spotlights on the cala tower industry...202 nexsysone 206 northstar 211 vinson & elkins rllp...

TowerXchange Americas Dossier 2016

Spotlights on the CALA tower industry

www.towerxchange.com


(Chairman) Daniel Lee Managing DirectorIntrepid Advisory Partners

Zhiyong ZhangChairman & PresidentMiteno

Akhil GuptaChairmanBharti Infratel

Michel FaivreDirecteur Programme Partaged’Infrastructure AMEA, Orange

Nina TriantisManaging Director, Global, Head of Telecoms & MediaStandard Bank

Terry RhodesCEOEaton Towers

Marc GanziPresident, Digital Bridge &Mexico Tower Partners

Arun KapurCo-FounderIrrawaddy Green Towers

James Maclaurinformerly CEOedotco

Areef KassamDirector of InfrastructureGSMA Mobile for Development

Ayman Al AdlDirector - TMTStandard Chartered Bank

Dagan KasavanaCEOPhoenix Tower International

Chuck GreenExecutive ChairmanHelios Towers Africa

Suresh SidhuCEOedotco

Malcolm CollinsChief ExecutiveCTIL

Ted ZhongCEOQ Towers International

Hal HessEVP, International Operations andPresident, EMEA and Latin AmericaAmerican Tower

Nobel TanihahaPresident DirectorPT SOLUSI TUNAS PRATAMA (STP)

Umang DasChief MentorViom Networks

Gilles KuntzCEOTowerCo of Madagascar

Maria ScottiCEOTorrecom

David MeganckFounder and COOAcsys

Tilak Raj DuaDirector GeneralTAIPA

Peter Owen EdmundsCo-founder and ChairmanRussian Towers

Kurt BagwellPresident InternationalSBA Communications

Jim EisensteinChairman & CEOGrupo TorreSur

Bimal DayalCOOIndus Towers

Inder BajajCEOHTN Towers

Riana DonaldsonManager: International Network Operations SupportVodacom

Tunde TitilayoVice ChairmanSWAP International

Jack DessayManaging DirectorMacquarie Capital

Jeffrey EldredgePartnerVinson & Elkins

Enda HardimanManaging PartnerHardiman Telecommunications Ltd.

Adeel BajwaSenior GM of Legal Affairs and Contracts, Warid Telecom

Scott CoatesCEOWireless Infrastructure Group

Carlo RamellaCOO, EI Towersand Chairman, Towertel

With special thanks to the TowerXchange “Inner Circle”About TowerXchange

TowerXchange is your independent community for operators, towercos, investors and suppliers interested in EMEA, CALA and Asian towers. We’re a community of practitioners formed to promote and accelerate infrastructure sharing. TowerXchange don’t build, operate or invest in towers; we’re a neutral community host and commentator on telecoms infrastructure.

The TowerXchange Journal is free to qualifying recipients. We also provide webinars and regular meetups. TowerXchange monetizes this community through hosting annual Meetups and the sale of advertising, without compromising editorial integrity.

TowerXchange was founded by Kieron Osmotherly, a TMT community host and events organizer with 16 years’ experience, and is governed with the support and advice of the TowerXchange “Inner Circle” – an informal network of advisors

Our informal network of advisers:

© 2015 Site Seven Media Ltd. All rights reserved. Neither the whole nor any substantial part of this publication may be re-produced, stored in a retrieval system, or transmitted by any means without the prior permission of Site Seven Media Ltd. Short extracts may be quoted if TowerXchange is cited as the source. TowerXchange is a trading name of Site Seven Media Ltd, registered in the UK. Company number 8293930.

www.towerxchange.com | TowerXchange Issue 16 | XX| TowerXchange Americas Dossier 2016 | www.towerxchange.com/meetups/meetup-americas2

172 Abloy

175 Acsys

180 Ascot International

185 Ausonia

189 Cotech Tower Services

192 GS Yuasa

195 Invendis

199 Metalogalva

202 Nexsysone

206 Northstar

211 Vinson & Elkins RLLP

Contents

100-170 172-212

47-99

4-31 Towercoperspectives

TowerXchange Meetup exhibition preview

Country-specificanalysis

TowerXchangeAnalysis

48 Mexico53 Caribbean58 Central America75 Colombia79 Peru83 Bolivia86 Brazil93 Chile97 Argentina

101 Insights from AMT, SBA, GTS and Digital Bridge

106 Insights from Innovattel/Torresec, Torres Andinas,

Catalina Inc., IIMT, Square1 Infrastructure,

Torrecom and Brazil Tower Company

111 AlfaSite

113 American Tower

120 Andean Tower Partners

124 First Corporate Finance

128 Grupo TorreSur

131 Innovattel/Torresec

133 Mexico Tower Partners and Digital Bridge

137 NMS

140 Phoenix Tower International

145 SBA Communications on Costa Rica

150 SBA Communications on Guatemala

152 Telxius

158 Torrecom

162 Torres Andinas

166 UBS

TowerXchange Meetup Americas

34 Latest agenda

39 Latest attendee list

42 Sponsors and exhibitors profiles

4 TowerXchange’s analysis of the independent tower market in CALA28 Global tower market maturation

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

**Telesites 12,874

3,765

Dominican Republic

Ecuador

Unknown

Spain & Germany

8,852

1,212 618484

Estimated number of towers owned or managed by towercos in CALA

1000

800

1200

1400

600

400

200

****

*Contin

enta

l

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

****

*NM

S

600

1531

600450

400500555

51105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

923

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

190 150

Phoenix

Tower

650

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous

Year Seller BuyerCountry Deal structureCost per tower US$Deal value US$Tower count

Portfolio acquisition

Company acquisition

Company acquisition

Company acquisition

SLB

Subsidiary acquisition

Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil

USA, Panama & Costa Rica

Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius

Grupo TorreSur 6,500

SBA Communications 7,032 540 221573 386599 136

600

71

132

23

208

194

193

Torrec

om

www.towerxchange.com/meetups/meetup-americas | TowerXchange Americas Dossier 2016 | 3

TowerXchange Meetup calendar

< TowerXchange Meetup Americas, June 16-17, 2016

< TowerXchange Meetup Africa, October 19-20, 2016

< TowerXchange Meetup Asia, December 13-14, 2016

< TowerXchange Meetup Europe, April 4-5, 2017

TowerXchange’s analysisof the independent tower market in CALA

New tower count, new towercos

TowerXchange’s periodical CALA baseline data update doesn’t only feature the latest tower count but includes several news items in terms of new towercos, market openings and changing dynamics in the CALA tower industry.

