With special thanks to the TowerXchange “Inner Circle”

Our informal network of advisers: About TowerXchange

TowerXchange is your independent community

Alan Harper Chuck Green Tunde Titilayo for operators, towercos, investors and suppliers
CEO CEO CEO interested in African towers. We’re a community
Eaton Towers Helios Towers Africa SWAP Technologies & Telecomms of practitioners formed to promote and accelerate
infrastructure sharing in Africa. TowerXchange
don’t build, operate or invest in towers; we’re a
Michel Faivre Riana Donaldson Fazal Hussain
neutral community host and commentator on
Directeur Programme Partage Manager: International Network Managing Partner, Deka Global
African telecoms infrastructure.
d’Infrastructure AMEA Operations Support former CEO
France Telecom-Orange Vodacom Helios Towers Nigeria
The TowerXchange Journal is free to qualifying
recipients. We also provide webinars and
Nina Triantis Chris Gabriel Andrew Doyle
regular meetups. TowerXchange monetizes
Managing Director, Global former CEO, Zain Africa Managing Director
this community through the sale of advertising
Head of Telecoms & Media Senior Adviser, Macquarie Group Tech & Comms Practice
and sponsored content, without compromising
Standard Bank Chairman, Clean Power Systems Mott MacDonald
editorial integrity.

Jeffrey Eldredge Natasha Good Johan Smith TowerXchange was founded by Kieron
Partner Partner Head – Africa Telecoms Group Osmotherly, a TMT community host and events
Vinson & Elkins Freshfields KPMG organizer with 16 years’ experience, and is
governed with the support and advice of the
Torsten Esbjørn Ayman Al Adl Rajat Malhotra TowerXchange “Inner Circle” – an informal
Regional Director, Africa Associate Director – TMT CEO, Middle East & Africa network of advisors
Ramboll Standard Chartered Bank Hayat Communications

© 2012 Site Seven Media Ltd. All rights reserved. Neither the
Zouhair Khaliq Adeel Bajwa Ahjeeth JaiJai
whole nor any substantial part of this publication may be re-
Consultant, Executive Director Senior GM of Legal Affairs and Consultant produced, stored in a retrieval system, or transmitted by any
means without the prior permission of Site Seven Media Ltd.
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Orascom Int’l Investment Warid Telecom source. TowerXchange is a trading name of Site Seven Media Ltd,
registered in the UK. Company number 8293930.

2 | TowerXchange Issue 1 | www.towerxchange.com

Contents Departments

5 Analysis
Estimated number of towers owned or managed by
independent towercos in Africa

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

13 Editorial
Welcome to TowerXchange

14 Are three towercos in Ghana

too many? 30 How to guide:
Shareability 47 Your letters and emails
Coming soon!
15 Is infrastructure sharing working in Ghana? 31 $value on telecom infrastructure assets
Join the TowerXchange Group on LinkedIn!
16 BuddeComm Perspective on Ghana 32 The cost of multi-tenant towers
17 Interview with Chuck Green, CEO, Helios 34 Design for shareability
Coming in the next issue of TowerXchange
24 Best of Both Worlds? With Tony Dolton of Vodafone 37 What are my towers worth?

Anatomy of an infrastructure sharing transaction

< Who’s who: lawyers with direct experience of
advising on African tower transactions
< A checklist of the data you need to buy and sell
towers
< How to accelerate transactions
< A closer look at SPAs and MLAs

What you need to know about the financing & track

record of the companies bidding for Africa’s towers

27 Introduction to
infrastructure sharing 40 Special feature:
Uganda case study
< Who’s who: the towercos bidding for African assets
< Are towercos paying a premium for first mover
advantage in Africa?
28 Why share Africa’s towers? 41 How Orange leverage infrastructure sharing
< Do the ‘Big 4’ towercos have the digestive capacity
48 How to structure a deal 43 An interview with the UCC to acquire all the towers that are coming to market
50 The criticality of tenancy ratios 45 How Eaton hit the ground running: in Africa?
52 When is the right time to share towers? An interview with Alan Harper, CEO

www.towerxchange.com | TowerXchange Issue 1 | 3

Mott MacDonald
Infrastructure sharing – strategic
consultancy and transaction advice
We combine commercial and technical knowledge of telecoms
markets with a pragmatic understanding of the economic drivers
behind infrastructure sharing. We’ve worked internationally
with operators, towercos, regulators and investors on network
strategy, asset disposals and tower sales. Our insight underpins
our services, which enable us to help you at any point in your
infrastructure journey. We can assist with the following:

■ Evaluating site portfolios in the local market context,

set against international benchmarks
■ Undertaking complex subscriber modelling to assess
infrastructure demand
■ Assessing technology, regulatory and planning risks
■ Undertaking detailed cost modelling, assessing
M
capex and opex versus benchmarks
OTTMAC.CO
■ Understanding operator strategies for WWW.M
infrastructure sharing
M
OTTMAC.CO
W.DOYLE@M
ANDRE
OM
OT TMAC.C
C AT I O NS@M
MM UNI
OL OGY.CO
TECHN
The current state of the Please take this analysis as guidance, not
as gospel

African infrastructure As many readers will know, accurate tower counts

are very difficult to attain and even more difficult to

sharing market
ensure consistency.

TowerXchange have collated publically available

data on the number of towers acquired or managed
Estimated number of towers owned or managed by towercos in Africa by independent tower companies in each African
Source: TowerXchange research, quarterly filings, site lists country. Where the data was accessible, we’ve also
included towers built by independent towercos.
We’ve verified the figures by checking Quarterly
Reports, Analyst Call transcripts and simply by
asking the CEOs of each towerco for their counts,
but not everyone counts towers in the same way.

Understandably different stakeholders want to

use different definitions to make their company
compare favourably. Are towercos counting just
active towers or ‘works in progress’? Do they
include legacy sites with capacity currently for only
for single tenants? We’ve asked for counts including
only active towers, but some towercos will only
share estimated counts. However all the estimates
included here were updated to late November 2012.

An appeal for data

Nigeria, Cote d’Ivoire, Cameroon,
IHS Africa 5,610 MTN
Ghanga, Sudan, South Sudan TowerXchange welcomes any corrections and
American 4,540 Cell C, MTN Ghana, South Africa, Uganda additions to our tower counts, and will happily
Helios TA 2,800+ Millicom Ghana, DRC, Tanzania publish links to any site lists in the public domain.
Eaton 1,500+ Vodafone, Orange, Warid Ghana, South Africa, Uganda Please send any corrections or comments to
SWAP 1,211 Starcomms Nigeria, Ghana
[email protected]
Helios TN 1,000+ N/A Nigeria

www.towerxchange.com | TowerXchange Issue 1 | 5

Accelerate your sales cycle
and close your next major deal in Africa
Advertise in the TowerXchange Journal, circulated to a highly targeted community of the 628
most influential tower decision makers

2% 1%
5% 5%
12% 7%
12% Operators C-level
Sub-Saharan
TowerCos VP, Exec Director, Africa
34% Partner MENA
Equipment
Suppliers 46% Director-level/
13% Dept Head
24% 52% Europe
Advisers 27%
Senior Manager/ Asia
Investors Managing Exec
Americas
Others Middle & Junior
16% Manager Australasia
20% 11%
14%

To book your advertisement, contact: Kieron Osmotherly | [email protected] | M. +44 (0) 7771 148001
News
in the migration of assets and novation of leases,
here’s some quotes from IHS Africa’s press release
about the deal, just in case you haven’t seen them.

“The benefits to MTN of monetising our non-core

assets and outsourcing passive infrastructure to
experienced independent companies such as IHS
are considerable,” said Sifiso Dabengwa, Group
President and CEO of MTN Group. “With a continued
commitment to improving the service to our
customers, a reduction of our capital expenditure
requirements allows us to concentrate on investing
in our customer base and implementing additional
services to meet the demand for innovative products
and data.”

“We are delighted to build on our successful

partnership with MTN for whom we have previously
built and maintained sites in Nigeria and Sudan.
Our strong technical capabilities and operational
IHS Africa acquires towers from MTN in Cote d’Ivoire & Cameroon expertise reinforce MTN’s performance-oriented
approach and high standards of service,” said Issam
Congratulations to IHS Africa on their acquisition Unlike MTN’s previous joint venture deals with Darwish, CEO of IHS Africa. “This transaction is
of 1,758 towers from MTN in Cote d’Ivoire and American Tower in Ghana and Uganda, in which the next step in our strategy for expansion across
Cameroon. The cost per tower is US$151.5k in Cote they retained a substantial equity stake, MTN has Africa; we continue to invest in countries with
d’Ivoire (US$141m purchase price) and US$173k in parted with 100% of the equity in Cote d’Ivoire and attractive economic and demographic profiles. This
Cameroon (US$143m). While one needs to know the Cameroon. As usual, MTN becomes an anchor tenant. transaction firmly positions IHS as a leading mobile
lease rate to evaluate the deal properly, industry IHS Africa has made build-to-suit commitments. The tower infrastructure company in sub-Saharan
Africa with resources for continued expansion and
commentators agree that MTN realized a good price, initial term is 10 years. Citibank served as MTN’s

“
“
while IHS Africa have paid a justifiable premium advisers on the deal. The transactions are expected technological innovation.”
to cement their place among the most credible to close during the first quarter of 2013, subject to the
independent tower companies in Africa. Indeed, usual closing conditions.
this deal makes IHS Africa the largest independent This deal makes IHS Africa
tower company in West Africa with a presence in the TowerXchange have requested an interview with the largest independent tower
four largest economies in the region; Nigeria, Ghana, Issam Darwish, CEO of IHS Africa, but whilst he and
company in West Africa
Cameroon and Cote d’Ivoire. his team are currently doubtless deeply embedded

www.towerxchange.com | TowerXchange Issue 1 | 7

A closer look at the Cameroon and Cote d’Ivoire markets Cote d’Ivoire market overview

Operator Market Share, Cameroon Population: 20.2m

Cameroon market overview
Mobile subscribers: 15.6m
Mobile penetration: 86.4%
Population: 20m
GDP per capita (PPP current USD): $1,803
Mobile subscribers: 10.5m
Internet users per 100: 2.2
Mobile penetration: 52.4%
(Source: World Bank, 2011)
GDP per capita (PPP current USD): $2,383
Internet users per 100: 5 MTN
(Source: World Bank, 2011) MTN in Cote d’Ivoire
Orange
Population coverage: 85% Market share: 37-40%
ARPU: MTN reports US$6.2 Subscribers: 6,305,000
(Sources: MTN and Orange Quarterly ARPU: US$6.1
reports, Spring 2012) (Sources: MTN Quarterly report, Spring 2012)

“In Cameroon and Cote d'Ivoire there hasn't been as much of a push for While a similar market in size, Cameroon is a very different market in terms of
infrastructure sharing from the regulatory side as in the other countries,” says competitive dynamics. With only two competing networks, MTN and Orange,
Paul Budde, CEO of leading analysts BuddeComm. “But Cote d'Ivoire with its 7 mobile penetration in Cameroon lags many other African countries at 49%. The
mobile networks is certainly a market that is ripe for it.” Ministry for Posts and Telecommunication called for expressions of interest in a
3G license in May 2012, and the market is poised to take off. Qualifying bids for the
There are currently five active mobile operators in Cote d’Ivoire. The market is license are understood to have been received from Airtel, Viettel (from Vietnam),
led by MTN, who have a 40% market share, and Orange. Moov (Etisalat), KoZ Maroc Telecom (Vivendi Group) and Technologie et Systeme d’information/Korea
(Comium) and Oricel Green Network (Lap Green Networks) also operate live Telecom.
networks. Further licenses are held by Warid and World Café (Aircomm), but
spectrum allocation problems have delayed launch. The benefits of such a fiercely Keith Boyd of Eaton Towers commented: “Cameroon has two established operators,
competitive market include soaring penetration, which has risen from less than but with as many as three or four new licensees potentially coming to market, it
10% in 2004 to over 80% today. The first 3G licence in Cote d’Ivoire was issued to could be a very interesting market. However, with new entrant OpCo funding and
MTN in March 2012. launch dates unknown, it’s impossible to forecast prospective tenancies.”

Eaton Towers’ Keith Boyd on Cote d’Ivoire: “Towercos need to move fast in the The investment banking arm of the pan-African bank- Ecobank Capital, recently
Ivory Coast – most operators are believed to be considering tower plays, and those announced the successfully raising of a $202m syndicated credit facility on behalf
late to market will be worth the least as there are only so many tenancies up for of IHS Africa, $102m of which is for projects in Cameroon, and $100m for Cote
grabs.” d’Ivoire

8 | TowerXchange Issue 1 | www.towerxchange.com

IHS Africa valued at fourteen times EBITDA, according Eaton secures $60m debt financing to
invest in new and existing towers in
to latest equity finance deal Uganda
In order to finance their deals in Cameroon and Cote d’Ivoire, and development in Nigeria, IHS Africa has Eaton Towers has secured $60m in debt financing
announced the sale of 25% equity for $125m to European investment firm Wendel and its subsidiary Oranje- to fund their acquisition of just under 400 towers
Nassau. This continues IHS’s efforts to raise US$400m to finance their ongoing African business development. from Warid Telecoms in Uganda, enabling them to
Wendel becomes IHS Africa’s largest shareholder. Other shareholders include infrastructure services company upgrade existing sites and fund up to 80 new builds.
UBC, the founder and main promoter of IHS, and existing first tier shareholders IFC, Investec AM, FMO, ECP and Eaton also acquired 300 towers from Orange, giving
Skye Bank. Management currently hold 10% of the equity in IHS them national coverage in Uganda.

