Independent tower companies in Nigeria are shopping for fresh funds, particularly from banks and international finance institutions, to upgrade Base Transceiver Stations (BTS) they acquired from three of the big GSM operators in the country.
In a business model predicated on cutting operational cost, the GSM companies, South Africa’s MTN, India’s Airtel and United Arab Emirates’ (UAE) Etisalat, outsourced the management of about 30,000 towers to IHS, Helios Towers and America Tower Corporation (ATC) in a deal valued at about $3 billion.
But concerns are mounting in industry circles that the independent tower firms stand the risk of lower returns on investment if the required upgrades are not effected. It was gathered that most of these towers acquired by independent tower companies are in need of upgrade, as they were original built to accommodate one telecoms company (telco).
A senior executive at Helios Towers, who pleaded anonymity, said “most of these towers were built without taking collocation into consideration, which is critical to sustaining industry growth.
“At the time, mobile operators were focused on achieving national coverage. The current situation restricts us from servicing more operators. For these telecom towers to be of better economic value to us, we must upgrade them to collocation standard, which will allow us accommodate more operators and make more money”, the official said in an interview.
BusinessDay gathered that such upgrades are in the area of land space to accommodate other operators’ base stations and generators and height of the towers. Prior to this time, tower companies built towers in anticipation of demand by operators.
“This move enabled us to deliver service to operators anywhere and anytime. If any mobile operator comes to us and says he wants to expand his network, gives us number of towers and locations, we build for them,” he said.
Industry observers, however, are of the view that the alleviation of this operational and financial burden through outsourcing of these telecoms towers is already enabling mobile operators to increase their focus on developing innovative services, which would help them to reduce churn and boost Average Revenue per User (ARPUs) as the nation’s telecoms market matures.
Gbenga Adebayo, chairman, Association of Licensed Telecommunications Operators of Nigeria (ALTON), said that outsourcing the management of towers was indicative of the industry’s responsiveness to prevailing global economic conditions, as mobile operators strived to become more cost efficient. “In Nigeria, tower operators are faced with problems of approval cost, multiple regulations, multiple taxations and maintenance cost,” he said.
Adebayo added that outsourcing tower management would create more job opportunities, as it encourages supportive players in the industry. “This is also a fall-out of our internal regulatory mechanism to ensure growth in the industry. More so, tower sale could be as a result of administrative reasons, cost reduction or shareholders decision,” he explained in a recent report.
The sale of telecoms towers is a trend that had been witnessed in Europe and was continuing in Africa, due to the mutual benefits of such arrangements. “The process aims at reducing operating costs, so operators can focus on delivering telecoms services, customer services, and marketing, rather than managing infrastructure”, said Thelca Mbongue, telecoms analysts for research firm Ovum.
Telcos in Africa are offloading their infrastructure assets, which cost more to run in the continent than in other parts of the world because of the need for backup generators and batteries to guard against power failure.
In Nigeria, about $80 million is spent monthly to maintain telecommunication towers, according to Nigeria CommunicationsWeek. Siphiwe Nelwamondo, technical marketing manager for Aviat Networks in South Africa, pointed out that selling off towers meant infrastructure cost saving of between 16 – 20 percent for operators. “The Nigerian market for example, needs another estimated 50, 000 to 60, 000 telecoms towers for optimum mobile network coverage across the country. Multiply that by the $200,000 cost to build a new tower in Nigeria, including cost of obtaining all necessary permits, acquiring land and providing private power supply – usually from a diesel generator – and the cost becomes very high.” He said.
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