Since our last update, we’ve seen the creation of Telxius, Telefónica’s spinoff towerco which is going to incorporate the operator’s assets in Spain, Germany and Latin America into one entity. Additionally, TowerXchange has spoken to several towercos that we hadn’t identified before such as Balesia, active in Colombia, Peru, Guatemala, El Salvador and Puerto Rico; MX Towers, active in the Mexican market and likely to focus on small cell deployment across the country; and Golden Comunicaciones, a joint venture between Innova Capital Partners and Goldman Sachs, focusing on Colombia and Telecommunications Partners, operating in Peru.

In terms of tower count, América Móvil’s spin off is proving itself as a BTS force. In fact, it has added as many as 2,009 new sites since its creation. Grupo TorreSur has added a healthy 200 new sites to its count, closing at 6,500. Phoenix Tower International continues its regional (and U.S.) expansion with the addition of 545 Viva sites in the Dominican Republic, and the other middle market towercos continue to grow.

Mexico Tower Partners added 300 sites as did IIMT in Mexico. Innovattel grew its regional portfolio from 350 to 500 sites and Torrecom added close to 100

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

**Telesites 12,874

3,765

Dominican Republic

Ecuador

Unknown

Spain & Germany

8,852

1,212 618484


1000

800

1200

1400

600

400

200

****

*Contin

enta

l

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

****

*NM

S

600

1531

600450

400500555

51105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

923

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

190 150

Phoenix

Tower

650

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous



Company acquisition

Company acquisition

Company acquisition

SLB


Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil


Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius



600

71

132

23

208

194

193

Torrec

om

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

**Telesites 12,874

3,765

Dominican Republic

Ecuador

Unknown

Spain & Germany

8,852

1,212 618484


1000

800

1200

1400

600

400

200

****

*Contin

enta

l

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

****

*NM

S

600

1531

600450

400500555

51105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

923

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

190 150

Phoenix

Tower

650

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous



Company acquisition

Company acquisition

Company acquisition

SLB


Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil


Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius



600

71

132

23

208

194

193

Torrec

om

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

**Telesites 12,874

3,765

Dominican Republic

Ecuador

Unknown

Spain & Germany

8,852

1,212 618484


1000

800

1200

1400

600

400

200

****

*Contin

enta

l

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

****

*NM

S

600

1531

600450

400500555

51105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

923

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

190 150

Phoenix

Tower

650

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous



Company acquisition

Company acquisition

Company acquisition

SLB


Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil


Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius



600

71

132

23

208

194

193

Torrec

om


Source: TowerXchange research, quarterly filings, site lists

* American Tower’s Brazil count is pro rata to the closing of the second tranche of TIM Brazil towers** Creation of Telesites remains subject to regulatory approval. We understand Telesites has a BTS contract from Claro Costa Rica*** QMC has a portfolio of 901 towers across Brazil, Mexico, Colombia and Puerto Rico**** Continental Towers owns a portfolio of ~690 towers, which their website claims are distributed across Mexico, Dominican Republic, Jamaica, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Colombia and Peru***** NMS has a portfolio of 600 towers across Nicaragua, Mexico, Colombia and Peru****** Innovattel/Torresec owns a portfolio of 500 towers across Puerto Rico, Colombia, Ecuador, Argentina, Panama and Peru


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sites to its portfolio across Nicaragua, Guatemala and Mexico.

In the meantime, SBA Communications added approximately 400 new sites to its CALA portfolio and American Tower around 200. The U.S. publicly listed giants may own the lion’s share of the existing towers in CALA, but they are on an even playing field when it comes to BTS, and the organic growth is being liberally shared around, at least until the Brazilian currency crisis settles.

Who is going to buy middle market towercos?

The CALA region is filled with middle market towercos with portfolios ranging between 100 and 1,500 sites. In Brazil alone, TowerXchange reports over a dozen entities purely focused on Build-to-Suit activities, while in Mexico there are as many as twenty.

As reported in a recent editorial on the status of the Brazilian tower industry, most of these towercos are private-equity backed and built on the assumption that after a few years of BTS activity, they’d scale their business enough to flip to one of the larger towercos – most likely American Tower or SBA Communications. And not only they’d be acquired but they’d be able to sell for multiples in the twenties.

Amid current economic conditions, doubts have risen as to whether these towercos can be monetised, let alone at high multiples. The Brazilian currency crisis alongside the saturation of the

Estimated total towers in rest of South America: 17,400 (Venezuela, Ecuador, Bolivia, Paraguay, Uruguay, Surinam, French Guiana and Guyana)

Source: TowerXchange

Selected estimated CALA tower counts

Newest towercos in the CALA market

Balesia

Golden Comunicaciones

MX Towers

Telecomm. Partners

Telxius

Name

Colombia, Peru, Guatemala, El Salvador, Ecuador

Colombia

Mexico

Peru

Peru, Chile, Brazil (Germany, Spain)

Countries

BTS

BTS

Small cells/rooftops

BTS

Carve out

Focus



Brazil 54,595

Mexico 27,205

Argentina 16,000

Colombia 15,353

CentralAmerica11,528

Caribbean10,550

Peru 9,118

Chile8,511

Major tower transactions in Latin America 2011/2016


Portfolio acquisitionPortfolio acquisitionPortfolio acquisitionPortfolio acquisitionPortfolio acquisitionCompany acquisition

SLBCompany acquisition

SLBSubsidiary acquisitionCompany acquisition

SLBSLB

Company acquisitionSLBSLBSLBSLB

Company acquisitionSLBSLBSLBSLB

Partial acquisitionSLBSLBSLBSLBSLBSLBSLBSLBSLBSLBSLBSLBSLB

Partial acquisition

$35,061$129,305

$128,000

$185,185

$211,231$321146$179,897$546,610$321,375$148,029$238,896$162,328$305,732$118,788$138,665$193,548$283,126