IHS Africa: analysis of towers This issue of TowerXchange features an exclusive

interview with Eaton CEO Alan Harper on page
Nigeria 1242 1193 45, in which he discusses how Eaton will invest
to reduce opex, extend the network and enhance
Ghana 697 capacity.
Owned sites

Sudan 720
Managed sites Eaton’s latest capital injection consists of a $30m
tranche from Standard Bank Group, acting
Cote d’Ivoire 931
through Stanbic Uganda, for a six-year term, plus
a $30m tranche with an 8.5 year maturity from
Cameroon 827
IFC. The investment in Eaton is IFC’s second foray
Total 2659 2951
into African towers, having made a $25m equity
investment in Helios Towers Africa in January 2011.
0 1000 2000 3000 4000 5000 6000
(Source: Wendel Investment in IHS analyst call) "This latest round of debt funding is a further
validation of the Eaton Towers business model and
IHS Africa overview management team, and a clear demonstration of
< Operations in Nigeria, Ghana, Sudan and South Sudan our ability to efficiently leverage our assets across
< Services across full tower value chain: managed services, deployment and site ownership Africa”, said Eaton’s CFO Peter Lewis. “Eaton Towers
< 99.9% uptime on IHS co-location sites is now a leading tower company in Uganda and this
< FY2012 turnover was US$97m, of which US$38m came from co-location funding facility will allow us to further consolidate
< FY2012 EBITDA was US$11m, of which US$10m came from co-location our position there."
< Reported tenancy ratio: 1.67x
(Source: Wendel Investment in IHS analyst call)
Eaton Towers has recently established offices in
Kenya

www.towerxchange.com | TowerXchange Issue 1 | 9

Orange examining infrastructure sharing scenarios in Kenya Smile 4G network plan becomes clearer

Smile Telecoms’ extended partnership with Alcatel-

Kenyan Mobile Subscribers (in millions) Kenyan Mobile Data/Internet Subscribers (in millions)
Source: Commission of Kenya, June 2012 Source: Commission of Kenya, June 2012 Lucent to build and operate their data-centric LTE
networks revealed that Smile will expand their
networks to 120 towers each in Tanzania and Uganda,
focusing on Dar es Salaam and Kampala, by February
2013. Smile intends to have thirty 4G base stations
Safaricom Safaricom
operational in the DRC capital, Kinshasa, by Q3 2013.
Orange Orange
Smile became the first network in Africa to provide
Airtel Airtel
4G LTE service for hi-speed mobile broadband access
Essar Essar in the 800 MHz frequency band in June 2012 when
Others
they launched in Tanzania, and they are investing
$100m to rollout in at least three African countries
over the next two and a half years

Orange is considering selling 600 towers in Kenya. A Kenya market overview American Tower adds a further 236
senior executive at the operator admitted Orange had towers in South Africa
“launched a process looking at different scenarios to Mobile subscribers: 29.7m
optimise costs in Kenya.” Mobile penetration: 75.4% American Tower’s September 2012 Q3 report revealed
Internet / data subscribers: 7.7m the addition of a further 236 towers in South Africa,
A request for expressions of interest has been (of which 98.9% mobile, 9.4% broadband) taking their portfolio in the country to over 1,600
circulated, and 500 new builds would apparently (Source: CCK, June 2012) towers. The report also revealed that international
also be involved. Cell sites: 5,565, of which 4,988 on-grid (GSMA) rental and management segment revenue increased
Coverage: 89.1% (GSMA) 22% to $217.2 million, representing 31% of American
Orange currently owns or rents more than 900 sites Tower’s total revenue, while international rental
in Kenya, with just over 40% of them running 3G as tariff wars took hold in Kenya, but it now seems that and management segment pass-through revenues
well as 2G technologies. Over 30% of sites are already Telkom Kenya (Orange) are once again considering increased 6.5% to $57.2 million. International rental
shared, the majority being shared with Safaricom. substantial infrastructure sharing. and management segment Operating Profit increased
In June 2011, Telkom Kenya and Safaricom had 20.9% to $110.7 million.
announced that they were exploring the viability In December 2007, France Telecom acquired a 51%
of an Indus-style, independently managed tower stake in Kenya’s incumbent operator, Telkom Kenya, In Q2 American Tower’s international segment had
sharing firm to manage a pool of 4,000+ towers. Those through its holding company Orange East Africa, generated higher commenced new business than their
talks were believed to have been deprioritised as launching 3G services in 2011 domestic segment for the first time in their history

10 | TowerXchange Issue 1 | www.towerxchange.com

Will Nigeria, South Africa and Egypt be the next Etisalat investing $400m in network
expansion in Nigeria
markets for infrastructure sharing deals?
Steve Evans, Chief Executive Officer of Etisalat Nigeria,
said that the company would be investing more in
Operator Market Share, Nigeria (subscribers in million)
2G networks in rural areas and in 3G networks in
(Source: Nigerian Communications Commission, September 2012) urban centres in 2013. With about 3,500 base stations
3.2 across Nigeria, Etisalat is targeting 20 million active
subscribers by the end of 2013. According to NCC
MTN figures, Etisalat had 14.4m subscribers in September
2012.
22.3
EMTS (Etisalat)
In an interview with local newspaper The Guardian,
MTEL Evans also pointed out the challenges posed by
45.6
interruptions in power supply, suggesting that
Airtel
powering base stations in Nigeria cost 15-20% more
21.1 than in countries where there was more stable grid
Globacom
power.
4 CDMA
14.4 operators Evans also spoke about the NCC ban on promos and
0.3 lotteries, saying: “The main promotion, which was the
root cause of the ban was the one where customers
receive five times daily expenditure on on-net calls
The grapevine is buzzing that the next infrastructure look at the infrastructure on the ground, it’s not our and which must be exhausted before midnight. To us
sharing transactions could take place in the massive core focus, so we don’t leverage it to the extent that that promo, from the outset was clearly going to lead to
and fiercely competitive South African and Nigerian perhaps we could. If you put it into an entity that can catastrophe, reason why Etisalat didn’t join the foray.
markets. leverage it, then you have improved efficiencies.” The network capacity became congested because it
Meanwhile, Vodacom has increased the number of wasn’t capable any longer to carry the traffic.” Evans
According to September 2012 figures from the NCC, LTE-enabled base stations on its network from less continued: “NCC needs to reconsider this decision. They
Nigeria has over 107m active mobile subscribers, than 70 at launch in October 2012, to over 200 in should only base a ban on promotions from networks
with teledensity of 76.7%. Networks have become so Johannesburg. having quality of service and congestion challenges.
congested in Nigeria that the NCC recently issued a We feel very bad about the ban. It is unfair, reduces
ban on promotions and lotteries. Amid rumors that Egypt could add a fourth license in competition and sort of takes the benefit away from
Q1 2013, check out the interview with Tony Dolton, the customers. I am sure that if you ran a referendum
Meanwhile, South African publication Tech Central CTO of Vodafone Egypt on page 24 for hints of intent on Etisalat customers they will tell you they have no
ran a quote from MTN’s Managing Director Karel to form a carve-out joint venture towerco in this high congestion issues on the network. So, the criteria used
Pienaar in August 2012, saying: “The reality is, if you penetration country by the regulator needs to be revisited.”

www.towerxchange.com | TowerXchange Issue 1 | 11

Zimbabwe regulator to install 54 base stations in postal projects,” said Mr Marisa.

underserved and remote areas “As at the end of September 2012, the teledensity
figure was 89.8 percent (active sim cards and fixed
lines without factoring in multiple line ownership).
Given the current growth trends, we expect
teledensity to reach 100 percent by next year as
mobile services are extended to more under-served
rural areas,” added Marisa.

“ Sharing infrastructure
has been hampered by
old designs (especially
towers) which were not
designed to carry more
than one operator
“
The regulator has also strongly advocated the sharing
of infrastructure: “operators are already sharing
infrastructure. Sharing infrastructure has been
The Postal and Telecommunications Regulatory and three repeater sites while the second phase is hampered by old designs (especially towers) which
Authority of Zimbabwe (POTRAZ) plans to install targeting a total of 43 sites. Our target is to reach all were originally not designed to carry more than one
54 mobile phone base stations in under-served and under-served areas in Zimbabwe. The areas targeted operator and, in some cases, inadequate backhaul
remote areas across the country over the next two and prioritised are remote rural areas.” infrastructure,” concluded Mr Marisa.
years.
“Construction of towers at the 43 sites is likely to Previously, Zimbabwe’s leading operator Econet had
POTRAZ has already erected 11 sites for the stations, span over two years since the Universal Services called for the Universal Services Fund, a 2% levy on
and deputy director-general Mr Alfred Marisa said Fund cannot fund all of them in one year, given that all operator’s annual revenue, to be scrapped due
in an interview in local newspaper The Herald: “the the USF is also funding other projects such as the to a lack of meaningful development of telecoms in
first phase (of the) project had eight terminal sites Schools Connectivity project and some deserving underserved areas from the fund

12 | TowerXchange Issue 1 | www.towerxchange.com

Editorial on how to structure, negotiate, close and leverage
infrastructure sharing transactions. The most
popular TowerXchange Journal articles will become
Welcome to the first edition of the TowerXchange Journal! live webinars giving you the chance to ask YOUR
questions.
those who know how the tower sharing business
model works, and how it can be tailored to achieve TowerXchange will recognize the achievements of
different objectives in different African markets, pioneers both in our annual “Tower Power 50” list,
and those on the front lines of infrastructure and an annual awards ceremony, inaugurated at
sharing – whether they’re gathering data on their TowerXchange Live, part of Africa’s new annual
towers for an RFP, or leading post-deal efforts to telecoms infrastructure conference and exhibition.
reduce opex and improve tenancy ratios. We’ll also have regular meetups rotating between
different African regions and occasionally coming to
And we’ve launched TowerXchange because we Europe and the US to connect with the international
passionately believe infrastructure sharing is investment community. TowerXchange respects the
great news for Africa – creating a new class of competitive sensitivity of infrastructure sharing,
‘InfraCo’ specializing in creating and managing and our events combine practical “how to” briefings
next generation networks while driving down with private 1 to 1 meetings between qualified
opex, enhancing the economics of universal access, decision makers.
releasing capital and creating new shareholder
value. I’ll leave you with an appeal to engage in the
TowerXchange community! Please share YOUR
Kieron Osmotherly, TowerXchange Founder TowerXchange has a laser-beam focus on expertise and experience – we’re always on the look
infrastructure sharing in Africa. It’s a small world of out for new case studies, interviews and columnists!
This is the bi-monthly publication of TowerXchange people who have “gotten their hands dirty” leading Join our linkedin group at www.linkedin.com/
– your new, independent community for operators, Africa’s pioneering infrastructure sharing deals, groups/TowerXchange-4536974 and email or call me
towercos, investors, advisers and suppliers and we’re grateful that many of those pioneers directly to share your opinions on the articles and
interested in infrastructure sharing in Africa. have joined TowerXchange’s “inner circle” informal interviews in this Journal…
advisory board.
We’ve launched TowerXchange because we believe All the best,
the volume of infrastructure sharing transactions TowerXchange provides several services to support
in Africa will continue to increase in the coming infrastructure sharing in Africa. This bi-monthly Kieron Osmotherly
months. Journal taps the expertise of leading practitioners, Founder, TowerXchange
keeps your ears to the ground for news of future
We’ve launched TowerXchange because we feel infrastructure sharing transactions, celebrates the M. +44 (0) 7771 148001
we can help there is an information gap between successes of deals that have closed, and “lifts the lid” [email protected]

www.towerxchange.com | TowerXchange Issue 1 | 13

Special Feature:

Are three
towercos in
Ghana
too many?
With three major tower transactions
to date and five active independent
towercos, Ghana could be a glimpse
into a future for African telecoms
infrastructure that involves a
migration from operator-captive
towers to an independent tower
company-centric model.

In this feature:
15 Is infrastructure sharing working in
Ghana?
16 BuddeComm perspective on Ghana
17 Interview with Chuck Green, Helios
24 Interview with Tony Dolton, Vodafone

14 | TowerXchange Issue 1 | www.towerxchange.com

Test case:
recalls “the deal meant a lump sum cash payment
was invested to upgrade the legacy towers, and for us
an immediate opex reduction of over 30%.” You can

Is infrastructure sharing
read an in-depth interview with Dolton on page xx.

Meanwhile, from the new market entrant’s

working in Ghana? perspective infrastructure sharing is working well –

Airtel are rumored to have doubled their network in
a year thanks to co-location.
Tower sharing arrived in Ghana in a big way in 2010
Is it working for the towercos? American Tower have
The Ghanaian market has become the perfect acquired over 2,000 towers in Ghana and are believed
test bed for tower sharing. Ghana is a favorite of to have placed over 400 co-located tenants from the
international investors due to low political risk, so likes of Airtel, Vodafone and Tigo on those towers.
it’s no surprise that the country has attracted tens of And Helios’ Chuck Green is happy to go on record to
millions of dollars of investment in infracos. say “to date our business in Ghana has performed at
or above our expectations at the time we executed
With Globacom recently joining the existing five the deal.” Chuck’s views on the Ghanaian market are

“
nationwide carriers serving a population of 25m,
high cost of new builds, ARPU falling below $5
forcing a reduction of opex, and a regulator strongly
in favour of sharing, network planners often have no
option but to co-locate. But infrastructure sharing is
not a necessary evil in Ghana – it’s been a successful
explored in the interview on page 17.

As a shareholder we’re happy with

our investment. As a tenant we’re
happy with the management of the
“
investment for incumbents and new market entrants towers
Ghana’s infrastructure sharing market was alike. – Khumo Shuenyane, MTN
pioneered by Millicom’s deal with Helios Towers
Africa, in which Helios invested $54m for a 60% “As a shareholder we’re happy with our investment,” 3G mobile broadband customers constitute the
stake in the joint venture. Vodafone soon closed says Khumo Shuenyane, Group Chief Strategy majority of Ghana’s internet users. TowerXchange
an operational lease deal with Eaton Towers, to Mergers and Acquisitions Officer at MTN. “As a will revisit Ghana next year to examine the impact
be followed by another joint venture, this time tenant we’re happy with the management of the of growing capacity demands, and the role of
American Tower investing $218.5m for a 51% stake towers. And we’re happy with the build to suits.” towercos in densifying the network. For now, and
in a joint venture with MTN. SWAP Technologies, as Africa’s most mature market for independently
with 500 towers, and IHS Africa, with 697 sites, Vodafone Ghana seem similarly pleased with their owned and managed towers, the signs are good that
are also active in Ghana. operational lease deal. Tony Dolton, CTO at the time, infrastructure sharing is working in Ghana

www.towerxchange.com | TowerXchange Issue 1 | 15

Column Mobile Voice Market Share
(Source: National Communications Authority, Ghana, August 2012)
The BuddeComm
Perspective: Ghana 1%

7%
MTN
Leading analysts BuddeComm say Ghana market overview
difficulties obtaining permits for 12% Vodafone

new sites is driving infrastructure Population: 25m

sharing in Ghana. 45%
Tigo Mobile subscribers: 21.2m
Mobile penetration: 84.8%
15%
With permits to construct new base-station sites Airtel
GDP per capita (PPP current USD): $1,884
taking a minimum of six months, Ghanaian network
operators are warming up to the idea of infrastructure Internet users per 100: 14
Glo
sharing. Separate permits are required from the
Environmental Protection Agency (EPA), the Ghana 20% (Source: World Bank, 2011)
Expresso
Civil Aviation Authority (GCAA), the Ghana National
Fire Service, as well as District, Metropolitan
and Municipal Assemblies. These agencies are
overwhelmed by the number of applications, with In January 2010 Millicom Ghana agreed to sell 750 for tower sharing gained additional momentum in
the operators rolling out hundreds of new sites every towers to Helios Towers Ghana (HTG), a subsidiary February 2010 when the Ministry of Environment,
year. of Helios Towers Africa. At the same time, Millicom Science and Technology (MEST) banned the erection
Ghana and HTG entered into a long-term leasing of telecommunications masts in the country until
By March 2009, there were about 3,000 telecom agreement under which HTG will provide Millicom further notice. According to the Environmental
masts across the country, comprising 1,650 for MTN, with access to towers, including a build-to-suit Protection Agency (EPA), about half of all
700 for Tigo, 380 for Vodafone, 250 for Zain and 110 agreement. As part of the deal, Millicom will also telecommunications masts in Ghana were erected
for Kasapa. gain a minority interest in HTG. The transaction without the required permits. There has been public
is expected to create savings in both capital and outcry against the location of some masts, accidents,
MTN has provided a list of all its existing and operating expenditure for Millicom. HTG is seeking land disputes and alleged health implications. MTN
proposed future cell sites to its competitors, but similar agreements with other operators in Ghana. sold 1,856 of its towers to America Tower Corporation
some have not reciprocated the gesture. Ghana’s (ATC) in 2011
largest mobile operator is interested in co-location The NCA is planning to license additional companies
deals that go beyond the sharing of cell sites and may to install telecom infrastructure for co-location. For more on BuddeComm’s excellent market
include the sharing of fibre routes as well. The Millicom-Helios deal came just before the need research, visit www.budde.com.au

16 | TowerXchange Issue 1 | www.towerxchange.com

Proof of Concept
TowerXchange: Thanks Chuck for generously
giving up your time to share some insights with
TowerXchange readers. Let me start by asking
what characteristics of the Ghanaian telecoms
How infrastructure sharing is creating shareholder value for both market meant it leant itself to infrastructure
operators AND towercos in Ghana sharing?

