africa’s telecom towersHow to identify sites where investing in CDC battery and solar hybrid power will slash DG runtime

Bob Hurley, Regional Director MEA, Eltek


TowerXchange: Tell us about the current state of hybrid power at cell sites in Africa. Bob Hurley, Regional Director MEA, Eltek: Around 10% of African cell sites use hybrid energy, and most of those have been fitted in the last two years. Diesel generators run 24/7 on many sites and that leads to inefficiency in terms of maintenance, site visits and generator renewals. With hybrid energy solutions, you might be able to cut run time to six hours per day, reducing diesel consumption by 70-75% while reducing maintenance site visits. You’re then able to run the generator at a much more efficient load – typically they might be running at 20%, we can make it more like 70% with systems that simply switch it off except when it’s most efficient to do so. TowerXchange: If 10% of cell sites in Africa use hybrid or use pure renewable energy, what’s the balance between CDC battery hybrid, solar, wind and fuel cells, and what in you opinion are the relative merits of each? Bob Hurley, Regional Director MEA, Eltek: CDC battery hybrid are the most popular hybrids. I’d estimate that out of all the hybrid and renewable powered cell sites in Africa, probably 60% have got as far as investing in CDC, 30% have added renewables to become a full hybrid, and maybe 10% are pure solar. The quickest way to reduce energy opex is to put in a bigger cyclic battery to enable the battery to run longer than the DG. In a number of cases we’re

Read this article to learn:< The adoption and relative merits of CDC battery, solar, wind and fuel cell hybrid energy solutions

< How to prioritise at which site to invest in hybrid power solutions

< How to design a greenfield site to maximise energy opex efficiency

< How to futureproof a cell site so it is energy efficient with single or multiple tenants

< How hybrid energy solutions help towercos improve site level profitability

Keywords: Hybrid Power, Reducing Opex, DG Runtime, CDC Battery Hybrid, Solar, Wind, Fuel Cell, Renewables, Off-Grid, Retrofitting, Greenfield, Multi-Tenant, Infrastructure Sharing, Africa, Nigeria, Eltek, Helios Towers Nigeria, Etisalat Nigeria

Eltek is a leading hybrid telecom power manufacturer with 60 offices worldwide. Eltek’s product portfolio includes hybrid energy solutions focused on opex reduction, supported by a zero capex financing deals. Eltek have 4,000 hybrid sites deployed, and are currently bidding for a further $100m worth of hybrid solutions. TowerXchange spoke to Eltek’s Middle East and Africa Regional Director Bob Hurley and his colleague Younis Shan, who focuses on West Africa and who had previously worked at Helios Towers Nigeria.

deploying CDC solutions that are solar-ready so the tower operator doesn’t have to rebuild the cabinet if they choose to add solar panels and chargers. Another option is pure solar off-grid sites consisting of a cabinet with a solar charger and a cyclic battery. They might be 1-1.5 kW sites, usually in rural areas. Younis Shan, Regional Sales Director, Eltek West Africa: Solar isn’t very common in West Africa, given the cost, and size of power required for a 2.5kW base station. Of their 3,500 cell sites, Etisalat in Nigeria have 460 hybrid sites, all of which are battery hybrids. Some of those sites are totally off-grid, some have 4-6 hours of non-continuous grid power a day. The battery hybrids are realising 50% savings. Bob Hurley, Regional Director MEA, Eltek: Wind is experimental at this stage. RoI can be five to six years because of the cost of the tower, turbine and interconnection with the telecoms system. The

cost of turbines needs to come down, and there needs to be more commonality across the turbine manufacturers – each has their own system, dump load, and method of converting rotating power to static DC or AC to input into system. Operators tend to look for RoI in less than two years, so people are dabbling with wind power, but there’s no great penetration in the telecoms market. Fuel cell solutions usually run on a gas, so you have the logistical cost to get that gas to the site, or you need to source a local supply to make it cost effective. So the running cost may be similar to using diesel as you’ve still got to top-up and monitor consumption. The upside to gas is it’s less stealable than diesel. TowerXchange: Has the entry into the market of low-cost manufacturers meant that off-grid solar cell sites are becoming somewhat commoditised? Bob Hurley, Regional Director MEA, Eltek: There is a price band which operators find acceptable. The capex requirements of pure solar sites is driven by the cost of solar panels, and that has come down significantly to perhaps a third to half what they cost four years ago. That improves the timeline to RoI in solar. I don’t think it’s a commoditised market. One of Eltek’s key focuses is to be technologically ambitious. Technology plays an important part in which vendor is given these sites – it’s not just about price, it’s about performance too. We deploy a complete solution – we seek to understand and


resolve at operational issues, not just provide a black box. A well chosen controller will look at performance of batteries, generators and solar panels to tell the operator where they’re getting the most efficient usage. TowerXchange: How do operators prioritise at which sites to invest in hybrid power solutions? Bob Hurley, Regional Director MEA, Eltek: Operators often make pragmatic decisions about investing in solar at big sites that have tri-site coverage – if one site goes down and the majority of subscribers can be picked up by an over-lapping BTS, they might not invest in hybrid energy. Of course that changes if it’s a backhaul or backbone site they can’t afford to drop. Operators might use multi-site monitoring to look at performance within an area or group of perhaps twenty sites to identify the right technology to invest

“ “Of their 3,500 cell sites, Etisalat in Nigeria have 460 hybrid sites, all of which are battery hybrids

in, and at which location they’ll get the most out of it. On that basis they might select five sites for solar and five for CDC batteries. TowerXchange: How do you design a greenfield site to maximise energy opex efficiency? Bob Hurley, Regional Director MEA, Eltek: At greenfield sites the first thing to assess is grid availability and consistency. If it’s an off-grid or unreliable grid site requiring significant generator runtime, you need to asses how big the site is, how key that site is in terms backhaul, transmission and subscribers served, and any overlap with other base stations that can pick up subscribers if the site goes down. How much power is required? Can you get away with simply buying a bigger cyclic battery and accept you will have some diesel cost (and diesel theft risk), or is the site important enough to invest in solar? Other considerations might include noise from running the DG and carbon emissions. It’s all about finding the best fit, the least capex for the most efficiency. Is it worth investing $4,000 of capex on solar to keep a few subscribers happy if they have tri-site coverage and the majority will be picked up by an overlapping base station? That’s a commercial decision based on customer lifetime value and churn. In our experience, full hybrid sites combining diesel, battery and solar power tend to only be deployed at key sites off the grid in Africa yet still serving lots of subscribers.

Younis Shan, Regional Sales Director, Eltek West Africa: When it comes to greenfield site construction, smart companies are realising that it doesn’t cost much more to ensure a site is hybrid-ready – in comparison, retrofitting is expensive. That said, return on investment payback cycles for retrofitting to hybrid have fallen to 1.5-1.8 years as solar panels are getting cheaper. TowerXchange: How do you futureproof a cell site so it’s energy efficient with just one tenant, but readily upgradeable to accommodate multiple tenants? Younis Shan, Regional Sales Director, Eltek West Africa: You need to have a modular approach to cell site power equipment. When you have a modular system, such as with your DC rectifier, you only buy what is required. Keeping a few empty slots means it only costs a few hundred dollars to upgrade compared to thousands of dollars to replace.


When a towerco acquires a site, they must find a balance between generator capacity and efficiency. Oversized generators need more diesel. You should also make sure your generator is sized initially for a maximum of two tenants; you can always move it to a newly acquired site if tenancy increases and more power is required. On a co-location site, ensure that there is one centralised power system to serve multiple tenants – the previous co-location model was for each tenant to have their own power system due to decreases in lease rates it is now cost effective to have one outdoor centralised power system. TowerXchange: Is it good news for energy equipment providers when towercos acquire assets from operators – do they stimulate investment in energy equipment upgrades to reduce opex, or do they just mess up your key points of contact?

Bob Hurley, Regional Director MEA, Eltek: Many Mobile Network Operators are trying to get expensive, non-core network assets off their books, and are devolving to towercos the challenge of reducing Africa’s high opex. Towercos have a business model that requires investment in new batteries, generators and other technologies to drive down power costs and improve site level profitability.

Where previously we maintained relationships with operators and their OEM partners, towercos have become equally important. Airtel have driven the

model quite hard in India, where we have to sell to the towercos. Eltek has relationships with American Tower, Helios, Eaton and Airtel, but it varies country by country, even with the same towerco. For example in one country Alcatel-Lucent might be the OEM partner and they may be installing Eltek equipment, but in another country the same towerco might be working with an operator with a pre-existing relationship with Huawei, who don’t supply Eltek products. TowerXchange: How can hybrid energy help towercos improve site level profitability? Younis Shan, Regional Sales Director, Eltek West Africa: Market dynamics have changed. Four years ago towercos were making good money, achieving leases of $7,000 per month for a gold package. In many cases rental rates have halved, so they need to find ways to further reduce opex. I believe towercos need hybrid power solutions to preserve their margins, unless they can guarantee tenancy ratios above two from the outset


“ “Four years ago towercos were making good money, achieving leases of $7,000 per month for a gold package. In many cases rental rates have halved, so they need to find ways to further reduce opex

Multi-tenant tower powerHow CPS design hybrid energy solutions to cut opex by 50-60% at multi-tenant sites

Bill Bubenicek, Managing Director, CPS


TowerXchange: Where do Clean Power Systems fit in the telecoms infrastructure ecosystem? Bill Bubenicek, Managing Director, CPS: Clean Power Systems, or CPS, are entirely focused on power solutions for off-grid or unreliable on-grid (poor-grid) cell sites. Few cell sites in Africa have stable grid power, with many reliant on diesel generators (DG) as primary or heavily used backup power. DG runtime can be 18-20 hours a day even at sites connected to the grid as power is intermittent and sensitive equipment requires that voltage fluctuations mean a switch from mains to DG. With regulators and service level agreements targeting 99%+ uptime, outages are unacceptable. CPS’s niche is to solve these problems on existing and new cell sites using the latest hybrid, line conditioning and renewable power technologies that reduce OPEX by 50-60%, and as a side benefit reduce carbon emissions by the same. We often start with a low cost initial base system – we don’t have to deploy renewable power immediately, but our upgrades introduce clean technologies that allow solar and wind power to be added down the road and eventually eliminate DG over three to five years. TowerXchange: What’s the balance of your business between pure product provision and installation versus energy as a service? Bill Bubenicek, Managing Director, CPS: We fall between the two. Our ultimate goal is the full service model – to become a total energy and power

Read this article to learn:< How to reduce energy opex by 50% or more

< Comparing the capital outlay to install or retrofit off-grid and on-grid cell sites

< How to reduce maintenance visits from every 10-11 days to every 42 days

< Why average rather then peak load is critical when dimensioning hybrid sites

< How to design power solutions that can be upgraded easily if additional tenants are added

Keywords: DG Runtime, Opex Reduction, Off-Grid, Unreliable Grid, Line Conditioning, Hybrid Power, Renewables, RMS, Service Level Agreements, ESCOs, Site Level Profitability, O&M, Dimensioning, Single to Multiple Tenant Power Solutions, Infrastructure Sharing, Africa, CPS

Clean Power Systems provides end-to-end power solutions that dramatically reduce diesel generator runtimes, diesel fuel consumption and overall operating expenses for cell sites in developing markets where power is unreliable or unavailable. CPS’s technology consists of AVR/Line Conditioning Platforms for On-Grid applications, Hybrid/Renewable Platforms for Off-Grid Applications and Remote Performance & Alarm Monitoring Systems for all systems. The combined technology has been proven and deployed on thousands of cell sites across the Middle East and Africa.

optimisation provider. But we recognise that we don’t necessarily get the whole pie from the outset, we may start with supply and installation. In the end, we want to sit on same side of table as our towerco partners with aligned interests making the partnership larger than sum of the parts, which ultimately serves our mutual end customer, the mobile network operator.

TowerXchange: Who is CPS’ target customer? Bill Bubenicek, Managing Director, CPS: Towercos make up the majority of our business in Africa. Our focus has been on towercos because we share the MNO as the end customer – they view us as a partner and not just a vendor. Towercos must make power optimisation a priority. When towercos agree on service level agreements that transfer responsibility for power onto them, they’re taking on the risk of choosing the right power provider, and it’s in the towerco’s interest to optimise sites immediately to maximise return on their substantial investments in towers. In many cases, Towercos make agreements with anchor tenants to supply power at a certain price, and that price is often based on legacy power equipment with high DG runtime. By helping the towercos optimize power on these sites, it results in reduced energy costs by 50% or more, which can have a significant impact on site level profitability. We’ve proven CPS technologies over the last four years and spent a lot of resources proving our technology and services with our existing towerco

customers. In our experience, the Towercos prefer to optimise their supply chain and to rely on a central point for end-to-end power services. This includes site surveys and turnkey installation to O&M and Remote Monitoring Systems. For Africa, CPS has a presence in Uganda, Ghana, Tanzania, Kenya and South Africa, and works with most of the major towercos in Africa. We also sell to MNOs directly and through channel partners, although the MNO mindset isn’t quite as focused on capital expenditure to reduce opex. I believe the trend for Africa’s mobile network operators to sell towers to specialist towercos will continue.