$222,500$213,576$171,875$131,799$150,000$172,043$207,851$208,904$144,000$85,607

$151,694$878,378

$200,130

$11,500,000$214,000,000

$16,000,000

$1,200,000,000

$978,000,000$527,000,000$349,000,000$129,000,000$645,000,000$413,000,000$398,000,000$343,000,000

$4,800,000,000$251,000,000$293,000,000$18,000,000

$250,000,000

$178,000,000$258,000,000$33,000,000

$252,000,000$225,000,000$96,000,000

$323,000,000$122,000,000$18,000,000

$182,000,000$206,000,000$585,000,000

$8,288,000,000

545900328

1655130190125529

648060

463016411940236

2007279016662113

1570021132113

93883100350400800

1208192

19121500558

1554584125

21261358666

42,822

Phoenix TowerTelxiusTelxiusTelxius

SBA CommunicationsPhoenix Tower

Highline do BrasilPhoenix Tower

American TowerPhoenix Tower

American TowerSBA Communications

American TowerAmerican Tower

SBA CommunicationsAmerican TowerAmerican Tower

SBA CommunicationsAmerican Tower

BR TowersGrupo TorreSurAmerican TowerAmerican Tower

BR TowersTorres UnidasTorres Unidas

SBA CommunicationsGrupo TorreSurAmerican Tower

BR TowersAmerican TowerAmerican TowerAmerican TowerAmerican TowerAmerican TowerAmerican TowerGrupo TorreSurAmerican Tower

Totals / average

VivaTelefónicaTelefónicaTelefónicaTorresec

Amzak/TeletowerAlgar Telecom

T4UTIM

American TowerBR Towers*

OiNextelZ-Sites

OiNextelNextel

OiGTP**

OiOi

TelefónicaAxtel

SitesharingTelefónicaTelefónicaTelefónica

OiTelefónicaTelefónicaTelefónicaTelefónicaTelefónicaTelefónicaTelefónica

Millicom/TigoTelefónicaSitesharing

Dominican RepublicPeruChileBrazil

EcuadorDominican Republic

BrazilBrazilBrazil

PanamaBrazilBrazilBrazilBrazilBrazilBrazil

MexicoBrazil

USA, Panama & Costa RicaBrazilBrazilBrazil

MexicoBrazilPeruChileBrazilBrazilBrazilBrazilBrazilChile

MexicoMexico

ColombiaColombia

BrazilBrazil

20162016201620162015201520152015201420142014201420132013201320132013201320132013201320132013201320122012201220122012201220122012201120112011201120112011

Special thanks to Jonathan Atkin, Managing Director at RBC Capital Markets for his contribution

*American Tower acquisition of 4,630 BR Towers includes 2,530 towers plus 2,100 exclusive rights**Totals and average exclude the GTP / American Tower deal as it was US-centric


LatAm towerco breakdown by country

AMT Andinas Continental Innovattel/Torresec QMC SBA Torrecom Torres

UnidasPhoenix Tower Int.

Centennial NMS ATP Balesia

Towercos focusing on a single countryBrazil: GTS, Highline, CSS, Skysites, Telecom Torres, Torre Online, AlfaSite, Brazil Tower CompanyMexico: MTP, IIMT, Intelli Site Solutions, Telesites, MX Towers, Vialux, Rent-A-TowerPanama: Torres de PanamaUruguay: Uruguay TorresCosta Rica: Catalina Inc., TocsaPeru: Telecommunications PartnersColombia: Golden Comunicaciones

Mexican market represent near-term barriers to high valuation exits. And the Andean States - namely Colombia and Peru - are getting pretty crowded too, with lease prices being driven down by fierce competition, which raises further concerns with regards to the valuation of future successful sales.

However some companies did manage to exit the market, namely BR Towers which sold its 4,630 sites across Brazil to American Tower for US$978mn, T4U which was acquired by Phoenix Tower International (PTI) in 2015 and Teletower Dominicana, again bought by PTI in the Dominican Republic.

I believe that there are a couple of reasons why towercos could achieve good exits. On one hand, they might hold valuable and scalable portfolios, with good locations, tenants and paperwork. Or they could be hitting a sweet spot by being up for sale at the right time, in the right country, hence representing a good entry point for aspiring towercos or to scale existing businesses.

No matter where these towercos operate and the scale of their portfolios, middle market entities looking at a successful exit strategy should very carefully follow the rules of the game in terms of pricing, paperwork and permitting to ensure the value of their portfolios is maximised upon exit.

Mexico

Shying away from Mexico is almost impossible. TowerXchange is constantly drawn by its dynamics

Brazil Mexico Colombia Chile Peru Costa Rica Panama Nicaragua Guatemala El Salvador Jamaica Honduras Ecuador Puerto Rico Argentina Dominican Republic


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and changing scenarios, even if we consider the tower market over populated.

The recent creation of Telesites, América Móvil’s spin-off, represents a new phase for the local industry with two towercos, Telesites and American Tower, leading the pack in the Build-to-Suit race thanks to their alliances with respectively América Móvil and AT&T.

In spite of a relatively weak demand and a third player - Telefónica - reluctant to commit to any growth plan and uncertain plans from AT&T, Telesites has managed to build as many as 2,009 new sites for its anchor tenant as of Q4 2015. And Telesites is already expanding beyond Mexico.Market analysts have been cautious at predicting site needs in Mexico and have forecasted no more than 5,000 additional co-locations by 2020, a factor that could dampen the tenancy ratio growth expectations of Telesites, American Tower and the wide array of middle market towercos including Mexico Tower Partners, Torrecom, IIMT, Vialux and Intelli Site Solutions.

The government is currently working on a US$7bn shared 4G network - the Red Compartida - which could be an additional factor dampening the demand for new sites in the country. In fact, the shared network would need around 12,000 new sites to function but to date, the bidding process is being delayed and local commentators remain cautious with regards to the actual feasibility of the project.

