Win-Win Opportunities of
Infrastructure Sharing
March 2014
Agenda
1. The Need for Infrastructure Sharing in Africa
2. The Options Available
3. The FullValue ofThe Independent TowerC...
1.The Need for Infrastructure Sharing in Africa
Telecom Infrastructure Growth
Population
Growth
Penetration
Increase
Infrastructure
Need
2%
69%
95%98%
31%
5%
2000 2012 20...
Need for Colocation
$
Ghana:
Need for
Efficiency
Declining
ARPU
Colocation
DRC:
Tanzania:
Competition
28.8
7.1
2000 2012
S...
Need forTowers in Africa
Total Number of Points of Service (PoS) in Africa (2005-2018)
(1)Assuming an operator “go-it alon...
2.The Options Available
Operators Option 1: Do ItYourself
“Do it yourself”: sharing between mobile telecom operators
8
Pros
• Keep control of the ...
Operators Option 2: Managed Services
Retaining owner whilst handing over management to a third party
9
Pros
• Contracted p...
Operators Option 3: Build-To-Suit
Partnering with aTowerCo to build, own and operate new sites
10
Pros
• Contracted perfor...
Operators Option 4: Sale & Lease Back
Sells passive infrastructure & lease it back under a long term agreement
11
Pros
• C...
Outsourcing Options
Spectrum of MNO’s options and resulting efficiencies
Self
Funding
Managed
Services
Build-to-
Suit
Sale...
3.The Independent TowerCo Model
What does aTowerCo Do?
HTA supplies the passive infrastructure necessary for wireless network
operators to provide communi...
Efficiencies from aTowerCo
Towers
Generators
Hybrids
= 3 = 1 = 1
= 3 = 1= 3
 Full Duplication
 Lack of Focus on Efficien...
Takeaways
• Delivering Africa’s coverage and service requirements
 Requires capital efficiencies
 Require more sharing
...
Any Questions?
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Jeffrey schumacher helios towers

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Helios Towers Presentation at the IAD Summit

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  • Welcome Everyone. I’m Jeff Schumacher Chief Commercial Officer of Helios Towers in DRC. I’d like to thank Extensia for the opportunity to present this afternoon. Helios towers biography: 4,500 towers across 3 geographies. Operational since 2009The subject of this presentation is the benefits of infrastructure sharing. We will approach it from benefits to the mobile operator who reduces CapEx spending, the governments who limit the proliferation of tower masts, which impact urban planning and the consumer who benefits from lower tariffs and better quality of service
  • Moreover, on the agenda we will tackle how infrastructure sharing helps alleviate the investment concerns of having 3 or more operators in a mobile market and the value propositions of an independent towerco to the mobile operator and to the consumer.
  • Infrastructure sharing is a critical component to improve quality of service, while reducing costs and maintaining sufficient investor returns
  • The demand for telecommunication infrastructure derives from a few key fundamentals:Population growth, a larger proportion of whom are middle classIncreased spending power driving higher mobile penetration Smartphone proliferation, the consumption of mobile data and improvement in the mobile ecosystem (social apps, etc)These factors increase usage on mobile networks and require operators to deploy more points of presence to maintain quality
  • In yesterday’s discussion, we heard concern of the viability of multiple tenants; shared infrastructure represents an opportunity for mobile operators to economize costsLiberalisation & spectrum auctions has led to increased competition, lower tariffs and declining ARPUFor example, in each of Helios’ mobile markets, at least 4 operators has a nationwide footprintThus, to maintain required investment returns, improve service quality and meet regulatory license requirements, efficiency gains must be achieved
  • In this section, we tackle the basic options available for passive infrastructureDo it yourself or maintain tower ownership; share with competitors if advantageousManaged services: contract out full site management, but retain tower ownershipNew Builds to a tower company; reduce future CapExFull sale and leaseback: monetizing stranded capital and reducing future tower costs
  • Do it yourself tends to be the preferred strategy for operators with a dominant market position:Towers believed to be competitive advantageOperator maintains temporary network advantage at cost of immediate savingsRelies on co-operation between competitors and usually results in low levels of sharingNo upfront cash payment to fund new rolloutMoreover, such option may be restricted in government-regulated tower markets, such as Rwanda, where tower sharing has been mandated to preserve the urban landscape and facilitate competition