Chuck Green needs no introduction. The Chuck Green, CEO, Helios Towers Africa: As ever,
former Crown Castle CFO and now CEO of the opportunity in Ghana came about as a result of
Helios Towers Africa was the pioneer behind decisions made by a specific operator– the initial
the first sale and leaseback deal in Africa impetus to share infrastructure is not only driven
by the attractiveness of the market in every case.
between Helios and Millicom in Ghana. Chuck
One or more operators have to take the initiative.
looks back on the deal, shares valuable lessons
learned, and gives his verdict on whether
Ghana represented a clear opportunity for us in
three towercos is too many for one market. Africa. The country represents a big, relatively
sophisticated market with mobile penetration
at less than 60% (probably 40-45% adjusted for
Keywords: Structuring a JV, Rental Rates, Market
multiple SIM cards) and rising when we first
Evaluation, Towerco Valuations, Transfer of Assets,
assessed the opportunity in 2009-10. With five
Due Diligence, Cost Reduction, Power, Maintenance,
operators, reasonably high GDP per capita and
Deep Cycle Batteries, RMS, Urban vs Rural, 3G, 4G, personal disposable income, market conditions
Tenancy Ratios, Build vs Collocate, Infrastructure were favourable for infrastructure sharing. While
Sharing, Africa, Helios, Millicom, American Towers, there were, and are, other markets with similar
MTN, Eaton Towers, Vodafone Ghana characteristics on the continent, the first sale and
Chuck Green, CEO, Helios Towers Africa leaseback in Africa took place in Ghana because
Millicom took a decision to outsource tower assets
to create shareholder value.
Read this article to learn:
< How Millicom created over $400m of value by structuring a JV deal with Helios Millicom initiated a competitive process in 2009,
< How towercos bid for assets based on a balance of up front cash, rental rates and equity and we signed the deal in January 2010 making
< How to manage the integration and transfer of assets, including novation of leases Helios the first licensed independent tower
< How towercos buy from subcontractors, and how they invest to reduce opex company in the market. As is often the case, other
< The impact of five competing towercos all operating in Ghana operators quickly followed suit. MTN quickly
entered into a marketing agreement with American

www.towerxchange.com | TowerXchange Issue 1 | 17

Tower, as we aggressively leased up Millicom’s which is meaningless without knowing the term of formation of our sister company, Helios Towers
towers, and subsequently entered into a sale and agreement and rental rate, which is commercially Nigeria in 2005. By the time we started working
leaseback deal with American Tower. Vodafone ran sensitive information. There should be a direct with Millicom in Ghana, we had almost five years
a lengthy process first looking at sale and leaseback, relationship between price per tower and rental experience building, operating and growing an
then a managed service deal structure. Ultimately, rate, and you need to know if is it’s a conventional independent tower company in what was at times
Vodafone Ghana agreed a managed service deal 10-12 year anchor lease tenure; any changes here a hostile commercial and operating environment
with Eaton Towers, who market and lease their also affect valuation. in Nigeria. We wanted to maintain the first mover
portfolio (see the interview with the then CTO of advantage and Ghana was an attractive market for
Vodafone Ghana, Tony Dolton on page 24). American Towers’ price per tower suggests a higher the aforementioned reasons. To date our business in
anchor tenant rental rate, while ours reflects Ghana has performed at or above our expectations
TowerXchange: What are you able to tell us Millicom’s preference for achieving a lower cost at the time we executed the deal.
about the final terms of the deal in Ghana? structure over the release of stranded capital.
TowerXchange: What were Millicom’s objectives
Chuck Green, CEO, Helios Towers Africa: We TowerXchange: What were Helios’ objectives during negotiations?
announced the acquisition of 750 towers in Ghana in Ghana and to what extent have they been
for $54m. Across three transactions with Millicom, realized? Chuck Green, CEO, Helios Towers Africa: Millicom
with whom we subsequently did deals in Tanzania prioritized driving down and stabilizing operating
and DRC, we acquired just under two thirds of their Chuck Green, CEO, Helios Towers Africa: Ghana was expenditure, with some monetization of stranded
towers, a total of 2,500. Millicom announced that the our first step in a diversified strategy for building capital. Furthermore, they were concerned with
three deals created $400m of value for the group, an independent tower company for Africa. Helios continuing to own a residual stake, a priority
inclusive of the $180m in cash we paid them, plus Investment Partners and I established the first important enough that they were prepared to make
the value of their retained 40% stake in the venture. independent tower company in Africa with the compromises on up the front fee and rental rate.

“
TowerXchange: Can you help readers who are There are five potential operator priorities
new to infrastructure sharing transactions motivating any prospective infrastructure sharing
understand a little about what they can and Millicom prioritized driving deal.
can’t tell from the details of these transactions?

Chuck Green, CEO, Helios Towers Africa: You can

calculate the headline price per tower – such as
$72,000 per tower in the Helios/Millicom Ghana
transaction and $235,000 per tower paid by
down and stabilizing operating
expenditure, with some
monetization of stranded
capital. Furthermore, they were
concerned with continuing to
“ •
•
•
•
•
Up front cash
Minimization of operating expenditure
Retention of stake
Capital preservation
Focus on core business
American Tower for 2,000 of MTN’s towers in
Ghana. However, TowerXchange readers should own a residual stake Each operator will rate each of those priorities
be wary of over-reliance on price per tower data differently. For example MTN took a minority stake

18 | TowerXchange Issue 1 | www.towerxchange.com

in Ghana, paid a higher rental rate, and took more TowerXchange: So if there’s a curve of world gave us a clear plan for the integration and
money out upfront. Millicom did the opposite. As indifference at the balance between price per transition of tower assets.
buyers, we’re mostly indifferent to the balance of tower and rental rate, is there a threshold
price per tower paid versus the rental rate and of equity stake Helios Towers Africa are There are two key challenges to be overcome in
we’ll agree a deal anywhere along a “curve of comfortable for operators to retain? the integration and migration of assets. The first is
indifference.” ensuring major conditions precedent are resolved
Chuck Green, CEO, Helios Towers Africa: The expeditiously, the most important of which requires
Millicom understood the shareholder value they integrity of the independent tower business model going to every landlord to negotiate the assignment
could create by sharing infrastructure in Africa. relies on an operator’s retained interests being less of ground leases – the novation of financeable, sub-
They wanted to be owner of a diversified tower than 50%. The operator shareholder has minority leasable terms. We had already put in place controls
company and exploit the favourable relative shareholder rights with no access to competitor over the financial impact of those negotiations on
multiple arbitrage that can see tower company information. Operators are fiercely competitive the transaction. And of course we had to confirm
valuations at fifteen times EBITDA. and only share as a matter of necessity, so the building, environmental and civil aviation permits,
independence of the tower company is sacrosanct. which is always a condition of purchase for Helios.
On the other hand, some operators resist minority
stakes. Some are less motivated by long term If you look at the tower swaps operators do, they The second challenge concerns due diligence and
monetization than by the need for cash to fund are usually just one-for-one barter exchanges, assessing the quality of what we’re buying. During
immediate rollouts. where they often don’t even share power and have due diligence we are given access to a sample
no Service Level Agreements (SLAs) – they’re very of sites to determine the quality of assets, but
Chuck Green’s ‘Curve of indifference’ cautious. Understandably, operators don’t want inevitably there is a certain amount of risk that you
competitors having control over their network. can only quantify once you own all the sites and
can complete engineering site surveys. We can then
Price per tower

The Service Level Agreements between independent remediate sites to be structurally sound and stand
tower companies and their customers are tough. up to our Health & Safety requirements, to meet the
We’re required to deliver better quality of service, requirements of the SLA, and to be ready for co-
and that is our core business. locations. All those investments have to be built into
the capital economics of transition.
TowerXchange: As pioneers leading the way into
Africa’s first sale and leaseback transaction, While the towers we acquired in Ghana were a
what were the key lessons learned you took from pretty good portfolio and had been well maintained,
the experience in Ghana, particularly in terms of they weren’t all in the condition we would need to
the transfer of assets post-deal close? run for multiple operators.

Rental rate Chuck Green, CEO, Helios Towers Africa: My The transition of assets we’re talking about here
experience in tower acquisitions around the accounts for the period between the announcement

www.towerxchange.com | TowerXchange Issue 1 | 19

of signing and the actual initial close. In Ghana, we Flashback - How Mikael Grahne, CEO of Millicom International Cellular SA, described
closed more than the contractual minimum number the value created through infrastructure sharing in their 2010 annual report
of sites at initial closing, novating leases over the
subsequent 12-18 months, to complete the seamless
“In 2010, we made significant progress in the area of asset optimization and network efficiency, having
transition of ownership from Millicom to Helios
come to the conclusion that owning passive infrastructure no longer confers a competitive advantage
Towers Africa.
and that it makes sense, where possible to share tower networks with other operators with similar
coverage to ours.
TowerXchange: Interesting – so thinking back
to before the deal closed, or indeed before any
In 2010 we signed tower deals with Helios Towers Africa in Ghana, Tanzania and DRC through which
infrastructure sharing deal closes, how do the
we have committed to sell the majority of our towers to a Helios subsidiary company in each of these
buyers and sellers agree on who carries the risk
countries. We now have almost 2,500 or two thirds of our towers in Africa committed to be outsourced
revealed during transition?
which enables us to focus our efforts on areas of real differentiation from our competitors, namely:
sales, marketing, branding, distribution, service innovation and customer care.
Chuck Green, CEO, Helios Towers Africa:
Competitive tension generally determines the risk
We believe that the value created from these deals exceeds $400 million through
sharing dynamics of any transaction.
a combination of more than $180 million of cash to be received for the sale of the towers, the 40% stake
that we have in each tower company, expected future cost savings and significantly reduced capex for
A lot of the asset risk depends on the sample of
towers in the three countries. In 2011 we expect that these transactions will produce an additional
towers we evaluate. We often take bigger samples
percentage point of EBITDA in Africa, which could be reinvested in sales and marketing.”
than proposed by the seller, evaluating 10% or
more of the sites. We try to pick the sites and cover
a variety of different regions, but sellers offer few reps and warranties so due diligence is key to certain terms than Helios. For example, overly

“
mitigating, or at least taking calculated, risks. generous termination clauses destroy value; a 90-
day cancellation clause turns it from a 10-12 year
Ultimately, the seller expects a fairly standard deal into a three month deal, which kills the value
I feel the biggest risk is not set of terms to be agreed, relatively few of which for the tower company, even if there are penalties
in the tower portfolio itself,
but in potential deviation in
transaction terms from the
proven independent tower
company business model that
“ are subject to significant negotiation. The auction
process gets prospective buyers to compete and
improve upon negotiable terms.

I feel the biggest risk is not in the tower portfolio

itself, but in potential deviation in transaction
involved. There are better steps operators can take
to retain flexibility and control.

TowerXchange: How reliable and extensive is

grid power in Ghana?

creates value for all parties terms from the proven independent tower company Chuck Green, CEO, Helios Towers Africa: Grid
business model that creates value for all parties. power is available for 18 to 20 hours per day on
Some of our competitors are more relaxed about average across Ghana, and is of variable quality.

20 | TowerXchange Issue 1 | www.towerxchange.com

 “
This of course can have a huge impact on network tenant rental rate agreed was below Millicom’s
availability (uptime) unless you have adequate all-in opex cost so they secured an immediate
reserves in terms of backup generators and In each of the transactions improvement in cost structure. They also reduced
batteries.

TowerXchange: Is the involvement of a towerco

good news or bad news for energy service
companies and equipment manufacturers?
Infrastructure sharing deals may result in an
with Millicom the anchor
tenant rental rate agreed
was below Millicom’s all-in
opex cost so they secured an
immediate improvement in
“ uncertainty about their future tower operating cost
structure, don’t have to worry about the vagaries
of fuel theft and maintenance costs, and can focus
on their core business. Helios is incentivized to
invest in the reduction of power consumption, for
example by installing Remote Monitoring Systems
incentive, or indeed a requirement, to invest in and using deep cycle batteries, and solar in some
cost structure
generator and battery upgrades et cetera, but instances, as alternatives to diesel power. We’re also
towercos are canny buyers with a reputation for reducing the carbon footprint, so there is a positive
driving a tough deal… Committee that includes members of the Board. It’s environmental impact.
a disciplined process with lots of internal controls,
Chuck Green, CEO, Helios Towers Africa: For energy and that drives a highly competitive spirit in Currently, we are making a $40-50m investment in
service companies and equipment manufacturers, negotiations with suppliers. Remote Monitoring Systems and deep cycle batteries
this is an opportunity. There is often deferred across our three existing markets. We install remote
maintenance leading up to an asset transfer, but it’s TowerXchange: Does the involvement of a monitoring systems to track site conditions, such
mainly an opportunity because operators had been towerco necessarily mean a consolidation of as access, fuel delivery, generator run time, utility
running sites for a single power user, whilst tower suppliers? availability, etc. This generates efficiencies in
companies are designed to load more tenants. That controlling the fuel supply chain. We’re replacing
means generators need to be enhanced, resized and Chuck Green, CEO, Helios Towers Africa: Not always. station batteries with deep cycle batteries so we can
upgraded. We’ve also invested in technologies such We want multiple suppliers, sometimes regionally get more hours of battery support, reduce generator
as deep cycle batteries that reduce generator run focused, driven to operate sites economically. run time and reduce the risk of downtime. Such a
time and associated fuel costs. Ultimately it’s important that we don’t squeeze our strategy makes sense only where we are managing
suppliers so hard they can’t stay in business! We’re DC power, so that is an important consideration for
Our SLAs are very strict; we can afford little simply looking for business partners who can help tower companies and sellers to agree.
downtime and few faults that require material time us achieve those strict SLAs at a competitive cost.
to deal with, yet we need to drive down opex. As TowerXchange: Is Ghana an urban fill-in driven
such, I have to agree that tower companies must be TowerXchange: Can you share any success stories play, or a rural network extension focused
canny buyers. We’ll tender maintenance contracts in terms of the opex savings Millicom realized in market?
annually or bi-annually to be sure we’re getting a Ghana?
competitive cost structure, and of course we’re able Chuck Green, CEO, Helios Towers Africa: Ghana
to order in bulk. At Helios we have a centralised Chuck Green, CEO, Helios Towers Africa: In each follows a fairly usual pattern: there are still
procurement process, and a Procurement of the transactions with Millicom the anchor deficiencies in 2G voice coverage, and there has

www.towerxchange.com | TowerXchange Issue 1 | 21

been an initial deployment of 3G in urban centres. Estimated number of towers owned and managed by independent tower
There has been activity to extend rural coverage,
companies in Ghana
albeit modest to date.