While TowerXchange forecasts Telesites and


Breakdown of ownership of CALA’s 165,000 telecom towers, Q1 2016

American TowerTelesitesSBA CommunicationsGrupo TorreSurTelxiusOther independent towercosOperator-captive

12874

33782

9487

6500

14754

84971

2883


Mexico - Estimated tower count 27,205


Telesites

American Tower

Mexico Tower Partners

IIMT

Centennial

Torrecom

Intelli Site Solutions

Other independent towercos including Conex

(QMC), NMS Towers and MX Towers

Estimated MNO captive towers

450400

208190

12874

8852

1531

~700~2000

American Tower to maintain their moderated expansion in Mexico, we also remain positive with regards to the potential for consolidation among towercos, especially since there are as many as twenty middle market towercos operating in the country.

Central America and the Caribbean

Costa Rica is the first country beyond Mexico where Telesites is pursuing its expansion beyond Mexico. In fact, Claro has recently assigned a 300-tower BTS project to the Mexican towerco. Telesites will be the sixth towerco in this 2,923 tower market, joining market leaders SBA and American Tower, Continental Towers, TOCSA and recent entrants PTI. Since liberalising the market back in 2008, the Costa Rican market has grown into a stable business environment with relatively good growth potential and a modern regulatory system. In a further attempt to improve the local telecom sector, the Coordination Commission for the Installation or Expansion of Telecommunications Infrastructure (CCIAIT) has recently presented its first Action Plan for Telecoms Infrastructure which aims, among other goals, at creating a record of all telecoms infrastructure of the country, which would be the first of this kind in the region.

Cuba had a population of 11.3mn people and 2.6mn mobile subscriptions at the end of 2014, giving a mobile penetration of just 23%. Over the past twelve months, diplomatic relations between the U.S. and Cuba have been reinstated and there have been an increased ability to transact between the two countries.

Costa Rica - Estimated tower count 2,924

El Salvador - Estimated tower count 1,246



SBA

American Tower

Continental Towers

PTI

TOCSA

ICE

Claro

573450

484

~1000

180

132105

SBA

Continental Towers

Tigo

Claro

Digicel

Telefónica

221

400300

250~25

50


AD_TowerXChange.indd 1 29/07/15 15.27

TowerXchange is keeping a close eye on the island in light of its untapped market and undisputed potential to become a target of international towercos. In terms of towers, Cuba holds approximately 500-700 sites which are currently being shared by radio companies, TV stations and ETECSA, which to date is the only operator active in the country.

Innovattel/Torresec has recently participated to Informática 2016, the IT and telecom forum held in Havana, Cuba. Discussing with TowerXchange on the potential of the Cuban telecom industry to open up to new MNOs and, as a result, to towercos, they commented that there’s still quite a way to go before the Cuban government makes a move towards liberalising the market. However, the change is likely to happen sometime over the next couple of years.

The Dominican Republic has been the target of Phoenix Tower International which grew its local portfolio from zero to 735 sites in just five months. PTI has first acquired local towerco Teletower Dominicana and its 190 towers and lately added 545 sites by closing a deal with Viva, the third carrier of the country, at the time owned by Trilogy International Partners. Along with the transaction, Trilogy sold Viva to local media company Telemicro Group, owned by businessman Juan Ramon Gomez Diaz.

At the end of 2013, the mobile industry became a three-way game between Claro, Orange and Viva, since Orange and Tricom were both acquired

Honduras - Estimated tower count: 1,200


200

Operator captive towers

Continental Towers

~1000

~200


SBA

Torrecom

Continental Towers

Tigo

Claro

Telefónica


599

194

~100

~2000

500

200

Guatemala - Estimated tower count: 3,593

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Given the presence of four creditworthy tenants, it is perhaps surprising that El Salvador is the least penetrated tower market in Central America at 17%. SBA Communications and Continental Towers appear to be the only towercos active in El Salvador, SBA having acquired the majority of Telefónica’s sites.

Guatemala is a complex country with a very competitive tower industry. SBA Communications, Torrecom, Balesia and Continental all operate in the local market which is characterised by a fairly strong regulatory environment and the huge influence of local communities - Consejos Comunitarios de Desarrollo Urbano y Rural (COCODES) - in the approval of new deployments. Local billionaire Mario Lopez owns substantial equity in market leaders Tigo, and also owns most of the land under their towers, which makes the operator reluctant to participate in widespread infrastructure sharing.

Honduras might soon see the entrance of a second towerco, Balesia, which would be the second one to operate in the country in addition to Continental Towers Corp. For now, there’s been little visibility on the local industry and its potential with around 20% towerco penetration and the two carriers - Tigo and Claro - still holding on to their tower portfolios.

Nicaragua is a country where the perceived operational and country risks may be higher

SBA

Torrecom

NMS

Claro

Telefónica

SBA

Continental Towers

PTI

Torres de Panama

Cable & Wireless

Claro

Telefónica

Nicaragua - Estimated tower count: 1,004

Panama - Estimated tower count: 1,561



386

19375

300

50

540

71

90

60

550

150

~100


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than the actual ones. Four towercos including SBA and Torrecom operate in the country and to date, most of their activity is focused on BTS since the inventory of available portfolios is scarce. In fact, Telefónica has sold most of its assets to SBA Communications, Claro retains approximately 300 towers which could be transferred to Telesites in the future and the third operator Xinwei hasn’t started operating yet in spite of its announcements this past January.

Panama holds its place in the regional tower game since the acquisition by Phoenix Tower

International of 60 sites from American Tower. SBA remain market leaders with smaller portfolios held by Continental Towers and Torres de Panama. According to GSMA Intelligence, Panama is a fast grower market in Central America with four active carriers (Cable & Vision, Claro, Digicel and Movistar), 148% penetration rate and 5.9mn mobile connections.

The rest of the Caribbean has been very quiet in terms of towerco activity. I believe that Cuba and the Dominican Republic could represent interesting starting points for towercos looking at entering

this highly fragmented collection of markets, and Phoenix Tower International with its recent acquisitions and Innovattel with its eye on Cuba seem ahead of the competition.

Bolivia Still a virgin market in terms of towerco penetration, Bolivia is a complex country to do business in. However, with three active operators all planning to make considerable investments to upgrade their networks and enhance the quality of their infrastructure, BTS firms could consider making a move in the near future.

Specifically, dominant player Entel has recently announced a US$1bn five year investment plan which will focus mainly on enhancing the quality of mobile infrastructure and ensuring coverage of rural communities. Tigo invested US$130mn to expand its infrastructure across the country and Viva committed to US$80mn in 2015.

