One for all
Tower-sharing companies eye South Africa
THE CURRENT PRESSURES facing cellular operators from regulatory, legislative and market perspectives are forcing them to emphasise cost-cutting. Now telecommunications companies are increasingly looking at ways to share infrastructure. It just makes sense. Why should there be separate, ugly cellular towers dotted all over South Africa when multiple operators can easily install all of their equipment on shared towers?
In mature markets the sharing approach is increasingly being adopted. There are a few examples of cellular operators selling their towers to an infrastructure leasing company and then renting them back, as Telefonica has done in South America. That allows operators to raise capital and leave worrying about maintaining a physical tower network to someone else.
Eaton Telecom is a British tower infrastructure company moving into Africa to facilitate the concept of sharing. It announced last week it would first launch in Tanzania but was also eyeing other southern African countries: it already has operations in Ghana and Nigeria. It will both build and buy towers in Tanzania to then lease them to prospective customers, such as Vodacom Tanzania and Zantel, the latter being the fastest growing telecoms company in that country.
Eaton has appointed Piet Nel, former CEO of Dimension Data’s Plessey subsidiary, to run its office in SA. It also confirmed it’s been in talks to possibly acquire all of Cell C’s tower infrastructure. SA’s third cellular operator has been seeking such a deal for some time in a move to reduce debt and further spread its network.
Speaking to Finweek, Eaton Telecom CEO Alan Harper suggested strongly the company would have something to announce soon concerning SA. “There will be an independent tower player or two in SA over the coming months,” Harper said.
Cell C CEO Lars Reichelt wouldn’t confirm a deal with Eaton specifically but affirmed the company was close to tying up a deal with an independent tower company. “I can’t confirm anything yet, but we’re close to coming to a decision.” Reichelt said Cell C would announce something within the next month.
John Strand, founder of independent international telecoms consulting firm Strand Consult, said tower-sharing is the right way to go for SA’s operators. “The development you’re now seeing in Africa is identical to what we’ve seen in a number of countries worldwide. In practice, more and more operators don’t have towers as part of their core business and with the ability to sell those to outside partners you free some capital while sharing resources with competitors who also have the same interest. It’s one of the examples where 1 +1 +1 = 5,” said Strand.
“If you look at those who buy and operate towers – well, it’s an investment very attractive for pension funds. They see the investment as a long-term investment with a stable cash flow and they see many opportunities to develop the business through economies and to negotiate good agreements with the people they rent space or locations from.”
Strand said internationally Telefonica has sold a portion of its towers in South America and the trend has also started in the United States. “In a continent such as Africa – where there are too many mobile operators and where there’s a need for consolidation – it will be easy to conclude those agreements.”
In SA Cell C has been speaking to three companies about selling its towers, including Eaton Telecom. Whoever the final buyer is, the question it will face will be whether Vodacom, MTN and other telecoms providers will be as interested in sharing as Cell C is? By all accounts, they will be.
LARS REICHELT Sorting it out