General coverage is still a big issue in Ghana. There 500

were lots of co-locations after the tower companies
entered the market in 2010-11, but few builds. The ATC Ghana
network planning priorities were largely motivated
697 Helios Towers Ghana
by coverage, with some 3G rollouts.

TowerXchange: To what extent is capacity a 1,908 Eaton Towers Ghana

concern?
IHS Africa
Chuck Green, CEO, Helios Towers Africa: Operators’ 700
SWAP Technologies
concerns about capacity are accentuated when
regulators and ministers complain about quality
750
of service! With capacity for data, and even for
2G voice, restricted, regulators are increasingly
applying quality of service assessments across
Africa. There will always be pressure from coverage requirements within operators’ licences, companies have played to benefit of sellers. But
regulators to push forward with the expanded and to improve quality of service generally, which we’re happy with our investments in Africa, and

“
means operators will need more in-fill sites for 2G, we’re achieving our objectives.
let alone 3G and, eventually, 4G LTE.
The proliferation of tower companies may not be
The larger markets can probably
The continuing growth of voice and data traffic puts sustainable over time. There are only so many
tolerate two tower companies a strain on networks, which needs to be improved tower companies can operate in any given market.
but three is not ideal. Having
said that… we have the market
share we targeted and we’ve
already had a reasonably decent
lease up experience but we never
expected to be the only player in
“ and expanded. Towercos are there to preserve
capital, expand networks and satisfy quality of
service requirements without burdening the
balance sheets of operators.

TowerXchange: Are towercos paying a premium

TowerXchange: Based on your experiences in
Ghana, would it be difficult for many individual
markets to sustain more than two towercos?

Chuck Green, CEO, Helios Towers Africa: The larger

Ghana for first mover advantage in Africa? markets can probably tolerate two tower companies
Chuck Green, CEO, Helios Towers Africa: The but three is not ideal.
strategic interests of four competing tower

22 | TowerXchange Issue 1 | www.towerxchange.com

 Elmina, Ghana

Having said that, demand in Ghana has been only occurs when an operator wants to locate on a a self-adjusting governance: if independent tower
significant enough to spread among three towercos site right next to another tower company’s tower. companies charge too much for the co-location lease
with different footprints. We have the market share Operators have a specific rollout plan, and generally rate, operators would build rather than co-locating.
we targeted and we’ve already had a reasonably whoever has the optimum site they need gets the
decent lease up experience but we never expected tenancy. TowerXchange: So having three towercos active
to be the only player in Ghana. in Ghana slightly moderates upside, lowering the
Rollout demand from Airtel, Vodafone and to glass ceiling on the achievable tenancy ratio?
The independent tower company model lends itself a certain extent MTN has been almost entirely
to a common set of terms and pricing assumptions. satisfied to date by sharing with tower companies Chuck Green, CEO, Helios Towers Africa: The
We don’t have that much flexibility on price, and we in Ghana. Over the last 30 months or so there have achievable tenancy ratio might be 0.1-0.2 lower, but
haven’t experienced predatory pricing despite three been very few builds, apart from Glo. Operators will it’s not of a huge magnitude, especially given the
towercos being in Ghana. There’s only a 30-40% generally favour the sharing or co-location option required densification needed by the data demand
overlap in footprints at outset, so direct competition before they build – furthermore, the market has associated with 3G, and subsequently LTE

www.towerxchange.com | TowerXchange Issue 1 | 23

Best of both worlds?
TowerXchange: Thanks for taking the time to
speak to us Tony. First of all, please could you tell
us a little about your background and the how
your experiences at Vodafone Ghana motivated
How Vodafone Ghana secured investment in their legacy you to agree this landmark tower sharing deal?
infrastructure, reduced opex AND kept their towers through an
operational lease deal Tony Dolton, Vodafone: I’ve been involved in tower
sharing on both the buy-side and sell-side for many
years. I was first involved when I was Director for
TowerXchange had an opportunity to
EMEA Managed Services at Motorola, where we
interview Tony Dolton, CTO of Vodafone were trying to buy towers and get involved in tower
Egypt, who was CTO of Vodafone Ghana from sharing. I was subsequently involved in putting
Vodafone’s acquisition of the Ghana Telecom together the Orange-Vodafone towerco in 2007,
in 2008 through July 2011. Vodafone Ghana’s which was probably a case of too much too early.
operational lease deal with Eaton Towers was We completed the deal with Eaton Towers in Ghana,
Tony’s brainchild. and are considering how a tower deal in Egypt
might work. So I have a reasonable view on the
expectations and objectives of tower sharing from
Keywords: Structuring an Operational Lease, both the vendor and operator perspective, and on
both counts I consider Ghana a success.
Legacy Towers, Rental Rates, Transfer of Assets,
Cost Reduction, Fuel Security, Risk, Infrastructure
Vodafone bought Ghana Telecom in 2008, and
Sharing, Africa, Ghana, Egypt, Vodafone, Eaton
there was very limited tower sharing at that time.
Towers, Helios, American Tower, MTN Vodafone’s priority was to expand and clean up a
Tony Dalton, CTO, Vodafone Egypt (CTO Ghana 2008-11)
poor quality network – it needed investment and we
needed to reduce costs. A limited tower sharing deal
with MTN was agreed pretty quickly that helped
Read this article to learn:
with rapid network expansion but did not address
< How infrastructure sharing secures investment in legacy towers
the legacy costs issue. We needed to reduce cost of
< Why Vodafone Ghana decided on an operational lease deal structure
both network delivery and operations, so we issued
< How to transfer risk to an independent tower company an RFQ to several Tower Companies including
< How Vodafone Ghana and Eaton reduced opex by using more efficient generators and improving American Tower, Helios and Venture Towers (later
fuel security acquired by Eaton). None of the initial bids met
< Potential infrastructure sharing strategies for Egypt our objectives – at the time the TowerCo business
cases were focused on build or buy, with a 10-15

24 | TowerXchange Issue 1 | www.towerxchange.com

year payback and I felt the opex levels being offered took a huge amount of complexity out of the deal, formula.
were unacceptable to our long term business in (site valuations etc were removed) and opex was
Ghana. secured. At that time our focus was infrastructure The TowerCo invested to make towers more
efficiency and reducing our operating costs. Of efficient, and were motivated and better positioned
Our legacy towers were generally in poor condition course the option to sell the towers at a later date is to increase the third party tenant rate – in fact,
and very expensive to run. We knew that opex still available if circumstances change. we structured the deal such that we believed the
could be reduced by making the sites more efficient, TowerCo could only make a profit if they achieved
through using more efficient generators and by I believe it was a good deal for the tower company efficiencies and co-locations.
tightening up on fuel security. So we wanted to as well since whilst they did not own the asset they
create a model where a TowerCo would invest to did have a long right to use contract, and they didn’t The deal took a long time to agree as Tower
make the sites more efficient and thus reduce the have to fund the cost of acquiring the towers, so Companies were used to realizing value by buying
operational cost of running the site whilst at the they weren’t saddled with that debt. They got the towers. It took time to understand each other’s
same time make the sites more attractive to other contract, which is a valuable asset in it’s own right. needs, and to agree various safeguards suitable for
operators to share with us – creating a revenue both sides.
stream, which effectively could be seen as a further TowerXchange: Structuring tower sharing
cost reduction in operating the site. So we came contracts isn’t just about financials, but is TowerXchange: Why did an operational lease
up with a different deal structure: an operational also about transfer of risk – tell us who had suit Vodafone Ghana’s objectives better than say
lease with the “right to use” the towers for a responsibility for what. a sale and leaseback or Indus-style joint venture
period of time; a requirement to invest to generate
efficiencies; and by selling space to other tenants, Tony Dolton, Vodafone: We had to do something Tony Dolton, Vodafone: Every tower deal is
creating the revenue stream. about opex – among other things we had a problem different, depending on what is motivating the
with diesel theft. Working with the TowerCo, we deal. Sale and leaseback deals do not always end
We ended up agreeing a deal with Eaton Towers, only pay for diesel actually consumed, so passing on
although the final selection was very close. The deal responsibility and risk to the TowerCo for the site Eaton’s verdict on their operational lease
meant a lump sum cash payment was invested to monitoring and security. deal with Vodafone Ghana
upgrade the legacy towers, and for us an immediate
opex reduction of over 30%. The TowerCo made The TowerCo also has responsibility to upgrade the “A deal structure which allows the operator to
money by firstly reducing the operation cost of passive elements such as DC and AC power, battery retain ownership of their towers, gets around
running the site and secondly by selling the space and generator replacements through the life of the many complexities that a tower sale deal
on the site. contract. We included suitable break clauses in presents, and is the best way for operators to
contract in the event of new technology that would reduce opex significantly and immediately, as
TowerXchange: What were the advantages of the make a significant reduction in opex; in addition we well as escape the capex requirements for site
operational lease model you chose? had contract break points where the fees would be refurbishment, and new roll out” – Keith Boyd,
benchmarked across Africa and adjusted downward Business Development Director, Eaton Towers
Tony Dolton, Vodafone: We kept the asset which in the case where fees were reducing, according to a

www.towerxchange.com | TowerXchange Issue 1 | 25

up in a reduction of opex as the TowerCos have the local team can perform very well. TowerXchange: Are there any transferable
got to pay back the cost of borrowing to make the lessons from your experiences in Ghana to other
acquisition. I would rather they used their cash to TowerXchange: Tell us a bit about the transfer of countries in Africa?
invest and make the network more efficient. From assets to the TowerCo.
the TowerCo’s point of view, the sale and leaseback Tony Dolton, Vodafone: Every market is different.
business case is based on borrowing money to buy Tony Dolton, Vodafone: The greatest challenge in In Egypt we have three operators with similar
towers for which they control recurring revenue. any Tower deal is the transfer of sites – ensuring networks, and I believe it would be difficult to make
The way TowerCos create value is in selling the you’re giving them what you say you’re giving a traditional TowerCo business case without some
space and reducing operating costs. them. In Ghana, we did a snapshot audit, which was sort of network consolidation so for a TowerCo
easier since we owned the sites. We handed over model to work in a country like Egypt we probably
I feel that if you want cash then a high priced sale about 100 sites per month, and had built another have to have a slightly different model than the
and leaseback deal is effectively a financial deal. 1,000 sites by the time the deal was done, a mixture traditional one.
Your opex doesn’t go down, and once the assets are of brand new and original very old fixed network
sold you may find yourself in a weaker negotiating sites. It was important to have a good governance I think when looking at taking advantage of a
position. process, controlled through regular meetings. tower opportunity, it is important to establish
what you’re trying to achieve – return of cash to
The operational lease deal structure worked well TowerXchange: Is infrastructure sharing the business is great or often necessary in in the
for us in the circumstances we were in and I would working in Ghana? Is it a good or a bad thing that right environment, but if you can reduce your
certainly consider it again if it was the right thing to the three leading operators each worked with requirement for short term cash, it might be better
do for the business. different TowerCos? to structure a deal more likely to give a reduced
opex, such as the deal we completed in Ghana – and
TowerXchange: To what extent was it part of Tony Dolton, Vodafone: On the whole competing lower opex is always beneficial to the long term
your motivation in working with the TowerCo to operators don’t work well together, so I’m not business
secure specialist skills and people to look after greatly surprised that three of the OpCos’s ended up
passive infrastructure? working with different TowerCos. I am surprised Egypt market overview
however that there are three incumbent TowerCos
Tony Dolton, Vodafone: A CTO has many areas to in Ghana chasing six operators, two of which are
Population: 82.5m
manage whereas a TowerCo’s entire focus is on new. I would have expected to have two Tower
Mobile subscribers: 83.4m
delivering a cost effective site, so I believe there Companies for the size of business in Ghana, but it
Mobile penetration: 101%
are good synergies and benefits for OpCos to work seems each of the three are doing well.
GDP per capita (PPP current USD): $6,324
with Tower Companies. The TowerCos still use local
Internet users per 100: 35.6
skills and suppliers to deliver their product, and If a TowerCo pays too much for towers and do not
often the Operator will outsource the local team to achieve good co-locations and a reduction in opex,
(Source: World Bank, 2011)
the Tower Company. There was a lack of expertise they could lose money. So Ghana is still probably a
initially Ghana, but with the right focus and training challenging environment.

26 | TowerXchange Issue 1 | www.towerxchange.com

Special feature:

Introduction to
infrastructure
sharing in
Africa
There are approximately 170,000 telecom
towers in Africa today. In order to meet
growing demand for capacity and coverage,
up to 300,000 towers may be needed.
Independent tower companies can meet
much of that requirement, attracting an
estimated $15bn of capital investment into
Africa’s communications infrastructure in
the process.

Four introductory articles explain:

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

www.towerxchange.com | TowerXchange Issue 1 | 27

 “
Why share ?
Initial resistance to
Africa’s towers? infrastructure sharing “
has gone over the last
three years

The sale and leaseback of towers to specialist

independent tower companies is not a new
phenomenon of course – it’s a widespread practice
in Europe, the US and India, but the volume of
infrastructure sharing transactions in Africa is
increasing.

TowerXchange spoke to Keith Boyd, who in

2002 co-founded and served as CEO of Venture
Communications, one of the pioneers of African
telecommunications infrastructure. Keith is now
Business Development Director at Eaton Towers,
with whom Venture Communications merged
in 2008. Keith explained “initial resistance to
infrastructure sharing has gone over the last three
years. Previously operators were all building their
Tower portfolios represent long term, recurring Infrastructure sharing is like building a big house own networks, trying to outspend each other, with
cost to operators. A cost they’d like to stabilise and in a prime location then appointing a real estate two or more towers on the same hill. That was the
minimise. If acquired by an independent towerco, firm to divide it into several apartments. You keep case when coverage was king - the big operators had
those same towers represent long-term recurring the penthouse for yourself, and then that real estate better access to cash, and could outspend the smaller
revenue, supplemented by lease revenue from co- firm leases out the apartments to multiple tenants, operators.” With ARPU declining,  fierce tariff wars
locating tenants who can spread out and further creating far more value than if you just rattled about and increasing data demands putting pressure on
reduce operational costs across. in that big house on your own. network capacity and EBITDA margins, a new era of

28 | TowerXchange Issue 1 | www.towerxchange.com

Africa’s biggest infrastructure sharing transactions to date

Publicly stated
Year Operator Country TowerCo Est. # of towers Deal structure
purchase price

2010 Millicom / Tigo Ghana Helios 750 $54m for 60% Joint venture
2010 Vodafone Ghana Eaton 750 Not applicable Operational lease
2010 Cell C South Africa American 1,400* $430m Sale and leaseback
2010 MTN Ghana American 1,876 $218.5m for 51% Joint venture
2010 Starcomms Nigeria SWAP 407 $81m Sale and leaseback
2010 Millicom / Tigo DRC Helios 729 $45m for 60% Joint venture
2011 Millicom / Tigo Tanzania Helios 1,020 $80m for 60% Joint venture
2011 MTN Uganda American 1,000 $89m for 51% Joint venture
2012 Orange Uganda Eaton 300 Unknown Sale and leaseback
2012 Warid Uganda Eaton 400 Unknown Sale and leaseback
2012 MTN Cameroon IHS Africa 827 $143m Sale and leaseback
2012 MTN Cote d’Ivoire IHS Africa 931 $141m Sale and leaseback
*Cell C deal included 1,400 existing towers plus up to a further 1,800 under construction

efficiency-focused network strategy has begun,  and

a wide variety of different tower sharing deals, Comparisons between infrastructure sharing transactions
each shaped to specific market objectives, are being
announced regularly. “Every tower valuation is different due to the differences between jurisdictions – there can be no
standard read across of value per tower for example, a KPI which is often quoted,” says Rhys Phillip,
Boyd continues: “Eaton Towers have bought towers Partner and Head of Transaction Advisory Services for Telecoms at Ernst & Young. It’s necessary to
from Orange and Warid in Uganda, and we’ve got consider the rental rate and term of the lease, as well as the capital released, among a number of
a ten year operating lease with Vodafone Ghana. In different factors. “Differences in transactions are driven by the legal, tax and regulatory regime in
Ghana we don’t own the towers, but we invest in and the jurisdiction, the motivation of the operator in selling, the competitive characteristics of the local
maintain them. In South Africa, we are rolling out market and the funding of the towerco,” concludes Ernst & Young’s Phillip.
our own towers, and have seen very good uptake of
co-location slots on these, as operators densify their
Our introduction to infrastructure sharing continues on page 48
networks in urban areas”

www.towerxchange.com | TowerXchange Issue 1 | 29

How to guide:

Shareability
TowerXchange pulls back the curtain
to reveal how tower portfolios are
evaluated from an engineering,
commercial and financial
perspective. Whether you’re buying,
selling or building towers, this
feature explains how to maximize the
capital value of your assets.