The Andean States

In just over a year, TowerXchange came across at least a dozen towercos operating in Colombia, the most recent of which is a joint venture between Innova Capital Partners and Goldman Sachs, Golden Comunicaciones. Of the 15,353 towers in Colombia, 67% are still in the hands of carriers with Claro owning approximately 6,500 sites and Telefónica 2,000.

Interestingly, both companies have created spin-offs and it’s yet to be seen whether their portfolios will eventually be transferred to Telesites and Telxius,

Bolivia: fast facts

Population10.8mn (Q4 2015)

Economy

Mobile sector Carriers

$$$$$$$$$$$$$$$$$$

$$$

Foreign investmentsUS$2.1bn (2014)

Poverty headcountratio 39.3% (2014)

Fitch ratingBB/Stable

(July 2015)

98% SIM penetration(Q4 2015)

Connections 106mn(Q4 2015)

Entel

Tigo

Viva

Inflation 4.9% (2016E)

49.6%

30%

23.1%


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hence reducing the chance of any further sale and leaseback opportunity in the country.

The announced 700MHz auction is yet to take place in spite of being announced back in Q2 2015 and to date and local news outlets suggest that the process should be completed before the end of 2016. And while local carriers still perceive their towers as a competitive differentiator, the lack of a strong regulatory environment doesn’t necessarily favour the infrasharing model.

A National Law designed to ease permitting in Colombia reportedly has not prevented local government from closing sites. And Tigo, Movistar and ETB are sharing their 4G rollout, with roaming agreements in place, which will dampen tenancy demand. However Avantel and DirecTV, with the potential of AT&T investment represent significant upside to tenancy ratio models.

Possibly the quietest of all Andean States, Ecuador has seen the development of its tower market considerably suppressed in light of Claro’s dominant position. The recent acquisition of Innovattel/Torresec’s 130 towers by SBA Communications hints that the latter might be looking at developing its presence in the country but to date, we are yet to see other towercos active in Ecuador. In fact, Torres Andinas has so far been focusing on Peru and Colombia while Andean Tower Partners is planning a market entry during Q1 2017.

Peru is one of the most interesting countries in the

American Tower

Centennial

Torres Andinas

Phoenix Tower International

Other independent towercos including

Innovattel, NMS, Continental Towers,

Balesia, Andean Tower Partners, Torres

Unidas and Golden Comunicaciones

Estimated MNO captive towers

Telxius

American Tower

Torres Unidas

Torres Andinas

NMS

Innovattel

Claro

Telefónica

Bitel

Entel

Colombia - Estimated tower count: 15,353

Peru - Estimated tower count: 9,118



~100010300

3765

6520023

900

618

600

1358

6002500

2342

1005050


entire CALA landscape, and is a market which is being heavily colonised by towercos. With a total tower count just under 10,000 sites, it’s also one of the least penetrated tower markets in the region with towercos owning 24% of sites. In Q1 2016, Telefónica has transferred 900 sites to Telxius and it would be interesting to see if Claro follows the same path and opens the door to Telesites in the country.

Local sources still suggest that the country might be up for big changes which could considerably reshape the dynamics of the tower industry. In fact, Peru could be the first country to regulate the towerco sector, hence reducing the freedom of action of towercos in terms of prices, conditions and overall business strategy.

Peru’s Ministry of Transport and Communications has called for an increase from their current 9,000 to 22,000 cell sites over the next three years, an increase of almost 2.5x in tower stock. In order to ease the notoriously complex permitting regime, the Congress passed Law N. 29022 back in 2015 which introduced, among other things, the tacit approval of permit requests after thirty days from the initial demand.

Chile has seen its attractiveness to towercos considerably reduced as a result of Law No. 20.599, also known as the Towers Law, which has suppressed the local BTS market with its onerous restrictions on building in saturated or sensitive areas, its somewhat heavy handed attempt to mandate infrastructure sharing, and

its requirements to invest in camouflage, at times compensating local communities.

However, the country still presents a certain degree of opportunity for acquisitive towercos. In fact, of its 8,500 towers, less than 2,000 are currently in the hands of towercos. It must be noted though that with Telefónica and Claro both active in the country, the possibilities for independent towercos to acquire assets are limited to Entel. In fact, Telefónica has already transferred its 328 sites to Telxius during Q1 2016, although it is not clear whether that figure represents all Telefónica’s towers in the country.

In 2015, Entel, Movistar and Claro all started using the 700MHz frequency for their 4G LTE networks, following the 2014 spectrum auction which included with extra coverage obligations including connecting 1,281 remote regions, leading BMI to project that Chile’s carriers would need three to four times as many towers.

Brazil A deep recession combined with associated forex crisis and a less than rosy political landscape have dragged Brazil back into the news for all the wrong reasons. No more talks about BRICs, exploding GDPs, generous investment in infrastructure for major sporting events, and a flourishing economy any more. But we must always keep in mind that Brazil needs thousands of towers to bring its network up to par with other developed markets. With close to 5,000 subscribers per site, the potential for towercos to deploy hundreds of greenfield projects in the country remains, but

American Tower

Torres Unidas

Telxius

Other independent towercos

Estimated MNO captive tower

Chile - Estimated tower count: 8,511


~120

6371

1212

480

328

www.towerxchange.com/meetups/meetup-americas | TowerXchange Americas Dossier 2016 | 23| TowerXchange Issue 16 | www.towerxchange.comXX

currently there is very little new build going on in the country, with carriers shying away from new projects and investments.

In the midst of this challenging phase, the market might be up for some fundamental restructuring with both TIM and Nextel reportedly being up for sale. And while consolidation among carriers seem more likely, the tower market is at a standstill, with middle market towercos struggling to achieve an exit that meets their investors’ ROIs’ expectations.

Carveouts seem more in fashion than SLB these days and Telxius - via its subsidiary Towerco Latam Brasil - has already acquired 1,655 sites from Telefónica. And the real game changer could be América Móvil in the case it decides to transfer its 8,500 towers to Telesites, hence creating the second largest towerco in the Brazilian market.

More insights into the Brazilian tower industry and the current state of play can be found at this analysis.

