Tower xchange issue 3 featuring Broadnet Telecom

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Tower xchange issue 3 featuring Broadnet Telecom

  1. 1. Tower XchangeTower XchangeTop 200 decision makers in African towers invited to TowerXchange MeetupISSUE 3 | April 2013 | www.towerxchange.comMarc Rennard: Why Orange is sharing towersStructuring deals to meet the requirements of each affiliateWhy IHS invested in Cameroon and Cote d’IvoireEaton CTO Thomas Jonell’s procurement prioritiesEgypt’s 4 companies licensed to lease infrastructureGrowth stock ATC vs the PE-backed towercosAfrica’s New telecoms infrastructure journal
  2. 2. With special thanks to the TowerXchange “Inner Circle”About TowerXchangeTowerXchange is your independent communityfor operators, towercos, investors andsuppliers interested in African towers. We’re acommunity of practitioners formed to promoteand accelerate infrastructure sharing inAfrica. TowerXchange don’t build, operate orinvest in towers; we’re a neutral communityhost and commentator on African telecomsinfrastructure.The TowerXchange Journal is free to qualifyingrecipients. We also provide webinars andregular meetups. TowerXchange monetizesthis community through the sale of advertisingand sponsored content, without compromisingeditorial integrity.TowerXchange was founded by KieronOsmotherly, a TMT community host and eventsorganizer with 16 years’ experience, and isgoverned with the support and advice of theTowerXchange “Inner Circle” – an informalnetwork of advisorsOur informal network of advisers:Alan HarperCEOEaton TowersMichel FaivreDirecteur Programme Partaged’Infrastructure AMEAFrance Telecom-OrangeNina TriantisManaging Director, GlobalHead of Telecoms & MediaStandard BankJeffrey EldredgePartnerVinson & ElkinsTorsten EsbjørnRegional Director, AfricaRambollZouhair KhaliqConsultant, Executive DirectorWarid Telecom, Former CEO,Orascom Int’l InvestmentLaurentius HumanCEOInalaChuck GreenCEOHelios Towers AfricaRiana DonaldsonManager: International NetworkOperations SupportVodacomChris Gabrielformer CEO, Zain AfricaSenior Adviser, Macquarie GroupChairman, Clean Power SystemsNatasha GoodPartnerFreshfieldsAyman Al AdlAssociate Director – TMTStandard Chartered BankAhjeeth JaiJaiConsultantInvestecGary StauntonCEOLikusasa GroupDaniel LeeFormerly Managing DirectorCitigroupFazal HussainCEOSWAP InternationalAndrew DoyleManaging DirectorTech & Comms PracticeMott MacDonaldJohan SmithHead – Africa Telecoms GroupKPMGRajat MalhotraCEO, Middle East & AfricaHayat CommunicationsAdeel BajwaSenior GM of Legal Affairs andContractsWarid TelecomTunde TitilayoVice ChairmanSWAP International© 2013 Site Seven Media Ltd. All rights reserved. Neither the wholenor any substantial part of this publication may be re-produced,stored in a retrieval system, or transmitted by any means withoutthe prior permission of Site Seven Media Ltd. Short extracts may bequoted if TowerXchange is cited as the source. TowerXchange is atrading name of Site Seven Media Ltd, registered in the UK. Companynumber 8293930.www.towerxchange.com | TowerXchange Issue 2 | XX| TowerXchange Issue 3 | www.towerxchange.com2Cover image © François Maréchal pour Orange
  3. 3. ContentsDepartments5 Tower People6 News< Etisalat seeking buyers in Tanzania< Telma’s towers for sale< Airtel to acquire Warid Uganda< African MarketWatch14 Cover story: Why Orange is sharing towers19 BMI Analysis: Why Kenya could be next23 Editorial: Announcing the TowerXchange Meetup50 How to guide: Understanding FX risk in Africa92 Beyond passive infrastructure:93 The case for transmission sharing99 Wholesale network sharing29 54 63117102TowercoperspectivesEgyptcase studyWho’s who in tower design,manufacture, installation & MSTowerPower – reducing Africa’sreliance on diesel, part twoFrom RMS to monitoring andmanagement platforms30 How IHS creates shared value35 Eaton’s procurement priorities40 Helios on H&S, ethics and compliance45 Growth stock ATC vs PE-backed towercos55 The Mott MacDonald Share Square: Egypt57 Mobiserve believe a tower deal is imminent60 EEC Group are positioning themselves to partnertowercos71 Mer Telecom’s one-stop-shop76 End-to-end services from NETIS81 Static asset manufacturers TESA & GSM TP85 How to design towers for easy installation90 Fast deployment by Viettel’s rollout consultants118 Power beyond the tower122 The dawn of the green energy era126 Why you should re-think charging batteries with DG129 Achieving desired autonomy103 How to combat fuel theft109 How to create actionable intelligence from yourInfrastructure data114 How to measure what matterswww.towerxchange.com | TowerXchange Issue 3 | 3| TowerXchange Issue 2 | www.towerxchange.com3
  4. 4. Leadcom Integrated Solutions Ltd. isan international leader, in the provision,management, and implementationof telecommunications networkdeployment services and solutions forpan-regional operators, vendors, andmajor enterprises.Our extensive and longstanding experienceand extensive footprint, building and upgradingnetworks worldwide qualify us to offer ourcustomers excellent, comprehensive operationand maintenance services for their networksaimed at reducing the Operator’s OPEX andincreasing network efficiency and availability.Contact us at info@leadcom-is.com
  5. 5. Tower PeopleIHS appoints new Chief Commercial Officerto drive continued growth IHS has appointed Rhys Phillip as ChiefCommercial Officer. Mr Phillip joins IHS fromErnst & Young where he was Partner and GlobalHead of Transaction Advisory Services for theTelecommunications Sector.In addition to advising tower businesses onmany of the African transactions since 2007 –particularly focusing on deals in Cameroon, Coted’Ivoire, Ghana, Kenya, Nigeria, South Africa,Tanzania and Uganda – Phillip led cross bordertransactions for leading operators, infrastructurebusinesses, financial investors and Managed ServiceProviders.  Prior to Ernst & Young, Mr Phillip ledM&A transactions in house for Vodafone and BTGroup and spent a number of years in InvestmentBanking in the UK and Europe.  Issam Darwish, CEO, IHS commented on theappointment: “Rhys has been one of the mostimpressive experts on African infrastructure inthe market for years.  Having advised some of theworld’s largest mobile network operators, he is anexciting addition to the IHS leadership team as wecontinue to grow our business. He is an expert inconstructing value driven acquisitions, ensuringefficacy and accuracy throughout.  We are lookingforward to benefiting from Rhys’ knowledge andnetwork in the telecoms sector at this importantstage of our growth.” Rhys Philip said: “IHS’ recent deals with OrangeDaniel Lee developed the leading tower advisorypractice at Citi where he advised on the sale of over10,000 towers (with a corresponding deal value ofUS$1.75bn) from mobile operators primarily in theemerging markets. Daniel brings incredible insightand tremendous relationships across the sector. Daniel advised on the first sale-leaseback in Africaand many other ground breaking transactions,each representing the first tower transactionin a number of different markets (e.g. Ghana,Tanzania, DRC, South Africa, Uganda, Cameroon,Cote d’Ivoire). Daniel has broad experience inworking with a variety of different mobile operatorsincluding MTN, Millicom and Cell C amongothers. Additionally, Daniel successfully advised anumber of towercos in Africa in their critical earlyfunding rounds, raising more than US$500mn inequity.Daniel recently departed from Citigroup, butwe’re delighted to announce he has accepted ourinvitation to join the TowerXchange Inner Circleadvisory board, and you’ll hear more from him inan in-depth interview to appear in the June editionof TowerXchangeDaniel Lee leaves Citigroup, joins TowerXchange Inner Circle informal advisory boardwww.towerxchange.com | TowerXchange Issue 3 | 5| TowerXchange Issue 3 | www.towerxchange.comXX
  6. 6. Newsin Cameroon and Cote d’Ivoire highlights thedynamism of the management team and themomentum they have created for IHS, Nigeria’smost exciting telecommunications infrastructureprovider. The focus on providing cutting edgetechnology solar energy innovations in addition toterrific growth over the last 18 months makes mevery proud to join Issam’s team and I am thrilled tobe part of IHS’ continued growth story and increasethe tower portfolio while attracting supportiveinvestors.”You can read an interview with Mr Phillip on pages30-34Etisalat seeking buyers for Zantel Tanzaniaor for Tanzanian towersTowerXchange understands that Etisalat isconcurrently seeking a buyer either to acquireTanzanian subsidiary Zantel, of which Etisalatowns 65%, or to acquire the 600-700 towers Zantelhas in the region. Standard Chartered have beenappointed as Etisalat’s advisors.Helios Towers Africa would be favourites to acquireZantel’s towers, if sold separately, as Chuck Green’spioneering towerco acquired a 60% stake in ajoint venture with Millicom-Tigo in 2010, to whichMillicom-Tigo’s 1,020 Tanzanian towers weretransferred.Market conditions in Tanzania appear veryfavourable to the towerco business model.Tanzania has four licensed tier one mobile networkoperators; Etisalat’s Zantel, Airtel, Vodacom andMillicom Tigo. There’s room for growth in themarket – according to the GSMA, Tanzania has 62%mobile subscriber penetration, growing at 4.4%CAGR 2011-2012, with 75.8% population coverage.Diesel and maintenance costs push opex inTanzania to a point where the efficiencies offered bythe towerco business model makes sense. Tanzaniahad 4,593 base stations in 2012, a 25% growth from2011, of which 1,442 were off grid and another halfon unreliable grids experiencing power outages ofmore than six hours per day – statistics again fromthe GSMA.Rumours persist that Etisalat is still seeking to sellit’s 3,000 towers in Nigeria, but securing the buy-inof local stakeholders is believed to continue to holdup any potential transaction.www.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com6With the appointment of ThomasSonesson, former CEO at managedservices company Reime Group, as CEOof ATC Ghana, Gordon Porter has movedfrom Ghana to become CEO of AmericanTower’s other joint venture with MTN,ATC Uganda.Both Ghana and Uganda share a similarlychallenging operating environmentwith high capex and particularly highopex due to only around half of cell sitesbenefitting from grid connectionsAmerican Tower swaps CEOs inGhana and UgandaAccording to Bloomberg, Madagascan telecomsfirm Telecom Malagasy (Telma) has askedinvestment bank Lazard to explore optionsfor the complete disposal of its business or thedivestment of its portfolio of 500 towers, believedto be valued at between US$50-70million. Severaltowercos are believed to be interested. Telmarecently created one of Africa’s first operator-ledtowercos, TowerCo of Madagascar, to which 100sites were transferred.Telma competes with Bharti Airtel, who holda similar number of towers, and Madagascanmarket leaders Orange who have an estimated700 sites.According to BuddeComm, mobile penetrationin Madagascar remains at a modest 47%. 3G waslaunched in 2012Telma’s towers for sale
  7. 7. AssetManagementSystem(AIMS)Passive InfrastructureMonitoring DataPassive InfrastructureFinancial and TechnicalData• Availability•••• SLA Support•• Asset Register•• Hierarchical Dashboards• GIS