Three expert interviews:

32 Ganges International on driving down
the cost of multi-tenant towers
34 Ramboll on ‘Design for Shareability’
37 What are my towers worth?
Mott MacDonald on due diligence

30 | TowerXchange Issue 1 | www.towerxchange.com

How do you put a $value ?
Shareability
on telecom infrastructure as a service

assets? Shareability isn’t just a function of the

technical and financial potential of a site
Towers + tenancies + turnover... its’s a complex formula! – service matters; specifically, the timeline
between requesting a tenancy and the
TowerXchange spoke to a senior representative of undertaken evaluations for American Tower and first day you generate revenue. A recently
the TMT team at Standard Chartered Bank, from Eaton Towers in Africa. “It’s critical to evaluate what
launched network complained “although we
whom many of the infrastructure sharing RFPs proportion of the tower portfolio are genuinely
were able to agree bulk tower sharing deals
originate. shareable; location, structural integrity, and to get
to our advance 5 year plan, securing a couple
a sense of the subscribers per point of service and
He told us, “the valuation derives not just from the demand forecasts,” says Andrew Doyle, Managing of thousand sites, tower sharing didn’t really
number of towers, but tenancies, location, capacity Director of the technology & communications accelerate our time to market – some co-
and potential for revenue contribution. Investment practice at Mott MacDonald. locations took 24 to 30 months to agree with
banks use proprietary models to figure out these the operators! However independent towercos
metrics, looking across the technical, financial, and By way of a cautionary tale, TowerXchange spoke to like American Tower and Eaton were up and
strategic angles. Valuation models vary dramatically. a consultant with extensive experience of African running much faster.”
It goes far beyond the asset-based perspective, which telecommunications infrastructure, who said: “I
is just the metal and real estate, to the potential of a know of one instance where the operator sold assets
TowerXchange understands that American
site to generate revenue and profit.” to a towerco, and that towerco targeted a tenancy
Tower measures the cycle time between a
ratio of 2.3 to be successful. However, less than half
TowerXchange has mirrored Standard Chartered’s the towers in the portfolio were shareable as they tower request and the first day the tenant
methodology, asking Ramboll and Ganges were overloaded, poorly constructed, or just in a sub- earns revenue. ATC say they can get a new
Internationale, two of the world’s foremost tower optimum location. There wasn’t capacity for three to tenant up and running in a month. It’s a simple
design companies, for their perspective on the four tenants on the remaining premium shareable case of working closely with their customers
technical evaluation of multi-tenancy towers. sites, so the 2.3 tenancy ratio target was very and ensuring that everything is there and is
We’ve followed Standard Chartered’s roadmap challenging!” However, it is possible to strengthen ready when a new tenant arrives with their
to subsequently take a look at the financial and legacy towers to boost capacity and realize aggressive equipment vendor.
strategic evaluation of tower portfolios, drawing tenancy rations, as Ramboll and Ganges explain in
on the experience of Mott MacDonald, who have the next articles

www.towerxchange.com | TowerXchange Issue 1 | 31

Driving down the cost ? TowerXchange: What are the critical design
factors in the shareability of a tower?

of multi-tenant towers
Bhaskar Babu, Marketing Head – Exports, Ganges
International: Operators should plan for 3 tenants
on each tower, although there are up to four or five
TowerXchange spoke to Ganges Internationale to get some advice tenants on some towers in some countries where
there are more operators and in big populated cities
how to build, buy and upgrade towers for multiple tenants. like Nairobi, Lagos or Dar es Salaam.

Ganges Internationale is a ‘Total Solutions A multi-tenant tower doesn’t have to cost much
Provider’, specialising in all the capex elements more than a single tenant tower. The land costs the
of telecoms infrastructure: from the design and same, maintenance and power costs don’t increase
supply of towers, to building foundations and much. Most of the equipment is the same. The tower
installing tower, antennas, shelter, electrical and might be slightly higher, but we’re talking about
other equipment. less than 20%; it’s just a modest increase in the
weight of steel and in the cost of the foundation. A
Ganges sold over 3,000 towers in Africa between forty to fifty metre tower can be shared, even lower
2007 and 2012 and have over 30,000 installed in heights. Height is rarely a problem for signalizing,
more than 14 countries on the continent. Clients unless you’re using microwave antennas for the
include Airtel, Vodafone, Huawei (MTN), Orange, backbone network, particularly in hilly terrain.
Keywords: Investing in Multi-Tenant Towers,
Helios, Eaton, Ramboll and Safaricom. In Africa Antenna brackets can sometimes accommodate
Loading, Strengthening, Tenancy Ratios, Cost
they work with partners such as Plessey, QTE and two or three antennas (Dual/Triple GSM brackets)
Reduction, Outdoor Equipment, Rental Rates, or even with circular platforms where up to 12
Reime to deliver towers and other equipment for
Shareability, Infrastructure Sharing, Africa, GSM antennas can be fixed at single height for four
Total construction.
Ganges, Airtel operators. Backhaul and the site network are bigger
considerations when it comes to shareability since
operators need to use bigger microwave antennas.
Read this article to learn: However, the lack of standards for loading in many
< How many tenants you should design new towers to accommodate African countries remains a challenge. There’s also
< The cost of single versus multi-tenant towers a lack of people with the technical skills to evaluate
< How to strengthen legacy towers for multiple tenants designs and the cost of offerings; network suppliers
< How Airtel rolled out towers costing 40% less than their competitors often don’t know the micro-level costs, although
< An insight into tenancy ratios and rental rates in Africa Vodafone and Airtel have excellent technical teams
to evaluate towers and foundations. For example,

32 | TowerXchange Issue 1 | www.towerxchange.com

Airtel has rolled out towers costing 40% less than sharing companies and are the largest supplier the future. We do a lot of work to help towercos
those of MTN, Etisalat and Glo in Nigeria. to ATC. Also we get more work in legacy tower strengthen legacy towers they’ve acquired –
strengthening, which is good for the industry in the strengthening foundations, upgrading shelters and
TowerXchange: What can operators and long term. diesel generators.
towercos do to reduce the total cost of cell sites?
However, not all towercos are profitable. In India, With towercos seeking long-term contracts with
Bhaskar Babu, Marketing Head – Exports, Ganges only Infratel and Indus are making good profits. The operator tenants, it’s important that they choose
International: When such a high proportion of the minimum cost savings and lease up rates to break contractors with the credentials to be around
total cost of the site can come from equipment such even are not being achieved by other towercos in for 20 years and more. It can be a problem if a
as shelters and air conditioning units, operators India. In Africa tower tenancy ratios may need to tower supplier vanishes – you might lose designs
should consider the benefits of buying class A be even higher because opex is so high. African and drawings. If you don’t have the drawings, as
equipment directly from manufacturers – when towercos’ 20-25 year contracts and high rentals happened to American Tower in Ghana, then the
they buy through contractors, they can be subject to for expensive new sites may mean they struggle to new vendor has to measure every component of
markups of 20-30%. Airtel reduce costs by buying quickly attract additional operators tenancies and the site and do lots of re-engineering. It can be very
direct from vendors, and give those materials to achieve profitability from day one. costly.
their contractors. Airtel gets the lowest prices due
to product standardisation and buying in bulk for Airtel conducted a study into whether to build We design future-ready towers, with shared
many countries on a long-term contract basis. new towers, and saw ROI in less than three to four drawings and common dimensions. For example,
years if they built their own towers, giving them we can upgrade a two operator tower to suit three
You can also reduce operating costs by using less the potential to offer lower rental rates to tenants co-locations by sending just twenty parts, essentially
indoor equipment. Using outdoor BTS equipment in the future. Towercos need to offer lower rates to increasing thickness, while other dimensions
that operates at ambient temperatures means the operators so that operators can take up more sites. remain the same. Operators and towercos should
shelter capacity and air conditioning load comes Most legacy towers are not designed for sharing keep the future in mind and standardise the towers
down, and you don’t need so many lengthy cables. hence towercos are not interested in crowding the in their network; having 20-30 different tower
towers and reducing the rentals. designs in network makes it much more difficult to

“
TowerXchange: Is the transfer of tower make changes such as moving towers to new sites
ownership from operator to towerco good news
from your perspective?

Bhaskar Babu, Marketing Head – Exports, Ganges

International: Some tower manufacturers dislike
these deals because volumes go down – where once
TowerXchange: What are the different
requirements when selling to a towerco
compared to an operator?

Bhaskar Babu, Marketing Head – Exports, Ganges

International: The structures ordered by towercos
We can upgrade a two operator
tower to suit three co-locations
“
three towers were built, now it’s only one shared should be of greater loading capacity with space by sending just 20 parts
tower. But for professional companies like us, it’s for 3 to 4 operators, and also to have flexibility to
not such a threat. We’ve upgraded our designs for upgrade to higher loading with minor charges in

www.towerxchange.com | TowerXchange Issue 1 | 33

Design for shareability ?
passive infrastructure fits uniquely with Ramboll’s
products and services, where especially Ramboll’s
expertise in tower loading validation, strengthening,
and design and supply of towers have remarkable
How to evaluate the design, foundations, and loading of towers references.
to determine current capacity and required strengthening to add
additional tenants Ramboll is preferred supplier to Huawei in Eastern
& Southern Africa and in Western Africa as well.
Furthermore, Ramboll is approved supplier to NSN,
ZTE, and Ericsson. Ramboll also work directly with
Keywords: Investing in Multi-Tenant Towers,
towercos like Bharti Infratel, Indus, ATC, IHS, Helios
Loading, Valuation, Safety, Strengthening,
and with operators like Airtel, Vodafone, and MTN.
Foundations, Drawings, Shareability, India, In 2011 alone, Airtel bought almost 3000 Ramboll
Infrastructure Sharing, Africa, Ramboll Towers for Africa.

Ramboll Group is the biggest consulting Previously, Torsten led Ramboll’s successful entry
engineering company in Northern Europe, with into the Indian tower market where Ramboll today
over 10,000 employees based in 200 offices across enjoy an estimated 70% market share. In addition
23 countries. Their expertise in designing and to Ramboll’s success in tower supplies, Ramboll
evaluating towers is unrivalled. has invaluable experience and references working
closely with customers like ATC and Indus, where
Torsten Esbjørn came to Johannesburg in 2011 to in 21 months more than 30,000 sites where audited
position and market Ramboll’s products and services and analysed and more than 8,300 strengthening
to the increasingly interesting African Telecom solutions given.
market. The change from an operator-owned to an
Torsten Esbjørn, Ramboll independent tower company based industry for TowerXchange: How do operators and towercos
balance investing in space for potential multi
tenancy with minimizing cost when ordering
Read this article to learn:
new tower designs?
< How to find hidden capacity in over-engineered towers
< How to conduct a thorough evaluation of tower foundations Torsten Esbjørn, Regional Director, Africa, Ramboll:
< When to reverse engineer lost data and drawings We find that people need help with evaluating the
< Why standardising your range of towers increases flexibility technical options when deciding on a design for
< A comparison of infrastructure sharing in India and Africa the rollout: do you invest in a tower that takes two,
three or four tenants, given that there can be no

34 | TowerXchange Issue 1 | www.towerxchange.com

 “
installed for one, two or more tenants? How many got a complete picture of the foundation and that
square meters of loading did the designer say it affects safety and load capacity.
Do you invest in a tower
that takes two, three or four
tenants, given that there can
be no guarantees of future
“ could take, and how many can it take in practice?
The documentation might say it can take 10
square meters, but if you recalculate using today’s
expertise you might find it can take 13 square
meters. That could mean capacity for another
tenant – that is 50% more lease revenue if you can
These Tower Load Valuation Activities can ensure
that towercos don’t overpay, and that operators get
full value.

TowerXchange: how can operators and towercos

tenants? increase tenancy from two to three. A proper tower add value to their legacy towers?
load valuation will help find the hidden capacity
in over-engineered towers, identifying potential Torsten Esbjørn, Regional Director, Africa, Ramboll:
guarantees of future tenants, and what options is for upgrades with a minimum of investment might You can strengthen towers and rearrange antennas
there to change a two tenant design to something increase capacity from two to three tenants. Our to add value to the asset by increasing shareability,
else once it has been deployed? There is always a experience in India has shown that approximately thereby creating more revenue potential.
risk of being over-optimistic. 30% of all sites can be strengthened – that is a
significant revenue stream hidden in existing assets You might have lost all data and drawings for a
TowerXchange: How do buyers and sellers of that can be unlocked by a minimum investment. tower, so you need to reverse engineer and measure
towers evaluate ‘shareability’? everything to work out how much wind loading
On the other hand, some towers might be unsafe, the tower can handle. It’s important to use a
Torsten Esbjørn, Regional Director, Africa, Ramboll: for example overloaded or poorly designed or reputable company with proper insurance and risk
As well as evaluating the commercial potential installed. The documentation might say it can take assessment methodologies – use a company that
for co-locations (see the interview with Mott 10 square meters, but once analyzed it can only take can’t afford to get it wrong.
MacDonald on page 37), you must also evaluate 7 square meters. For example, we audited tens of
technical aspects – you should not just assume you thousands of sites for one towerco, and found that TowerXchange: Should African operators install
have a well designed, safe, and well-maintained 3,5% of towers were unsafe. The conclusion for such multi-tenant towers with a view to future tower
tower. sites may be that they have to be taken down or the sharing?
antenna load has to be reduced and/or rearranged.
If you want to hive off your towers, your first Safety has to be a priority. Torsten Esbjørn, Regional Director, Africa, Ramboll:
headache is to establish the data quality of your Most urban rollouts consist of multi-tenant towers,
tower assets base – some of the more incredulous A proper evaluation of the foundation considers but the rural situation is a completely different ball
challenges is that not all towers are where you the quality of the concrete, how it’s reinforced, game – so many variables make the choice of tower
thought they were, and in other cases the tower you the depth and dimensions of the excavation. I’ve extremely difficult. Most operators today have a
thought were there, is something else entirely. seen some companies verify foundations by simply clear sharing strategy in place.
drilling 3 holes. In such instances you’re only
You need to understand your legacy towers: was it certifying the grade of the concrete, you haven’t Standardise the range of towers in your network

www.towerxchange.com | TowerXchange Issue 1 | 35

if you can. If you need 13.5 square meters in one
region and 14.5 square meters in another, be wary Vodacom’s multi-tenant investment dilemma
of ordering completely different designs, which can
mean a higher cost and less future flexibility.