Paraguay and Uruguay

Paraguay and Uruguay are virgin markets but we are keeping an eye on their potential to open up to the tower industry.

Specifically, Paraguay is host to four operators, namely Millicom’s Tigo, Telecom Argentina’s Personal, América Móvil’s Claro and state-owned Copaco, trading as Vox, who are currently committing to considerable investments to upgrade

American Tower

SBA Communications

Grupo TorreSur

Telxius


Remaining big 4 operators

Other operators including Nextel, Sky Brasil,

Algar Telecom, Sercomtel and ON Telecom

Brazil - Estimated tower count: 54,595


Brazilian independent towercos


CSS

Phoenix Tower do Brasil

Brazil Tower Company

Centennial

Highline do Brasil

AlfaSite

Torres Online

Skysites

Telecom Torres

Allowance for other small towercos

18851

7032

65004557

15000

1000

1655

1203

650

923400

1000

150 514040

100


positive factor for entrepreneurial towercos looking at making their way in what could become the most attractive new tower market in CALA.

Argentina’s new government is committed to making the country an attractive destination for international investors, and local authorities within the telecom sector are currently engaging with TowerXchange to present Argentina and its market potential to the tower industry.

It must be noted that to date, BTS firm Innovattel/Torresec is the only towerco actively operating in the country and has begun constructing sites in several locations and have been assigned search rings throughout Argentina. But we are likely to see more towercos exploring market opportunities in the near future, especially in terms of BTS activity, while we might need a bit more time before the first wave of sale and leasebacks takes place. But local experts bet that it’s just a matter of time!

Conclusions: towercos keep penetrating CALA

In spite of the slowdown of the Brazilian market, the CALA tower industry is continuing its mission to conquer the market and to date, it has reached a respectable 48.5% penetration rate.

With the creation of Telesites, we’ve witnessed the saturation of the Mexican market and are now assessing the potential disruptive effect of its entrance of other countries where Claro is an active player. In the meantime, Telefónica’s carve out, Telxius, is reducing the potential for sale and

their networks, scenario which might create the right conditions for towercos to make a move into the country.

Uruguay offers another enticing telecom landscape with state-owned Antel actively competing with Movistar and Claro and could be another interesting target for towercos looking at new markets to colonise.

To date, TowerXchange is tracking one active towerco in the country - Uruguay Torres - of which we have very little information.

Argentina Last but not least, Argentina is the next big thing and what a few months ago was just speculation about its potential is now turning into action. In fact, while the new Government

Paraguay baseline data (Q4 2015)

Source: GSMA IntelligenceUruguay baseline data (Q4 2015)

Source: GSMA Intelligence

is pushing to put Argentina back on the map of international relations, the country does present an ideal scenario in terms of its telecom industry and cell site densification needs.

Local experts suggests that of the (less than) 16,000 towers built in the country, as low as 12,000 are actually active and with an average of 4,500 subscribers per site, Argentina needs as many as 40,000 but at least 20,000 new sites in the near term, entailing investments of as much as US$3bn.

The country still presents many challenges for international businesses looking at making a move. From inflation all the way to permitting, towercos willing to enter the market do need to juggle many challenges and contribute to the definition of rules and regulations from scratch. But this could be a

116%

159%

SIM penetration

SIM penetration

Population6.7mn

Population3.4mn

Connections7.7mn

Connections5.5mn


140%

SIM penetration

1,500-2,000new sites neededper year 2016-2018

16,000existing towersin Argentina

US$2.2bn:Raised during the 2014

4G spectrum auction

$$$$

US$9bn:expected combinedMNOs investmentsin the next five years

$$$$

35%

Incometax rate

VAT

21%

Wealthtax

1%

1:BTS firmactive inArgentina(Innovattel)

US$7+averageARPU

32-33%:the marketshare of eachof the threetop MNOs

the newregulatorENACOMresultingfrom themerge of

AFSCA

andAFTIC

1

leasebacks in several CALA countries. It will be interesting to see how quickly the two carve outs scale up, how quickly they gear up to focus on co-location sales, and whether third party tenants buy in to them as genuinely independent business partners. With a Telxius IPO to follow soon after Telesites’, we’ll be able to gauge how investors rate these moves also.

In the meantime, new markets generate much excitement among the investment and tower community. Argentina is in the spotlight and could very well become the most attractive tower market over the course of the next two years. And Cuba, Paraguay and Uruguay all seem well aligned to become future targets for towercos willing to explore new opportunities.

TowerXchange originally estimated that the level of towerco penetration could reach 75% by 2020, a figure which might be challenged by current market conditions hampering new deals and investments. However, with both Telesites and Telxius in the mix, we could see considerable assets being transferred in the near future

If you want to find out more about the

evolution of the CALA telecom tower

industry, TowerXchange invites you to join

the third annual TowerXchange Meetup

Americas, which will be held at the Boca

Raton Resort & Club, 16-17 June 2016.

2013

2014

2015

2016 to date

Year

140000

148000

156000

165000

46011

61729

69850

80180

Est. total towers Towers owned by towercos

32%

41%

44%

48.5%

Towerco penetration

The evolution of the CALA telecom tower industry 2013-2016


Argentina: fast facts


Latin America Heatmap

Towercos have acquired the majority of towers from carriers

Towercos have acquired a significant proportion of towers from carriers, but the majority remain carrier-owned. Significant BTS towerco activity also present

Less SLB activity, but plenty of BTS towerco activity

Early stage market for BTS and/or SLB

Negligible towerco activity

Legend


Meetup Americas 201616-17 June, Boca Raton Resort and Club, Boca Raton

A unique networking opportunity with 250 leaders of the CALA telecom tower industry

www.towerxchange.com/meetups/meetup-americas


Global tower market maturationTowercos and infracos now own 61.9% of the world’s 3.4mn towers