  8. 8. Bharti Airtel has acquired 100% of the equityin Warid Telecom Uganda for an estimatedUS$100million, in news broken by Reuters justbefore TowerXchange issue 3 went to print. Thedeal was expected to bring Airtel’s market share inUganda to around 39%, very similar to MTN whohave around 40%. Also competing in the market areUganda Telecom Ltd (UTL), Orange Uganda and iTel.The implications for the tower industry could besignificant. In 2012, Eaton Towers acquired anestimated 400 towers from Warid Telecom Uganda,combining them with a further 300 sites acquiredfrom Orange Uganda. With 260 of those cell sitesalready shared between the two operators at thetime of the transaction, as a result of a conscious,co-ordinated rollout, the deal to buy Orange andWarid’s networks gave Eaton Towers over 1,000tenants, meaning they had “scale, pre-existingrevenue, and an ability to run a bigger businessfrom day one,” according to CEO Alan Harper in hisinterview in issue 1 of TowerXchange.In 2011 American Tower paid US$89m to MTNUganda for 51% equity in joint venture towercoATC Uganda, to which 1,000 of MTN’s towers weretransferred. UTL’s towers had also been believedto be on the market recently, although towerco’sappetite for the portfolio may have been limiteddue the proximity of so many UTL sites to the ATCUganda and Eaton towers already being marketedfor co-location. Over half of of Uganda’s towers areoperated by independent towercos. According tothe GSMA, there were a total of 3,067 cell sites inUganda in 2012, 1,249 of which were off-grid.This month’s deal between Airtel and Warid wasdescribed by Airtel’s Managing Director and CEO(International) Manoj Kohli as the “first in-marketacquisition” in the telco’s history, and remainssubject to regulatory and statutory approval. WithAirtel’s Africa Towers towerco strategy still unclear,the Indian-owned operator has been an enthusiastictenant of shared towers in the recent past in severalof the seventeen African countries in which theyoperateAtlantique Telecom, which has operations inBenin, the Central African Republic, Cote d’Ivoire,Gabon, Niger and Togo, and part of The EtisalatGroup, announced that it has entered a five yearmulti-country managed services agreement withEricsson to manage its entire mobile networks. Thisagreement enables Etisalat to focus even more ontheir core business - delivering innovative offeringsto their customers.Nagi Abboud, CEO of Atlantique Telecom said: “Withthe evolution of the competitive landscape in ourmarkets, we need to adapt our operating model toprovide a better service to our end users. Adoptingthis business outsourcing model is therefore animportant step in our group strategy execution thatwill be for the benefit of our subscribers, who remainour top priority, and this will, as well, open newgrowth opportunities to our employees.”Lars Lindén, Head of Ericsson in region sub-SaharanAfrica says, “Managed services is a proven businessmodel to support operators in growth mode and it isone of the most dynamic areas in our industry. Ourwork together will support Atlantique Telecom indefining a new generation of operators in Africa.”The contract covers network operations, fieldmaintenance, network optimization and spare partsmanagement for Etisalat’ s multivendor mobilenetworks, including access, core and transmission, aswell as value added serviceswww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com8Bharti Airtel to acquire Warid Telecom UgandaAtlantique Telecom awards Ericsson fiveyear managed service contract
  9. 9. Accelerate your sales cycleand close your next major deal in AfricaAdvertise in the TowerXchange Journal, circulated to a highly targeted community of the 1,868most influential tower decision makersTo book your advertisement, contact: Kieron Osmotherly | kosmotherly@towerxchange.com | M. +44 (0) 7771 14800127%4%16%11%11%10%10%9%3%OperatorsTurnkey & managedservicesTowercosPower equipment & ESCOsInvestors & advisersPassive equipmentprovidersActive equipment &servicesRegulatorsOthersSub-SaharanAfricaMENAAmericasEuropeAsia45%10%22%18%5%C-levelVP, Exec Director,PartnerDirector-level/Dept HeadSenior Manager/Managing ExecMiddle & JuniorManager24%17%13%2%44%
  10. 10. MTN and Airtel CEOs on theprofitability of African mobilenetwork operatorsany one market?” Asked Dabengwa, referencingcountries with five of six operators servingpopulations of 30 million. “I’m not sure how manyoperators in Africa are actually profitable.”“Lots of African operators are making losses,”agreed Manoj Kohli, CEO of Airtel Africa. “The timehas come to turn around Africa into a profitablesustainable, healthy business. We’ve placed a bigbet on Africa, which has cost us US$13.5bn in cash.”“We think Africa is a great market with a greatfuture, and a great frontier. With population of twobillion, median age of eighteen, we can grow voice,data and m-commerce.” Kohli added that it wastough to maintain infrastructure in Africa, with siterunning costs up to US$5,000 per month at off-gridsites in some markets, compounded by high taxesand levies.“Operators are losing money at the point ofacquisition, which leads to taking multiple SIMcards,” continued Airtel’s Kohli, adding that he hadbeen surprised at the low elasticity in Africa, withusage of minutes per month being half India’s.“Competitive intensity can be harmful rather thanfruitful,” said Kohli, agreeing with Dabengwa’sconcern about saturation of markets by adding“While Africa’s 54 countries can digest moreoperators, countries with 10-25 million populationand three to five operators are a non-viablesituation. Governments and regulators shouldbuild agenda of consolidation, otherwise a lot ofoperators’ investments will be pulled back, whichwill not be good for Africa.”“The mobile market in Africa has had ten to fifteenyears of good growth. Penetration levels are at 50%,but with up to 30% of consumers using multipleSIMs, real penetration is below 50%. Nonethelessdata penetration, internet penetration, is still nomore than 10%, so overall the opportunity is stillvery significant,” declared MTN Group CEO SifisoDabengwa.Challenges to long term sustainability identified byDabengwa included aggressive price competition(“operators selling product below cost is a bit of aproblem”), and the need to avoid regulations stiflingthe industry, as seen in Europe where the marketcapitalisation of telecoms companies is in manycases in decline.“What is the sustainable number of operators inwww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com10Sifiso Dabengwa, CEO of MTN Group, and Manoj Kohli, CEO of Airtel Africa appeared onthe Sub-Saharan Africa regional focus panel at Mobile World Congress 2013. Here are thehighlights of their contribution.Manoj Kohli, CEO, Airtel Africa and Sifiso Dagengwa, CEO, MTN Group
  11. 11. While they agreed on competition, the CEOs ofMTN and Airtel Africa disagreed on the regulationof infrastructure sharing. “We expect regulators tolead on infrastructure sharing,” suggested Airtel’sKohli.“I don’t agree that regulators should be involvedin infrastructure sharing,” said MTN’s Dabengwa.“Operators should do that among themselves.”Continuing the discussion of infrastructure sharing,Kohli added: “I believe if Africa is to achieve fullcoverage of voice and data, all towers have to beshared. Towers are expensive and the revenues insmall towns are small. Similarly, for voice and datawe need fibre. No single operator can bear the costof fibre,” added Kohli, referencing a consortium ofthree operators and government in Tanzania as anexample model. “Tower and fibre sharing will pavethe way for fantastic penetration tomorrow.”“In Africa generally every site, even if connectedto grid, needs to have pair of backup generators.This can be hugely expensive, complex and franklywasteful,” said Kamar Abass, Country Manager forNigeria and Head of Regional Accounts, RSSA forEricsson. “However, the power consumed by ourequipment is on a downward trajectory.”“Nigerian regulators are insisting on infrastructureinvestment – coverage requirements are ‘baked in’to licenses – so the mindset of operators is focusedon physical investment; on RAN and on buildingsignificant transmission networks that didn’t existin the pre-mobile world,” added Abass.“Property rights aren’t enshrined in Nigeria asthey are in other countries – land may be ownedby families, with no paperwork,” continuedEricsson’s Country Manager for Nigeria. “Passiveinfrastructure has been a key focus for networksharing in Nigeria, but nothing is happening yetwith active infrastructure sharing, and we thinkthat’s a major oversight. Passive infrastructuresharing has the potential to halve the infrastructurerequirement, and gives you capacity to densifythe network and improve QoS, but the operationalcomplexity of running a secondary power networkmeans active infrastructure sharing is somethingNigeria simply has to explore.”Kamar felt that the intensity of competition inNigeria may be preventing operators from openingwww.towerxchange.com | TowerXchange Issue 3 | 11| TowerXchange Issue 3 | www.towerxchange.comXXSpeaking at the Reuters AfricaInvestment Summit, MTN GroupCEO Sifiso Dabengwa said: “Growththrough mergers and acquisitions isstill an important part of our strategy.Anything between ZAR35.56 billion andZAR71.12 billion is something that wecould look at.”MTN’s US$8 billion M&A war chestWhen challenged by Nic Rudnick,CEO and Founder of LiquidTelecommunications, that Africa’smobile network operators weresharing with each other but not withsmaller ISPs trying to enter newmarkets, Manoj Kohli responded: “Wehave towercos in seventeen countries.Give me a list of countries and towersyou need, you’ll get it in 24 hours!”Perhaps Africa Towers have a fewmore towers on the market than werealised!Q&A soundbyte: Airtel offersshared towers in all 17countries“ “I believe if Africa is toachieve full coverage ofvoice and data, all towershave to be shared– Manoj Kohli, CEO,Airtel AfricaLow energy active equipment andactive infrastructure sharing