We’re seeing exactly the same strategies being

adopted across Africa that we saw in India:
operators increasingly sharing towers, the bulk of
new rollouts coming from independent towercos –
it’s the same discussion, and the same need to help
technical departments understand their legacy
assets.

TowerXchange: Having come from India

to Africa, how would you compare the
opportunities for infrastructure sharing in the
two regions?
Zulu Village, South Africa

Torsten Esbjørn, Regional Director, Africa, Ramboll: Pedro Rabacal, Network Officer, International at Vodacom succinctly summarises the investment
I’m not sure that infrastructure sharing will spread dilemma facing many operators as they consider whether to invest in shareability. “Do we
quite as swiftly in Africa as it did in India. There build cheaper, low capacity, single tenant towers, spreading our investment for a wider footprint?”
are so many borders, different regulations, and Asks Rabacal, “or do we invest two and a half to three times as much in multi-tenant sites with more
some countries have a low population density. expensive generators? And how do we balance that with the cost of installation in rural areas, areas
Some African countries will be very interesting for where we might need to be efficient enough to serve a $10 per week ARPU environment?”
infrastructure sharing, some not at all.
Should tower portfolios in Africa be built with sharing in mind? Warid’s network rollout was co-
However, the increasing number of infrastructure ordinated with Orange from the outset, yielding a solid tenancy ratio (and a good sale price) when the
sharing deals being agreed in Africa excites me. towers were sold to Eaton.
It’s great to see towers transition to specialists who
manage the towers as their core business. Ramboll But Uganda may be the exception rather than the rule. While operators may be building multi-tenant
are designers and engineers first and foremost, towers with a view to future capacity, particularly in urban areas with growing data traffic and higher
and our services are perfectly fitted to help with ARPUs, few network planners will commit additional capex without a clear indication of future
the transition of tower assets, from technical revenue streams. The revenue forecasts get increasingly difficult, and the installation and operational
evaluations and tower design, to software for asset costs increase, as one moves into rural areas increasingly beyond the reach of transport infrastructure.
management, rollouts and managed services

36 | TowerXchange Issue 1 | www.towerxchange.com

What are ? We spoke to Andrew Doyle, Managing Director of
Mott MacDonald’s technology and communications
practice and two of his principal consultants, Simon

my towers worth? Clayton-Mitchell and Dave Tanner, to learn more

about the art of evaluating tower portfolios…

How the experts conduct due diligence on tower portfolios to TowerXchange: Thank you for your time
evaluate potential investments gentlemen. Please could you tell us about the
different models required to undertake the due
diligence for infrastructure sharing projects.
Mott MacDonald’s technology and communication
business has extensive experience of providing
Mott MacDonald: We have a set of models,
due diligence and consulting services on benchmarks and forecasts which we use to predict
infrastructure sharing strategies – just one part lease up rates, revenues and costs. These will
of a comprehensive range of advisory services. typically feed directly into a financial due diligence
The consultancy has worked with some of the process. The data is combined into an analysis
leading players in the African tower sharing presented to secure finance for tower transactions.
market such as Eaton Towers and American Tower,
either working directly for or appointed by their Let’s start with our typical demand-side models,
which look at the current market structure. We
investors on particular transactions.
consider what assets the operators have, where
their towers are located, the amount of tower
Keywords: Investing in Multi-Tenant Towers, Rental Rates, sharing that has taken place to date, and the
Financial Due Diligence, Subscriber & Traffic Forecasts, drivers for growth. Often we’re able to talk to the
PoS Forecasts, Shareability, Infrastructure Sharing, Africa,
operators about their feel for where the network is
Mott MacDonald, Eaton Towers, American Tower
going. We evaluate current and future subscriber
numbers, traffic growth, new technologies, coverage
extensions, capacity, infill in towns, and based on
Read this article to learn:
these we forecast the required network architecture
< How demand side models are used to evaluate tower portfolios
investment over the next ten to fifteen years.
< How to evaluate site attractiveness
< How to evaluate a tower company’s addressable market We find that our forecasts vary significantly from
< How to analyse site location data across multiple operators country to country. We could be talking about
< Is infrastructure sharing in Africa a good investment? driving 2G to 95% coverage in one country while
introducing 4G in another.

www.towerxchange.com | TowerXchange Issue 1 | 37

 “
Once we’ve predicted capacity demand in a country, usually have the site location data on the portfolio
we translate that into forecasts for the number of being acquired, but it can be a challenge to get
sites and points of service needed. Ultimately that location information from other operators, although
We’re able to assess the towerco’s
enables us to assess the addressable market, and the
towerco’s prospective market share if they acquire
that portfolio. From this we are able to forecast the
potential lease up rate. And with a forecast of both
the number of potential new towers and points of
service that might be needed, we can predict the
addressable demand based on
the overlap between available
capacity at the locations they’re
acquiring, and where there’s
“ sometimes it can be derived from site maps or other
available data.

If we have this data, we’re able to conduct an

analysis of how far apart the towers are, the overlap
in networks, and this informs the modelling side
capital expenditure and operating expenditure demand for new sites of the due diligence. This enables us to get a sense
needed to maximise the shareability of the network. of whether the opportunity is an urban fill-in
play or more focused on rural network extension,
Alongside that, we benchmark to determine tenancies, to determine how that aligns with the for example. We’re able to assess the towerco’s
whether the proposed lease pricing is sensible, often locations and quality of towers in the portfolio for addressable demand based on the overlap between
seeking to at least match, and preferably improve sale. available capacity at the locations they’re acquiring,
upon, the revenues generated at existing sites. and where there’s demand for new sites.
We conduct physical site audits to evaluate the
Finally, we also evaluate risk from an operational quality of the site. Is it a big, well-constructed lattice TowerXchange: how do new technologies,
perspective. Are the buyers of the towers building a with space for additional kit, or is it a rusty old site whether 3G or in future 4G, factor into your
towerco in the way they need to? Have they got right that needs upgrading? Is there enough shelter and forecasts and models?
skills, processes and procedures in place? lease space for new cabinets and cabins? Is there
Depending on who we’re appointed by, we present room on the towers for additional antennas? We Mott MacDonald: Capacity for future 3G and 4G
these findings to the towerco to inform their look at transmission: the connections, reliability – is equipment of course creates additional demand.
business plans and negotiations, or to investors so there enough bandwidth available? Is there fibre? We have some interesting models to map potential
they can then make a decision on the financing of Is there enough power? Is it on grid? What’s the demand at each point of service by technology,
the deal. grid connection like – is there enough capacity? whether it’s 2G, current or future 3G or 4G. We are
Potential transmission and power problems tend able to predict the capacity the operators are going
TowerXchange: How do you evaluate the to be quite obvious, for example if 85% of sites are to need for each, and get a sense of the balance
shareability of the physical assets at a site, from using significant diesel generator run time, with the between macro cells, microcells, small cells, in-
the towers themselves to backhaul and power associated truck rolls and diesel costs, you know a building solutions and offload to Wi-Fi, giving us a
capacity? lot of investment might be required in the network. picture of how demand for traffic will be met.

Mott MacDonald: We evaluate “site attractiveness” We also try to take a geographic information system TowerXchange: What can you tell us about the
in our due diligence process – matching operators’ view of the world – where the towers are located increasing demand for points of service across
current and future demand for sites, or indeed compared to locations of other operators. We Africa?

38 | TowerXchange Issue 1 | www.towerxchange.com

 “ We feel that the first or
second towercos will
find a market, if they
strike relatively quickly
“
different infrastructure sharing transactions
you’re advised on, does infrastructure sharing
look like a no-brainer in Africa? Have they
looked like good investments?

Mott MacDonald: Every market we’ve looked at has Mott MacDonald: We think operators would find Mott MacDonald: The maturity of the market
significant demand for additional towers and points it difficult to make a case to invest that capital in terms of mobile and, in particular, mobile
of service in general, driven by coverage extension expenditure now, but they’ll look at it on a case by broadband adoption is critical, and in the seven
and 3G. We would anticipate a further substantial case basis. Building a shareable site doesn’t have or eight markets we’ve looked at, I would say the
increase in demand for points of service with 4G, to cost that much more, but of course it depends infrastructure sharing model stands up well.
albeit that is quite a bit further down the line. how much space you share. In markets where little
sharing is taking place currently, an operator could We feel that the first or second towercos will find
In three out of four different country models we build shareable structures in unique locations, but a market, if they strike relatively quickly. Markets
last produced, there was a doubling of the tower there’s no guarantee you would get tenants. will continue to mature and delays may mean that
requirement in the next 10-15 years, and in the the greater opportunities are missed.
fourth market the growth was just less than double. Operators tend to look only as far as whether to
So you see why Africa is an attractive market for build a tower at a given site or not, they don’t tend With increasing data demands, network growth
towercos and investors. to see tower sharing as a potential revenue stream, and falling ARPUs, margins are pressurised. So we
which is of course why towercos’ focus on co- feel that increased infrastructure sharing, whether
TowerXchange: Given the increasing volume of locations adds so much value. through outsourcing or sale and leaseback to a
tower sharing deals in Africa, should operators towerco, or through joint ventures, is where many
invest in building more shareable towers to TowerXchange: Based on the models and African markets are heading. But operators and
boost valuation in a future sale? forecasts Mott MacDonald have built over the towercos alike should not delay!

www.towerxchange.com | TowerXchange Issue 1 | 39

Special Feature:

Uganda
Case study
Infrastructure sharing continues to play
a growing role in Ugandan network
expansion. From the early days of tower
swaps, to the coordinated network rollout of
Warid and Orange, 2012 has now seen the
entry of American Tower and Eaton Towers
into the Ugandan market.

In this special feature, TowerXchange tracks

the development of infrastructure sharing
in Uganda, seeking lessons transferrable
to other jurisdictions by talking to some of
the key stakeholders at Uganda’s operators,
towercos and regulators.

Don’t miss:
41 How Orange leveraged infrastructure
sharing to claim data market leadership
42 The BuddeComm Perspective on Uganda
43 Regulations to support infrastructure
sharing, an interview with the UCC
45 How Eaton Towers hit the ground running
with a high tenancy ratio in Uganda;
an interview with Alan Harper, CEO

40 | TowerXchange Issue 1 | www.towerxchange.com

Uganda Case Study
By way of an introduction to the market, let’s take
a look at Uganda’s operators and towers. MTN’s
network has the most cell sites in Uganda, with
growing data demands prompting them to recently
How Orange leveraged infrastructure sharing to claim data market install 78 new base stations and plans to deploy a
leadership in Uganda further 300 3G+ sites, bringing their total cell sites in
Uganda to 1,100 by the end of 2012. MTN command a
Uganda made telecoms market share of just under 50%.
infrastructure headlines at the end
Airtel, formerly Celtel / Zain, were the first GSM
of last year when American Tower network in Uganda and have around a 20% market
set up a 1,000 site joint venture share and approximately 700 sites. UTL is the oldest
towerco with MTN. Uganda was network with some 500 sites.
back in the news in June when Eaton
Then there’s Warid and Orange Uganda, the latter
acquired 700 towers from Warid of which reported an 8% market share in Q4 2011,
and Orange. TowerXchange talks to having increased 57.3% in the second half of the year.
Orange, UCC and Eaton to learn why “Orange Uganda were the last market entrants in
infrastructure sharing is taking hold 2009, and we own 70% of the data market, largely on
the basis of tariffs and speed,” said Godfrey Kisekka,
in Uganda. CTO, Orange Uganda.

Keywords: Market Entry, Due Diligence, Data, As in many African markets, the entry of Airtel
Network Rollout, Tenancy Ratios, Infrastructure has prompted tariff wars. With low and still falling
Sharing, Africa, Uganda, Orange, Uganda ARPU, there is pressure on operators’ cost structures.
Telecom, MTN, Warid, Airtel, American Tower, This provides motivation to work with independent
Eaton Towers tower companies and other outsourcing partners
Abela Rock, Katakwi, Uganda to stabilise and minimise operational expenditure,
with reductions of 30% reported already.

Read this article to learn: We asked Orange Uganda’s CTO Godfrey Kisekka to
< The evolution of tower sharing in Uganda explain the evolution of tower sharing in Uganda. “I
< The role of the CTO of Orange Uganda in preparing data to sell their towers was at UTL (Uganda Telecom) previously. UTL was
< How tenancy ratios were maximized BEFORE the sale the sole telecom company in Uganda until Airtel (then
Celtel) entered the market in 1995. MTN entered the

www.towerxchange.com | TowerXchange Issue 1 | 41

market in 1998, and in the late ‘90s UTL and Airtel
Uganda market overview Column
started some modest tower sharing. Warid tried to
share sites when they entered the market in 2007, Population: 34.5m The BuddeComm
but found it difficult and ended up building most Mobile subscribers: 16.7m
of their own infrastructure. When Orange came to Mobile penetration: 48.4%
Perspective: Uganda
Uganda, we were under time to market pressure. GDP per capita (PPP current USD): $1,354
Warid found it beneficial to share with us. While (Source: World Bank, 2011)
Orange did build some new sites, we also shared 180 Cell sites: 3,067, of which 1,267 off-grid (GSMA) Dependence on costly diesel
of Warid’s sites, while they shared 80 of ours. By this Coverage: 75.8% (GSMA) generator power and regulations
point Airtel were also sharing many sites. And of ARPU estimated at $3.80 in 2011 (BMI)
encourage infrastructure sharing
course earlier this year Orange Uganda completed a Mobile internet users: 977,500 (UCC)
sale and leaseback transaction with Eaton Towers.” in Uganda, according to analysts at
Orange sold 300 sites to Eaton Towers, who BuddeComm.
TowerXchange asked Kisekka, as CTO of Orange’s announced the deal in March 2012 together with the
Ugandan operation, what was your role in the tower acquisition of 400 towers from Warid. Both deals As the number of antenna towers dotting Uganda’s
sale and leaseback transaction? “As CTO I ensure were structured as sale and leaseback transactions. landscape increases, the government is working
integration between Group and affiliate activity on Warid had invested in building towers in prime on regulations to encourage infrastructure sharing
operational and strategic issues. Operational and locations with capacity for upgrades and additional among the network operators. A major problem
capital costs were already under discussion, and we tenants, and already had Orange on many of their is the lack of access to the electricity grid in many
investigated the towerco model as well as various towers, as well as tenancies from Airtel and a WiMAX rural areas. The network operators depend on diesel
alternate models.” operator. So tenancy ratios were up around two even generator power for more than 40% of their sites,
before Eaton started selling further co-locations. which can add operational costs of up to US$200,000
“I had to gather lots of data to prepare the per year per site. As a result, MTN, Zain, UTL and
documentation for the RFP,” continues Kisekka. “We MTN Uganda and American Tower created a joint Warid formed a consortium in 2009 to share costs of
had a special local team supplemented by Group venture towerco in late 2011. American Tower connecting their sites to the grid.
experts and the expertise of Sofrecom.” paid $89m for a 51% stake in ATC Uganda, and
approximately 1,000 towers were transferred to the ATC Uganda, a joint venture between MTN and
What were Orange Uganda’s objectives in adopting new business. American Tower Corporation (ATC) took over MTN’s
the towerco business model? “We freed up capital for towers in Uganda in December 2011. ATC paid US$89
build-to-suit projects. We were sharing infrastructure Infrastructure sharing is off to a good start in million for a 51% stake in the new company. It plans
anyway, but our core competency is as a telco Uganda, with both ATC Uganda and Eaton Towers to roll out more than 280 new sites in the country
service provider. Eaton Towers specialize in those Uganda having access to portfolios with excellent over the next three years
site infrastructure practicalities such as security and coverage. You can read more about Uganda from the
fuel, releasing opex savings greater than when we perspective of Eaton Towers CEO Alan Harper in the For more on BuddeComm’s excellent market
simply share sites with another operator.” interview on page 45 research, visit www.budde.com.au

42 | TowerXchange Issue 1 | www.towerxchange.com

Regulations to support When TowerXchange speak to operators and
tower companies about what they need from their
regulators to best support infrastructure sharing,

infrastructure sharing there is a common list of requests.

< Explicit telecoms infrastructure sharing

TowerXchange shares a wish list of regulatory requests, and regulations are preferable to policies found
looks at how the UCC creates a supportive environment for within general communications and anti-
infrastructure sharing in Uganda trust policies or, worse still, policies pertaining
to electricity towers

Keywords: Regulation, Licensing, Market Entry, < A fairly priced, transparent licensing regime for
Universal Access, Active and Passive Infrastructure network providers that keeps less reputable
players out of the market
Sharing, Africa, Uganda, UCC

< Light-touch regulation supporting competition,

backed up with help to resolve disputes, but not
getting involved at site level or in pricing

< Encouragement, rather than mandating

infrastructure sharing is generally preferred to
enable the economics of competition to define
the market

< Consideration of incentives for rural

connectivity, with efficient investment of
Universal Access Funds

…All supported by tax authorities that share the

Read this article to learn: same ethos of clarity and fairness.

< How operators and tower companies think infrastructure sharing should be regulated
The critical requirements seem to be transparency
< How the regulatory environment in Uganda supports infrastructure sharing
and speed of response. As ever, time to market is
< News of the UCC’s forthcoming new infrastructure sharing guidelines
critical, and having a responsive regulator able

www.towerxchange.com | TowerXchange Issue 1 | 43

to swiftly license and support the market entry
of value-adding infracos helps attract substantial
infrastructure investments.

The regulation of infrastructure sharing

in Uganda – a positive example

The operators and towercos in Uganda speak highly

of the “helpful, transparent and positive” support for
infrastructure sharing received from regulators the
Ugandan Communication Commission (UCC).

TowerXchange spoke to Patrick Mwesigwa, Director

of Technology and Licensing at the UCC. He told
us “the UCC encourages co-location and sharing
of infrastructure because it enables maximum
optimization of resources and limits duplication of
network resources; optimizes capital expenditure
and hence frees funds for investment in core
network equipment; and contributes to protection of sharing is expected to provide good incentives for “Tower sharing will lower the costs for development
the environment.” new entrants in the market, while it will also enable of networks in the rural areas and thus make the
the existing operators to optimse the use of their business more viable for existing and new operators.
It seems that the UCC are preparing an explicit infrastructure,” adds Mwesigwa. We envisage rapid penetration of services in the
infrastructure sharing policy: “The UCC is finalizing rural areas as the costs of infrastructure go down.”
guidelines which will require operators to share We asked Mwesigwa: how are towercos licensed in
infrastructure wherever feasible under mutually Uganda? We concluded by asking the UCC’s view of active

“ The UCC is finalizing guidelines

which will require operators to
“
agreed commercial arrangements. Infrastructure
“Tower companies in Uganda are issued with Public
Infrastructure Provider (PIP) licenses which enable
them to erect towers and other related facilities
which are rented by service providers at mutually
agreed commercial arrangements.”
infrastructure sharing – for example, Rural NetCo
has a license in neighboring Tanzania.

“The UCC will issue guidelines that require operators

mainly to share passive infrastructures such as
towers, cable ducts, antennas, buildings et cetera.
share infrastructure wherever But the guidelines also permit sharing of active
feasible What is the UCC’s view on the impact of infrastructure infrastructure under mutually agreed commercial
sharing on rural connectivity? arrangements,” concluded the UCC’s Mwesigwa

44 | TowerXchange Issue 1 | www.towerxchange.com

Eaton Towers hits
TowerXchange: Thank you for agreeing to share
some insights in this interview, Alan. To put
this interview in context, please tell us a little

the ground running with about the current state of the telecoms market in
Uganda.

a high tenancy ratio in Uganda Alan Harper, CEO, Eaton Towers: MTN are market
leaders, with Airtel second, Warid third, Orange
Keywords: Sale and Leaseback Deal Structure, Cost Reduction,
fourth, and UTL fifth. The sixth license was bought
Network Extension, Capacity Enhancements, Urban vs Rural, by Sure Telecom, recently acquired by Roshan, and
3G, Tenancy Ratios, Rental Rates, QoS, Infrastructure Sharing, they’ve not yet launched.
Africa, Uganda, Ghana, Eaton Towers, Orange, Warid, MTN,
American Tower, Airtel, Uganda Telecom We bought all the towers from Warid and Orange,
the third and fourth licensees, which combined give
us national coverage. Prior to this, tower sharing
Alan Harper, Co-founder and CEO of Eaton Towers,
had been relatively minimal between operators,
kindly consented to be interviewed concerning Eaton’s
with the exception of Orange and Warid who had
recent acquisition of 300 towers from Orange and 400
rolled out in a fairly co-ordinated way – co-locating
towers from Warid in Uganda.
on one another’s sites – while there had been quite
a bit of sharing with Airtel, who are on a reasonable
Alan has over 25 years of telecoms experience, including
number of Orange and Warid’s towers.
17 years in Africa. Most recently, he served as Group
Strategy and New Business Director for Vodafone Group
TowerXchange: Partnering with a towerco
PLC from 1995 to 2007, responsible for corporate and
enables more long-term network investments,
regulatory strategy, business development, R&D and
where will you invest first?
public policy. He was Managing Director of Vodafone UK
Alan Harper, CEO of Eaton Towers
from 1999 to 2000.
Alan Harper, CEO, Eaton Towers: We’ll provide
better mechanisms for refuelling; remote network
Read this article to learn: monitoring through the NOC to monitor passive
< How Eaton Towers plans to reduce opex in Uganda infrastructure, improving security on sites. We’ll
< The benefits of acquiring a portfolio with a high tenancy ratio also undertake some network extensions beyond
< Strategies to extend the network and enhance capacity the initial portfolio, for example in the West
< What happens when towercos compete for co-location tenancies of Uganda there are new mining and oil & gas
< Comparing Eaton’s sale and leaseback deal in Uganda with their operational lease deal in Ghana discoveries, so there are some new industrial areas
that need coverage. But the major driver is capacity

www.towerxchange.com | TowerXchange Issue 1 | 45

 “ While we had to pay for it, we’ve
“
taken over those tenancy agreements
and secured that ongoing revenue
like that in most other markets – you’d expect more
overlap between towers, but it meant we didn’t
buy redundant assets. So while we had to pay for
it, we’ve taken over those tenancy agreements and
secured that ongoing revenue stream – we start on a
both have capacity, then you might choose on the
basis of a volume deal with operator, knowledge
of better QoS, or you might consider performance
against service level agreements on other towers –
essentially, which towerco is easier to deal with. So
stream – we start on a very high very high tenancy ratio. it’s rarely a shootout on tenancy rental costs.
tenancy ratio
MTN Uganda and American Tower announced TowerXchange: What are the benefits of
enhancement – most of the new tower growth their deal a couple of months beforehand, securing infrastructure sharing for Uganda as a country
is urban areas, not just in Uganda but in most a portfolio of around 700-800 towers, but because and for Ugandan subscribers?
markets – with rural to urban migration there’s a MTN had done relatively little sharing before the
growing customer base and of course data usage transfer, they start with 700-800 tenancies. We have Alan Harper, CEO, Eaton Towers: There are
is increasing. Orange in particular has a data and a very similar nationwide footprint but start with economic benefits for the operator: better network
quality play, with a good 3G network and urban over 1000 tenants – making us the market leading coverage with lower capex and opex investment,
strategy. towerco in Uganda. This gives us scale, pre-existing which enables better QoS and an opportunity to
revenue, and an ability to run a bigger business reduce tariffs. There are environmental benefits;
TowerXchange: Speaking with the team at Warid, from day one. We want to drive the lease up rates, obviously three tenants on one tower is better than
I understand their towers already had good targeting 0.5-1 tenant per tower. Meanwhile, the three towers. But it’s not just about visual impact,
tenancy ratios after a conscious strategy on their rollout of 3G adds to the capacity needs of network. it’s about reducing power consumption, truck rolls –
part to build a network with prime locations the logistical overhead of one tower is so much less
and multi-tenant capacity for future value. TowerXchange: speaking of MTN and American than for three. It’s a genuine win-win. Uganda wins
For example, I understand some 260 of the 700 Tower, to what extent do the tower portfolios because the government achieves it’s objectives in
towers were already shared between Warid and overlap? How do you differentiate your service terms of speed and quality of network rollout, while
Orange. How does Eaton add value to a portfolio from alternate co-location sites? also creating new license revenues from towercos;
that already has good tenancy ratios? operators win because service levels improve, QoS
Alan Harper, CEO, Eaton Towers: We may have improves, and the balance sheet is improved; while
Alan Harper, CEO, Eaton Towers: We start with a overlapping footprints, but not often overlapping towercos win new business and customers.
good portfolio, with established sharing agreements, tower locations. You might have a one square
and some benchmarks for pricing in the market. kilometre area within which you need a new base TowerXchange: Tell me about the regulatory
This avoids the challenge of varying expectations on station, if there’s only one tower, there’s only one environment – how supportive have the Uganda
tenancy rents. choice – the tower has simply got to be in the right Communications Commission been?
It had been a conscious, co-ordinated rollout place. So it’s not that intensely competitive, either
between Orange and Warid – sharing towers made you’ve got the location or you haven’t. Alan Harper, CEO, Eaton Towers: The UCC have
pragmatic sense at the outset, and it made both been helpful and supportive where asset transfers
more interesting portfolios to us. It wouldn’t happen If there are two towers within 100 metres, and if needed clearance – they were comfortable with

46 | TowerXchange Issue 1 | www.towerxchange.com

QoS. Importantly, the UCC had a clear licensing
policy, and enabled Eaton Towers Uganda to get up Participate in the TowerXchange community
and running quickly.

African governments are starting to understand

that towercos are a good thing; they enable network
extensions, they present an opportunity for new Decision makers
license fees (or revenue shares), and those license at operators
fees are fair.

TowerXchange: How do your strategies in

Investors & Independent
Uganda, where you’ve acquired 100% of the
advisers towercos
equity in the towers, compare with Ghana where
you have an operational lease with Vodafone
Ghana?

Alan Harper, CEO, Eaton Towers: From a customer Tower Xchange

point of view there’s really no difference: we
sell services, we run towers, we have quality of
performance targets. The operator drives the
business model. The only reason we do operating Regulators & Tower
leases is because it’s what the operator wants, policy makers manufacture &
if for whatever reason they’re not ready to sell installation
their towers. And of course as in Uganda we’re
also happy to do tower purchase and leaseback – Equipment
although these deals can take longer. & managed
services
The market structures are similar in Ghana and
Uganda – a similar number of licensees. Of course
we started with more tenants in Uganda, we started
with a tenancy ratio near 1 in Ghana. Probably the
biggest difference is that the idea of a towerco is
more advanced now. CTOs accept towercos more
readily, so the biggest difference has been that our
Join the TowerXchange LinkedIn™ group at
speed to market has been faster in Uganda www.linkedin.com/groups/TowerXchange-4536974

www.towerxchange.com | TowerXchange Issue 1 | 47

How to structure an ? not as attractive a deal for the towerco.”

infrastructure sharing deal to

Singh continues: “Towercos will offer a range of deal
structures, perhaps offering future lease discounts
based on opex savings realized, or they might offer a

suit your market and objectives lower lease rate right now and the towerco keeps the
subsequent opex savings. It’s a matter of striking a
Striking a balance between lease rates and up-front cash balance between lease rates and up-front cash.”

“Towercos are smart at doing the math and working

Keywords: Structuring a S&L, JV and an out what makes sense to them, while the OpCo needs
Operational Lease Deal, Cost Reduction, Build vs to determine their priorities in terms of P&L, cash
Co-locate, Business Case, Infrastructure Sharing, flow and shareholder valuation,” continues Standard
Africa, Uganda, Ghana, Kenya, Egypt, Standard Chartered’s Singh. “For example, MTN’s deal with
Chartered, MTN, American Tower, Deka Global, American Tower realized a high value per tower. As a
Warid, Orange, Eaton Towers, Vodafone Ghana profitable business they could probably afford higher
lease rentals that helped maximise value. However,
“The structure of any tower transaction depends on if you have a cash-starved operation that isn’t yet
what the sell-side mobile operator is trying to achieve,” breaking even, perhaps you can’t afford higher leases.”
says Mohit Singh, Associate Director of M&A at Standard
Chartered. “They might be trying to get stranded assets The business case for sharing towers
off the balance sheet, reduce opex and release capital
for future rollout. Under such circumstances, if your Not every operator is convinced about the business
objective is to minimise the burden on the OpCo by case for sharing their towers. Some operators remain
lowering lease costs and passing certain risks onto protective of network assets that had been a critical
the towerco, you might need to retain a lesser share of source of competitive differentiation.
future synergies, and up-front cash will be limited as it’s
One operator’s remarks summed up the perspective of
those opposed to sale and leaseback, asking “Why sell?
Read this article to learn:
To create positive cash flow? Is that a good enough
< A comparison of sales and leaseback, operational lease and joint venture deal structures reason to waive the competitive advantage accrued
< How to balance up front cash release with reduced opex to achieve your objectives from the network? Are the benefits equitably balanced
< Anchor tenant privileges of first movers across all parties? There is a risk that operators are
< The pro’s and cons of selling towers – the business case for operators giving up too much value to towercos. In some cases
< Regulatory mandates for tower sharing opex actually rises as operators use the towerco like a
bank and sign up to higher lease costs to release more

48 | TowerXchange Issue 1 | www.towerxchange.com

cash. OpCos had to invest the initial capex, and now the
towercos are looking to benefit from someone else’s Unpacking the range of tower deals open to operators
balance sheet. Operators need to realize benefits from
these transactions too – there has to be a balance.” Keith Boyd’s experiences represent two of the times multiples. We haven’t yet seen an Indus-style
main three forms of tower transaction, from operator-led joint venture in Africa, where several
But the pioneers of infrastructure sharing in Africa operational leases as agreed between Eaton Towers operators pool their assets, perhaps offering a
remain bullish. Fazal Hussain, Managing Partner at and Vodafone Ghana (see the interview with Tony management contract to a third party towercos.
Deka Global and former CEO of Helios Towers Nigeria Dolton, former CTO of Vodafone Ghana on page 24), There have been rumours of such joint ventures in
contends “infrastructure sharing will eventually to full sale and leaseback, as exemplified by Eaton Kenya and Egypt.
happen everywhere – there’s just no case to keep Towers’ work with Warid and Orange in Uganda
having multiple towers serving the same location. (see the interview with Alan Harper on page 45). Of course, one can also use tower transactions to
And there’s the incentive of first mover advantage – liquidate cash for turnaround plays and aggressive
anchor tenant privileges for operators, and being first The third variation on the model is where the rollouts. In such circumstances, an operator
to market to attract the finite number of tenants for operator carves-out their towers into a newco joint might accept increased leaseback costs in order
the towercos.” venture, and retains a substantial stake in the joint to maximize the amount of capital released in the
venture, as MTN have done in retaining a 49% stake short term.
“Anchor tenant privileges can be pretty much in ATC Uganda and ATC Ghana. This model has to
whatever you want,” continues Hussain. “You define date been favoured by Millicom, who have retained However, a high sale price doesn’t always mean
the covenants. Do you want the upside from opex a 40% stake in their deals to date with Helios in a short-term priorities over-ride the long term.
savings? Do you want to retain a substantial equity Ghana, Tanzania and the DRC. One African operator realized a sale price over
stake in the towerco? Do you want a discount when
30% above the replacement value per tower, and
additional tenants co-locate? If you’re a first mover,
Joint ventures offer an opportunity for operators’ increased leaseback costs by around 50%. But
you can take your pick!”
shareholders to benefit from the favourable thanks to their retention of a substantial stake in the
valuation multiples of infracos – successful joint venture towerco, the aforementioned higher
“Where once there was resistance to sharing such
towercos might trade at EBITDA multiples in the valuation of towercos means the deal makes sense
strategic assets, operators are starting to realize
teens, while operators might trade at seven to eight for the CFO.
that instead of retaining their towers to delay new
competitors’ rollout, they’d be better off sharing their
towers, creating a revenue stream from those new
market entrants, using them to subsidise their own no option but to pursue a co-location strategy as the built. As Alan Harper, CEO of Eaton Towers explains,
network, marketing and pricing,” concludes Hussain. authorities are reluctant to grant many additional “the rationale for a new base station works something
site permits – African regulators are increasingly like this: first, can I add equipment to one of my own
Many regulators in Africa are strongly in favour of concerned about the environmental impact of towers.” towers? If the operator can, they do. If not, can I co-
infrastructure sharing, in some cases banning new locate on an existing tower, either by doing a bi-lateral
site builds. As one senior network planning manager In markets such as Ghana, where infrastructure swap or co-locating on a towerco’s tower? And only if
at a new market entrant operator explained: “we have sharing has taken hold, very few new sites are being neither of these options is possible do they build.”

www.towerxchange.com | TowerXchange Issue 1 | 49

How to ? Target tenancy ratios vary according to a variety
of factors including the capacity of the market,
volume of sharing before acquisition, rental

measure success
rate and terms of the initial sale of the towers.
Experienced practitioners tend to agree that
a tenancy ratio above 1.5 is usually the first
The criticality of tenancy ratios target in most markets. If tenancy ratios exceed
2, it usually indicates a highly successful tower
venture.
It’s not just the initial deal structure that
defines the success of tower sharing The competitive sensitivity of tenancy ratios
transactions. Income from co-locations means we cannot publicly state how the different
infrastructure sharing deals are progressing, but
is the critical measure of success for we do know that towercos in some of Africa’s
towercos, and for their investors and most mature markets are on target to achieve
partners. tenancy ratios well above 1.5 by the end of 2012.

Tenancy ratios, also known as lease up rates, remain the Towercos can only do so much to attract new
critical measure for success. But beware of the different tenants. Ultimately the RF characteristics of the
means of presenting tenancy ratios – is an equipment tower are what they are. Towercos may not be
upgrade from an anchor tenant counted as an additional able to influence roll out plans, but they can
tenant? Sometimes bartering may also be counted in identify holes in coverage, and of course they
tenancy ratios. Ultimately the best measure of success all maintain relationships with RF Network
remains improvements to EBITDA margin. Planners.

Therefore, tower companies must analyse data

Keywords: Tenancy Ratios, Network Rollout,
supplied by the seller, using their own models to
Business Case, Deal Structure, Infrastructure
bid for portfolios based on an accurate forecast
Sharing, Africa, Freshfields of potential tenancy ratios. TowerXchange have
revealed some of the evaluation metrics used in
our interview with Mott MacDonald on page 37.
Read this article to learn:
< The different means of calculating tenancy ratios Another important measure of operational
< How towercos are progressing toward target tenancy ratios in Africa efficiency is site-level profitability, as highlighted
< The option to use infrastructure sharing transactions to release capital by AT Kearney’s excellent recent report “The
Rise of the Tower Business.”

50 | TowerXchange Issue 1 | www.towerxchange.com

 Securing buy-in from key stakeholders in the operator

Another critical consideration is the need to secure permission of all extensions that accelerate time to market.
shareholders. As we know, substantial stakes in many African operators are
retained by local market shareholders. Natasha Good, Partner at Freshfields It’s a common misconception that CFOs are universally in favour of
Bruckhaus Deringer explains: “every subsidiary of a global operator is infrastructure sharing, whilst CTOs remain protective of their network assets.
effectively a new OpCo in it’s own right when it comes to structuring As one senior executive at a tower company stated, “one of the principal
infrastructure sharing transactions – each local OpCo board needs to be challenges is convincing local CTOs and COOs that it’s a good idea – although
familiar with tower sharing. Previously network operators had been able to it’s becoming easier as more and more CTOs have experience dealing with
make changes with every moving part – employees, contractors, networks – so towercos.”
tower sharing requires the loss of control of what feels like a very core asset.”
The conclusion of TowerXchange’s ‘introduction to infrastructure sharing in
Operator CFOs can use tower transactions to achieve a variety of objectives. Africa’ is a simple one: there are an infinite variety of tower deal structures,
EBITDA might actually go down if you’re selling and leasing back towers at a defined by sliding scales of capital released, rental rates and stabilised opex
premium rate in order to maximise cash released – the increased lease costs and equity stakes, not to mention the term of the deal. All these variables mean
simply being the cost of that capital. But it might be necessary to free up cash infrastructure sharing can be tailored to meet different objectives in different
flow, which might be used to provide dividends, or to fund network rollout or market contexts

www.towerxchange.com | TowerXchange Issue 1 | 51

To share ? The perspective of incumbent market
leader operators

or not to share…
Many market leaders had feared that if they shared
their towers too soon, they might facilitate the
market entry of low tariff competitors who would
…When is the time right to share your towers? erode their market share and increase churn in the
short term. But if market leaders don’t share towers,
those same competitors might secure first mover
advantage. If leaders leave it too late, their towers
could be devalued as someone else has snapped up
Keywords: Market Maturity, the finite number of prospective tenants. Africa’s
First Mover Advantage, longest-established operators might have legacy
Shareholder Value, Tower towers, which would benefit from working with a
Valuation, QoS, Coverage, towerco to secure investment in power solutions and

“
tower strengthening to increase tenant capacity.
Network Rollout, 3G, 4G,
Urban vs Rural, Market
Evaluation, Tenancy Ratios,
Infrastructure Sharing,
Africa, Ghana, Uganda, DRC,
Tanzania, Cameroon, Cote
Many transactions in
Africa have yielded over
“
d’Ivoire, South Africa, Pyramid $150k per tower
Research, Helios, MTN,
Vodafone, Millicom, Orange,
Market leaders should accelerate progress toward
Warid, Etisalat, Airtel
infrastructure sharing, as they will currently find
themselves in a strong negotiating position. In some
markets, towercos are prepared to pay more than
Read this article to learn:
the replacement cost of towers – many transactions
< The business case for market leaders and new market entrants to share towers
in Africa have yielded over $150k per tower. Market
< The infrastructure sharing strategies of Africa’s leading operators leaders can release capital, stabilize opex AND
< The indicators that suggest it’s a good time to share towers realise an uplift in network performance at a time
< How to create shareholder value through infrastructure sharing when QoS is becoming a critical differentiator –
< How first movers create the greatest value by snapping up credit-worthy tenants especially critical to secure those all-important high
value customers.

52 | TowerXchange Issue 1 | www.towerxchange.com

 “
The perspective of new market entrant
operators

New entrant operators should accelerate their

network rollout by sharing towers with incumbent
The perspective of towercos

Towercos and investors have a delicate timing

dilemma too. Acquire towers too soon and they could
pay a first mover premium for a market that might
shared. We’ve shared towers where
we’re number one in the market
“
There is a big advantage to being first
movers – only so many towers will be

market leaders if they can. There’s a backlog to secure lack sufficient credit-worthy tenants. Acquire too with the right market competitive
permits for new cell sites, if they are permitted at all, late and the there might be insufficient tenants still dynamics” – Khumo Shuenyane, MTN
so new entrants should deploy as few of their own available to achieve tenancy ratio and profitability
towers as possible. Leverage independent towercos targets. Towercos need to be well funded – many limit where they have to go out into more rural areas,
and existing operators’ network reach and try to tap have had to pay a premium for a substantial portfolio and this necessitates opex reductions.”
into volume discounts. Concentrate any new builds of African towers in order to be considered credible
in higher value locations – look for gaps in incumbent players. Get it right and valuation multiples in the This view is shared by Africa’s leading operators. “In
market leaders’ networks, particularly around data mid to high teens can be achieved. some markets there is still a degree of competitive
capacity in urban areas. advantage through coverage – so we’re in no rush to
Diagnosing market readiness share infrastructure there,” says Khumo Shuenyane,
Consider a coordinated roll-out with another 3rd, Group Chief Strategy Mergers and Acquisitions
4th or 5th ranked operator. For example, Warid and When it comes to timing a transaction, it’s important Officer at MTN. Even the towercos agree: “towers
Orange realized a good sale price when they sold a to consider the number of licenses in a market, are a strategic asset and therefore not sellable in
total of 700 towers to Eaton Towers in Uganda earlier including the regulator’s stance on licensing 3G and countries where one OpCo dominates,” asserts Chuck
this year because they already had a healthy tenancy future networks, and any restrictions on new builds, Green, CEO of Helios Towers Africa.
ratio having shared many towers from the outset. as all these factors affect the tenancy ratios that can
be achieved. Urban network expansions, with the However, when the time is right to share towers,
What’s in it for market leaders to share with new densification required to cope with increasing data you’ve got to move fast. MTN’s Shuenyane continues:
entrants? Enhance the valuation of towers before demands and upgrades to next generation networks, “There is a big advantage to being first movers – only
selling by sharing with new entrants and driving are considered to be a more favourable indicator so many towers will be shared. We’ve shared towers
tenancy ratios. Market leaders can further enhance than rural network expansion, where towers tend to where we’re number one in the market with the
their value proposition by offering attractive roaming have less healthy tenancy ratios. right market competitive dynamics.”

“
agreements.

Warid and Orange realized a good

sale price… because they already
had a healthy tenancy ratio, having
“ Another way to tell when the time is right to buy and
sell towers is to look for signs that coverage has become
a commodity. “In some markets, the importance of
coverage as a competitive differentiator has become
over inflated,” said Kerem Arsal, Senior Analyst at
If one operator sells their towers, it tends to prompt
the other operators in that market to act. Vodafone
Ghana and MTN Ghana’s towers were on the market
within a year of Africa’s first infrastructure sharing
transaction from Tigo Ghana. It took even less time
Pyramid Research. “Quality of Service isn’t great in in Uganda, where American Tower’s deal with MTN
shared many towers from the outset
urban areas, rural connectivity is poor – competitive was fast followed by Eaton Towers acquiring a
market saturation means operators have reached a similar number of towers from Orange and Warid.

www.towerxchange.com | TowerXchange Issue 1 | 53

The infrastructure sharing strategies of
Africa’s leading operators

All Africa’s leading operators seem to be inclined

toward infrastructure sharing:

< Millicom have shown their hand in Ghana, DRC

and Tanzania – they see infrastructure sharing
as a strategic investment
< MTN’s appetite for infrastructure sharing
continues unabated, with deals closed in Ghana,
Uganda, Cameroon and Cote d’Ivoire, and
rumours persisting about a potential deal in
South Africa
< Etisalat had an active RFP for up to 4,500 African
towers earlier this year
< Vodafone have aggressive targets for
infrastructure sharing in certain African
markets

However, the greatest influence over African

tower sharing in the coming months might come
from Airtel, who have registered “Africa Towers”
subsidiaries in 16 African countries. Airtel have a
commitment to low cost telecommunications and Sale and leaseback deals are fuelled by 10 to 20 the site are what they are, and there are only so
substantial investments and experience from their year income streams from leases, so the ability of many tenancies to be secured in any given market.
involvement in tower sharing giants Bharti Infratel the tower company to lease up the towers to credit- First movers will have a considerable advantage
and Indus in India. worthy operators is key. in maximizing their valuation and in securing
tenancies.
Independent tower companies’ inclination to pay Infrastructure sharing in African telecoms is
a premium for assets will diminish as the market literally is a land-grab. Depending on your market, Don’t let your valuable tower assets get stranded
leaders close their deals – we’ve reached the tipping there could be between two and five credit-worthy on your balance sheet, their value declining, opex
point for infrastructure sharing in Africa. licensed operators, so there could be as many as ten increasing whilst your competitors reduce their own
prospective tenants if you count WiMAX, ISPs and opex by outsourcing to specialist infracos. Share
So the market leaders are all keen. But beware – not broadcasters. But towercos can only do so much your towers when the time is right, but that time
all tower tenants are created equal. to attract new tenants – the RF characteristics of could be now!

54 | TowerXchange Issue 1 | www.towerxchange.com

Four phases of tower market maturation inspired by Helios CEO Chuck Green’s words

Market leaders own the network and feel

“I invested lots of capital in my network, so I’m not sharing”

Governments liberalise the market, prompting new market entrants and increased competition.
Every new entrant needs finance even to roll out by co-locating on incumbents’ towers

The market share of leaders erodes. Coverage is no longer king. QoS and network delivery becoming
key differentiators. Every time another tower goes up next to one of yours, value is being destroyed.
Incentive to protect your investment in the network by sharing as this monetizes stranded assets on
the balance sheet, stabilizes and can lower opex, and gets rid of O&M responsibilities

Tower sharing enables incumbents to compete with disruptive new entrants’ prices, while also
potentially lowering opex and improving EBITDA margin

An alternative final phase in the maturation of Africa’s tower market

– operator joint ventures similar to Indus
There may be a case for operator-owned joint ventures in African countries with 2 or 3 strong market
leaders, but the economics, coverage and transmission planning are complicated when towers are in
close proximity, potentially duplicating one another. Decommissioning of sites can be expensive, and
TowerXchange has seen no large-scale projects of this nature yet in Africa. However, at least one of Africa’s
leading operators seems to favour this model.

A potential fifth phase of infrastructure sharing might see a progression to active infrastructure sharing.
We’ll have an in-depth article on active infrastructure sharing in issue 3 of the TowerXchange Journal.

www.towerxchange.com | TowerXchange Issue 1 | 55

 Tower Xchange

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