“

“

When towercos agree on service level agreements that transfer responsibility for power onto them, they’re taking on the risk of choosing the right power provider

TowerXchange: What kind of capital outlay should operators and towercos anticipate to upgrade each site, and what’s the timeline to ROI? Bill Bubenicek, Managing Director, CPS: The capital outlay depends on size of site and whether it’s on or off-grid. CPS has developed two product lines that address the “on-grid market” which means the site has access to AC Mains/ grid power and the “off-grid market” which refers to sites that are currently using two generators as the main source of power. For all of our product offerings, we also include our Remote Performance Monitoring and Alarm System to allow live performance monitoring and alarm management. For most off grid sites, we provide our SolSite™ hybrid systems, which typically cost around $25-30,000 fully installed, with twelve months or less to ROI. For most on-grid sites, we provide our SolSite™ Stability Series (Line Conditioning Platforms) and the cost is typically around $10-15,000, fully installed, with a faster ROI of 8-12 months. We have even had ROI’s less than eight months as this system focuses on utilizing the AC mains power when one or two of the three phases go down, while still maintaining a steady 220 volt output across threelines. Although hybrid and renewable solutions get most of the recognition, in reality, our on-grid SolSite™ system is having the greatest opex-reducing impact across Africa.

TowerXchange: Tell us about the real costs of maintenance at remote cell sites. Bill Bubenicek, Managing Director, CPS: We typically find that total OPEX as it relates to power is approximately 55% fuel-related and 45% O&M related. Some sites are so remote that it will take a field O&M engineer a full day just to get there. When you consider that off-grid sites are running 24/7 on diesel generators, and generators require a 250-hour service interval; this means they require maintenance every 10-11 days. You can then appreciate solutions that reduce DG runtime as this not only saves on fuel but also extends the interval between maintenance visits to 42 days. TowerXchange: Tell me about dimensioning a site for wind, solar or hybrid energy. What data does the MNO or towerco need to evaluate a site’s suitability for hybrid energy solutions? Bill Bubenicek, Managing Director, CPS: When dimensioning for a hybrid site, peak load has been used in sizing the generator at traditional sites where the generator is the primary source of power and generates power based on the fluctuating load. At such sites, it’s critical that the generator is capable of meeting the load requirements when and if they reach the peak load. However, average load is the key factor in dimensioning a hybrid site. This is because an energy storage device (battery bank) is the primary source of power, and this can meet the fluctuating load of the site as required. Therefore, hybrid sites

site must be sized according to the average daily load of the site. The dimensioning of hybrid systems requires a different paradigm, which can be challenging to get across, especially when presenting to engineers who have been dimensioning sites based on peak load for so many years in this industry. Traditional sites with generators as their primary source of power seldom reach their peak load for more than a few minutes at a time. Most of the time, the required load is at less than 40% of peak, which means the generator is running at a low load most of the time, causing the generator to run inefficiently, resulting in glazing, corrosion, and reduction to the lifetime of the generator. In contrast, when the generator starts on a hybrid site, it runs at a high load during the boost recharge period to charge the battery bank AND power the existing site load. The generator is therefore running at a much greater efficiency, perhaps 80-90%, which extends its lifetime. To evaluate a site, it’s also useful for the operator or towerco to know the generator capacity and cost per delivered litre of fuel, as well as grid power availability and rates, and the average cost of service and frequency of maintenance visits.

TowerXchange: Are hybrid sites a necessary first step to more widespread adoption of renewable energy, as solar and wind technologies become more affordable?


Bill Bubenicek, Managing Director, CPS: Yes. To utilize wind and solar energy in off-grid locations, the site design must include some form of energy storage to provide power when there isn’t enough sunshine or wind. Hybrid systems provide the perfect platform for the immediate or future adoption of renewable energy sources, especially for off-grid sites. TowerXchange: How do you control which power source is used at which time? Bill Bubenicek, Managing Director, CPS: The key to a good Hybrid system is the power manager or controller, which provides the essential function of managing battery and generator cycling, and ensuring maximum energy harvest of renewable energy sources through intelligent software controls. Additionally, through our Remote

“ “The power solutions at a site need to be designed so they can be upgraded easily in the field if additional tenants are added

Site Performance Monitoring System (SolSite™ Manager), fuel information from the generator is collected alongside battery and power data in order to provide complete statistics on the status and performance of the site. This allows for remote configuration and optimisation on the site to maximise performance of the system. Site data is extended via alarm relays and a GPRS Modem. TowerXchange: How do requirements vary when dealing with a single tenant compared to multi-tenant shared cell sites? Bill Bubenicek, Managing Director, CPS: The power solutions at a site need to be designed so they can be upgraded easily in the field if additional tenants are added. We might need as few as three added parts, depending on the number of tenants we’re adding. All cell sites have to be economical in their use of limited space, but that focus is even greater at multiple tenant sites. So it becomes even more important that hybrid power systems have a minimal footprint. Our SolSite™ systems are typically single cabinet integrated hybrid systems and they can handle up to 3kW average load, before requiring an additional battery cabinet. CPS’s experience with towercos means we’re used to dimensioning solutions that are prepared for multiple tenants from day one, with multi-tenant distribution boxes and power metering, giving the towerco options on how to monitor and bill for power, for example charging each tenant according to their equipment’s power consumption


How ESCOS can reduce your energy opex by 30-35%A closer look at site design to minimise opex: choosing the right generator, shelter, air conditioning, outdoor equipment and RMS

Kwabena Rangi Smith, Founder, Orun Energy


TowerXchange: Where do Orun Energy fit in the telecoms infrastructure ecosystem? Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: Orun Energy dedicated seven years to coming up with a best in class, end to end suite of solutions that will handle all the issues an operator or towerco faces, from power and cooling to remote monitoring systems. We’re a “go to” systems integrator for telecoms infrastructure, with solutions including proper site design, installation, management and even a financing company to help with capex. Working with Orun Energy, the operator needn’t worry about power – we’ll provide daily, weekly and monthly reports on each cell site, enabling the operator to focus on new services and customer experience. Orun Energy has set up an ESCO subsidiary to drive its business in India using the kW/hr pricing model. The India environment is actually suited to companies willing to take risks with the opex model. The environment in Africa is still evolving and would require more support from regulators and the government so as to better manage the perceived high operational and financial risks. We have an open platform, and work with local partners to access vital local knowledge and skills. Orun Energy owns the system IP. We design the solution at the outset, and we own contract at the end, but in between we use supply chain partners, O&M, a sophisticated outsourced ERP system, and

Read this article to learn:< What is an ESCO and how do they help reduce power opex for telecoms?

< The role of ERP systems in plotting and comparing sites, and in tracking performance against SLAs

< How to re-engineer cell sites with excess shelter and generator capacity

< The need for partnerships to drive value and accelerate universal access initiatives

< Why opex at a site can increase by 50-60% as you move from well connected urban areas to remote,

off-grid rural sites

Keywords: Reducing Energy Opex, ESCOs, Energy Efficiency, Flat Fee PPA and ESA Outsourcing Models, ERP, Service Level Agreements, Air Conditioning, Outdoor Equipment, RMS, Rural Connectivity, Infrastructure Sharing, Africa, India, Tarantula, Orun Energy

Orun Energy can demonstrate spectacular cost savings at a single outdoor and three indoor sites in the remote mountainous region of Rajasthan, India, where they’ve have been able to reduce diesel consumption by 86-92%. We asked Orun’s founder Kwabena Rangi Smith for his advice on how to achieve similar opex savings in Africa…

equipment partners to deliver the solution. We train the local O&M partner on our solution, then they handle the installation and day to day management of the system. Orun Energy uses a robust ERP system. The system provides Orun Energy with the capability to plot sites on integrated Google maps and compare sites with site survey data. The system also enables us to track performance against SLAs through automated workflows and configurable milestones, such as forecast and target dates. The system gives us one-click access to secure data, custom reports and instant dashboards, while providing Orun Energy with an audit trail. TowerXchange: What exactly is an ESCO?

Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: An ESCO, or Energy Services Company, is a business that develops,

installs and arranges financing for projects designed to improve the energy efficiency and maintenance costs for facilities over a seven to twenty year time period. Typically an ESCO provides the following services:< Development, design and arrangement of financing for energy efficiency projects< Installation and maintenance of the energy efficient equipment involved< Measurement, monitoring and verification of energy savings

ESCOs might also assume the operational and financial risk of the project. ESCO projects often include high efficiency power, heating and air conditioning, as well as centralised energy management systems. As the telecom industry evolves models to outsource power generation for cell sites, ESCOs can help operators and towercos reduce dependency on diesel without having to invest capital in renewable energy solutions. Outsourcing models have been developed on an operating lease or monthly flat fee basis. You can also use a Power Purchase Agreement (PPA) model, or an opex saving recovery or Energy Savings Agreement (ESA) model. TowerXchange: What’s your view of the migration of Africa’s telecoms infrastructure assets from operator-captive to being managed


by specialist, independent infrastructure companies? Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: African telcos are over-reaching themselves. With the skills shortage in Africa, it’s tough finding people to manage every issue from customer service to cell-sites, so it’s a good idea to outsource to specialist companies. I believe the tower industry is an increasingly distinct community, and power for cell sites is an industry in itself too. This is where Orun Energy fits: “from tower to power”. If we’re not careful the African telecoms industry may be heading the same way as India, where regulation has impacted the market adversely, ultimately eroding value through excessive competition and high operational cost. Another challenge in Africa is that low price, sometimes low quality passive and active equipment has been installed at many cell sites, which are running very inefficiently. This means high opex and a high failure rate, hence Africa’s QoS issues. Outsourcing to specialist energy and tower management companies enables operators to impose SLAs that ensure a transparent and open process, while delivering significant opex savings.

TowerXchange: What’s the blend of your business between upgrading legacy sites and optimising the power consumption of new sites?

“ “ESCOs can help operators and towercos reduce dependency on diesel without having to invest capital in renewable energy solutions

Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: We have been engaged in both retrofitting legacy sites and building new sites, helping towercos create multiple operator solutions with capacity for up to four tenants. TowerXchange: How do you optimise a site to reduce opex and add capacity for multiple tenants? Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: Optimising sites for multiple tenants depends greatly on the original site design. We’ve seen a lot of sites not designed optimally, and load capacity can suffer as a result, so we often have to address these design issues to make it easier to deliver our solution. For example, we often find generators are significantly larger than required – perhaps because the site owner over-estimated the prospective amount of equipment or prospective number of tenants. Installing a more suitable generator can

significantly reduce opex, but of course there’s always a capex-opex tradeoff. However, generators in Africa are generally swapped out every 19-24 months. Similarly, in our work in India we often found ourselves dealing with large shelters that put a greater burden on air conditioning, or separate mini-cabins for different operators as they didn’t want equipment tampered with. If operators are willing to share cabins it will drive down opex. You also need to ask if the equipment can allow for higher temperatures in the cabin. It might be fine at 29°C, so you might simply need better temperature sensors. We’ve found simply retrofitting air conditioning systems with sensors that switch to free cooling when it’s cooler at night can save considerable air conditioning power consumption. When we have upgrade legacy indoor sites in India, we’ve often found opportunities to swap out indoor for outdoor as equipment, particularly as equipment nears end of a typical 10-year lifecycle. Indoor sites require efficient cooling, which can account for 58-63% of power consumption. 80% of green field sites in Africa are going to have predominantly outdoor equipment going forward, but the majority of legacy sites have indoor equipment, so there’s another upgrade that can reduce opex. Finally, you need effective Remote Monitoring Systems, for example Orun’s RMS monitors sixteen parameters and enables predictive maintenance to avoid downtime.


You need a modular approach – we can help site owners stack up their requirements, and we can give you a capex you can afford. And we’ll often wait for proven tenants that need the site to be upgraded before making the investment. TowerXchange: Talk to us about the capital costs of the kind of solutions Orun Energy provides.

Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: For a typical outdoor

“ “80% of green field sites in Africa are going to have predominantly outdoor equipment

Orun Energy RMS

legacy site, retrofit may cost in the ballpark of $38k - $45k, with payback in 18-22 months, and an eight year life. Payback on a new build site is significantly better: 4–7 months. TowerXchange: Is the transfer of operator-captive infrastructure assets to specialist towercos with aggressive SLAs requiring opex reduction good news for companies like Orun Energy? Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: The towerco has got to create a profitable infrastructure business. So far, all you’ve done is transfer risk. Energy will still be the biggest cost. Energy costs are captured in the lease contracts with operators, so any improvement in energy opex savings would go straight to the bottom line, especially helpful where tenancy ratios do not meet expectations.

rural area where there might not be a decent road. The variable costs are all logistics – getting the diesel to the site, getting O&M to the site, the further you go, the more attractive diesel tends to become as a means of exchange, which means more theft. Your maintenance costs rise – engineering skills are scarce, and simply aren’t often found in rural areas. And you’ve got the cost of diesel itself which can be 70% higher in francophone than in anglophone countries, due to things like tax and the cost of trucking it in.

TowerXchange: Where next for Orun Energy?

Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: Orun Esco is in advanced discussions with major operator in Australia for a contract of 40-75 sites (pilot phase) for Orun On Grid energy efficiency solutions using the opex model. The number of proposed sites for retrofit could exceed 4000. Our goal is to save them 25% in energy related opex


The jury is still out on whether the towerco business model will work in Africa; whether they’ll be able to achieve targeted tenancy ratios, and whether they can create the portfolios of 12-15,000 towers needed to really drive efficiencies. TowerXchange: how can these opex savings accelerate rural connectivity? Kwabena Rangi Smith, Founder & Executive Chairman, Orun Energy: Africa’s tower business model has to change. As networks expand, new towers will be in expensive locations, and we need partnerships to drive value and spread the service. We need regulators to invest Universal Access Funds. Developments like mobile number portability in Nigeria will put further pressure on QoS. Operators need to change their approach to towers and let specialist companies help. The opex for a site could increase by 50-60% as you move from well connected urban areas to off-grid

Orun Energy achieved impressive cost savings such as:

< 90%+ savings in diesel costs with 35% monthly opex savings at an off grid outdoor site

< 86%+ savings in diesel costs with 30% monthly opex savings at an off grid indoor site

< 70% reductions in air-conditioning runtime

< Increasing uptime to 99.99%

“ “As networks expand, new towers will be in expensive locations, and we need partnerships to drive value and spread the service

Quantifying potential opex savings

Experiences from the front lines of managing a towerco in GhanaKeeping the network on the air makes it easier to sell co-locations

Gareth Townley, Managing Director, Eaton Towers Ghana

TowerXchange: How does your mindset need to change as you move from leading an operator to leading a towerco? Gareth Townley, Managing Director, Eaton Towers Ghana: When you are running a towerco, you’ve got to remember back to the pre-boom days of African telecoms. Mobile operators started “putting on weight,” by which I mean adding unnecessary cost to the business during the rapid growth experienced in the last decade. As a Towerco, you have got to get back to being proactive, lean and mean. TowerXchange: Can towercos really be proactive if the operator either needs the location or they don’t? Isn’t there a temptation to just wait for the phone to ring? Gareth Townley, Managing Director, Eaton Towers Ghana: We certainly send information on our tower locations to Ghana’s Mobile, 4G, TV, Radio, ISP and WiMAX operators, and yes they’ll call us when their networks are congested or if they’re expanding into new territories. But during my time as CEO of Viasat Africa, I learnt media sales where it’s sell or die, and I believe the tower industry needs active as well as passive selling. We’ve got to get away from selling a tower and instead sell access to consumers. We’ve got to know what these people want: do they want to access Facebook, to use mobile money, watch videos, make international calls? How much disposable income do they have? How much airtime and data do they represent for our prospective tenant? Our sales guys need to know the demographics of the areas

Read this article to learn:< How co-locations should be sold proactively rather than passively

< What comes first, the new tenancy sale or the site upgrade?

< How towercos buy energy equipment

< The impact of three towercos competing in Ghana

TowerXchange wanted to learn about the realities and priorities of managing the local operating company of a towerco. So we met Gareth Townley, Managing Director of Eaton Towers Ghana. Gareth is a veteran of several senior leadership roles in African TMT, including as CEO Africa for Viasat, and CEO of Millicom in Sierra Leone then Ghana.

Keywords: Co-location Sales, Uptime, TV, Demographics, DG, Procurement, RMS, Maintenance, Infrastructure Sharing, Africa, Ghana, Eaton Towers, Vodafone Ghana


surrounding the tower, not just the tower itself.

TowerXchange: How are your sales teams organised? Gareth Townley, Managing Director, Eaton Towers Ghana: We’re organised by account rather than by region. All the decision makers are in the capital cities so our sales teams are based there. The mobile operators remain the largest accounts, but TV will get more interesting as it migrates to digital, creating a new demand for towers. Today, Africa’s TV companies are quite small with big city-centric coverage. TowerXchange: What comes first, the tenancy sale or the upgrade? And how long does it take for a new co-location site to become operational for the tenant? Gareth Townley, Managing Director, Eaton Towers Ghana: The priority for the operators is to find a new site on which they can hang their equipment and quickly generate revenue with the minimum reconfiguration. We usually undertake any required site upgrades after a new tenancy sale. The cycle time can just be a couple of weeks, depending on what needs to be done. The upgrades can consist of some minor tower work or perhaps laying some extra concrete if outdoor equipment is used. We know the size of the generator at each site and what is required with regard to power. TowerXchange: Are those upgrades handled in-house by Eaton or by selected suppliers?

Gareth Townley, Managing Director, Eaton Towers Ghana: We have supplier agreements in place with a number of companies who we keep on their toes. It is important to avoid exclusive deals, I need my suppliers to be competitive, ensuring stocks are available at the right price, when I need it. Eaton Towers handles a majority of its procurement centrally. I only get involved personally to check out local outlets in Ghana – whether they have a good reputation, whether they keep equipment in stock et cetera. TowerXchange: What are the practicalities of maintaining the power solutions at cell sites? Gareth Townley, Managing Director, Eaton Towers Ghana: Telecoms is a DC industry. Even though Ghana has relatively stable grid power, we still have sites with significant generator runtime. And inevitably the generator will go down sometimes. But with effective remote monitoring alarms and strong batteries, there is enough time for the maintenance teams to respond and keep the site on air. TowerXchange: Are three towercos in Ghana too many? Gareth Townley, Managing Director, Eaton Towers Ghana: No. It’s better for the industry as competition keeps prices honest and ensures we all have to deliver a great service. There are enough operators in Ghana to keep three towercos busy, plus TV, radio, 4G, WiMAX players. Most sites can only take three to four tenants, so there’s enough to go around.

The more independent towercos you have in a country, the greater potential for expanded network coverage with lower congestion rates. TowerXchange: What’s in it for the operator to outsource the passive network to an independent towerco? Gareth Townley, Managing Director, Eaton Towers Ghana: Operators are able to unlock the value in their passive network, either by reducing maintenance and operating expenditure or via a cash sum. It’s true that towercos don’t do anything that the operator can’t do themselves, but I’ve been a CEO of African MNOs and there are a hundred and one other things to concentrate on rather than extracting value from the passive network. Towercos enable the operator to focus on the consumer. TowerXchange: How would you sum up your priorities as Managing Director of Eaton Towers Ghana? Gareth Townley, Managing Director, Eaton Towers Ghana: We have a responsibility to keep the network on the air. If we do that well, it makes the responsibility to sell co-locations, much simpler. The tower business in Africa isn’t like the US for example, where it’s a pure real estate play.

The African market is much more focused on the logistics of maintaining sites, which then combined with active colocation selling, drives the business forward


Special feature:

Maintenance costs can cripple site level profitability for towercos or suffocate MNOs’ business case for rural network extensions. Poor quality roads connecting remote cell sites, compounded by the scarcity of skilled local resources, can mean it takes days not hours for field engineers to reach a site, which makes the selection of the right O&M partners critical. The choice of RMS or ISM system is as important as the field maintenance subcontractor. Installing sensors to monitor passive and active equipment isn’t just about combatting pilferage – the most sophisticated systems integrate with maintenance scheduling systems at the NOC, translating hundreds of data feeds into actionable intelligence and transforming reactive scheduled maintenance into proactive preventative maintenance, or even achieving the “gold standard” of Just-in-Time maintenance.

How to leverage RMS to optimise preventative maintenance

Don’t miss:72 From data to intelligence

73 Inala’s Laurentius Human on how to

identify the smallest capex that yields the

biggest return

77 “Towards just-in-time maintenance”

with Kentrox


delivered and consumed. Indeed, one of many applications of RMS by towercos is remote meter reading, which reduces site visits while enabling each tenant to be billed for energy on a consumption basis.

Change management implications“A layer of subcontractors exists serving the towercos and OEMs who win passive and active infrastructure sharing contracts,” says TowerXchange inner circle member Fazal Hussain, veteran of Helios Towers Nigeria and Eltek. “This layer of subcontractors often includes ‘mom and pop’ businesses providing passive infrastructure services – small companies unable to make substantial investments, facing skills shortages, and struggling to deliver the reliability necessary for the prime contractor to achieve demanding SLAs.” Dick Hayter of Kentrox has a challenging perspective on the change management implications of installing Intelligent Site Management systems, including the need to reorganise subcontractors to combat engineering skills shortages by adjusting lines of reporting and directing field engineers to where the potential problems can be found. Read the interview with Dick on pages 77-80 . Having a few sensors at a cell site is not the same thing as holistic, intelligent site management Experts in RMS are fairly universal in their opposition to cheap point solutions “built in a garage”, the

mediocre results from which can tarnish tower operators’ view of the insights that remote monitoring can yield. On the other hand, sensors built in to generators are considered complementary not competitive to RMS. However experts caution that such sensors aren’t enough on their own. Your RMS partner should be able to integrate generator sensors into holistic systems, saving capital investment in pricey sensor hardware. Speaking of capex, this special feature puts the leading RMS and ISM manufacturers, Inala and Kentrox, on the spot to explain what their solutions cost on a per site basis. Translating data into intelligenceLaurentius Human, CEO of Inala and one of the godfathers of RMS, gives his perspective on the integration of RMS with maintenance scheduling systems in his interview on pages 73-76. According to Human, “if you can translate RMS data into actionable intelligence, you can build models for asset management and asset optimisation.”Maintenance costs can represent half of power opex,

which in itself is usually the single largest network operating cost. Remote Monitoring Systems (RMS) communicate an array of key performance indicators back to the NOC about the generation and consumption of energy. RMS can be integrated with job ticketing and asset lifecycle platforms to enable preventative maintenance, reducing truck rolls, extending the lifecycle of equipment, and making pilferage auditable. It’s an attractive prospect to only pay for fuel that’s

From data to intelligence


O&M team en route to remote cell site (image courtesy of Camusat)

Do you have experiences with RMS to share?...

…or would you recommend an O&M

subcontract, RMS or Asset Lifecycle Platform

supplier we should cover in a future edition?

If so, please contact TowerXchange at

[email protected]

How to identify the smallest capex that yields the biggest returnHow RMS identifies investments that will slash your energy and maintenance costs

Laurentius Human, CEO of Inala


TowerXchange: Tell us about the Remote Monitoring of cell sites in Africa Laurentius Human, CEO, Inala: Running telecoms infrastructure in Africa isn’t easy. But the challenges aren’t so much about crime or corruption as many people think; they’re challenges of geographical reach and of supporting diverse requirements rather than deploying a standard solution. Almost every cell site is unique, whether we’re retrofitting or dealing with a new build; they have different priorities, different passive infrastructure hardware, different software and active equipment installed, so a different configuration of RMS is needed for each site. You simply can’t have an out-of-the-box standard RMS system and expect to have clean, complete data coming in. TowerXchange: What are the KPIs for passive infrastructure management? Laurentius Human, CEO, Inala: Tower owners mainly use RMS to understand the reason for power failures, whether it’s just running out of diesel, power grid or mechanical problems. So it’s all about energy. The key performance metrics around energy concern generation, consumption and interruption of energy at a site. On a generation site, we monitor grid power quality, DG runtime, battery discharge and any solar or wind components. Any interruption triggers alarms that call attention to

Read this article to learn:< The necessity to configure each RMS to measure what’s important at that specific site

< How to leverage RMS to communicate critical data back to the NOC

< How to translate RMS data into actionable intelligence by integrating with maintenance job ticketing

< The challenges and opportunities for ESCOs in Africa

< Retrofitting cell sites with RMS to meet the needs of towercos with multiple tenants

Keywords: RMS, Retrofitting Cell Sites, Performance Metrics, Batteries, Renewables, Unreliable Grid, Maintenance, Asset Optimisation, Hybrid Power, Low Power Active Equipment, Energy as a Service, Service Level Agreements, Uptime, Infrastructure Sharing, Africa, Inala

Inala is one of the first companies in Africa to offer Remote Monitoring Systems (RMS). The company has deployed over 24,000 systems over eight years. Inala count Airtel, Helios, Eaton, IHS Africa, SWAP Technologies, Warid, Orange, MTN, Vodafone Group, Indus, IndoSat, Digicell and Vodacom among their many clients, and they own their own hardware IP. TowerXchange spoke to Laurentius Human, CEO of Inala and the newest member of the TowerXchange “inner circle”.

problems such as diesel theft, grid or battery failure or discharge issues. We also help monitor and remotely manage consumption: measuring what is contributing the greatest energy load to the site and providing the capability to switch on and off generators and air conditioning. Cell site power optimisation is a process; it’s not something you can ever “finish” because the profile of each site changes, from environmental conditions and unreliable power grids to diesel delivery and problematic traffic. The data from RMS becomes more valuable as it enables tower operators to not just identify grid failure but also to map grid failure phases and identify the right phases. TowerXchange: How does the communication of these critical data vary whether the site is operator-owned, run by a third party towerco or managed by a service provider?

Laurentius Human, CEO, Inala: It’s important not to underestimate the importance of RMS in communicating these critical data back to the NOC. As Inala has such a substantial installed footprint, we carry all sorts of data over the GSM network

via SMS or a GPRS link back to the NOC. If a cell site is owned and operated by the MNO, then they have direct control. But if the cell site is owned by an independent towerco, then they have to acquire a SIM card from the MNO and if that SIM card gets disconnected or runs out of credit then they’re blind. Inala provides a buffer by saving management data on the site for later upload.


Management service companies often lack the hardware platform to optimise remote monitoring – they try to use generic hardware with standard configurations, but the performance metrics differ for every site. So one size definitely doesn’t fit all. TowerXchange: What kind of capital investment should tower operators anticipate when investing in RMS?

“ “

Cell site power optimisation is a process; it’s not something you can ever “finish” because the profile of each site changes

Laurentius Human, CEO, Inala: A basic monitoring system to log data for the top 20-30 key performance indicators is going to cost $3,500-7,000 per site for the hardware and sensors, that’s before installation and commissioning and excludes batteries and generators. Competitive RMS range from $1,500 up to $20,000 per site. Of course it varies according to what you need to monitor; whether it’s grid power, diesel consumption, any renewables, security, navigational lights, humidity, access control, et cetera. If you’re talking about full hybrid monitoring and control, line conditioning and deep cycle batteries providing eight hours of autonomy, you could be looking at north of $20-40,000 per site on a retrofit basis. New sites offer a lot more options. Many generators now have in-built sensors tracking the top fuel consumption alarms. We can reduce capital outlay by integrating with these sensors. TowerXchange: How do tower operators translate RMS data into actionable intelligence?

