An issue which ICT Forum Pakistan is studying together with all stakeholders including PTA- as evidence shows that it benefits the industry and the country.
Telecom towers are absolutely essential for modern telecommunications, but too many towers drain the resources of telecom operators and escalate the cost of doing business for them. They also clog the skylines of our cities and make them look horrible. The obvious solution is to decrease the number of towers by making the telcos share them. Tower infrastructure sharing, or outsourcing, provides one quick mechanism to achieve this. But it seems to be a case of ‘easier said than done’.
The pioneers of mobile telephony all over the world, built their own infrastructures and jealously guarded their towers to gain as much competitive advantage over their competitors as possible. But now after nearly three decades, things have changed. Cellular Operators – particularly in developing world – are facing stiff competition among themselves. 3G/ 4G investments have increased the pressure on profits manifold.
While the data market grows slowly, operators are keenly looking for quick gains on revenue enhancements and cost optimisations. Among other things, operators like to reduce capital expenditure and ensure that their operational expenditures are more predictable – advantages that operators can immediately reap from a shared or outsourced tower infrastructure. The future cash outflows are then limited to monthly rentals that the telcos can easily plan, whereas the cost management of entire infrastructure becomes another entity’s responsibility. For instance, unreliability of power from the main grid has pushed telcos to rely on diesel generators and in some limited cases alternative energy solutions. These solutions have heavy Capex requirements and there are severe challenges related to maintenance, pilferage and O&M.
Encouraging tower infrastructure companies results in sectorial efficiencies and also enables operators to focus more on service delivery improvement and expansion, using of more advanced technology. The operators have more time, resources and energies available to them to concentrate on bringing new innovative services that are now becoming possible after the introduction of 3G/4G. Outsourcing the towers brings immense benefits for the telecom, which is what gave birth to separate tower infrastructure companies (TowerCos.).
The additional value that TowerCos bring to operators lies in their internal teams. TowerCos today play a role in an array of projects ranging from structuring sale and leaseback agreements to actually managing and expanding networks. Large experienced towerCos have on board strategy consultants, network experts and even investment bankers, who help the operators. Tower infrastructure business creates specialised skill-sets in the country which otherwise do not get enough attention when these skill-sets are treated as “junior” subsets of the mobile telecom business. This results in further expansion in this area of business and thus contribute handsomely to the economy.
If we look around, on the African continent, a trend to outsource cellular towers, which started a few years ago, is gaining rapid momentum. Fast-growing towerCos have emerged as a result. Kamal Daswani, director at telecommunications advisory and investment Firm Delta Partners, estimates that about 45,000 towers in Africa have been transferred from mobile network operators to independent towerCos. “Nearly half of these have been carried out in the past 12 months,” said Daswani, already a few months back. Thus the independent TowerCos own and operate more than a quarter of Africa’s total estimated 165,000 towers.
In Africa Eaton Towers recently raised US$ 350m to fund expansion, buying 2,000 towers from Mobinil in Egypt. IHS Towers owns and manages more than 22,000 sites across the continent – majority of these in Nigeria. MTN Ghana has outsourced towers to American Tower Corporation. Helios Towers operates in Tanzania and the Democratic Republic of Congo.
Closer to home, in India, already in April 2007 three big telecom operators – Vodafone Essar, Bharti and Idea Cellular – joined hands to put all their infrastructure assets in the joint venture “Indus Towers”. The JV is now a large tower company, with a tenancy ratio (total number of towers of sharing operators divided over the total number of towerCo sites) of 2.15. Indus Towers provides infrastructure to several operators other than the original three anchor customers. In the meantime Bharti Infratel, Viom and American Towers are also doing roaring business there. Department of Telecom (DoT) allowed sharing of active equipment, RAN, as far back as in April 2008. However sharing of active networks is yet to ramp up, initially because of technical inter-operability issues, and now due to a major concern as to how the active elements can be shared without affecting the aspect of spectrum sharing, which is not allowed.
In Pakistan during the last nine years, PTA issued nine (9) “Tower Provider” licenses. Two (2) of these were issued in the last nine months, which seems to be a good news. Another good news is that a new company (TowerConnect) is going to join the list soon. But the bad news is that at this time out of nine licensees, only three (Tower Share, Awal Telecom and EDotCo) are in business!
The present Tenancy Ratio in Pakistan is said to be about 1.2. For a TowerCo to be profitable and offer economical rates to the operators, TR should be around 2.5. This is only achievable if at least three telecom operators are on board. The concept has been discussed several times within and among the operators in Pakistan. At least once three operators came very close to signing a deal for forming a TowerCo some years back. There are even trials underway to sharing of active components (RANs). But then the initiatives fizzle out due to various reasons.
Taxation issue may be a barrier that has been recently highlighted. But surely this is not the only issue standing in the way of an apparently lucrative cost-saving venture.
Question is: If other countries – with similar circumstances – are succeeding in sharing/outsourcing telecom infrastructure, why not Pakistan?
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