By Kieron Osmotherly, CEO, TowerXchange

There remains a pronounced difference in MNOs’ attitude toward passive infrastructure ownership, ranging from North and Northeast Asia, where operators cling to their towers as a primary source of differentiation, to the US tower market, where a significant majority of towers were long since transferred from MNOs to independent towercos, a critical evolution in vaulting the US mobile market from laggard to leadership status. Outside of Northern and Northeast Asia, MENA is the least mature tower market, but a landmark first transaction has already been closed (in Egypt by Eaton Towers, who are closing in on a second deal with counterparts Orange Egypt). A further five decent scale MENA tower transactions are in the pipeline: all three MNOs in KSA are at various stages of bringing their towers to market, while Zain are selling towers in Kuwait and VimpelCom may soon turn their attentions to monetising their Algerian towers. We’ve even heard talk of potential joint venture, operator captive towercos in Bahrain and the UAE. Predicting when, or even if, a MENA tower deal will close is a risky business, but TowerXchange will stick our necks out and say we anticipate towerco penetration in MENA reaching around 14% by the end of 2016, exceeding 20% by the end of 2017, by which time the region will have matured to “launch velocity” status. Our rating of Europe’s maturity as a “launch velocity” tower market indicates both the high quantity of prospective deals in the transaction pipeline, and the relatively low penetration of independent towercos to date, representing just

Read this article to learn:< The scale of the tower industry worldwide and by region

< When will the MENA tower market achieve “launch velocity?”

< Why and where tower transaction deal flow is accelerating in Europe

< Why Asia is currently the fastest growing tower market in the world

< How the increasing maturity of the SSA and CALA tower industries affects market dynamics

Keywords: Africa & ME, Africa & ME Research, Americas, Americas Research, Asia, Asia Research, Business Model, Carve Out, Deal Structure, Europe, Europe Research, Infrastructure Sharing, Market Overview, Multi-Region, Operator-Led JV, Research, Russia & CIS, Sale & Leaseback, Tower Count, TowerXchange Research, Towercos

During Q1 2016 the proportion of the world’s telecom and broadcast towers owned and operated by towercos or specialist infracos rose from 60.3% to 61.9%. A new, parallel industry to retail telecommunications, the tower industry is building the vast majority of the world’s new towers. This 20 year old, US$192bn infrastructure asset class currently owns 2,092,865 of the world’s 3,379,806 towers. In this quarter’s global tower market overview, I’d like to take the opportunity to contrast the maturity of different tower markets worldwide.


13% penetration. Penetration in Europe is topped up to 37% by several large scale joint venture infracos, and a growing trend favoring MNO-captive carve out towercos and infracos, most recently exemplified by Telefónica’s Telxius. The other concentration of carve outs is in Russia, where each of the three leading MNOs has created their own towerco, each with a different purpose: VimpelCom with intent to sell and leaseback ‘National Tower Company’ as soon as their valuation is met, MegaFon with intent to professionalise asset management in ‘First Tower Company’ before sale to a strategic investor, while 5,500 towers have been transferred to “MTS Towers” with the apparent intention of retaining the value created by co-location. The status of Europe as a “launch velocity” market masks a variety of hot and cold regions of activity.


North America

India

SSA

CALA

S & SE Asia (exc India)

China

Europe

MENA

NE & E Asia (exc China*)

Region

140,000

453,500

122,739

165,000

318,263

1,180,000

600,000

139,800

247,600

Estimated tower count

82%

68%

42%

48%

29%

100%

36%

1%

0%

Mature

Mature

Maturing

Maturing

High growth

High growth

Launch velocity

First movers

Dormant

Towerco penetration Tower market maturity

Dormant: negligible towerco activity, almost all towers remain on the balance sheets of MNOs, who still see the network as a primary source of competitive differentiation. First movers: early adopter MNOs are considering the first transactions in the region, but less than 10% towers have been transferred from MNOs to towercos. First mover markets are generally treated with caution by investors, but on the other hand much of the “low hanging fruit” assets may yet to have been picked.

Launch velocity: MNOs are seriously considering monetising their towers, and the first four landmark transactions have taken place, with over 10% of towers in towerco hands. While towercos still don’t own a high proportion of towers, the pipeline of future transactions is starting to fill up. High growth: MNOs have bought in to the principle of partnering with towercos, and there are immediate drivers to monetise assets. Multiple concurrent divestiture processes mean towercos are equally busy raising and deploying capital.

Maturing: deal flow is starting to plateau – an increasing proportion of the investible towers have been absorbed by towercos, whose attention increasingly turns to the integration and leaseup of acquired assets, and the drive to maximise efficiency and profitability. Mature: most of the MNO towers have been acquired, towercos are able to focus their attention on the last improvements to site level profitability and tenancy ratio. Much of the M&A in mature tower markets consists of consolidation between towercos, while those who achieve scale may consider an IPO

TowerXchange market maturity classifications


The aforementioned Russian activity creates a hotspot to the east, which is warming neighboring CIS countries, where tower transactions are forecast from 2017. Another hotspot is in Southern Europe, where Cellnex and EI Towers are battling for control of TIM’s INWIT in Italy, and in Spain where Cellnex now has a peer in Telxius. Considered in isolation, Spain and Italy are certainly maturing markets. Other European tower markets to watch in Q2 2016: Turkey, where Turkcell has stated intent to list their carve-out towerco Global Tower on the local stock exchange; and Germany, where Telefónica’s Telxius has recently taken ownership of

the MNO’s 2,350 towers, where Deutsche Telekom is considering monetising the 27,000 towers in subsidiary Deutsche Funkturm, and where American Tower Germany is raising third party investment. The rest of Northern Europe is a more static market, perhaps because the MNOs of the UK and Scandinavia have organised infrastructure sharing through several joint venture infracos which themselves have delivered some of the prospective efficiency gains of partnering with independent towercos.