Laurentius Human, CEO, Inala: That’s the million dollar question! An RMS system delivers between 20 and 200 data points to the MNO or towerco and, while we present it in a simplified graphical format, they must be able to interpret the data. They’ll need to prioritise which measurements are more important for any given site; it might be temperature for sites in arid environments, or fuel consumption at sites prone to pilferage. The towerco’s Service Level Agreement will define their tenants’ priorities We’ve built dashboards that show the ten worst performing sites, the ten most prone to theft, or the ten with the worst battery performance. But RMS won’t provide job ticketing or a work order. A third party system is used for maintenance and scheduling. For example, Bharti Airtel is working with IBM in Africa. Others have opted for custom developments to integrate into their active network management software and yet others prefer to deploy stand-alone third party solutions. Integration between that maintenance scheduling system and the RMS is an obvious thing to do. However, most job ticketing systems don’t allow for the level of data input our RMS can provide, so there’s usually a human element to reading and responding to alarms. If you can translate RMS data into actionable intelligence, you can build models for asset management and asset optimisation, helping you prioritise battery bank replacement, investment in line conditioning to clean up grid power, or whatever it is that incurs the smallest capex for


the highest return. In my experience, international tower companies have got extensive modelling from other markets, but those models don’t necessarily apply to Africa, where pilferage alone can bleed you of all your profits. Ultimately, remote monitoring is an iterative process to finding the right data that provide customers the right insights for the particular challenges they face at portfolio and individual site level. TowerXchange: What has attracted Inala to diversify into the hybrid power and energy services markets? Laurentius Human, CEO, Inala: We’ve done a number of hybrid sites. It’s a fiercely competitive market, with a number of battery and DG manufacturers playing in this space. Controlling hybrid sites is about more than RMS. For example, it requires a substantial outlay on batteries to get 8-15 hours of autonomy from the grid. Hybrid power is a necessary first step on the road to renewable energy as tower operators balance capital investments to identify the right sources of renewable energy, where they slot in and how to manage and get the most from them. Again, it’s got to be a case of the right solution addressing the needs of the individual site. For example, there’s generally not much wind in central Africa, which means a need for more investment in batteries. The sunlight angles onto solar panels mean that solar energy has a tough business case on the equator.

“ “The power solutions at a site need to be designed so they can be upgraded easily in the field if additional tenants are added

At Inala we favour chemical fuel cells; power generation from methanol. Introduction of renewable energy sources may be best undertaken in conjunction with a technology upgrade or swap enabling installation of new, low-power active equipment. There are plenty of sites at which we can move away from diesel altogether. There is a plethora of new technologies with which tower operators must be familiar and up-to-date: batteries, generators, renewables and now ESCOs (Energy Service Companies) – companies that own and operate distributed power generation. Few if any tower companies want to be electricity companies; towercos would much rather back-to-back their Service Level Agreements to ESCOs. Inala has stimulated some debate about energy as a service within the IFC and GSMA Green Power Initiatives and we are positioning ourselves to be an ESCO. But fools rush in where angels fear to tread. Diesel is a currency and so getting into that business cuts close to the livelihoods of some people who you don’t want to meet in a dark alley! TowerXchange: Is the transfer of towers from operator-captive to independent towercos a good thing from Inala’s point of view? Laurentius Human, CEO, Inala: Of course it’s good news for us if there’s continuing growth in the number of base stations deployed, whether by MNOs or towercos. Towercos may mean there are less towers on the hillside, but co-tenanting makes RMS

taking a risk on their ability to close the gap between potential opex reductions and actual performance. Remote Management systems are not a panacea, we’re not a magic bullet that delivers 100% uptime - we’re just the messengers. If you’ve acquired a low quality site with an old battery bank that cannot hold its charge, on a grid that fails 70% of the time and a worn out DG, RMS data will identify the deeper-lying problems in the acquired hardware, but then it’s up to the tower owner to prioritise which capital investments to make first to improve site-level profitability. TowerXchange: How are RMS and other passive infrastructure investments negotiated? Laurentius Human, CEO, Inala: Africa’s tower industry is a small network of people, and generally we all know each other. Negotiations are based on long-standing relationships. We negotiate on price of course, but also on getting sites installed and commissioned. The site acceptance procedure that defines an acceptable installation is also usually part of the negotiation. Ultimately it’s a similar sales approach for us whether we’re selling to an MNO, towerco or bank – we’re selling to the owner of the asset. In the end, grid power is going to fall short of telecoms infrastructure requirements systemically across all of Africa. Generation of electricity to power infrastructure must be one of the single biggest operational headaches for tower owners and I don’t see that changing


more critical. We’re finding ourselves retrofitting retrofitted sites where the RMS wasn’t sufficient to meet the new needs of tower companies. The entry of tower companies has changed the market. The towerco may now negotiate on behalf of a whole region, so we have fewer people to sell to and the sales cycles are long. But Service Level Agreements require towercos to understand the assets they’ve acquired and how they are performing, so we’ve seen an increase in orders. Tower companies tend to be more attentive to passive elements. While MNOs might have seen the passive elements of their networks as a necessary evil, tower companies are focused on the maintenance cycle and opex savings. The focus of our business will naturally be drawn to multi-tenant sites with 99.5-99.8% DC uptime Service Level Agreements. TowerXchange: Do tower companies’ Service Level Agreements reflect the current state of energy opex at the sites they are acquiring?

Laurentius Human, CEO, Inala: The terms and conditions of Service Level Agreements between Africa’s MNOs and tower companies have been drafted with a forward looking bias. Tower companies have very little real case study evidence of the conditions of the networks they are bidding for and acquiring. They may have basic uptime numbers but do these refer to DC or AC power? Is it load balanced? Tower companies are

Towards just-in-time maintenanceHow intelligent site management (ISM) transforms maintenance scheduling and management while reducing energy opex

Dick Hayter, MD MEA, Kentrox

TowerXchange: Why should tower operators invest in Intelligent Site Monitoring? Dick Hayter, Managing Director MEA, Kentrox: Tower companies are focused on reducing operating expenses (opex) at every cell site and, with a large number of sites in Africa still reliant on diesel, one of the best cost savings is in fuel and energy consumption. Kentrox recently deployed a system with a Tier 1 tower operator to enable remote tenant energy metering, providing the capability to bill each tenant at a site separately for power consumption. With one meter per tenant, they’re able to reduce truck rolls through automated remote reading, with correlation and bill generation. Intelligent site management in this instance provides three capabilities: fuel management, security and reduced environmental impact. The fuel and energy management capability, can, amongst other things enable tower operators to closely monitor the state of fuel; how much is delivered, if there is abnormal consumption (pilferage), and can also monitor the runtime and fuel consumption of the generation plant. This allows the tower operator to generate an auditable output and reconcile this against invoices from the subcontractors who deliver fuel, therefore only paying for fuel that’s actually delivered and consumed. The tower operator also gains visibility of the

Read this article to learn:< How to pay only for the fuel that your sites actual consume

< How to install fuel sensors to make pilferage auditable

< The change management necessary to move from scheduled to just-in-time maintenance

< How to reduce energy opex and extend the lifecycle and ROI in power equipment

< What it costs to purchase and install a robust ISM solution

TowerXchange spoke to Dick Hayter, Managing Director for the Middle East and Africa at Kentrox, a leading intelligent site monitoring, management, and control solutions provider with over a million products successfully deployed in carrier and enterprise networks worldwide. Their primary focus in Africa is on tower operators and service providers and they have a considerable number of Tier 1 customers throughout the region.

Keywords: Remote Monitoring Systems, Remote Site Management, Intelligent Site Management, Automation, Generator Management, Energy Opex, DG Runtime, Batteries, Subcontractors, Fuel Delivery, Pilferage, Just-In-Time Maintenance, Change Management, Reduced Truck Rolls, Africa, Kentrox


performance of the diesel generator (DG) and an opportunity to move away from scheduled maintenance, which is expensive especially for remote sites. The tower owner can identify issues in the power plant, batteries and rectifiers from the field and NOC, determine that a maintenance crew needs to be sent, and provide directions to maintenance crews as to what they should do when they get there. ISM also measures temperature and humidity and can instrument parameters from each piece of equipment, enabling tower owners to remotely shut down air conditioning and run fans when it makes sense to do so. This minimises the substantial load and energy consumption air conditioning can represent. And of course ISM tracks when maintenance is needed. Intelligent site monitoring also gives the NOC control over hybrid power sites and optimises the

selection between mains, renewables and batteries to minimise DG runtime. One of the biggest challenges we encounter in Africa is the state of batteries. On paper they look great – by investing more capital in better batteries you can reduce generator runtime to just a couple of hours a day. Yet many batteries are poor quality, poorly maintained, and the amount of charge they’re able to hold in practice is significantly less than in theory, so DG runtime doesn’t reduce as much as it should. Monitoring the state of batteries is critical. TowerXchange: How do site monitoring systems help mitigate against fuel theft? Dick Hayter, Managing Director MEA, Kentrox: We have fuel management systems in all three markets in which we’re active, and all of them have assisted tower operators and service providers in identifying pilferage. We place sensors in the fuel tank, the most commonly being a pressure sensor that measures the quantity of fuel within 2% accuracy. That’s hooked into a black box that transmits data back to a central monitoring point, so we can detect refuelling events or abnormal reductions. We use another sensor to detect water in the fuel – it’s a common ploy to cut fuel with water. Tampering with or disabling sensors generates alarms. The tricky part is collecting data from 1,000 or more cell sites correlating it and presenting it in a way that’s meaningful to management. You can’t apprehend a thief and take them to court of law based on our

systems alone, but the provider can follow up. TowerXchange: How big is the market for intelligent site management systems – are they in widespread use in Africa?

Dick Hayter, Managing Director MEA, Kentrox: In our opinion, the ISM market in Africa is pretty immature. We’ve encountered many point solutions implemented to solve one specific problem such as access control or just looking at fuel. Customer expectations haven’t always been properly managed, and there is customer dissatisfaction with low cost point solutions. Tower operators and service providers are becoming more interested in having a holistic view of what’s happening at their sites and are looking for carrier-grade, robust solutions, that retain data at a site in the event that the backhaul network temporarily fails. Strategic departments in tower operators and service providers are driving the requirements for intelligent site management.


“ “Tower operators and service providers are becoming more interested in having a holistic view of what’s happening at their sites

Kentrox Fuel Tanks at Risk

TowerXchange: Can intelligent site management help reduce maintenance costs to the extent of enabling just-in-time maintenance for African cell sites?

Dick Hayter, Managing Director MEA, Kentrox: It may take some time before we get to just-in-time maintenance, but that’s definitely the target.

Achieving just-in-time requires excellent visibility of every site, with effective dashboards and alarms, but more importantly we also need tower operators and service providers to revise existing processes. When they acquire assets, tower companies often inherit an old subcontractor network, with established but inefficient mechanisms for fuel

delivery and a lot of “interested parties”. There are all kinds of local cultural challenges and deep routed interest groups to win over. Subcontractors need to be re-organised. As things stand today, a local person who lives near the tower may have the capability to maintain air conditioning. Now with ISM, all the power elements are integrated, so the maintenance person needs to understand all of the elements at the site: air conditioning, batteries, diesel and renewable energy plants, rectifiers, aircraft warning lights, security fences and locks et cetera. Field maintenance staff who had been managing themselves for many years can now be directed from the NOC, telling them where to go and what to do. Implementing just-in-time requires substantial change management and means stretching many O&M subcontractors beyond their capabilities. Senior management may be disappointed with the results of installing ISM if they don’t address these change management issues, which can be particularly challenging in the many cases where O&M is an outsourced managed service.


“ “

Implementing just-in-time requires substantial change management

Kentrox solution architecture

Unfortunately this may dissuade some tower operators and service providers from implementing ISM, when I would suggest that the first thing they need to do is implement ISM to see what’s really going on at their sites. TowerXchange: What is the typical capital outlay per site to install your remote site monitoring systems? Dick Hayter, Managing Director MEA, Kentrox: For a network of 200+ towers, budget on around $5,000 per site for a full system inclusive of fuel sensors and a central O&M server installed at the NOC.

An IP remote camera would be another $700-1,200 on top, depending on functionality, but you don’t need those on every site. Around half of that cost is services to install the system, but I would recommend that operators do not take a shortcut on this aspect. The installation and tune-up of ISM requires a site visit, and proper quality control when installing sensors. We recommend that operators engage a well-qualified,

pan-African services company with bona fide project management skills. TowerXchange: Thanks for sharing your expertise and experience Dick. Could you wrap up the interview by summing up the benefits of intelligent site management? Dick Hayter, Managing Director MEA, Kentrox:Investing in a robust ISM solution enables tower operators and service providers to save opex by reducing energy consumption through the simple ability to turn off a generator remotely. ISM enables the more efficient use of battery capacity, renewable energy, and air conditioning. ISM provides visibility into maintenance requirements, reducing truck rolls and extending

the lifespan of equipment. This gives tower operators and service providers an opportunity to maximise the use of highly competent O&M resources to direct less experienced resources in the field. Uptime can be improved as we move toward just-in-time maintenance, improving Quality of Service and boosting subscriber loyalty. ISM helps reduce pilferage by making it more auditable. It’s not just about gathering data; it’s about integrating data and turning it into actionable intelligence. Intelligent site management is not just about fuel monitoring, it improves holistic management and control of network availability over the whole lifecycle of a tower and its equipment

Historically maintenance visits to cells sites have been scheduled through regular planned maintenance regimes. Whilst this can be effective, it isn’t necessarily efficient. Not all truck rolls are necessary – and if your truck roll consists of a multi-day journal to a remote cell site in Sudan, that can incur a lot of unnecessary opex. Just-in-time maintenance leverages ISM to track the actual usage of energy and other equipment at the site and can identify symptoms of potential problems before they result in downtime. ISM also enables the NOC to direct field maintenance teams to specific problems, which can be helpful in mitigating against skill shortages. Just-in time maintenance has been used for some time in the automotive and manufacturing sectors, leveraging self diagnosis capabilities and usage monitoring to provide maintenance when it’s needed, resulting in significant reductions in operating costs.

Applying Just-in-Time maintenance to telecoms infrastructure


“ “

ISM provides visibility into maintenance requirements, reducing truck rolls and extending the lifespan of equipment

Download issue 1 of TowerXchange FREE at www.towerxchange.comDepartments

5 Analysis

7 News< IHS acquires 1758 towers from MTN< Cameroon and Cote d’Ivoire market views< Orange selling 600 towers in Kenya

13 EditorialWelcome to TowerXchange

14 30

4027

Are three towercos in Ghana too many?

How to guide:Shareability

Special feature:Uganda case study

Introduction to infrastructure sharing

15 Is infrastructure sharing working in Ghana?16 BuddeComm Perspective on Ghana17 Interview with Chuck Green, CEO, Helios24 Best of Both Worlds? With Tony Dolton of Vodafone

31 $value on telecom infrastructure assets32 The cost of multi-tenant towers34 Design for shareability37 What are my towers worth?

41 How Orange leverage infrastructure sharing43 An interview with the UCC45 How Eaton hit the ground running: An interview with Alan Harper, CEO

28 Why share Africa’s towers?48 How to structure a deal 50 The criticality of tenancy ratios52 When is the right time to share towers?


Estimated number of towers owned or managed by towercos in AfricaSource: TowerXchange research, quarterly filings, site lists

TowerXchange is free for all African tower decision makers

Whether you missed the first edition of TowerXchange or you’ve just lost your copy, download issue 1 free at www.towerxchange.com!

Special Feature:

The front lines of the African tower industry are manned by experienced turnkey telecoms infrastructure providers – specialist subcontractors able to cut through Africa’s engineering skills shortage through outstanding project management and supervision capabilities. This unique breed of partner can design a cell site to meet any requirement, on or off-grid. They’ve surveyed and retrofitted thousands of towers to add hybrid energy solutions or capacity for multiple tenants, often reverse engineering the tower in the absence of the original designs and drawings. They possess a unique determination to install new cell sites, deliver fuel and perform preventative maintenance despite the most challenging logistics of washed out or non-existent roads.

Who’s who in tower design, manufacture, installation and managed services

In this feature:83 Who’s who in tower design, manufacture, installation and managed services86 Likusasa on innovating cell site design to connect the next billion subscribers91 “What gets measured gets done” at Reime Group96 Camusat’s logistics and maintenance best practices100 Leadcom propose the marriage of passive and active infrastructure management


Image courtesy of Camusat

warehousing, timely delivery and installation of passive and active equipment and components, all the way to managing an NOC integrating comprehensive RMS data feeds with maintenance job ticketing and asset lifecycle platforms that enable preventative maintenance. Services can extend into the installation and maintenance of energy equipment, with several turnkey infrastructure providers also developing cutting edge hybrid and renewable energy innovations.

“The tower acquisition and turnkey build to suit models yield different financial results. Acquisition seems to be the road to a more profitable proposition, and tower companies’ deals often come with build to suit agreements,” said one investor with considerable tower industry experience. With managed services reputed to be a high cost, low margin business, in the future some turnkey infrastructure companies may move up the value chain to bid for tower portfolios, perhaps fronting a consortium with investment partners.

While few turnkey infrastructure providers have yet acquired and leased back towers in Africa, many have become key strategic outsourcing partners of towercos. TowerXchange will examine the impact on the business model and capabilities of turnkey infrastructure providers of the arrival of independent towercos in Africa.

MNOs and towercos want to know that the potential turnkey infrastructure partners you shortlist have been trading for some time, have an excellent QHSE record, have a track record of meeting strict delivery schedules on time, and (ideally) have a physical presence in your specific market – or at least in a neighboring country. When selecting turnkey infrastructure and managed service partners, you want to know that your chosen partner has “been there and done that”, so we are pleased to introduce you, or reintroduce you, to some of the partners most warmly recommended by TowerXchange members and readers.

Companies profiled in this edition and in the first edition of TowerXchange:< Camusat (pages 96-99, TowerXchange issue two)< Ganges Internationale (pages 32-33 of issue one)< Hayat Communications (pages 22-23 of issue two)< Leadcom (pages 100-102 of issue two)< Likusasa (pages 86-89 of issue two)< Ramboll (pages 34-36 of issue one)< Reime Group (pages 91-94, of issue two)

In future editions TowerXchange hope to profile Alkan, Egypro, Linksoft, Mer Telecom, MobiServe, Netis, Plessey, QTE, Radio Network Solutions, TESA and Zamil Infrastructure.

TowerXchange will examine the slightly different role played by the active equipment manufacturers, such as Alcatel-Lucent, Ericsson, Huawei, NSN and ZTE, in a separate special feature. The OEMs often bundle managed services with active equipment sales, and often subcontract to the companies covered in this special feature, so merit covering separately

Mobile Network Operators and towercos typically outsource tower design, manufacture, installation and managed services to specialist turnkey telecoms infrastructure contractors.

TowerXchange will profile the most credible niche and “end-to-end” service providers in this segment of the tower industry supply chain, mapping their capabilities against seven key categories of service, while giving a sense of the scale and geographical footprint of their operations. We will also interview senior executives at selected turnkey infrastructure companies in this edition and the next three editions of TowerXchange.

The installation and managed services end of the tower industry supply chain is characterised by considerable organisational complexity. Substantial rollout and retrofit projects engage skilled supervisors to marshal hundreds of hard-working local staff. Projects can span the design, manufacture, import,

TowerXchange Who’s WhoYour turnkey telecoms infrastructure partners for the design, installation and maintenance of thousands of cell sites in Africa


Keywords: Tower Design, Tower Manufacture, Installation, Rollout, Retrofit, Leasing & Permitting, NOC, Managed Services, ESCOs, Hybrid, Infrastructure Sharing, Africa, Alcatel-Lucent, Alkan, Egypro, Ericsson, Camusat, Ganges Internationale, Hayat Communications, Huawei, Leadcom, Likusasa, Linksoft, Mer Telecom, MobiServe, Netis, Plessey, QTE, Radio Network Solutions, Ramboll, Reime Group, TESA, Zamil Infrastructure


(In alphabetical order. This is not yet a complete matrix - further companies will follow in parts 2, 3 and 4 of this special feature)Matrix of African tower design, manufacture, installation and managed service providers

Company

Company

Company

Company

Tower Design

Tower Design

Tower Design

Tower Design

Camusat

Tower Manu

Tower Manu

Tower Manu

Tower Manu

Install

Install

Install

Install

ManagedServices

ManagedServices

ManagedServices

ManagedServices

TOC

TOC

TOC

TOC

Acquire &lease

Acquire &lease

Acquire &lease

Acquire &lease

Permits & licenses

Permits & licenses

Permits & licenses

Permits & licenses

African Footprint: Botswana, Cameroon, Central African Republic, Congo Brazzaville, DRC, Egypt, Guinea Bissau, Guinea Conakry, Ivory Coast, Kenya, Madagascar, Mali, Mauritius, Morocco, Niger, Senegal, Uganda

Footprint: “Many countries in Africa”

Footprint:

Footprint (Africa): Benin, Burkina Faso, Chad, DRC, Gabon, Ghana, Ivory Coast, Niger, Rwanda, Tanzania, Uganda, Togo

Sample clients: France Telecom/Orange, Digicell, Eaton Towers, Bulgaria Telecom, ZTE, Telma, TowerCo of Madagascar

Sample clients: Airtel, Vodafone, Huawei (MTN), Orange, Helios, Eaton, Ramboll and Safaricom directly and through partners

Sample clients: Etisalat, Qtel, Vodafone, Bharti, Wataniya, Ericsson, NSN, Alcatel-Lucent and Huawei

Sample clients (Africa): Alcatel-Lucent, Ericsson, NSN, Huawei, Airtel, Atlantique Telecom, MTN, Orange, Tigo, Vodafone, Helios TA, Eaton, ATC

1,500 worldwide, 843 in Africa

500 perminant, 1,000 contractors

1,200-1,500

700

1940s

1991, in towers since 2004

1997

1982

5,000

4,000

3-5,000

TP

TP

TP

TP

India TP Africa

India TP Africa

TP

Capabilities

Capabilities

Capabilities

Capabilities

Approx # of towers in Africa




Founded

Founded

Founded

Founded

Staff

Staff

Staff

Staff

TP = Through Partners

GangesInternationale

Hayat Communications

Leadcom

Company Capabilities Approx # of towers in Africa Founded Staff




Tower Design

Tower Design

Tower Design

Ramboll

Reime Group

Tower Manu

Tower Manu

Tower Manu

Install

Install

Install

ManagedServices

ManagedServices

ManagedServices

TOC

TOC

TOC

Acquire &lease

Acquire &lease

Acquire &lease

Permits & licenses

Permits & licenses

Permits & licenses

Footprint: Mauritius HQ, Mozambique, Zimbabwe, Zambia, Malawi, South Africa, Lesotho, Angola, Cameroon, Nigeria, Ghana, Liberia, SDR Guinea, Sierra Leone, Kenya, Tanzania

Footprint: Pan African, continental HQ in South Africa

Footprint: DRC, Ghana, Ivory, Kenya, Madagascar, Malawi, Nigeria, Republic of the Congo, Tanzania, Uganda, Zambia plus satellite operations in Burkina Faso, Rwanda and Sierra Leone

250 permanent, 500-750 contractors

10,000

360

1995

1945

1912

3,000

7,000

3-4,000

TPTP TP

TP Software

Sample clients: MTN, Econet, Cell C, Vodacom, Huawei, Ericsson, NSN, American Tower, Helios

Sample clients: (In Africa) Huawei, NSN, ZTE, Ericsson, American Tower, IHS Africa, Helios, Airtel, Vodafone, MTN

Sample clients: Airtel, Alcatel-Lucent, Eaton, Helios TA, Helios TN, Huawei, IHS, MTN, NSN, Safaricom SWAP, Tigo, Vodacom, ZTE

If you would like to refer us to other turnkey infrastructure companies that should be featured in this Who’s who, then please contact TowerXchange at [email protected]. We are generally interested in companies that have manufactured, installed or maintained at least 1,000 cell sites in Africa, or smaller companies with a unique capability within this segment of the tower industry supply chain.

Please note that inclusion in the TowerXchange Who’s who is based solely on the proven capabilities of the companies profiled, usually on the basis of client recommendation. It is not possible to “buy” coverage in our Who’s who, but we are very grateful to the advertisers in this special feature, Likusasa and Reime Group, as their support helps TowerXchange keep our publication free to over 1,000 African tower industry decision maker readers.

Recommendations

TP = Through Partners

Likusasa

Matrix of African tower design, manufacture, installation and managed service providers

The future is nowInnovating cell site design to connect the next billion subscribers

Gary Staunton, CEO, Likusasa

TowerXchange: Thanks for speaking to us today Gary. How has the increasing role played by independent tower companies in Africa affected the greenfield new site build business? Gary Staunton, CEO, Likusasa: The operator has different objectives from a towerco. The towerco is essentially a real estate company that generates income from rentals, while an operator’s generates data and airtime revenue. In the recent past, when infrastructure defined an operator, operators rolled out sites either through site build contractors or equipment vendors. Nowadays, if an operator wants to roll out 1,000 base stations, their first question is now usually “how many can we co-locate?” as co-location incurs less risk, and the time from investment in equipment to generating income from the site is much accelerated. To ensure long term sustainability, towercos prefer towers with capacity to maximise potential tenancies and power systems that can minimise opex costs. In rural areas towercos might build for a single tenant, but in urban areas builds are almost always for multiple tenants, with designs to accommodate potential future expansion. For example in urban Nigeria it’s common to see high capex, heavy towers with power systems that can accommodate three or four tenants. When building new tower sites, towercos have some tough choices to make balancing maximum business potential specification with cost.

Read this article to learn:< The impact of infrastructure sharing on investments in greenfield sites

< How to survey structural capacity and power systems to identify site modifications that enable

additional tenancies

< The logistical challenges of co-ordinating hundreds of site builds and upgrades in Africa

< The supervision and training necessary to harness hard-working local workforces

< How to reduce capex and opex to economically connect subscribers in low ARPU areas

Likusasa are a pan-African ICT project manager and constructor offering comprehensive services incorporating infrastructure construction, cell site design and installation, and diesel, hybrid and PV energy solutions. Likusasa have built approximately 3,000 greenfield cell sites in Africa and retrofitted many thousands more. TowerXchange spoke to Likusasa’s CEO Gary Staunton about the impact of towercos entering the African telecoms infrastructure market, and innovations to improve the economics of rural connectivity.

Keywords: Greenfield, Co-location, Power Systems, Hybrid, Solar, Time to Market, Opex Reduction, Site Surveys, Upgrades for Capacity, Logistics, Local Workforces, Next Billion, Rural Connectivity, Infrastructure Sharing, Africa, Altobridge, Likusasa


The practical impact of the introduction of towercos and the co-location model to Likusasa’s traditional market is significant. As much as 40-50% of newly installed base stations would now be expected to be co-located and this percentage is expected to increase as the model further develops. Back in 2002 we were building around 500 greenfield sites a year – that’s probably down to 200 now, so more than half of our business is related to co-locations these days. We have had to make adjustments to the way we work and expand the services that we offer to accommodate this emerging demand. This includes surveys, tower upgrade assessments and designs, improved database systems and the development of many opex reduction innovations for power, control and security. Econet, Vodacom & MTN are substantial clients of ours through their various OpCo subsidiaries, but as the market evolves we serve a larger variety of clients with different business objectives. TowerXchange: Is the transfer of assets from operator-captive to independent towercos good news from your perspective? What are the quick

fixes towercos use to improve opex and add capacity? Gary Staunton, CEO, Likusasa: It’s neither good or bad news for companies like Likusasa. Towercos have a different business objective focused on maximising return on asset investment but in some cases they have in-house capabilities similar to ours. We have worked with some of the most prominent African companies including American Tower, Helios and more recently IHS and we fully expect to continue to support these companies with the services and innovations they require to make their business models successful. There is often a wide variety of tower and power specifications among the assets that have been rolled out across Africa, and as towercos make new acquisitions they have to establish a detailed understanding of each tower site. Likusasa provides design and construction services that assist towercos with assessment of tower structural capacity, modifications for improvement and replacement or relocation of towers. We also provide associated power audits that include making recommendations on efficiency improvements, like managing dirty power from grid connections, hybrid and PV retrofits and sizing generators for the specific capacity requirements of an increasing number of tenants. Likusasa is familiar with and has deployed thousands of network management systems that monitor and control fuel, power metering and other site


“ “

As much as 40-50% of new base stations would now be expected to be co-located

Co-location sites built for USF in Zimbabwe

operations. All of these systems have the ability to significantly improve site efficiency. TowerXchange: Likusasa has a particularly strong reputation for joining up the logistics between product manufacturers and the successful installation of equipment at new and retrofitted cell sites. Talk to us about the logistics of installing cell sites. Gary Staunton, CEO, Likusasa: Procurement responsibility is often shared between ourselves and the client due to the arrangements that a client would have with its preferred technology suppliers. However, there are significant logistical challenges in coordinating hundreds of site builds or upgrades across a dispersed and often remote geographical area such as coordinating deliveries from various African, European, American and Asian manufacturers and integrating these imported technologies using mainly local resources to meet strict SAQ/ CW / TI time and quality KPI’s. Likusasa have an extensive and successful track record in this area and have developed an enviable organisation of people supported by systems, processes and in country resources that can face these challenges and deliver to client expectations. TowerXchange: How are Likusasa able to use local resources to deliver highly skilled technical projects? Gary Staunton, CEO, Likusasa: We’ve got good systems, strong partners and the required

supervision skills to train and manage hard-working, local workforces. Likusasa will typically have significant operations in five or six African countries at any one time. These operations are used as a base for projects and operations in other countries which maximises our overhead efficiency so we can remain competitive. We have over 250 core permanent staff with excellent constructions technical, engineering, administration, HSE, quality management, commercial management and project management skills, overseeing 500-750 short term contract

resources. The number of contracted resources fluctuates as we gear up down according to project requirements. Likusasa invests in its people and encourages development. We have different levels and approaches to human resource development. For instance we do regular HSE awareness presentations and we maintain HSE certification such as tower climbing. We support our technology partner product training programs by sending our in-country technicians to our partner training facilities for installation and support certification. We encourage formal external training at



“ “

The objective is to reduce both capex and opex, and to present a business case that provides a decent return with low ARPUs

accredited academic institutions both in-country and internationally and in some cases we partner with these institutions to establish training and development programs for project management and business leadership. TowerXchange: How are Likusasa innovating to make connecting the next billion mobile subscribers economically viable? Gary Staunton, CEO, Likusasa: Extending coverage, improving capacity and introducing data technologies all form part of our business portfolio. For us, “connecting the next billion subscribers” means many things including making rural communications economically sustainable for single and multiple operator sites. Likusasa recently won a project in East Africa to design and implement low cost 35m/55m towers on sites with grid power that is typically interrupted or of poor quality. We’re working with selected partners and the operator to build those sites for less than $70,000 each which at that cost a

significant achievement. In southern Africa, we’re helping a regulator fulfill a challenging rural coverage communications requirement using large solar powered multiple operator co-location sites. This design considers future proof designs for macro sites in the rural application that use microwave transmission. In another example, we were presented with a brief to provide connectivity to 120 rural areas with a $35m budget and a 12-18 month time window. Using our innovative approaches, we came up with a low opex, community engaging business model

requiring $10m capex that could be deployed in 6 months, based on Altobridge 2G/3G radios, a solar PV power system, that incorporates a highly efficient VSAT backhaul.

We find that there is no silver bullet to reduce costs. You have to value engineer the network plans and site designs taking into account the objectives of all the stakeholders including the regulator, operators, and local communities. One of the main sustainability objectives that Likusasa contributes to is the reduction of capex and opex to present a business case that provides a decent return with low ARPU’s

Likusasa is a specialist engineering and contracting service provider in the energy, communications and infrastructure sectors operating across Africa and the Middle East.

- Hybrid power systems- Multi-tenant remote energy metering- PV solar solutions

Energy

Gary StauntonChief Executive OfficerE: [email protected]: +230 941 5330 (Mauritius) +27 83 284 6153 (SA)

- Fibre optic installations- Implementation and integration of telecommunications equipment- Remote site monitoring and control- Turnkey rural telecommunications solutions

Telecommunications

- Data centres and cable landing stations- Optical network construction- Site upgrades and tower strengthening- Turnkey network deployment

Infrastructure

[email protected]

What gets measured gets done at Reime GroupThe new CEO of one of Africa’s leading passive infrastructure and managed service providers explains their key performance indicators

Anand Garg, CEO, Reime Group

TowerXchange: Congratulations on Reime Group’s centenary (December 2012). Please introduce us to the company. Anand Garg, CEO, Reime Group: Thank you so much Kieron and I am indeed glad to be speaking with you on the occasion of our centenary year. I also wish to avail of the opportunity to thank our esteemed customers for their support in this rather long journey.

Reime Group employs around 360 people in Africa. Apart from thirty expats, the majority of our team members are African. We believe in investing in local talent. We’re now one of the leading passive infrastructure service providers in Africa, with projects and services across the whole lifecycle from rollout to energy efficiency services to managed services. Reime started out as a harpoon factory in 1912 in Norway, and then moved in the early 1950s into extensive production of hot-dip galvanized steel structures for the country’s power supply industry, producing 70% of the high voltage transmission towers in Norway. New opportunities appeared in the rapidly growing market for telecommunication, so Reime focused mainly on design and production of hot dip galvanized towers and masts for radio link and cellular phones, and 70% of the volume was eventually exported. Decades of experience with Norwegian landscape and weather conditions gave the company the right foundation to be able to carry

Read this article to learn:< The Key Performance Indicators for passive infrastructure management needed to meet exacting SLAs

< Leveraging performance measurement to optimise maintenance response times and productivity

< The necessity of understanding local laws and obligations to accelerate leasing and permitting

< A comparison of capex in new sites in East ($80-100k), West Africa ($125-150k) and India

< How Reime deliver energy savings of 35-40% by running the DG at variable speeds according to active

equipment load

Anand Garg is the incoming CEO of passive infrastructure supplier Reime Group. Anand came to Reime from Viom Networks, part of $ 100bn Tata Group, where he managed Southern and Western India, a $300m business with 21,000 towers and over 1,000 people. Anand wanted to take what he’d learned to make a difference to a smaller set up, and his previous experience setting up Neotel’s rural business in South Africa gave him the geographical and cultural knowledge to return to Africa.

Keywords: Local Workforce, Rollout, Power Management, Leasing & Permitting, Opex Reduction, Capex Optimization, Low Cost Tower Designs, KPIs, RMS, NOC, SLAs, Maintenance, Uptime, Asset Utilization, Pilferage, Infrastructure Sharing, Africa, ACME Tele Power, Reime Group


out demanding assignments worldwide.

A transformation of the business that started in 1996 has led to a highly internationalized business operation focusing on managerial and entrepreneurial services. By 2002, all steel production was outsourced to various partners worldwide. Reime Group later expanded further by offering its intellectual capital in the form of niche project management skills as well as software packages for monitoring and managing network rollout projects. In 2007, Reime became a wholly owned subsidiary of ACME Tele Power Ltd., which is the flagship company of the ACME Group of India and an industry leader in the field of passive infrastructure solutions for the telecom sector. Reime became a one-stop shop doing the entire gamut of businesses, from tower supply and erection, installing passive infrastructure to post sales maintenance and servicing of the sites. The solutions offered by Reime

thus expanded to include network rollout solutions, enclosure solutions, power management solutions, cooling solutions and network management solutions. With these patented, innovative and energy efficient solutions, Reime brings the value add to its customers by reducing their opex with their environmentally friendly green solutions. TowerXchange: Reime has just about every major name in African telecommunications on your client list - where does your business come from, direct from operators and towercos, or via subcontracts from the major equipment manufacturers? Anand Garg, CEO, Reime Group: Most of our site build and energy efficiency product orders come direct from towercos and operators. Our managed services are subcontracted by the major equipment manufacturers. TowerXchange: What practical steps can be taken to accelerate leasing and permitting when acquiring new cell sites in Africa? Anand Garg, CEO, Reime Group: We firmly believe in adherence to the law of the land. The only way to fast track leasing and permitting is to understand your obligations fully. Because of Reime’s presence in 14 countries in Africa, we have local knowledge about which permits are required on a country-wide and regional basis. The better you understand your local obligations, the better your ability to fulfill those obligations quickly.

TowerXchange: How does infrastructure capex and opex in Africa differ from typical levels in India, and what cost efficiencies have Reime Group been able to achieve? Anand Garg, CEO, Reime Group: A new cell site typically costs $80-100k in East Africa, $125-150k in West Africa. In comparison, the same tower can be installed for roughly half the cost in India. Opex running costs average $1800-2500 per month per site, depending on number of hours of quality grid power – DG and battery runtime constitute a significant proportion of opex. For capex, besides the product cost, it is important to consider the logistics cost from sea port to final destinations in the Eastern and the Western Provinces of the continent. Opex cost varies mainly because of fuel price, space rent, per capita income (country specific) and labor wage act prevailing in the country. Reime have developed solutions to bring down capex and opex. For example we have a unique low cost tower design which can be built for $65-66k, inclusive of everything you need - structure, power supply et cetera. This is a Nano tower – a 40 meter tower with capacity for 2 tenants, suited to rural areas with low penetration, but it can also be installed for urban in-fill sites where there are a number of towers, but capacity and coverage is inadequate. Reime can also design and install towers for up to 5-8 tenants. On the opex side, we’ve done successful trials


“ “The only way to fast track leasing and permitting is to understand your obligations fully

leading to orders from customers including Airtel, MTN, Tigo and various Towercos including Helios Nigeria, Eaton Towers and American Tower that have achieved benchmark energy savings of 35-40%. These savings come from our recent innovation called the Energy Management Unit (EMU). The solution allows the existing diesel generator to run at variable speed with regards to active equipment load and thus reduces the generator fuel consumption substantially. The EMU is further supplemented with our patented product called PIU (Power Interface Unit). This incredible solution makes up for the missing grid phase and steps up the line voltage as a result delays the genset run time and therefore saves operating expenditure.

TowerXchange: Anand, your LinkedIn profile mentions your belief that “what gets measured gets done” – what are the key performance measures for passive infrastructure management? Anand Garg, CEO, Reime Group: At Reime, we have developed unique solutions to measure KPIs of passive infrastructure management. At our state of the art Global Energy Management Centre (GEMC) we’re able to remotely monitor KPIs such as energy consumption, asset utilization, and technical field force utilization, which enable us and our customers to monitor and realise substantial opex savings.

We have alarm monitoring systems of course, and measure how quickly we can attend and implement corrective actions. It’s important to mention here that we have stringent KPI’s with our customers for Managed Services. In order to achieve 99.998% site uptime, we have to plan and deploy right resource at the right place and right time, so that the response to the cell site is a maximum of 90 minutes. For example, in Rwanda, Reime’s response time to reach sites in and around in Kigali is 60 minutes. Accordingly, Reime has deployed resident engineers who are equipped with tools to fix the problem at site. We also monitor engineers in the field from our GEMC, and are able to assess productivity and response times – that’s important to help us understand if we’re adequately or over-staffed. These measures are all critical in ensuring we meet the exacting Service Level Agreements set out in our managed service contracts. Similarly, we use PROMASYS, a unique equipment ordering and cost monitoring integrated project planning and tracking tool which helps us monitor and track our project completion on a timely basis without any surprises. Health and safety of our assets and employees is at the core of everything we do and therefore, as a company, Reime adheres to stringent HSE (Health, Safety and Environment) norms.

TowerXchange: Can you tell us a little about how Remote Monitoring Systems are used to combat


35-40%

Benchmark Energy Savings

fuel theft?

Anand Garg, CEO, Reime Group: The calibration of the fuel tank is one of the most important features of RMS. We can track fuel utilization. We know the quantity put into the DG, we know the DG capacity and track the runtime. So we can establish whether there was any abnormal discharge from the historical data of fuel consumption. TowerXchange: Do you expect the African tower industry to develop along similar lines to the Indian market, where the majority of assets transferred from operator-captive to independent towercos, managed by specialist infrastructure companies? Anand Garg, CEO, Reime Group: There are indications that a similar change is already taking place in Africa. The establishment and growth of ATC, Helios Nigeria, Helios Towers Africa,

Eaton Towers, Africa Towers (Airtel) & IHS bears testimony to this. While some MNOs think retaining their towers is a strategic advantage, they think that owning the towers means owning the customer, others have realised that by hiving off towers to infrastructure management specialists, the operator can concentrate on their core business of marketing minutes on one hand and reduce the burden of both capex and opex to a large extent by sharing the

passive infrastructure on the other. Thus sharing of passive infrastructure in Africa has become a reality and will gain further momentum in times to come. It’s good news for passive infrastructure service providers like Reime as it provides us with an opportunity to work with all stakeholders in the value chain: towercos, MNOs & energy providers


“ “We’re able to remotely monitor KPIs such as energy consumption, asset utilization, and technical field force utilization

Thank You For Your Support!

[email protected]

Ÿ Energy Management Solutions

Ÿ Cooling Solutions

Ÿ Turn-key site installation

Ÿ Managed services

Ÿ Network Monitoring System

Ÿ Opex Reduction by 30-40%

Reime

Whatever it takes to get it doneThe logistics and maintenance best practices required to install and maintain towers in Africa

Eric d’Aboville, Business Development Director, Camusat

TowerXchange: Rolling out new cell sites swiftly is critical. Tell us about the logistics of getting a new tower from your factories to a remote installation site in Africa – take us through the import, warehousing and delivery logistics processes. Eric d’Aboville, Business Development Director, Camusat: Logistics is probably the most important aspect of any telecoms infrastructure rollout programme. Camusat keeps tight control over logistics, so we minimize the use of subcontractors. Our two tower manufacturing plants are in Europe so it’s essential that we have a good logistics department to deal with shipment of towers and accessories to Africa by air or by sea. This is the easy part! The difficult part is local transportation. Africa has few proper logistics companies, and the road infrastructure is poor. Camusat makes a difference because we take the attitude “whatever it takes, we’ll deliver what is needed to that site, when it’s needed.” As soon as we open a subsidiary in a new country, we simultaneously will have offices and warehouse premises, so that we can have a stock of towers and accessories. We then can respond rapidly to customer requests. We keep this stock buffer available to face most of the urgent commercial request of our customers. In order to accelerate deployments and meet challenging SLAs, especially in remote locations, we may not hesitate to invest in military-style logistics

Read this article to learn:< The logistical challenges of importing, delivering and installing towers in Africa

< How to overcome the challenges of relocating towers

< How to reverse engineer a tower that lacks proper documentation

< The monitoring tools, telemetry and statistics needed to build a knowledge base and move from

corrective to preventative maintenance

< The contractor’s perspective on towerco asset transfers and price negotiations

Since the 1940’s Camusat has been a leader in the turnkey implementation of telecommunication infrastructures, offering a complete range of services related to construction, installation, supply and maintenance of towers, masts, shelters, fibre and additional parts. Camusat is a natural partner for operators and towercos who are looking for a company with strong capabilities all over Africa, with unified company culture and high QHSE standards, providing a single point of commercial contact to optimize the supply chain and negotiations of multiple similar deals in several countries.

Keywords: Logistics, Warehousing, Rollout, Relocation, Upgrading for Capacity, Reverse Engineering, Preventative Maintenance, RMS, Hybrid Power, Line Conditioning, Pilferage, Tier 1 OEMs, Subcontractors, Infrastructure Sharing, Africa, France Telecom-Orange, Camusat


and vehicles to make sure goods are delivered onsite without any risk, respecting European standards of safety and environment. When we’ve been pushed to get new towers erected very quickly, we’ve shipped a special unit crane from the US to Africa that can raise 40m high, enabling tower erection quicker than any of our competitors.

In Madagascar, where there are no roads and many areas are impassable for normal vehicles during the rainy season we’ve invested in heavy duty pickups, as well as 6x6, and quads to ensure access, and we’ll use a chopper when we have to.

Camusat’s reputation for doing “whatever it takes”

is appreciated by our customer base – it’s not just a slogan, it’s a reality for them! TowerXchange: As tower sharing increases in Africa, we are starting to see consolidation of sites, so tell us about the logistics of relocating towers. Eric d’Aboville, Business Development Director, Camusat: Relocating a tower is a measure of last resort, both because of the cost and because of the challenge of ensuring the service for tenants is not interrupted.

Relocating a base station requires erecting a new tower according to the new requirements, transferring equipment and using a change process to avoid service interruptions. Dismantling a tower is more time consuming than mounting a

tower, primarily due to the foundations. In many cases it’s not economically reasonable to remove foundations, as it’s difficult to destroy three to five metre deep reinforced concrete. We might destroy the first few centimeters and re-cover with soil, but of course that’s not always acceptable for tower operators with exacting environmental protection standards.

TowerXchange: How do you reinforce a tower to add capacity for multiple tenants? Eric d’Aboville, Business Development Director, Camusat: Compared to relocating a tower, refurbishment is a purely technical, relatively straightforward task. The challenge comes if we don’t have proper documentation about the existing tower, such as designs and calculation notes. It’s also a problem if we don’t have good information


about a tower’s foundations and we can’t estimate how good the concrete is, or it’s conformity to QHSE standards. Reverse engineering a tower without documentation is costly and it takes time.

We have to inspect every section of the tower, verify and measure steel thickness, potential corrosion, bolts and nuts, concrete foundations and then evaluate from these measurements what the most cost-effective way is to re-inforce the tower. We may have to increase the size of the foundations, add re-inforcement legs, replace sections, add diagonals, etc. Assuming you have proper documentation or have successfully reverse engineered a tower, re-inforcing a tower is easy – with the proper calculation notes, it’s a straightforward process to work out how to add capacity. Camusat have its own R&D and design people who do this exercise regularly without interrupting transmission and radio operations.

TowerXchange: How can tower operators minimise maintenance opex?

Eric d’Aboville, Business Development Director, Camusat: As far as possible, we need to practice preventative rather than corrective maintenance. Excellent monitoring tools feeding into an NOC with proper processes to detect and prevent corrective interventions drive preventative maintenance. Achieving preventative maintenance requires that Camusat deploy specific tools to supervise

passive infrastructure. The most important aspect is the power, which is where most maintenance headaches start. We work very hard to find alternative green and hybrid power solutions, customised for telecoms. There are plenty of solar and hybrid solutions on the market, but few suppliers who really understand the specific needs of telecom requirements. Camusat has sixty years of experience of specific African requirements dealing with unstable grid power. Off grid sites are actually easier to maintain.

Backup diesel generators are the most commonly used solutions at unreliable grid sites, but they can be very expensive in terms of daily operations and opex. You need to look at how to deal with power availability and filtration of the grid to reduce usage of backup generators. Camusat’s R&D teams have developed customised line conditioners for the harsh environment and specific needs of Africa so that we get the most of the grid whenever it’s present but unstable. The key to organising your team for preventative maintenance is telemetry and statistics. Telemetry and statistics enable you to build a knowledge database, based on which you can build a profile of operations on each site to establish preventative maintenance schedules. For example when dealing with unreliable grid sites, we can build patterns of grid behavior which means we can design and install the proper equipment to maximise energy efficiency and avoid equipment damage. Another element of preventative maintenance is to

have regional maintenance agencies located at an optimum distance from each site as defined by the tower operator’s SLA, with maintenance agencies based as close as possible to top priority sites. The final and most important component of preventative maintenance is human resources. Camusat don’t use subcontractors so we can ensure quality and control through good supervisors who train and motivate the team, supported by incentive programmes to ensure they do this repetitive job properly.

There will still be some instances where you need corrective maintenance, such as in cases of theft, vandalism or lightning strikes. Unless you want to build a defensive bunker, it’s difficult to eliminate the theft and vandalism issue, so we try to find cost effective solutions. We’ll make local improvements to security, looking at the fuel tank and connection between the fuel tank and the generator, or improving access control, choosing most cost-


“ “The key to organising your team for preventative maintenance is telemetry and statistics

effective solution for that particular site. Of course lightning strikes are also difficult to predict! We’ll install surge protectors, but sometimes you just have to use corrective maintenance to repair and replace burnt out elements.

TowerXchange: What’s the balance of Camusat’s business between MNOs and towercos? Is the transfer of assets from operator-captive to independent towercos good news for Camusat? Eric d’Aboville, Business Development Director, Camusat: We sell initially to MNOs, but when assets are transferred to a towerco we become a supplier to the towerco.

It’s too soon to say whether tower transactions are a good business development opportunity for us. When our clients France Telecom transfer towers to a towerco, it means a jump into a new area and we need to build new relationship with the towerco. So tower transactions are potential risk, but they’re also an opportunity to secure business from other co-locating operators. We maintain a dialogue with all the towercos. They all put pressure on subcontractors’ prices, and of course you can only push prices so far before it may decrease quality. TowerXchange: How do Camusat differentiate herself from competition?

Eric d’Aboville, Business Development Director, Camusat: Camusat has a good control of all

the supply and delivery chain. We don’t use subcontractors. Manufacturing, delivery, logistics and maintenance are all provided by Camusat’s own team. So we have no real direct competition on this end-to-end service.

Thanks to our expertise in designing towers since more than forty years, we have integrated towers with common basis and sections thus allowing us to adapt our production very quickly to the customer changes of specification, without replacing every section of the tower.

We’re also unique because of our extensive network of local subsidiaries. Many of our competitors leave

the country after completing an installation project.

Our competition comes less from tower manufacturers, and more from original equipment manufacturers who bundle a suite of managed services with active equipment sales. Outsourcing managed services contracts to companies like Ericsson, Alcatel-Lucent and Huawei was a growing trend two years ago, but MNOs are now realising they need maintain direct relationships with their tower manufacture and installation companies to minimise opex. Today the new trend is outsourcing to towercos, and most of the towercos subcontract everything, both to local subcontractors and to pan-African partners like Camusat


The marriage of passive and active infrastructure managementHow to combine telecoms, structural and civil engineering skills to design, install, upgrade and maintain Africa’s telecoms infrastructure

Ofer Ahiraz, CEO, Leadcom


TowerXchange: Where does Leadcom fit in the telecoms infrastructure ecosystem? How does Leadcom differentiate itself from its competitors? Ofer Ahiraz, CEO, Leadcom: In 1982 Leadcom started operating in the domestic market, adding international operations in 1995. In 2007 we acquired Ytelcom, expanding our footprint in francophone Africa. We’re now the only company covering Africa from East to West with a continuous geographical footprint. This enables us to support projects in neighbouring countries by sending qualified telecoms, structural and civil engineers. All Leadcom subsidiaries in Africa have ISO 9001, ISO 14001 and OHSAS 18001 certification, giving us unique, high standards for quality, safety and the environment. MNOs and towercos are looking for regional partners who can support them in multiple markets with the same quality, specifications, and understanding of telecoms infrastructure. Leadcom is able to duplicate one framework agreement to provide the same outstanding service level everywhere to customers such as Airtel, Tigo, MTN, Eaton Towers, American Tower and Helios. Leadcom offers a wider product and service portfolio than just tower design, site build and maintenance. Most of our employees come from the telecom industry, so we know how to deal with active equipment, from base stations and in-building solutions to microwave links and power equipment (where we design and deploy solar, wind

Read this article to learn:< Duplicating the same contract framework agreement to ensure consistent service across Africa

< How to maintain service during tower swaps

< The potential for sharing rooftops and DAS in Africa in the near future

< How and why opex and capex increases as you move from well connected urban to remote rural areas

< How to survey and strengthen a tower to add capacity for additional tenants’ equipment

Keywords: Common Framework Agreement, Tower Design, Site Surveys, Upgrading for Capacity, Maintenance, Power Equipment, Active Equipment, In-Building Solutions, Rooftop, DAS, Reverse Engineering, Loading, Infrastructure Sharing, Africa, LatAm, Leadcom

The advent of a new class of specialist passive infrastructure tower operators and service providers for Africa should not detract from the strategic integration of passive and active assets. TowerXchange spoke to Ofer Ahiraz, CEO of Leadcom Integrated Solutions, an international leader in the provision, management and implementation of telecommunications network deployment services and solutions, with an extensive footprint of more than 20 countries in Africa and Latin America. Leadcom uniquely combines capabilities in telecoms, structural and civil engineering, enabling them to offer RF design and implementation as well as tower design, site surveys, upgrade and maintenance.

or combination hybrid solutions). We’re unique in providing services for both active and passive infrastructure – most of our competitors specialise in only one field or the other. Let me give you some examples. In Ghana we are supporting a towerco who acquired some rusty, poorly maintained coastal towers. Leadcom undertook a full swap of these towers, using temporary towers to accommodate the microwave and base station equipment, maintaining full service while we dismantled the old rusty towers and constructed new ones according to the client’s specification. In another example, we combined RF and civil engineering knowledge to deliver IBS (in-building solutions) for multiple operators, sharing active infrastructure to provide excellent coverage within a hospital, mall or hotel. TowerXchange: Do you anticipate Africa’s towercos diversifying into sharing DAS and rooftops?

Ofer Ahiraz, CEO, Leadcom: We’re still in the very early days of rooftop and DAS sharing in Africa. MNOs aren’t sharing them, while towercos are focusing on towers and co-locations. I think rooftops and DAS sharing will be an attractive option for in Africa in the next one or two years, and Leadcom is positioned to be a major player in this market given our proven experience with active sharing of remote units, fibre optics and

DAS in South America.

For example, Leadcom is working closely with a towerco in South America to offer road coverage in a nature reserve where no towers or electricity are allowed. Leadcom has done the RF design, implementation, and built the outdoor DAS solution, for which the towerco has provided the capex, leasing capacity to MNOs. TowerXchange: What’s the balance of your business between operator-captive and independent towerco-owned sites? Ofer Ahiraz, CEO, Leadcom: Towercos are relatively new to Africa, but have become increasingly important since 2011 with the American Tower / MTN and Helios / Tigo transactions. Since we started rollouts in 2002-3 with Tigo, Leadcom have built 3,000-5,000 sites in Africa, many in logistically demanding countries such as DRC, Chad and Niger where in some cases we had to charter aircraft and boats to transport towers to remote areas. We have the specifications and drawings for those sites, making us a strong partner for the towercos.

TowerXchange: Does Leadcom manage delivery logistics in-house or use subcontractors? Ofer Ahiraz, CEO, Leadcom: Leadcom’s supply chain has gained vast experience in logistics in Africa over the years. For shipments from port to the site we use pre-qualified third parties. We have a shipping agent supporting us, and we constantly evaluate and monitor the performance and efficiency of our


subcontractors, as getting sites up on time is heavily dependent upon logistics.

TowerXchange: By what magnitude does capex and opex rise in Africa as you move from well-connected urban sites to remote rural sites?

Ofer Ahiraz, CEO, Leadcom: Capex and opex can increase by double-digit percentages, and indeed can even double in some countries, as you move from urban to remote rural areas, depending on how difficult it is to reach the site. But the cost doesn’t just come from logistics, it’s also to do with the lack of available raw materials. At some locations we can’t find sand, concrete or even water locally, so these materials, and others have to be trucked in from the closest available place. Much also depends on the availability and capability of local workers to support a project. TowerXchange: How do you survey and strengthen a legacy tower to add capacity for additional tenants?

Installing solar panels to reduce opex

Ofer Ahiraz, CEO, Leadcom: The initial starting point is having the detailed designs of a tower to analyse on our software platforms. However, in most cases the towercos do not possess the tower designs and drawings for each and every site, so we have to send our expert to measure and evaluate every part of that tower on-site, and there can be thousands of parts in a 90-100m tower. We also have to identify the current load on the tower. Many operators didn’t maintain a strong database every time they swapped GSM 900 MHz for 1800 MHz equipment or added 3G or microwave equipment, so it’s important to map the existing load on the tower and the location of the load. Leadcom’s structural engineers can then run simulations to identify any potential additional load capacity on a tower. Unfortunately we often find overloaded towers, which the tower owner needs to take measures to strengthen. Once we’ve defined the status of tower in terms of capacity (under or over loading), we can project the additional load from adding one or two further tenants’ equipment. We can determine whether the tower can support that load in his present condition, and if not, what is required in order to strengthen the tower. Ultimately we can quote a full package of materials and services required to upgrade the tower to the required new capacity. Let me give you an example where Leadcom were able to upgrade a towerco’s assets in the most economical way. We were provided with a request to replace an overloaded tower. Leadcom were

able to offer and deliver a competitive solution to maintain the existing tower and only replace some elements, saving significant capex. This was probably the most complicated exercise we undertook last year as it involved replacing the legs of the tower, a unique procedure where we upgraded three legs to heavy duty legs, whilst keeping the tower in place and saving the asset for the towerco without dismantling the active telecom equipment. There was no interruption in service for the tenant during the whole process.


TowerXchange: Thanks for your time Ofer. How would you summarise Leadcom’s product and service offerings as applicable to the African tower industry? Ofer Ahiraz, CEO, Leadcom: Leadcom provides a comprehensive portfolio of products and services to the tower industry. We’ve assisted with site surveys for due diligence; tower audits, mapping and structural analysis; the design, supply and implantation of tower strengthening; tower replacement; the design, supply, site acquisition and installation of co-location and turnkey build 2 suite sites; we provide preventative and corrective maintenance services and this is only part of our offering.

When tower companies start to look at active equipment, as American Tower has done in the US, Leadcom’s experience and knowledge in active as well as passive infrastructure will mean towercos can continue to enjoy Leadcom’s support, with no new partner needed!Upgrading to heavy duty legs

“ “This was probably the most complicated exercise we undertook last year as it involved replacing the legs of the tower, a unique procedure

TowerXchange: I enjoyed reading the “Sharing Mobile Networks” viewpoint – please could you tell us about some of the strategic objections to network sharing highlighted in the report, how they apply in Africa, and how they can be overcome. Booz & Company: Some operators are already convinced about the benefits of network sharing. However many operators still see significant risks, yet the reasons behind their reluctance to share networks do not hold up under scrutiny. Operators have different objections depending on their market position: incumbent or new market entrant, while those with a mature network might think differently from those still actively rolling out. From a strategic point of view, many operators feel that their network provides competitive advantage in terms of coverage, quality, redundancy or backhaul capacity. Incumbents whose early entrance into markets has given them the best coverage and network quality might fear that sharing their network means relinquishing these advantages, with potential repercussions for their market position. Even in markets with mature network rollouts, some CTOs still don’t see the network as a commodity given growing smart phone penetration and network traffic. You have to ask if the network really is a genuine differentiator in the long term. Is network competitive advantage sustainable over time in Africa? Even market leaders may not be able to rollout in low ARPU areas, suggesting a selective

How to overcome objections to network sharing


New report reveals transaction costs of $20-30,00 per site and 2-3 year RoI

Read this article to learn:< Why owning the network as such is not a source of long term competitive advantage

< How to maintain flexibility by retaining control of strategically important assets

< The $20-30,000 transaction cost of network sharing and 2-3 year timeline to RoI

< Comparing operator-led network sharing joint ventures with third party towerco models

< How to structure the decommissioning of sites

Roman Friedrich, Booz & Company (right)Steven Pattheeuws, Booz & Company (left)

Keywords: Business Case, Capex, Competitive Advantage, Single RAN, Backhaul, Fibre, Transaction Cost, ROI, Decommissioning, First Mover Advantage, Shareability, Passive and Active Infrastructure Sharing, Africa, Booz & Company

Following the release of Booz & Company’s “Sharing Mobile Networks, Why the Pros Outweigh the Cons” viewpoint, TowerXchange spoke two of the report’s authors. Roman Friedrich is a partner with Booz & Company who leads the firm’s global communications, media, and technology practice. Steven Pattheeuws is a senior executive advisor who specializes in network and technology transformation, with a specific focus on active and passive network sharing. Booz & Company are one of the leading strategic consulting firms in the world.

?


network sharing or roaming model, and surveys of 2G and 3G networks have shown that subscribers in many cases do not notice any difference between networks. In many African countries where the rollout of networks is an ongoing process, we see a lot of c-level concern that sharing networks might mean losing the flexibility to adjust capex, such as the choice of hardware and vendors, or the ability to control the direction of network expansion based on commercial performance and potential, especially where regulators impose stringent coverage

requirements. There’s a concern that network sharing creates a rollout plan “lock in”, sacrificing the ability to financially steer the company and manage cash flows. Operators’ fear of losing control over the future direction of networks is simply misguided. While a shared network will have agreed performance targets, operators should structure network sharing agreements that allow them to maintain autonomy and control of selected, strategically important sites. TowerXchange: Tell us how to overcome operators’ objections to network sharing on technology grounds. Booz & Company: Operators might have practical concerns about the compatibility of shared networks. One operator might have 3G on 1800MHz, and might be reluctant to share with another based on 900 MHz. They might also have concern about sharing networks with an operator with a different vision for the rollout of 3G or LTE. Built networks can be shared, especially if network sharing is combined with a modernization cycle that implements single RAN technology, allowing networks of different generations to be combined on the same site with relatively inexpensive upgrades, thereby increasing the potential financial benefit of network sharing. TowerXchange: “Sharing Mobile Networks” made an interesting point about the transaction cost ($20-30,000 per site) and timeline to return on

investment being two to three years. How should we overcome concerns about the transactional cost of network sharing? Booz & Company: Operators are often concerned about the complexity of network sharing deals, whether sharing only passive networks, or progressing to include backhaul or antennae under active network sharing arrangements. Operators aren’t comfortable when they feel it’s difficult to guarantee network quality and control over network build outs. Operators are also concerned about the length and complexity of negotiations, which is why it’s essential to have clear expectations, targets and time lines at the outset. The transaction cost of $20-30,000 per site is made up of decommissioning or moving towers, strengthening towers, adding space in sheds, site accessibility improvements, updating certification and security arrangements. The transaction cost tends to be at the higher end of the range in developed markets with mature, overlapping networks as this gives rise to more decommissioning and reconfiguration costs. Less mature markets require less decommissioning and therefore lower transaction costs. The costs rise again if you’re sharing backhaul or active equipment, as you may then need to invest in the reconfiguration and upgrade of backhaul networks, or the addition or replacement of antennas. This can make the initial cost of network sharing seem daunting, so some operators feel they simply


can’t afford to participate. However, some operators are turning to outside investors to finance the initial costs involved in network sharing. Investors are attracted to infrastructure-heavy investments with limited risk, and can provide an independent platform for additional operators to join the network sharing arrangement, lowering the cost base and improving the competitive position for all, while mitigating any regulatory concerns. The cash flow profile of network sharing deals is a typical hockey stick. The initial capital expenditure required over the first two to three years is gradually paid for through savings over a the term

of a ten year network sharing contract. In most cases where two operators share networks in a joint venture, the breakeven point will occur after two to three years. Many operators ask us how to flatten the investment profile to release funds for rollout in the first two years, but the best way to do this is to spread decommissioning over five to six years, which only delays the benefits of network sharing, particularly if during this period upgrades or investments are required on towers that will need to be decommissioned in the context of the deal.

TowerXchange: Why should operators act now to start sharing their networks? Booz & Company: Operators’ objections to network sharing are often fair, but can be addressed properly. Potential cost savings soon exceed the up-front transformation costs, and the range of governance models open to operators means early movers can shape network sharing deals with joint venture or third party partners of their choice, giving them a distinct cost advantage in their markets. We have to start by establishing whether infrastructure sharing makes sense from strategic perspective. It’s important to understand if tower sharing is already happening in a market or not. In some markets in Europe operators aren’t forced to share by regulators, but the actions of competitors sharing gives them little choice. For example, in Denmark the second and third ranked operators started sharing and the incumbent was left out of a relevant deal. First movers in network sharing are able to shape deals; whether nationwide or focused in a specific area, whether inclusive of passive or active network components or backhaul. The objective is to negotiate a win-win deal; an operating model that makes sense for both operators in a joint venture, not providing benefits for one at the expense of the other. I can think of examples in Africa where relatively empty networks with good backhaul and core networks were shared with operators with traffic-congested networks, thus creating a win-win

Normalized 10-year Cash-Out Profile of a Typical Network-Sharing Deal

Above the line savings:include operations savings and saved network investment

Millionsof euros

Capex

Opex

Accumulated

Source: Booz & Company analysis

150

100

50

0

-50

Below the line:expenses include network transformation spend

Note: Figures include unilateral micro sites.


deal with very different impact drivers for each of the telecom partners. Sometimes infrastructure sharing is about more than towers; operators need to take a holistic view, and play with scope of a deal. We’ve already seen several operators that have adopted a wait-and-see attitude to network sharing being left out in the cold – first movers in network sharing can improve their bottom line and will gain a real advantage over their non-sharing competitors. TowerXchange: We’ve seen a lot more sale and leaseback deals to towercos in Africa than we’ve seen Indus-style operator joint ventures. We’ve discussed the potential benefits for operators to share towers in a joint venture deal, how can third party tower companies add value? Booz & Company: Joint ventures between telcos generate the most value, as they don’t have to give up a management / operating / profit “fee” to a third party. Especially in Africa, we often encounter concern that working with a third party towerco means losing control over with whom assets are shared, a particular concern where the competitive positions of operators are very different. The concern is that if a towerco manages the assets, they might be able to generate limited value with few towers shared except for competitors to cherry picking high value towers, accelerating their ability to compete for high value customers.

TowerXchange: What factors determine the shareability of a network? Booz & Company: From a strategic perspective, shareability depends on operators’ willingness to open up assets in certain high value, high population density locations for sharing. With low cost towers in rural areas often lacking both the capacity for additional tenants, and the revenue potential necessary to justify upgrades, there’s a strategic disincentive to share in both rural and urban areas. Then from a technical point of view, you have to determine if the towers are strong enough to hold additional antenna, and whether there is space in cabinets for additional equipment. These issues can be overcome, but if you need to replace towers and expand cabinets that means heavier capital investment. In our experience, in Africa and the Middle East many operators have deployed moveable towers, so the capacity for additional loading may be much more limited. While rural areas in African typically rely on microwave backhaul, the use of fibre or leased line connectivity in cities compromises shareability as it can make it difficult to reconfigure networks if sharing requires that you move towers. Then you have to consider the financial feasibility of sharing as a factor in shareability. A portfolio of towers might constitute an attractive number for a substantial sharing deal at the outset, but a bottom up analysis of shareable tower gives you a

However, I see two ways in which independent towercos can generate value. In African markets with four or more operators, each with partial coverage, the involvement of a third party towerco can facilitate securing deals with multiple operators. With Africa’s low ARPU, it’s important to maximise use of assets, and sharing among multiple operators creates more value than two operators sharing bi-laterally. That said, some of the operator-led towerco spin-offs in India have created deals with multiple operators. The second benefit of working with towercos is that they can be impartial. There’s definitely a benefit of having an independent party, with some skin in the game, who is able to push a deal through as a middle man between operators who’s working relationship might not be strong enough to create a joint venture. In this manner, towercos are able to create value where no deal would otherwise be possible. In Africa it may also be helpful that towercos can bring cash to the table, enabling rapid build-out. However there may be less investment appetite for smaller tower portfolios or towers brought to market late.

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Shareability depends on operators’ willingness to open up assets in certain high value, high population density locations for sharing


significantly lower number of towers that could be brought to market, and that affects their value. TowerXchange: Are infrastructure sharing deals in Africa resulting in many sites being decommissioned? Booz & Company: While network sharing in Europe can mean 40-50% of sites are ultimately decommissioned, we’d anticipate less decommissioning in Africa, where towers are more frequently moved rather than decommissioned, although moving towers is still a painful and complicated exercise particularly with regards to (fixed) backhaul. With operators upgrading to real 3G and, in some cases soon to LTE in African cities, and with market share and usage patterns so much more difficult to forecast in Africa, CTOs rightfully see no point in decommissioning towers they might need in two to three years. Hence the importance of establishing a clear view on how user numbers and traffic patterns will evolve over the next years before starting a network sharing redesign exercise. It can be complicated to structure decommissioning of sites where multiple operators have assets covering the same subscribers. The site may not be as important for local traffic as it is for transmission. Some sites are shared with other operators and hence cannot easily be decommissioned or moved. And in many cases operators signed long term leases that have to be paid for anyway. So unless decommissioning is structured effectively, it can mean it takes 20-25 years to realise the benefits of network sharing

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