  • Another shared infrastructure solution exists in a Managed Service ContractThird party maintains power and upkeep of the sitesMobile operator retains ownership of the towers but is guaranteed service level and potential cost savingsIt improves visibility of cost structureThe Towerco can manage the relationship among competitors to ensure neutrality and co-location benefitsMajor drawback tends to be the complexity of the contracts, which discourage investment by the managed service provider (for example, who owns the investment CapEx)Towers still seen by competitors to be owned by mobile operator and limited independence
  • A third option: utilizing a tower company for new tower deployments:Benefits include:Reduced CapEx and better cost visibilityContractual SLA performance while still maintaining the core network platformHigh levels of sharing on new Towers Higher level of efficiencies Higher level of savingsDrawback being duplication in some responsibilities and unrealized value from existing towers unsoldThus, No upfront cash payment to fund network deployments
  • Fourth option has become the industry norm for towerco: sale of towers & lease back under a long term agreementLarge upfront capital released to mobile operatorContractual service level agreement to ensure performance qualityFull visibility on cost structureComplete alignment of interestDrawback being a full open up of the networkThis option maximizes value of historic investment
  • Further illustrating the Towerco model, we analyse the efficiencies of each infrastructure sharing alternative: To reduce mobile operator CapEx & Operating costsTo provide upfront capital for new points of serviceTo enables better cost visibility To manage co-location independentlyBased on these criteria, the full sale and lease-back represents the best outsourcing option
  • Following up on the outsourcing models, we analyse the role of the independent towerco
  • A towerco manages all elements of a tower site beside radio electronicsPower, physical site, landlord & applicable maintenanceNetwork operator pays a fixed monthly fee for serviceTowerco manages relationship between the tenancies on each towerEnables quick and inexpensive of network expansion due to visibility in costsMinimal concern of tampering on site by competition
  • Efficiencies of a towerco are enjoyed by network consumers, urban planners and network operatorsExample 1) No sharing: redundant investments are made, lack of focus on efficiencies, no service level agreementsExample 2) Tower sharing facilitated between operators, but difficulty ensuring agreement between competitors causes a suboptimal solution. Occasionally multiple generators on site and no shared battery solutionExample 3) With a towerco, 3 or more operators use 1 tower, 1 generator, which reduces aggregate consumption of diesel fuel, mobile operator costs and CO2 footprint
  • In summary, Key Takeaways from infrastructure sharingCoverage and capacity requirements can be delivered cost effectivelyCapital efficiency improved; lower investment costsReduced proliferation of towers and urban landscape improvementAnd comparing the various options for sharing, the Towerco model creates the maximum valueCapital realized, opex guaranteed and ongoing capital requirement reduced
  • Jeffrey schumacher helios towers

    1. 1. Win-Win Opportunities of Infrastructure Sharing March 2014
    2. 2. Agenda 1. The Need for Infrastructure Sharing in Africa 2. The Options Available 3. The FullValue ofThe Independent TowerCo Model
    3. 3. 1.The Need for Infrastructure Sharing in Africa
    4. 4. Telecom Infrastructure Growth Population Growth Penetration Increase Infrastructure Need 2% 69% 95%98% 31% 5% 2000 2012 2018E Penetration rate Unconnected population 106 117 124 131 139 2010 2012 2014E 2016E 2018E 42% 54% 3% 2011 Ages 0-14 Ages 15-65 Age 65+ Demand for Mobile Usage Increase 34.5 81.2 160.2 2012E 2014E 2016E MOU Africa Mobile BB Connections Source:WCIS,WB Development Indicators (As of 2011) and Sub-Saharan Africa MobileObservatory 2012.
    5. 5. Need for Colocation $ Ghana: Need for Efficiency Declining ARPU Colocation DRC: Tanzania: Competition 28.8 7.1 2000 2012 Source:WorldCellular Information Service.