It is strange to see a market 100% penetrated by towercos classified only as “high growth” rather than “mature”, but the transformation of China to a co-construction and infrastructure sharing model has happened almost overnight, with China Tower Company (CTC) still building toward capacity. Although over a million legacy towers have been transferred from China’s MNOs to CTC, our categorisation of China as “high growth” stems from the fervent new build market (currently 150,000+ new towers per annum), which is being fought for by CTC and a growing band of independent towercos. To learn more about the structure of the

Comparing towerco penetration worldwide

Sources: TowerXchange, RBC, Delta Partners, Mott MacDonald

N & East Asia exc China 0 / 247,600

towers

48%

CALA 80,180 / 165,000 towers

SSA 51,332 / 122,739towers

Oceania 2,692 / 14,900 towers

82%

1.4%18%

MENA 2,040

/ 139,800towers

USA 114,139 / 140,000 towers

42%0%

100%36%

China 1,180,000 / 1,180,000

towers

S & SE Asia exc India 90,801 / 318,263 towers

Europe 216,538 /600,000 towers

India 308,855 / 453,500 towers

29%68%

* Europe includes JV infracos, broadcast towercos and operator-captive towercos as towercos. Independent towercos own 13%


Chinese tower market, check out the special feature later in this edition. The tower markets of Southern and Southeast Asia are currently the most dynamic and fast growing in the world. Within the region we still have considerable variance of local market maturity, from the “old growth,” mature tower market of Indonesia, where most operator towers that can be sold have been sold, and where three or four larger towercos continue to rollup assets from as many as 35 small independent developers. Then we have high growth markets like Bangladesh and Pakistan; in the latter country towercos own <1,000 towers now, but rumors suggest almost every MNO tower is coming to market (CM Pak notwithstanding). Myanmar is increasingly a category of one; the ‘great towerco experiment’ whereby independent

towercos rather than MNOs led a rollout from the outset, has been a bumpy ride for towercos and MNOs alike, with towerco consolidation coming earlier than some might have anticipated; those who have built quality assets with a disciplined approach to contractual terms will likely prosper. Brazil and Mexico’s status as maturing markets, with little left to acquire from MNOs, brings the CALA region to an overall ‘maturing’ level, yet there is high growth to be found in the Andean States (some would say too high growth, with over 20 towercos putting sticks in the ground in Colombia alone!) In this edition of TowerXchange we take a closer look at the long-dormant Argentinian tower market: has the blue touch paper been lit? Could CALA’s second largest telecom market achieve “launch velocity” in the next 12-18 months?

The tower market in SSA is showing the classic symptoms of maturing. Again, most of the investible towers have been acquired, and this quarter we’ve seen the first towerco consolidation in Nigeria with IHS acquiring HTN Towers and Hotpsot Networks Limited. For the three privately owned members of Africa’s ‘Big Four’ attention turns to the path toward monetisation; integrating their last acquisitions, driving tenancy ratio growth, and instigating operational improvements to enhance site level profitability. The Indian tower market is almost re-maturing after investors seemed to accept that valuations had been recalibrated after four years of restructuring in the wake of the cancellation of 122 MNO licenses. With towers now changing hands for a more palatable ~US$60,000-80,000 each, deal flow has returned to India, again characterised by towerco consolidation rather than sale and leasebacks. The most eagerly anticipated tower deal in India would be the inauguration of a BSNL tower company. This variation of tower market maturity, and variations in operator requirements, has created a parallel set of variant towerco business models; from steel and grass to full power as a service, from huge operator-led infracos capturing value for parents, to lean, fast “build to flip” independent developers. Whether you have an appetite for high growth, high return, high risk opportunities in early stage or fast growth markets, or prefer a more conservative exposure to risk and therefore growth in a more mature market, there is something in this asset class for everyone


61.9%

2,092,865 of the world’s 3,379,806 telecom and broadcast towers are now owned by towercos


See you at our future events!


Meetup Africa2016

Meetup Asia 2016

Meetup Europe 2017

Meetup Americas 2016

19-20 October, Johannesburg

13-14 December, Singapore 4-5 April, London

16-17 June, Florida


Thursday 16 and Friday 17 June, Boca Raton Resort and Club, Boca Raton


To discuss your participation, contact Annabelle on +44 7423 512588 or email [email protected]

Silver Sponsors:Diamond sponsor: Bronze Sponsors:

“TowerXchange is doing a tremendous job for the tower industry in Latin America. The opportunity to get together in one location and exchange ideas over several days with all of the tower companies in our region is truly invaluable”- Jim Eisenstein, Chairman and CEO, Grupo TorreSur

Day One | Thursday 16 June

8:00 Registration and coffee

9:00 TowerXchange’s analysis of the CALA telecom tower industrySpeakers: Kieron Osmotherly, Founder and CEO and Arianna Neri, Head of Americas, TowerXchange

9:45 CXO panel part I: Brazil < Moderator: Jonathan Atkin, Managing Director, RBC Capital Markets < Peter Bendall, Senior Vice President, Macquarie Group< Jim Eisenstein, Chairman and CEO, Grupo TorreSur< Mauricio Giusti, CEO, Phoenix Tower do Brasil < Andre T. Laloni, Managing Director, Head of Brazil and Southern Cone, UBS< Roberto Piazza, General Manager - Brazil, SBA Communications< Douglas Silva, Head of Operations - Brazil, American Tower< Aniko Szigetvari. Global Head - TMT Group, IFC < Chahram Zolfaghari, CEO, Brazil Tower Company

11:00 Strategic partners panel: remote monitoring solutions

11:20 Networking coffee break

11:50 Roundtable session I

12:50 Networking lunch

14:00 CXO panel part II: Central America and the Caribbean< Moderator TBA

< Kurt Bagwell, President - International, SBA Communications< José F. Escobar, Director, Catalina Site Management < Edgar Geidans, Group CTO, Trilogy International Partners< Dagan Kasavana, CEO, Phoenix Tower International< Federico Lorenzana, Country Manager - Costa Rica, Continental Towers Corp.< Maria Scotti, CEO, Torrecom

15:00 Strategic partners panel: energy solution providers


15:50 Roundtable session II

17:00 End of day one followed by drinks reception

19:30 TowerXchange networking dinner

DAY 2 - Friday 17 June

8:30 Morning coffee

9:00 CXO panel part III: the Andean States < Moderator: Eric Crabtree, Chief Investment Officer, IFC < Manuel Aviles, President and Founder, Innovattel/ Torresec< Eric Ensor, COO, Torres Andinas< Fernando García Álvarez, Construction and Network Infrastructure Manager, Entel Peru < Ryan Lepene, Senior Managing Director, Peppertree Capital< Estrella Zaharia, CEO, Andean Tower Partners 10:20 Strategic partners panel: access control and site management platforms


11:10 CXO panel part IV: Mexico < Moderator: Marco Cordoni, Senior Partner, Analysys Mason < