Towers of value: Mobile operators are sharing and outsourcing infrastructure

Across the continent, there is a trend towards sharing and outsourcing network infrastructure, which is capital intensive to build and costly to maintain. Ghana has been a leader in this movement, with major deals struck between mobile operators and infrastructure operators over the past five years.

Changing Times

For some time, the trend was slow due to the fierce competition between players, but economic logic has asserted itself. Declining average revenue per user and the need to boost data capacity have put pressure on operators to move towards outsourcing and sharing models, “releasing value” from their tower infrastructure.

Infrastructure ownership and management is no longer seen as a core business function of a mobile operator, when there are demands for focus on core business activities such as product development, marketing and tariff management.

“Releasing value” of towers (that is, base transceiver stations that form cells of a cellular network) can follow a range of models, including joint ventures, sale of assets to tower companies that offer the infrastructure to a number of players, and issuing of co-location rights. It can also entail outsourcing operation (including security, power supply and air-conditioning) and maintenance.

As well as reducing capital and operational expenditure, outsourcing towers that are then shared among operators reduces the cost of expanding networks into rural areas, as each network does not need to build its own infrastructure. Increasing network coverage is a priority for telecoms companies across Africa.

“Initially the towers were all built by independent phone operators, so they would build solely for their own customers,” Gareth Townley, manager of Eaton Towers Ghana, told OBG. He says that in Ghana, as elsewhere in Africa, operators have come under regulatory pressure to reduce the number of towers, partly due to a desire to minimise the visual clutter of towers in some areas, where they could be consolidated and shared.

The reduction in towers has in some cases led to problems, particularly where older infrastructure has been put under strain by increased volumes. Accra’s upmarket Airport Residential district is one area that has been particularly affected.

Major Players

There are four major tower operating companies working in Africa, according to Deloitte: Eaton Towers (ET), Helios Towers Africa (HTA), IHS Towers and American Tower Corporation (ATC). They are consolidating tower portfolios.

Major tower outsourcing deals made in Ghana include three made in 2010, showing how the country’s telecoms sector has been ahead of this particular curve in Africa. Tigo sold 752 towers to HTA in January 2010 for $33m, followed by Vodafone hiving off 750 sites to ET for an undisclosed sum in October, and MTN selling 1876 towers to ATC for $218m in December 2010.

In September 2014, ET signed a deal worth a reported $1.3bn to acquire more than 3500 telecoms towers in six countries, including Ghana and Nigeria, from Bharti Airtel. The deal gives Airtel a 10-year lease contract on the towers, and “follows Airtel’s and ET’s strategies to drive cost efficiencies throughout the industry via the use of shared passive infrastructure,” according to an ET press release. Airtel said that the sale would lead to considerably better infrastructure utilisation, boosting efficiencies and supporting the proliferation of mobile services across Africa.

With much of Ghana’s mobile telecoms infrastructure now in the hands of tower management companies, those firms will start to play an increasingly important part in maintaining and building the available network capacity to handle growing data volumes and geographical network expansion.