  12. 12. a conversation about active infrastructure sharing,while many operators felt there might be apotential regulatory objection. “The only possibleregulatory objection would be how to aggregatethe spectrum when you combine two networks.Beyond that issue, we suspect the regulator wouldno have objection to active infrastructure sharingas it helps improve QoS.”TowerXchange wanted to learn more aboutEricsson’s Managed Rural Coverage. “As long as thetop of a tower is at 10m then it can often give theright level of coverage in a rural context. Ericsson’ssolution supports 2G and 3G (and LTE if required),with a satellite uplink opportunity, solar power,and a pair of standard 12v batteries that will powerbase station for four and a half days if fully chargedif there’s a failure of the weather.”“There is no need for microwave re-planning – webuy satellite capacity and manage the whole piece,so we can charge the operator an installation fee tocover part of cost of the hardware and installation,then Ericsson recovers the rest of the cost anda small margin from a share of the revenuesgenerated.”“The model is one of national roaming, and itwill take calls from any operator. In reality localsubscribers will buy whichever prepaid cards thesupervisor sells. If you put it in a village where thecommunity leader takes responsibility for security,if you’ve chosen the right person that securitytends to be assured.”“We think Managed Rural Coverage works invillages of more than 1,000 people, but there’s anew satellite that offers a lower price point. Whilethe operator could claw back some installationcosts from Universal Access Funds in certainmarkets, it’s a modest capital outlay: aroundUS$5,000 per site depending on the situation andinstallation conditions.”“From our point of view, the rural market islacking investment,” said Gerry Collins, Headof Business Development at Altobridge. “I thinktowercos will put up more sites in rural areas ifthey can get into active infrastructure sharing,and if low energy equipment continues toreduce opex requirements.”“In remote communities, energy and backhaulcosts can make rural mobile communicationsuneconomic. Altobridge believe we have thebest balance of energy usage (90% of our sitesexclusively use solar power) and coverage witha 7-10km radius. We have an optimised satellitebackhaul band that can bring the price down toUS$300-400 per month.”It seems that in rural contexts, coverageremains king. “Rural telecoms is a land-grab.If an operator extends coverage on their own,they can acquire most of the potential minutes,data and subscribers within the first threemonths, destroying the business case for otheroperators,” said Altobridge’s Collins. “I’m notconvinced that building and sharing towersmakes sense in these finite rural markets.”“If you put our solution in a market town,traffic might increase four-fold on market day,and traders all need to have the local operator’sSIM card. So the key is for mobile networkoperators to be where people live, work,are educated, and where they trade,” addedCollins. “With on network call plans, you’regoing to persuade urban migrants to switch tothe same network as their home village.”www.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com12Kamar Abass, Ericsson
  13. 13. XX | TowerXchange Issue 3 | www.towerxchange.comNewsTMT Finance reports that MTN has appointedCiti to advise on the sale of towers in Rwanda,with talks under way with American TowerKorea Times reports that KT Corp has signed anMoU with the Rwanda Development Board toestablish a joint venture to develop, install and operatea nationwide LTE network, providing wholesale LTEservices to MNOs and MVNOsUnitel emerged as the sole applicant to meetthe technical and financial requirements of thetender, and so were awarded the islands’ second fixedand mobile license, according to PanapressPresident Macky Sall has asked his governmentto “take practical steps” toward the launch of afourth MNO license, according to Agence EcofinCell C CEO Alan Knott-Craig was quoted onmybroadband.co.za stating that the networknow has around 4,000 cell sites nationally, having added1,223 new 3G sites in 2012. Cell C has 100 active LTE sites,targeting to increase to 1,000 by the end of 2013The Lusaka Times reports Zamtel CEO DrMupanga Mwanakatwe as saying the operatorwill deploy 400 2G and 3G base stations in less connectedareas, with LTE expected in Livingstone by late May 2013Aquiva Wireless plans to invest US$80mn overthe next three years to deploy LTE nationwide,according to Chief Executive Brian Maphosa, quoted inThe Herald. Meanwhile Telecel Zimbabwe say they willexpand their network of 437 BTSs by 120 by July 2013Having been openly discussed since 2011,it seems that licensing of 3G may finally beimminent. Moussa Benhamadi, Minister of Posts,IT and Communications, told Agence Ecofin: “Theadministrative record, which allows us to embark onthe introduction of 3G and 3G+ is completed. In themeantime, ATM Mobilis, Nedjma and Djezzy havebeen encouraged to prepare their 2G networks for thetransition to 3G”It seems that the government of Burundiis again interested in selling a majoritystake in national public operator Office Nationaldes Telecommunications (Onatel), with a view tomodernising the networkBiztechAfrica quotes Patrick Benon, CEOsaying “Orange is now the first operator tooperate a 3G + network in Central African Republic,and it reinforces our position as an innovativeoperator”Vodafone Egypt and Etisalat Misr have bothappointed Ericsson to manage and operatetheir base stations in Egypt, according to Daily NewsEgyptGhana’s operators must first focus ondeveloping 3G before implementing LTE,according to Albert Enninful, Acting Deputy DirectorGeneral of the NCA. Meanwhile, MTN Ghana haveannounced their intention to deploy more basestations, bringing their total number of 3G sites to 994A press statement from Orange Guinea CEOAlassane Diene announced plans to investUS$56mn in network upgrades and extensions overthe next three yearsMauritania’s third telecoms operatorChinguitel may be up for sale. Chinguitel isa subsidiary of Sudanese telco Sudatel which is alsorumoured to be considering the sale of its licensedoperators in Ghana, Guinea, Senegal and South SudanWho will acquire Maroc Telecom? With thepreliminary bid deadline of 22 April loomingas we went to print, MTN were rumoured to be lateentrants into the auction, joining Qatar Telecom,Etisalat and possibly STCAccording to the Daily Trust, MTN will investUS$1.5bn rolling out 5,000 2G and a further4,000 3G base stations in Nigeria in 2013. At the recentReuters Africa Investment Summit, Etisalat NigeriaCommercial Officer Wael Ammar revealed that theoperator was raising US$500mn in debt finance, with aview to expanding their network and services. Etisalatis believed to have 3,000 cell sites in Nigeria.African MarketWatch: New licenses, acquisitions and upgrades in briefAlgeriaBurundiCentral African RepublicGhanaEgyptMauritaniaRwandaRwandaSao Tome & PrincipleMoroccoSenegalNigeriaSouth AfricaZambiaZimbabweGuineawww.towerxchange.com | TowerXchange Issue 3 | 13
  14. 14. Why Orangeis sharing towersStructuring deals to meet the specific requirements of each Orange affiliateMarc Rennard, EVP, AMEA,France Telecom-Orange© François Maréchal pour OrangeTowerXchange: Why is Orange sharing theirtowers in Africa?Marc Rennard, EVP, AMEA, France Telecom-Orange:Where passive infrastructure once represented athird of the cost of a new site, it now representsat least two thirds of the cost of a new tower. AsAfrican markets mature and ARPU continues todecline, we feel there’s an increasing necessity forOrange affiliates to share passive infrastructurewith other operators. However, the wayinfrastructure sharing is structured in each countrywill be different according to the requirements ineach market.With coverage of the major cities in Africa nowcomplete, nobody will be able to invest $150-300kto build and manage a single tenant cell site in aremote area without a sufficient concentration ofpopulation to enable a return on investment. This iswhy Orange is in favour of sharing towers.TowerXchange: Please could you tell us a littleabout how Orange makes strategic decisionsabout when and how to work with towercoswhen sharing infrastructure –  what is theinvolvement of the Group strategy team atheadquarters, and the involvement of the localaffiliates?Marc Rennard, EVP, AMEA, France Telecom-Orange: For the reasons that I just mentioned,Orange has given guidance to our affiliates in Africaencouraging them not to build new sites alone(there are always exceptions of course), and toRead this article to learn:< Why France Telecom-Orange encourages infrastructure sharing, supporting and empowering theiraffiliates to structure deals to meet their needs< Does Orange prefer to retain control and ownership of their towers?< The role of infrastructure sharing in reducing CO2 emissions< Orange’s objectives in their recent managed services and build-to-suite deal in Cameroon and Côted’Ivoire, and why they partnered with IHS< The prospects for future infrastructure sharing deals in Orange’s other AMEA marketsMarc Rennard was appointed International Executive Vice-President in charge of AMEA (Africa, Middle East and Asia) in2006, and he joined Orange’s Group Executive Committee in 2010.Marc ran leading French towerco TDF for eleven years prior tojoining France Telecom-Orange in 2003.Michel Faivre reports to Marc and is responsible for definingpassive infrastructure sharing strategy in the AMEA region.Orange’s AMEA division is responsible for 81m customers atOrange affiliates in 20 countries, with 21,000 staff, and globalincome of €5bn.Keywords: Who’s Who, Interview, MNOs, Deal Structure,Managed Services, 3G, Capex, Transfer Assets, Opex Reduction,QoS, Build-to-Suite, Densification, Hybrid Power, Renewables,Solar, Sale and Leaseback, C-level Perspective, InfrastructureSharing, Africa, Cameroon, Côte d’Ivoire, Kenya, Uganda, EatonTowers, IHS Africa, France Telecom-Orangewww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com14
  15. 15. consider infrastructure sharing.Each Orange affiliate has its own momentum, itsown ecosystem and environment, its own regulatorycontext and, crucially, each has a different positionin the local market – much depends on whetherthey are a new entrant or market leader, and on thenumber of operators on the market. So each affiliatemoves at its own speed. But the global trend is foreveryone to move toward infrastructure sharing.Michel Faivre runs a dedicated team, studyingthe different cases in each market and helpinglocal affiliates build their own business case toshare maintenance, existing towers and/or newtowers. Each affiliate then presents their proposedinfrastructure sharing strategy to Orange’sinvestment committee, and we give a red, amber orgreen light to their strategies. So local affiliates areempowered to implement infrastructure sharing,and the final decision will rest with that localaffiliate’s board of directors.In summary, the Group provides guidance andagreement on the investment case to share passiveinfrastructure. Implementation and the run periodis handled by our local affiliate.TowerXchange: Please explain what you mean by‘run period’.Marc Rennard, EVP, AMEA, France Telecom-Orange:For example, I just returned from Côte d’Ivoire andCameroon, where I joined senior executives of IHSfor the signature of our agreement with them. Oncethe infrastructure sharing agreement has beensigned, the Group team’s direct involvement comesto an end and the local team takes over operations.Implementation over the ‘run period’ requires thetransfer of sites and of staff, the organisation ofmaintenance and other contractors.  The local teamhandles all this.TowerXchange: What are your objectives whenoutsourcing passive infrastructure to towercos,especially in markets such as Cameroon and Côted’Ivoire where 3G is in its infancy?Marc Rennard, EVP, AMEA, France Telecom-Orange:Working with professional towercos enables usto improve Quality of Service (QoS) and reducethe costs of maintaining and managing passiveinfrastructure. We did not want to sell our towersin Cameroon and Côte d’Ivoire but we did want toopen them to new customers, while securing anopportunity to co-locate on IHS’s sites and to askthem to build new sites for us in remote areas.So our objectives are to save opex and capex,improve QoS and extend our network.TowerXchange: Do you feel that in marketswhere towercos are active, they will build most ifnot all the new sites, rather than the MNOs?Marc Rennard, EVP, AMEA, France Telecom-Orange:There is no exclusivity under our agreement withIHS, we are allowed to build our own towers, butthe spirit of the agreement is that the towerco buildsnew sites. There’s no obligation to have IHS build allnew sites, but it’s our intention to work with them ifthe price and quality of service is right.TowerXchange: Does Orange have a preferenceto maintain control and ownership of towers, asopposed to selling towers and leasing them back?Marc Rennard, EVP, AMEA, France Telecom-Orange:www.towerxchange.com | TowerXchange Issue 3 | 15| TowerXchange Issue 3 | www.towerxchange.comXXGuidance from Paris HQ, © Stéphane Foulon
  16. 16. We will review infrastructure sharing opportunitiesin each country according to the specific needsof each market. It depends on our affiliate’scompetitive position, whether they are number oneor number five in the market, and it also dependson the maturity of the market. In Africa, we havevery different cases: for example, if you takeDRC, the penetration rate is about 18%, and yet inTunisia, it’s over 100%. Our markets are extremelydiverse.However, at this time, Orange is not engaging in aglobal strategy of selling our existing towers. Oneyear ago, we chose to sell our towers in Uganda toEaton Towers, and we are open to selling towersin other countries as well. When there is no directneed of cash, like in Côte d’Ivoire and Cameroon,we retain ownership of the assets. The deal in thesecountries could become a reference model formarkets with similar conditions. All options remainopen and we will review each country on a case bycase basis.If you are the owner of a site one day, and if yousell those towers the next day, all you do is changecapex into opex. The value comes from the numberof tenants on each tower.Africa accounts for 70% of the total dieselconsumption of France Telecom-Orange worldwide,so the real battle is to save opex in energy andmaintenance.TowerXchange: Please tell us about Orange’scommitment to reduce CO2 emissions andhow infrastructure sharing and working withtowercos on build-to-suite programmes helps toincrease usage of renewable energy sources.Marc Rennard, EVP, AMEA, France Telecom-Orange: Our Corporate Social Responsibility policyputs a lot of emphasis on our efforts to reduceCO2 consumption, so we are involved in severalinitiatives to develop and use solar energy.Our interests are aligned with those of the towercos.For example, IHS have established a dedicatedprogramme to reduce fuel consumption, which isa critical way to increase site level profitability forthem. Telcos benefit from working with passiveinfrastructure professionals to help to reduce dieselgenerator runtime and optimise the recharging ofbatteries, thereby reducing CO2 emissions. We havea specific requirement for partner towercos to be‘best in class’ when it comes to these environmentalquestions, as reducing emissions is key for us.www.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com16Reducing CO2 emissions, © Orange
  17. 17. TowerXchange: Thanks Marc! Moving on tospeak to Michel, who has agreed to speak to us inmore detail about Orange’s latest infrastructuresharing deal with IHS. Michel, please could youintroduce us to the Cameroon and Côte d’Ivoiremarkets to put this in context.Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange:The two markets are significantly different, withdifferent situations when it comes to infrastructuresharing. Cameroon has only two competingoperators at present and only 2G services. A new 3Glicense has been attributed to Viettel, and they willhave 3G exclusivity for two years.The three main players in Côte d’Ivoire are Orange,MTN and Etisalat, with two further operatorscovering part of the country. With five operators,the potential for co-location is larger in Côted’Ivoire.TowerXchange: What were Orange’s objectives inagreeing this deal?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange:Our objective is same as for all mobile networkoperators; cost reduction, especially opex butalso capex. Sharing towers shares renewal capex,primarily to modernise energy units, and sharesthe cost of new towers. Even with Orange’s largenetwork, we are still adding sites to cover ruralregions.As Marc mentioned, we want to improve QoS, eventhough our QoS is not bad. In the past, competitivemobile network operators were fighting ongeographical coverage, now we are fighting on QoS– and that is especially true for 3G.In Côte d’Ivoire, Orange is more present in theSouth than in the North of the country, while MTN’snetwork (recently acquired by IHS) is strongerin the North than the South. Working with IHStherefore improves our coverage and gives uscapacity for nationwide services. The developmentof 3G also requires us to densify the network.Sharing infrastructure enables us to focus onother tasks such as modernising, increasing andimproving capacity, rather than focusing on energyefficiency.Eventually, we are also sensitive to governmentand community objectives to reduce the number oftowers by adding tenants to existing towers.TowerXchange: Should we refer to the dealstructure in Cameroon and Côte d’Ivoire as an“operational lease”?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange:We refer to our agreement with IHS as managedservices with a build-to-suite programme. Orangehas not sold its towers in Cameroon and Côted’Ivoire.TowerXchange: Are the 2000+ sites includedin the deal all Orange’s towers in those twocountries?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange: InCameroon, the deal includes all the towers, while inCôte d’Ivoire it includes all the towers on which wehave mobile RAN equipment. It doesn’t include ourIvorian fixed telecom towers, although the optionto negotiate their inclusion in the future remainsin the contract, as we did not have time to includethem in the first place.www.towerxchange.com | TowerXchange Issue 3 | 17| TowerXchange Issue 3 | www.towerxchange.comXXMichel Faivre, Orange
  18. 18. TowerXchange: Why was IHS a good partner forOrange in Cameroon and Côte d’Ivoire?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange:IHS was very professional in the way theynegotiated with us, and they understood thetechnical aspects of what we were trying to achieve.However, we have no exclusive relationship withIHS elsewhere in Africa, and we will work with theright towerco for each market.TowerXchange: What are the benefits for thedevelopment of telecoms infrastructure inCameroon and Côte d’Ivoire, and benefits forOrange, of the same towerco managing thetowers of both market leaders, Orange and MTN?As opposed to for example Ghana, where eachoperator partnered with a different towerco…Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange:We felt that having two towercos in Cameroon wasnot possible for the market. There were only twooperators when we started the negotiation, so howcould we share and get the benefits of co-location ifwe partnered with different towercos? Even with athird operator, we are still not sure if it is possible tohave two towercos.On the other hand, in countries like Côte d’Ivoirewith three tier one operators and five in total, wecould imagine having two towercos.Working with the same tower provider helps toshorten the process. If we had partnered withanother towerco, we would need to negotiate aservice management contract and build-to-suiteprogramme with them, but we would need tonegotiate another contract to co-locate on thetowers IHS acquired from MTN. Working with onetowerco was simpler, and resulted into a betterprice.TowerXchange: What is the power gridavailability like in Cameroon and Côte d’Ivoire,and how important is hybrid energy in cell siteefficiency?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange:There is grid power in most places, but there isan issue with some power cuts for which we needalternative solutions.Orange already has some solar powered basestations in Cameroon and Côte d’Ivoire, but ourbuild-to-suite contract with IHS will increase thepercentage of solar sites in these countries.TowerXchange: Did Orange work with anyadvisers on the Cameroon and Côte d’Ivoire dealwith IHS?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange: No,we did not appoint a bank or a legal adviser for thisdeal. We handled it 100% in-house – we have a veryefficient team!TowerXchange: Finally, in the press releaseabout the deal, Marc was quoted as saying “thisagreement leaves open the possibility for Orangesubsidiaries elsewhere in Africa and the MiddleEast to look into similar partnerships.” Are thereany other markets in which Orange is activelyexploring infrastructure sharing? Any update onKenya?Michel Faivre, Directeur Programme Partaged’Infrastructure AMEA, France-Telecom Orange: Wewill implement this kind of passive infrastructuresharing contract in other countries. The competitionis still open – we will work with any of the towercosaccording to what is best in each country.We have started a similar project in Kenya. We arein the final stages. During the negotiation phase, wetry to sort out the maximum of issues in order todecrease the risks during the migration phasewww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com18“ “We have started a similar projectin Kenya. We are in the finalstages. During the negotiationphase, we try to sort out themaximum of issues in order todecrease the risks during themigration phase
  19. 19. Why Kenya could benext for tower sharingBMI Analysis: a new guest column by Ken Okeleke, SeniorAnalyst at Business Monitor InternationalKen Okeleke, Senior Analyst, BMIKenya’s mobile market – Safaricom dominant,price wars ragingKenya’s mobile market reached the 30m mark forthe first time during the three months to September2012. According market data published by theCommunications Commission of Kenya (CKK),there were 30.433m mobile lines in the country atthe end of September 2012. This was a 2.5% q-o-qgrowth and 14.9% y-o-y growth, making it one ofthe fastest growing markets in the region. However,a considerable number of lines were not registeredat the end of the latest mandatory SIM registrationexercise in December 2012 and a grace period wasgranted by the regulator until the end of March2013. The disconnection of these lines could pushthe country’s mobile penetration rate below the70% mark it attained in September 2012, accordingto BMI data.Safaricom remains the dominant player with amarket share of over 63%. Airtel Kenya is in adistant second position with a market share of lessthan 20%, while Orange Kenya and Essar-backedYU Mobile are separated by less than 1ppt in theirmarket shares, which jointly account for around afifth of the mobile market.Safaricom’s smaller rivals tried to erode itsmarket share through intense price competition,which set off a brutal price war that ravagedthe market for most of the last three years. Theimpact of this development on operators’ financialindicators, along with rising opex, has broughtthe need to improve operational efficiencies in theRead this article to learn:< Why market growth, price wars, declining ARPU and the struggle to achieve profitability attractKenya’s MNOs to consider tower-sharing< Country risk perspectives on Kenya’s economy and election results< The Kenyan regulator’s stance on tower-sharing< BMI’s view on which MNOs and towercos are likely to be most active in Kenyan tower-sharingKenya is arguably the largest of the remaining mobilemarkets in Sub-Saharan Africa yet to see the uptake ofindependent tower-sharing services. However, some keymarket dynamics make the service almost inevitableto ensure that some operators in the market remaincompetitive and for a general improvement in networkquality of service and coverage. The leading independenttower sharing firms operating in the region have all settheir sights on the Kenyan market, which may finally yieldto independent tower-sharing services in 2013.Keywords: BMI Analysis, MNOs, Towercos, Research, MarketOverview, Country Risk, Market Forecasts, ARPU, Operator-led JV, Regulation, Infrastructure Sharing, Africa, Kenya,Safaricom, Airtel, FT-Orange, Essar, Helios Towers Africa,IHS, Eaton, Business Monitor Internationalwww.towerxchange.com | TowerXchange Issue 3 | 19| TowerXchange Issue 3 | www.towerxchange.comXX
  20. 20. Kenyan mobile market to the fore. Although notindependently confirmed, local media reports,citing key stakeholders in Kenya’s telecoms markets,suggest that only market leader Safaricom is in theblack among the country’s four mobile operators,largely due to its scale and success of key non-voiceservices such as M-PESA.Lagging behind peers...Mobile network operators across Africa currentlyface the task of developing new revenue streamsand reducing input costs in order to improvetheir bottom-line figures and remain competitivein the market. In Kenya, the focus over the pastthree years seems to be on driving revenuegrowth through voice tariff increases, as in thecase of Safaricom, or through the rollout of non-voice high-value services such as mobile data andm-commerce services, as in the case of the threesmaller operators. However, declining revenuesfrom traditional voice services due to increasingcompetition and the sluggish take-up of high-value services due to low income levels make itinevitable for operators to look in the direction ofreducing input costs as a means of improving theirprofitability.One of the key strategies for efficiency improvementfor most leading operators in Africa are tower-sharing deals with independent tower firms. Towerdeals took off in Africa in 2011 and 2012 after awave of price wars swept across most markets inthe region. Surprisingly, Kenya, which is widelyregarded as the source of the price war, is laggingbehind other major markets in the region in thetower-sharing business.The closest the country has come to tower sharingwas an announcement by Safaricom and OrangeKenya in mid-2011 to form a jointly owned,independently managed infrastructure companyto acquire and manage their portfolio of towers.There is no update on this development, althoughwe would not be surprised if the operators areseparately exploring alternative tower sharingoptions.Tower sharing deal may be imminent in KenyaIt is increasingly unlikely the Kenyan mobile marketwill buck the trend towards tower-sharing servicesfor much longer. There are a number of factorsexpected to push the case for the market to open upto independent tower firms, possibly before 2013runs out. Some of these factors, which will likelystrengthen over time, are highlighted below.Downward pressure on ARPUsMarket average mobile ARPU in Kenya is belowUS$5 and is forecast to trend downwards overthe five years to 2017, according to BMI data.Meanwhile, Kenyan operators have witnessed asteep rise in opex over the past three years, mostlydue to external factors such high inflation, currencyinstability and high diesel prices. Although adversemacroeconomic factors that plagued the countryin 2011 and early 2012 appear to have abated,according to BMI’s Country Risk team, networkwww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com2063.2%9.9%10.2%9.9%16.8%SafaricomAirtelYUOrangeSource: BMI, CCK, operatorsoperators are unlikely to see a significant easing inopex. This, along with declining ARPUs, will furthersqueeze operators’ margins and strengthen the casefor more aggressive cost-cutting measures, of whichwe expect tower sharing to be at the top of the list.Regulatory environmentKenya’s code of practice for the deployment ofcommunications infrastructure is silent on the roleof independent tower firms. Instead, it outlines aframework for operators to engage in site sharingor co- location. However, we do not expect theregulator to hinder the operations of independenttower firms in view of the potential for tower-sharing services to contribute to the faster rollout of network services to underserved areas andother operational targets set for the mobile market.The fact that there is no express prohibition of theMultiple operators drive competitionKenya Mobile Operators By Market Share,September 2012
  21. 21. www.towerxchange.com | TowerXchange Issue 3 | 21| TowerXchange Issue 3 | www.towerxchange.comXXe/f = BMI estimate/forecast. Source: BMI, operatorsoperation of tower firms suggests that a frameworkfor their services could be prepared once thecountry’s operators make significant moves towardsengaging the services of independent tower firms.Willingness of tower firms to enter the marketKenya is perhaps the most attractive ‘new’ marketfor the tower firms operating in the region andthose looking for a foothold owing to the marketsize, the number of operators in the market andthe country’s positive economic outlook, whichwill inevitably drive growth in the telecoms sector.Helios Towers was previously reported to beinterested in the joint tower company proposedby Safaricom and Orange Kenya. The company,along with other leading firms including IHS andEaton Towers, have been open about their desire toenter the Kenyan market. We believe competitionby the tower firms for the Kenyan market will be akey factor in the conclusion of a tower deal in themobile market.Election results will not affect investorconfidenceThere were concerns over the possible reactionof Western investors if the PNU won the March 42013 presidential elections due to the indictmentof Uhuru Kenyatta and his running mate, WilliamRuto, for war crimes by the International CriminalCourt (ICC).BMI Country Risk team’s assessment of the situationis that the impact of Western action against Kenyawould be far more pronounced if that actioninvolved the imposition of sanctions that precludedWestern companies and individuals from investingin and trading with Kenya. Europe remainsan important market for Kenya’s horticultureindustry and the source of a large proportion of thecountry’s tourists. Western portfolio and FDI flowsalso play a meaningful role in plugging Kenya’slarge current account deficit. A reduction in theseinflows would have a significant impact on thecurrency, inflation and macro stability generally.However, as things stand, the chances of sanctionsbeing imposed are close to nil. That could changeif Kenyatta reneges on his commitment to complywith the ICC process but there is little reason tobelieve that he is about to backtrack. On the whole,we believe that the election of an ICC indictee tothe presidency is unlikely to have as meaningful animpact on the economy and investor confidence assome might fear.Which Kenyan operators are candidates fortower-sharingKenya’s four mobile operators have a combinedtowers portfolio of around 6,000 towers. This isgrossly insufficient for the country’s population ofalmost 45mn and land area of around 570,000 sqkm. Meanwhile, operators’ poor financial resultsover the last three years raise significant concernsabout their ability and willingness to invest in newtower deployments to underserved areas, especiallywhere ARPUs are likely to be lower than in majorKenya’s mobile ARPU (KES) heading south1002010 2011 2012e 2013f 2014f 2015f 2016f 2017f200300400500
  22. 22. www.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com22towns and cities.All four network operators are potential candidatesfor tower deals in view of the market dynamics andfactors mentioned in the previous section. However,Orange Kenya and Safaricom are the most likely tomove first in the market, mainly because of theirproposal to form an infrastructure company thatmay seek to partner with an established tower firmin the region. Furthermore, both companies areclosely associated with operators that have adoptedthe tower-sharing strategy in other markets.Orange and Safaricom’s parent companies, OrangeGroup and Vodafone Group respectively, haveimplemented the tower-sharing strategy in someother markets in which they operate, includingSouth Africa, Ghana and Uganda.YU Mobile is close behind Safaricom and Orange asa likely candidate for a tower deal. The operator’slack of 3G network services limits its ability toexpand its high-value data offerings, making italmost entirely dependent on voice revenues. Theoperator is keen to invest in 4G LTE services whenspectrum becomes available. However, this may nothappen soon and it will need to aggressively reducecosts in order to remain competitive in the mobilemarket. For its part, Airtel Kenya is likely to followa group strategy, which is yet undefined for towersale and leaseback deals. The operator subscribesto the services of tower firms in other markets itoperates and will likely do so when independenttower firms launch operations in Kenyawww.businessmonitor.com/bmoTower XchangeParticipate in the TowerXchange communityJoin the TowerXchange LinkedIn™ group atwww.linkedin.com/groups/TowerXchange-4536974Investors &advisersDecision makersat operatorsIndependenttowercosTowermanufacture &installationEquipment& managedservicesRegulators &policy makers
  23. 23. The TowerXchange Meetup will accelerate thetransactions, innovations and partnerships thatunlock new efficiencies for the African towerindustry.TowerXchange has created a unique communityof 1,868 decision makers in African passiveinfrastructure, and set out to share best practicesthrough this journal. Insights can be found on apage, but new relationships are formed and dealsagreed face to face, so it’s time to invite you all tothe inaugural TowerXchange Meetup Africa.The leaders of the African tower industryhave warned us that they don’t want or needa conference; there is too much competitivesensitivity for the pioneers to say anythinginteresting “on the record”. That’s whyTowerXchange have created a Meetup, not aconference.The TowerXchange Meetup is designed aroundstructured networking round tables held under theChatham House Rule, plus “Shootouts” in whichbuyers shortlist the energy equipment, RMS andmanaged services partners they need to stabiliseand reduce opex.Business leaders in passive infrastructure feeldisenfranchised by today’s telecoms exhibitions,overrun as they are by devices and VAS.TowerXchange maintains a laser-beam focus ontowers, on passive infrastructure, and on the lowEditorialTop 200 decision makers in African towers to gather atTowerXchange MeetupKieron Osmotherly, TowerXchange Founderwww.towerxchange.com | TowerXchange Issue 3 || TowerXchange Issue 3 | www.towerxchange.comXX 23TowerXchangePassiveInfrastructurefootprintAfricaCom:5% passiveinfrastructureMobile WorldCongress:1% passiveinfrastructureDevices & VAS footprintMobile World Congress footprintAfricacom footprintTowerXchange: 100%passive infrastructureenergy, compact active equipment that stretchthe capacity of Africa’s towers. So while 1% ofMobile World Congress exhibitors are from passiveinfrastructure, and 5% of AfricaCom, everyoneyou meet at TowerXchange will be a passiveinfrastructure decision maker.Let me tell you how the TowerXchange Meetup willwork. The TowerXchange Meetup is by invitation-only, and those invitations will be extended in earlyJune. However, you can e-mail me to apply for yourplace now. The open, strategic debates hosted atthe TowerXchange Meetup require that the event isfor decision maker level people only. Usually thatmeans Director, VP or C-level only, but if you’re thetop tower decision maker for your business andyou’re a manager or executive, drop me an emailand we’ll confirm whether we can extend you aninvitation.
  24. 24. | TowerXchange Issue 3 | www.towerxchange.com24TowerXchange carefully manages the ratio ofbuyers to sellers, and plans seating so that eachround table includes a senior representative ofa towerco, an investor, advisor, RMS or staticequipment manufacturer, a tier one OEM, amanaged service provider, and two senior decisionmakers from an operator. Attendees will participatein four different round tables, each with a regionalor topic matter focus chosen to meet their specificobjectives. So attending the TowerXchange Meetupguarantees you an agenda tailored to answer yourquestions, and guarantees “face time” with 28decision makers at prospective clients, suppliers orpartners interested in the same segment of towersand sharing the same round table as you. Of course,attendees also have lavish networking receptionsto network with the rest of the top 200 Africantelecoms infrastructure decision makers.Finally, if you are one of African towers’ thoughtleaders and you want to share your expertise byhosting a round table at the TowerXchange Meetup,please contact me.I look forward to meeting you in Cape Town at theend of September!All the best,Kieron OsmotherlyFounder, TowerXchangeM. +44 (0) 7771 148001kosmotherly@towerxchange.comwww.towerxchange.comwww.towerxchange.com | TowerXchange Issue 3 | XXBackhaul, FTTT, Core Network Active equipmentTier 1 OEMsMobile Network OperatorsInvestors: private equity, debt finance, infrastructure fundsLaw firmsGroup level strategistsC-suite & network planners at local OpCosOutsourcetoStrategic consultancyDue diligenceDemand forecastsValuationsIndependent TowercosSell co-locationsUpgrade capacityBuild-to-suitMaximise uptimeReduce opexInvest in networkTransfer assets toConstruction servicesTurnkey infrastructure rolloutManufacture of steelworkImport, customs & deliveryLeasing & permittingInstallation of towersUpgrades for capacityO&M servicesDynamic assetsEnergy equipmentDiesel gensetSolarWindFuel cellBatteriesRectifiersInvertersLine conditioningPIUsAir conditioningLightning protectionControllerVoltage regulatorManaged service providersESCOsStatic assetsTowers & mastsSheltersBracketsEnclosuresLightingFencing0&M servicesMaintenanceStaffingSpare partsVMI?RefuelingEnergy as a serviceMonitoring &managementRMSIntelligence/analysisSite managementJob ticketingAsset lifecycle platformAccess controlSubcontractMicrogenerationCommunity powerSubcontractor in-houseOutsourcetoSomebecometowercoTower Industry Value ChainInvestment management advisorsSource: TowerXchange
  25. 25. TowerXchanges’ unique structured networking round tablesEnergy Provider shootout in ProgressSmall groups of buyers recieve5 minute demonstrations200 Director, VP and C-level Decision makers broken down as follows:Mobile Network Operators (50)Towercos (25)Investors and Investment Management Advisors (25)Lawyers and Strategic Consultants (25)Energy Equipment Providers (25)OEMs & Managed Service Providers (25)Static Assets (10), Access Control (5) & Monitoring and Management (10)TowerXchange roundtables bring together 1 representative from each of 8 segments of thetower industry, brought together by a common geographical focus or hot topic. There are4 roundtable sessions at the Meetup, each new roundtable "reshuffles" the decision maker-level participants at your table so you will meet 28 different prospective partners.25| TowerXchange Issue 3 | www.towerxchange.comXX www.towerxchange.com | TowerXchange Issue 3 |
  26. 26. TowerXchange Meetup Africa 2013 AgendaRound table topicsEach “Round table” is a 90-minute structured networking session assembling participants in groups of8, brought together by a common regional or topic matter interest, and arranged so each group ideallyincludes 2 MNOs, a towerco, investor, advisor, OEM or managed service provider, energy equipment and astatic asset or RMS manufacturer.Buying and selling towers How to determine your organisational goals from towersharing; balancing opex reduction with cash released andequity stake retained How to structure a tower sharing deal to meet yourrequirements: operational lease vs sale and leaseback vsjoint venture Would an Indus Towers-like operator-led JV work in certaincountries in Africa? Creating shareholder value by retaining an equity stake in aJV-towerco How to prepare the data room; from asset registers, permitsand leases to tower designs, load valuations, maintenancelogs and DG runtime data How to structure MLAs, SLAs and anchor tenancyagreements Transferring assets from MNOs to towercos: confirmation ofpermits, novation of leases, transfer of staff and evaluationof contractorsFinancing African towers Are towercos paying a premium for first mover advantage?When will the gold rush end? Are African towers a bankable investment? What level ofgearing will investors permit before waiting for provenresults? How to measure, manage and mitigate country risk andoperational risk What are my / those towers worth? How to use demand-sidemodels, lease pricing benchmarks and GIS information toassess the commercial potential of a tower portfolio How to conduct a tower load valuation to unlock hiddencapacity and prioritise upgrades How tower auctions work, what terms are variable andwhich are non-negotiable, and what separates the winnersfrom the losers?A dedicated round tablefor each of the followingcountries: Cameroon, Côted’Ivoire, DRC, Egypt, Ghana,Kenya, Mali, Nigeria, SouthAfrica, Tanzania and Uganda.One roundtable for the rest ofNorth Africa(Morocco, Tunisia,Algeria, Libya andWestern Sahara)One roundtable for the rest ofEast Africa(Burundi, Djibouti,Eritrea, Ethiopia,Rwanda, Somalia,South Sudan and Sudan)One roundtable for the rest ofSADC (Angola,Botswana, Lesotho,Malawi, Mozambique,Namibia, Swaziland,Zambia and Zimbabwe)One roundtable for the rest ofCentral Africa(Central AfricanRepublic, Chad, CongoEquatorial Guinea,Gabon)One roundtable for the rest of West Africa (Benin, Burkina Faso, Gambia, Guinea, Guinea-Bissau, Liberia, Mauritania,Niger, Senegal, Sierra Leone and Togo)One roundtable for the rest of Africa’s Islands (Cape Verde, Comoros, Madagascar, Mauritius, Mayotte, São Tomé andPrincipe, Seychelles)| TowerXchange Issue 3 | www.towerxchange.com26 www.towerxchange.com | TowerXchange Issue 3 | XX
  27. 27. Towerco business models Are tenancy ratios above two achievable in Africa?And how towercos can improve their margins byoptimising site level profitability What are the criteria that govern how manytowercos can operate in a given market? How doescompetition between towercos affect markets suchas Ghana? Are there still opportunities in Africa for newentrant towercos? What infrastructure sharing needs (and does notneed) from regulatorsBuild-to-suite and refurbishment programmes How to determine your OM requirements,select the right partner and structure BTS andrefurbishment programmes How to accelerate time to market in roll outs andnetwork extensions Key performance indicators for the managementof African towers; how to meet SLA clausesconcerning uptime, site visits and MTTR How to optimise logistics from manufacture toport to site Cell site densification and equipment amendmentimplications of 3G and LTE How to reverse-engineer tower designs How to upgrade the structural capacity and powersystems at a cell site to support multiple tenants How to evaluate whether to upgrade or replacea tower to add capacity for multiple tenants, andhow to maintain service when consolidatingtowers From corrective to preventative to just-in-timemaintenance Vendor Managed Inventory for the tower industry Health and safety, ethics and compliance - frompolicy to practicalitiesHow to reduce energy opex How to combat fuel theft How access control systems reduce vandalism and fueltheft while helping to integrate maintenance logs withjob ticketing and asset life cycle platforms How to measure the performance of Integrated PowerManagement Solutions Which hybrid and solar hybrid energy solutions areproven in Africa? How to evaluate a cell site’s suitability for hybrid energysolutions How to proactively manage power to optimise MTTR How to get the most out of unreliable grid sites How to future proof power at a cell site to accommodatemultiple tenants What will it take for the ‘energy as a service’ propositionto work in Africa? Selecting the right battery supplier to minimise dieselconsumption and extend replacement cycles Defining a business model to pay for energy by the kWh Community power initiativesSite intelligence How to leverage RMS to identify the smallest capex thatyields the biggest return How to translate RMS data into actionable intelligence How to demonstrate and optimise performance againstSLAs How to measure, monitor and extend the life cycle ofpassive (and active) infrastructure assetsBeyond passive infrastructure sharing Active infrastructure sharing in Africa How transmission sharing creates new revenues/efficiencies whilst freeing load capacity for additionalco-locations FTTT Wholesale infrastructure sharingDay one9:00 Welcoming Remarks fromTowerXchange9:30 Towerco CEO panel10:30 Morning coffee and networking10:50 First structured networking round table12:20 Networking lunch1:40 Second structured networking roundtable3:10 Afternoon coffee and networking3:30 Mobile network operator tower decisionmakers panel4:30 Partner selection shootout: innovations toreduce energy opex5:30 Close of Day oneEvening drinks receptions, awards and dinnerDay two9:00 Third structured networking roundtable10:30 Morning coffee and networking10:50 Investor panel11:50 Partner selection shootout: managedservices12:50 Networking lunch2:10 Fourth structured networking roundtable3:40 Afternoon coffee and networking3:30 2020 vision of African tower industryand action points for 20134:30  Close of day twoTowerXchange Meetup Schedule27| TowerXchange Issue 3 | www.towerxchange.comXX www.towerxchange.com | TowerXchange Issue 3 |
  28. 28. TowerXchange Meetup Benefits PackagesMNOsTowercosInvestors advisorsManaged servicesTier 1 OEMsLawyers consultantsEnergy equipmentOther passive infraAttendeesSponsors/exhibitorsPassdiscount5025252525252525244936710*100%50%0%0%0%0%0%0%e.g. RMS, site management, job ticketing asset lifecycle platformsStatic asset manufacture and distributionAccess control systems*100% discounts for qualifying Director to C-level execs from MNOsBy invitation only: restricted to Director, VP and C-level attendeesMaximum of 2 delegate passes per company except for MNOs, towercos and sponsors*Expo only pass only available to exhibitors and sponsorsBronze, Silver, Gold and Platinum Sponsorship Benefit Options - choose one Capacity Limits*Expo onlypassDelegate pass ExhibitorBronzeSponsorSilverSponsorGoldSponsorPlatinumSponsorDiamondSponsor1 pass 1 pass90 secs100180 secs100180 secs200up to 5 mins200up to 5 mins200up to 10 mins2001 passwith booth with bootheitheror or or oreither either eitherwith booth with booth with booth2 passes 2 passes 3 passes 3 passesBenefitsExhibition accessDaytime cateringComplimentary volume one TowerXchangeAccess to MeetupRound table interactions with 28 selected prospectsAfter hours networking receptions cateringAcess to VIP loungeDedicated post event e-mailshot to all attendeesPresentation in Shootout to shortlist RFPsVideo on TowerXchange TVProfile in show guide and directory word limitLogo on backdrop, podium, signage, fliers invites3x3 turnkey boothPrivate meeting roomYour choice of bronze sponsorship benefitYour choice of silver sponsorship quality benefitYour choice of gold sponsorship premium benefitYour choice of platinum business-class benefitYour choice of diamond first-class benefitContact Annabelle Mayhew, amayhew@towerxchange.com, for price informationYour choice of bronze sponsorship benefitGift drop (gift provided by client)USB sponsor (USBs provided by TowerXchange)Pad and pen sponsor (stationary provided by client)Your choice of silver sponsorship quality benefitHost of phone charging point (provided by client)Sponsorship of massage areaSponsorship of coffee break day 2 pm Sponsorship of coffee break day 2 am Sponsorship of coffee break day 1 pm Sponsorship of coffee break day 1 amBrand sponsorship of lanyardsBrand sponsorship of tote bags(Bags provided by client)Your choice of gold sponsorship premium benefitSponsorship of lunch day 1Sponsorship of lunch day 2Sponsorship of icebreaker drinksSponsorship of breakfast (Open) day 1Sponsorship of breakfast (Open) day 2Your choice of platinum business-class benefitSponsorship of post dinner partySponsorship of VIP networking loungeHost of private lunch day 1 Host of private lunch day 2Host of private breakfast day 2Your choice of diamond first-class benefitSponsorship of Drinks ReceptionSponsorship of Award Dinner Sponsorship of Operator and Towerco only reception
  29. 29. www.towerxchange.com | TowerXchange Issue 3 | 29| TowerXchange Issue 3 | www.towerxchange.comXXSpecial Feature:TowerXchange will take you on a virtual tour ofAfrica’s leading towercos, building an holistic viewof the key roles within the towerco business, and anappreciation of the differences between Africa’s ‘BigFour’ towercos and the local tower operators hoping todevelop a pan-African towerco footprint.This first installment concentrates on the ‘Big Four’towercos. We introduce you to IHS Africa’s new CCORhys Phillip as he discusses their recent transactionsin Cameroon and Cote d’Ivoire. Eaton Towers’ CTOThomas Jonell provides a revealing insight into theirprocurement processes and priorities. Helios TowersAfrica’s Nick Summers explains their Health andSafety and anti-corruption policies. And we hearfrom American Tower’s CEO Jim Taiclet and CFO TomBartlett as TowerXchange examines ATC’s 2012 annualresults for insights into their international strategy.TowercoperspectivesFour perspectives from towerco leaders:30 How IHS creates shared value35 Eaton’s procurement priorities40 Helios on health and safety, ethics and compliance45 Growth stock American Tower playing a differentgame to PE-backed towercos
  30. 30. How IHS createsshared valueThe rationale for IHS’s acquisitions in Cameroon and Cote d’Ivoire and theirplan to scale to 25,000 co-location towers in the next five yearsRhys Phillip, CCO, IHSIHS’s twelve-year track record of successand leadership position in AfricaCEO Issam Darwish and CTO William Saadcreated IHS in Nigeria in 2001, establishing IHS as“commercially the leading independent towerco inNigeria.”“We started out as a builder,” said IHS’s Directorof Business Development Romain de Villeneuve.“This enabled us to develop operational excellenceand build mobile network operators’ confidencein the quality of service we provided, which led tous offering managed services. Becoming a towercowas a natural next step after our huge operationalexperience in Nigeria.”IHS targeted a move up the value chain frommanaged services into tower acquisition andleaseback, described as “great for investors, fornetwork operators and for consumers.” 2012 wasa transformational year for IHS, trebling theirnumber of towers owned and managed throughthe agreement to acquire 1,758 towers from MTNin Cameroon and Cote d’Ivoire. This deal madeIHS Africa’s number one towerco by number oftowers owned and managed, and gave them asubstantial footprint in these two high growthcountries through ownership of the market leader’stowers. According to IHS’ Chief CommercialOfficer (CCO), Rhys Phillip, “IHS was chosen overcompeting bidders because of our engineeringexpertise – over 80 percent of our 1,000 staff aretechnical engineers.” IHS has built over 3,000sites and maintains 99.95 percent power uptime.Read this article to learn: Why IHS invested in Cameroon and Cote d’Ivoire The 14 new African markets IHS have targeted Why towercos will build most new towers in Africa How IHS buys and their views of renewable energy and ESCO propositions How IHS extend operator relationships from one country to the nextIHS has risen from a proven engineering and managed servicesbusiness partner in Nigeria to become the largest towerco inAfrica, by number of towers owned and managed. IHS were in theheadlines again in early April 2013, taking over the managementand marketing rights of over 2,000 towers from Orange to addto the 1,758 towers they acquired from MTN in Cameroon andCote d’Ivoire in 2012. Selected members of the press and analystcommunity joined three senior members of the IHS  managementteam for a breakfast briefing in Barcelona during Mobile WorldCongress, where they explained their breakthrough year in 2012 andambitions to scale to over 25,000 towers owned or managed in MEAwithin the next five years.Keywords: Who’s Who, Interview, Towercos, Managed Services,Acquisition, Investment, 3G, EBITDA, Tenancy Ratios, InfrastructureSharing, QoS, Build-to-Suit, Exit Strategy, Regulation, Anchor Tenant,ESCOs, Hybrid power, Procurement, Sale Leaseback, OperationalLease, Private Equity, C-level Perspective, Africa, Cameroon, Coted’Ivoire, Nigeria, Sudan, South Sudan, Viettel, Orange, MTN, IHSwww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com30
  31. 31. “This transaction has accelerated revenue growth,extended our reach and extended the amount ofhelp we can deliver to MNOs,” added Rhys Phillip.The transaction also saw the introduction of newinvestors, with new 25 percent equity holders,Wendel, providing guidance and support at ashareholder level.The October 2012 deals with MTN were followed inearly April 2013 by the announcement that IHS hastaken over the management and license to market afurther 2,000 sites from Orange in Côte d’Ivoire andCameroon. In this latest deal the towers will remainthe property of the Orange subsidiaries: IHS willmanage the towers for Orange for an initial termof 15 years, whilst Orange subsidiaries will benefitfrom access to available slots on towers that IHScurrently owns in both countries.IHS’s rationale for the acquisition andlong-term lease of towers in CameroonIn acquiring 827 towers from MTN in Cameroon, IHSsecured the largest and most exciting tower portfolioin a country with plenty of capacity for growth inmobile penetration. Mobile subscriber numbersgrew from 3.1m in 2006 to 10.5m in 2011 at a CAGRof 38 percent, and are projected to increase to 17mby 2016, at a CAGR of 10 percent. Cameroon’s twoactive operators, MTN and Orange, are looking toexpand coverage to rural areas and second tiercities. 3G services are yet to be launched; howeverregulatory guidelines encourage co-location inCameroon.IHS’ anchor tenancy agreement with MTN, themost profitable and creditworthy MNO in Africa,also locks-in fulfillment of future build-to-suitrequirements from the number one operator.IHS has positioned itself as the natural partner fornew MNO entrants in Cameroon. IHS noted thatViettel had acquired a 3G license in Cameroon latein 2012, and that the company was well financedwith annual sales over US$6bn and profits overUS$1bn. IHS also noted the presence of elevenWiMAX/ISP players in Cameroon as potentialtenants.IHS’s rationale for the acquisition andlong-term lease of towers in Cote d’IvoireIn acquiring 931 towers from MTN in Cote d’Ivoire,IHS secured the largest tower portfolio with thehighest potential for co-location in another countrywith plenty of capacity for growth in mobilepenetration. Mobile subscriber numbers in Coted’Ivoire have grown at a CAGR of 26 percent since2007, and are projected to increase from 18.7m in2011 to 24.2m by 2016, at a CAGR of 5.3 percent.Cote d’Ivoire’s three major operators are seekingto expand capacity, while a further two tier twooperators are expanding to rural areas and secondtier cities. 3G services are in their infancy. The Coted’Ivoire government has hinted at the potentialcreation of a legal framework making tower sharingmandatory for MNOs. IHS also noted the presenceof eight WiMAX/ISP players in Cote d’Ivoire aspotential tenants.IHS’ anchor tenancy agreement is again withcreditworthy MTN and, like in Cameroon, locks-infuture build-to-suit requirements. Strong build-to-suit demand is expected from all existing MNOs inCote d’Ivoire.The lease conditions released for IHS in Coted’Ivoire were the same as in Cameroon: the leasewww.towerxchange.com | TowerXchange Issue 3 | 31| TowerXchange Issue 3 | www.towerxchange.comXX
  32. 32. term was ten years with annual renewals for thefollowing five years.3G and cell site densification inCameroon and Cote d’Ivoire“With the development and rollout of 3G inCameroon and Cote d’Ivoire comes a need fordensification. Where a network planner mighthave needed three towers to cover in 2G, 3Gmight require five towers. We are still at the startof investment in 3G in these countries; moreinvestment is needed in build-to-suit and weanticipate 3G requirements driving more tenancieson the towers we’ve acquired. On top of that thereis still a need for the improved voice call qualityand growth in the number of voice customers – the50-60 percent penetration in these countries is quitelow,” said IHS’s Director of Business Development,Romain de Villeneuve.IHS targets 25,000+ co-location towersover the next five years“We retain an ambition to keep the growth curvesteep and maintain IHS’s leadership position inAfrica,” said CCO Rhys Phillip, showing a slidethat highlighted that Senegal, DRC, Kenya, Mali,Zimbabwe, Mozambique, Morocco, Tunisia, Guinea,Egypt, Madagascar, Rwanda, Ethiopia, and Zambiaare countries particularly targeted by IHS.As for the Middle East, “we have a relationship withEtisalat and a presence in the Middle East, but formoment IHS is an African towerco. The Middle Eastwill always be part of our plans at the right time,”said Phillip.IHS is targeting over 25,000 co-location towers inthe next five years. “We will work on group levelrelationships with mobile network operators andpartner with those operators as they explore newopportunities, evaluating the attractiveness ofindividual markets from a macro economic pointof view as well as the telecommunications andnetwork opportunity,” said Phillip.“We have built up a reputation for performancewww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com32“ “Senegal, DRC, Kenya, Mali,Zimbabwe, Mozambique,Morocco, Tunisia, Guinea,Egypt, Madagascar, Rwanda,Ethiopia, and Zambia arecountries particularly targetedby IHSIHS CEO Issam Darwish signing the Orange deal
  33. 33. and quality of service in our markets and it isone we are very proud of.  It’s important that weconsolidate what we have in Nigeria, Cote d’Ivoireand Cameroon, North and South Sudan, investingin energy innovations, while leveraging ourcommercial teams to build IHS’s revenue profileand margins, enabling further investment in RD,”added Phillip.What defines IHS’ interest in a region- does IHS have an appetite to acquireany of the big portfolios rumoured to becoming to market?“We’re often interested if penetration of mobilegives us room to improve,” said the Director ofBusiness Development, Romain de Villeneuve. “It’simportant to be the first towerco in a country, tosecure first mover advantage. There is greater orlesser demand from all 54 countries in Africa, ofwhich we’ve prioritised 17 or 18. And then there’sthe operational challenge: it’s not easy to operatetowers in Africa, so risk monitoring is vital.”“If any big tower opportunities arise from MTN,Airtel, Orange, Etisalat, Vodafone/Vodacom orMillicom take place, IHS will want to play a role,”added the CCO Rhys Phillip.“IHS are not risk averse. Our founders set upa company in Nigeria when few would havewanted to startup in such a complex market. As anorganisation, we like challenges: it has to be large,growing market with potential tenancy growth. Ifthere is a large portfolio, we’d go for it,” added RajivJaitly, IHS’ CEO, Nigeria.Towercos will build the majority ofnew sites in the markets in which theyoperate“We believe few new towers will be built by mobilenetwork operators in the future; they will look tooutsource. In markets where there are towercos,I don’t think operators are going be building anymore towers,” continued Rhys Phillip. “Whenoperators outsource their towers, much of theirnetwork rollout and management expertise istransferred to the towerco. Subcontractors willcontinue to do much of the actual building, buttowercos will take over those relationships and beresponsible for the tower, for power, security andmaintenance.”Is there enough incentive to build towersin rural areas with low ARPU?“This is an age old dilemma, how do we makerural connectivity commercially viable?” saidRhys Phillip. “Governments remain keen to pushthe rural agenda, and the World Bank and otherssupport that ambition. IHS is keen to play ourpart in driving that, and we structure our pricingin rural areas so that it makes sense for both theoperator and us. The investments we’re making intopower solutions, such as uninterrupted solar, makesit easier for us to develop in rural areas.”Romain de Villeneuve took on the debate: “Wherethere is a lack of RoI in rural area networks,subsidies may be needed. But if we can build onesite for three operators and share the revenue, thenthe mobile network operator doesn’t have to takethe risk. Rural networks will benefit from hugegrowth thanks to tower sharing. We can be neutraland independent in network rollout, enabling theindustry to invest together without acting anti-competitively.”“It’s not our policy to ‘build it and they will come’.We talk to RF departments, and we know wherethey want to go,” added CCO Rhys Phillip.Given that the entry of towercos willtransform the passive infrastructuresupply chain, how do you buy?“The towerco will be a filter in front of all suppliersand subcontractors,” said IHS’s Director of Businesswww.towerxchange.com | TowerXchange Issue 3 | 33| TowerXchange Issue 3 | www.towerxchange.comXX“ “IHS are not risk averse...As an organisation, we likechallenges: it has to be large,growing market with potentialtenancy growth. If there is alarge portfolio, we’d go for it
  34. 34. unreliable grid power, and rising fuel prices, weare interested in opportunities to share the riskwith energy innovators who are key to effectivenessand profitability. Something like 80 percent of IHSstaff are African engineers, and we like to findnew solutions, not only through solar panels butdeep cycle batteries, the latest gensets, and remotemonitoring – we’re interested in innovations acrossthe whole passive infrastructure supply chain. Withevery new tenant, our cost of energy decreases byapproximately 40 percent, so the infrastructuresharing business model is aligned with energy opexreduction models.”“Power uptime is so critical, and the implicationsof failures so huge, that giving that responsibility toan unproven ESCO partner would be a step too far,”added CCO Rhys Phillip. “But that’s probably whatCTOs were saying about towercos a few years ago!Towercos had to prove themselves in Africa, andthey’ve done that over the last three years. I feelthe ESCO proposition will take a similar number ofyears to mature.”“African telecoms remains around 95 percentprepaid, which means if there’s no power, there’sno revenue. So our head is on the block. We haveto provide excellent Quality of Service (QoS) toensure our operator tenants do not lose revenue.QoS in energy is a priority for IHS, and our mobilenetwork operator partners’ first expectation isthat we improve energy QoS and increase networkavailability,” concluded IHS’ Director of BusinessDevelopment Romain de Villeneuve.Extending operator relationships fromone country to the nextKen Okeleke, Senior Analyst at Business MonitorInternational asked an excellent question: “MTNalso work with IHS’s competitors – how easy is it toestablish relationships in one country and extendthose relationships to other countries?”“Trust is a major requirement,” said CCO Rhys Phillip.“Once you’ve attained the trust of a mobile networkoperator it’s easier to get into another country. Ourexperience is that the relationship has to be right atcountry level, but relationships with the head officeare also important of course.”“We’re very proud of what we’ve achieved to date –we won those deals in Cameroon and Cote d’Ivoire onmerit. MTN will doubtless continue to make decisionsbased on what’s best for them in each market, butwe’re confident we can maintain and deepen ourrelationship with MTN,” concluded Rhys Phillipwww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com34“ “With every new tenant, ourcost of energy decreases byapproximately 40 percent, so theinfrastructure sharing businessmodel is aligned with energyopex reduction models.Development Romain de Villeneuve. “We buy likeall towercos: we research partnerships, we seekloyalty, quality, and a competitive price.”“Operators have their suppliers on a country bycountry basis,” added CCO Rhys Phillip. “Our duediligence process includes stepping into theirshoes, conducting our own due diligence on thosesuppliers, looking at alternatives and leveragingrelationships with trusted existing partners.”“IHS replaces the mobile network operator inmanaging subcontractors,” added de Villeneuve.“We have the time to focus on acquiring thebest engineering systems, the best innovationscombining grid, batteries, genset and renewables.It’s a major change from mobile network operatorsmanaging passive infrastructure, which is not theircore business. We know the passive infrastructureindustry, where fuel, steel and concrete are 75percent of costs.”“There has been an acceleration in solar energyinnovation. We won’t develop solar ourselves,but will select the right partners with time andfocus on energy. Builders of towers will staybuilders of towers, and we’ll maintain our 10-yearrelationships with companies on the ground,”concluded IHS’ Villeneuve.IHS’s view of the ‘energy as a service’proposition“Energy is our number one cost,” said Romainde Villeneuve. “With many sites off-grid or on
  35. 35. Eaton’s procurementprioritiesCTO Thomas Jonell reveals what opex saving equipment and servicesEaton are buying, and how they buy itThomas Jonell, CTO, Eaton TowersTowerXchange: Thanks for speaking to ustoday Thomas. Please tell us about Eaton’sprocurement processes.Thomas Jonell, CTO, Eaton Towers: Eaton Towersputs a lot of emphasis on procurement – deployingcapital effectively is critical to our ability tocreate value for our customers, our investors andourselves.We’re always very specific in defining and writingup the scope of our requirements before we go tomarket. We think it’s critical to establish what wewant and how we want it, including specificationsof work and material use, expectations of rolloutand internal rate of return (IRR).We typically use two official rounds. First, wesend our RFP to at least ten vendors. Responsesto that RFP are scored on quality of submission,compliance with the specification, and adherence toguidance pricing. By the second round it’s usuallydown to two or three suppliers, with whom we’llexchange a framework agreement for the productand related rollout requirement.TowerXchange: Tell us about Eaton’sprocurement decision making unit.Thomas Jonell, CTO, Eaton Towers: Eaton Towershas a Planning Board Committee that approvesall OM subcontracting and capex deployment.Decisions are made based on our requirementsand on our annual budgeting and reforecastingprocesses. I chair the Planning Board Committee,Read this article to learn: Eaton’s 25% IRR and opex criteria when selecting equipment and services, and their use of VMI 5-year contracts with pan-African OM partners to implement refurbishment plans Using site management systems to display alarms from RMS in the NOC Eaton’s installation of a “Rolls Royce” access management system Analysing data and designing energy solutions tailored for each individual siteThomas Jonell has been a CTO in African telecomsfor more than ten years. He served as Celtel’s CTO inNigeria and DRC before spending the last five yearsat the helm of the technology side of Eaton Towers’business. TowerXchange wanted to know whichcategories of partner selection merited the mostattention from the CTO, and to understand how one ofAfrica’s ‘Big Four’ towercos define their requirements,select partners and evaluate performance of keyequipment and service partners.Keywords: Capex, Procurement, OM, SLA, RMS, Sitemanagement system, Job ticketing, NOC, Energy, PIUs,Line conditioning, Batteries, ESCOs, Access control, Airconditioning, Active infrastructure sharing, Infrastructuresharing, Africa, Ghana, Uganda, Eaton Towerswww.towerxchange.com | TowerXchange Issue 3 | 35| TowerXchange Issue 3 | www.towerxchange.comXX
  36. 36. which also includes our CFO Peter Lewis, our GroupTechnical Manager and our Financial BusinessPlanner. We review the capex that each of our localOpCos want to spend based on the budget and theexpected IRR on that specific build out.In order for the Planning Board to grant permissionfor a new purchase, we require at least three,sometimes as many as five quotes from approvedsuppliers contracted under our frameworkagreement. So we secure firm quotations based onvolumes and lead times, and we select not just onprice but on ability to deliver and over the lifetimeof the equipment.Assuming the selected supplier’s presentationmatched up to their quotes and our expected IRR,then the Planning Board’s approval is granted.TowerXchange: What are the most strategicinvestments on which you spend the most time– which categories of equipment and serviceprovider are most critical?Thomas Jonell, CTO, Eaton Towers: The answerdiffers according to the needs of each market anddepending on the timing within a tower transaction.If we close a new deal where a number of existingassets are taken over then the number one priorityis identifying the right OM service partner tomaintain these assets. Can they execute? Do theyhave a clear scope? Our second priority is oftenthe immediate rollout of a management system sowe can understand how the OM subcontractor isdelivering against our expectations and SLAs.TowerXchange: Do you often inherit legacy OMcontractor relationships?Thomas Jonell, CTO, Eaton Towers: We may beasked to maintain existing OM relationships withsome tower transactions, and we usually don’thave any problem with that. Our thinking is that ifthings are working well, we are unlikely to have anyissue with maintaining that relationship. However,the mobile network operator’s relationships andrequirements may be very different compared tothose of a towerco. For example, when we cameinto Uganda the operator’s OM contractor had 30people. As towercos have fundamentally differentprocesses this has increased to nearly 70 sincewe’ve taken over.We like to encourage healthy competition byhaving at least two, maybe three or four, OMpartners in each country to make sure they arebenchmarked, that they can flex their muscles, fightfor the business, and receive more sites or lose sitesaccording to their ability to meet KPIs and SLAs.TowerXchange: Do you have a preference towork with pan-African OM contractors who canreplicate service levels in multiple countries?Thomas Jonell, CTO, Eaton Towers: Yes. In thenext country in which Eaton will operate, we willmaintain our existing contractor relationshipformed in Uganda and Ghana. We know theirmanagement team, they know what we expect, andwe have pre-agreed price lists.TowerXchange: How long are your typical OMcontracts?Thomas Jonell, CTO, Eaton Towers: We’ll oftenaward a three to five year agreement to give ourOM partners a longer term view and sense ofsecurity. This enables them to make investmentsin fuelling trucks, tracking systems and training,and ultimately to see Eaton as a bit more seriousthan the other clients who might offer only a six totwelve month contract.TowerXchange: What are your key performancemetrics for OM contractors?Thomas Jonell, CTO, Eaton Towers: We preferto use the same KPIs and the same expectationswww.towerxchange.com | TowerXchange Issue 3 | XX| TowerXchange Issue 3 | www.towerxchange.com36“ “We like to encourage healthycompetition by having atleast two, maybe three orfour, OM partners in eachcountry to make sure theyare benchmarked… andreceive more sites or lose sitesaccording to their ability tomeet KPIs and SLAs

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