    6. 6. Need forTowers in Africa Total Number of Points of Service (PoS) in Africa (2005-2018) (1)Assuming an operator “go-it alone” strategy and construction cost of $150k / site 000’ ~$25bn of StrandedValue 15 14 16 18 18 21 20 27 38 33 33 24 18 40 55 69 85 103 121 142 162 188 226 259 292 316 334 0 50 100 150 200 250 300 350 400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ~$22bn of Capex(1) New PoS added / year PoS required to normalise at 3,500 subs. / PoS in 2018
    7. 7. 2.The Options Available
    8. 8. Operators Option 1: Do ItYourself “Do it yourself”: sharing between mobile telecom operators 8 Pros • Keep control of the asset Cons • Relies on co-operation between competitors  Leads to low levels of sharing  Roll out plans need agreement • Value remains trapped on Balance sheet • Roll out requires MNO capital • No guarantee on cost structure Maintain temporary network advantage at cost of immediate savings
    9. 9. Operators Option 2: Managed Services Retaining owner whilst handing over management to a third party 9 Pros • Contracted performance guarantees (SLA) • Potential Cost savings • Better visibility on cost structure • Higher share levels vs. Option 1 with 3rd party marketing sites • Retain optionality around asset use Cons • Opex efficiencies but value remains trapped on BS • Towers still not seen as full independent reducing sharing • Issues around incentives for 3rd Party to invest with lack of ownership • Complicated contractual relationship to manage  Who owns investment new equipment? Partially realising efficiencies whilst keeping optionality
    10. 10. Operators Option 3: Build-To-Suit Partnering with aTowerCo to build, own and operate new sites 10 Pros • Contracted performance guarantees (SLA) • Capex efficiencies • Better visibility on cost structure • Retain control of existing “core network” High levels of sharing on newTowers Higher level of efficiencies Higher level of savings Cons • Opex and Capex efficiencies limited to new infrastructure • Value remains trapped on BS • Duplication of teams managing passive infrastructure Maximising effectives on new infrastructure
    11. 11. Operators Option 4: Sale & Lease Back Sells passive infrastructure & lease it back under a long term agreement 11 Pros • Capital realised • BS optimization & capex efficiencies • Contracted performance guarantees (SLA) • Full visibility on cost structure • Full alignment of interests High levels of sharing on all towers Highest level of efficiencies Higher level of savings Cons • Fully open up network Maximising value of historic investment before lost
    12. 12. Outsourcing Options Spectrum of MNO’s options and resulting efficiencies Self Funding Managed Services Build-to- Suit Sale-and- Lease-Back Opex Savings    x DYI Colocation  Financial Visibility  x x ≈ LowerCapex    x  Cash Consideration x x ≈ x   TowerCo Independence  x x ≈  Efficiency 12
    13. 13. 3.The Independent TowerCo Model
    14. 14. What does aTowerCo Do? HTA supplies the passive infrastructure necessary for wireless network operators to provide communications services 14Source: World Cellular Information Service. Revenue Tower capacity 1 Tenant Contracts 2 Opex Ground rent costs 3 Energy 4 Maintenance / First Level Maintenance Capex Expansion / Upgrade 7 Maintenance / Energy Renewal 8 Landlords TowerCo MNO Land Infrastructure + Energy FeeRent Other Costs 6 5 Mast Physical site Shelter Cooling HTA Power grid Generator Batteries Fence panel antennas Tenant A Tenant B microwave antenna feeders & connectors BTS rack AssetsOwnership Split between HTA andTenants
    15. 15. Efficiencies from aTowerCo Towers Generators Hybrids = 3 = 1 = 1 = 3 = 1= 3  Full Duplication  Lack of Focus on Efficiencies  No Focus on Maximising Sharing  No SLA - SuboptimalQoS  No CO2 savings = Sometimes = Sometimes = Key priority  OneTower  One Generator  Focus on Capital efficiencies  Focus on Operating Efficiencies  Active marketing driving sharing  SLA - Optimal QoS  Maximised CO2 savings  OneTower  Power Systems Usually Duplicated  Lack of Focus on Efficiencies  Limited Focus on Maximising Sharing  No SLA - SuboptimalQoS  Limited CO2 savings Source: World Cellular Information Service. 15 No Sharing Sharing between Operators TowerCo Model
    16. 16. Takeaways • Delivering Africa’s coverage and service requirements  Requires capital efficiencies  Require more sharing  Requires investment  Reduces tower mast requirements and improves urban landscape • Towerco model maximises value compared against other alternatives  Capital realised  Opex guaranteed  Ongoing capital requirement reduced
    17. 17. Any Questions?

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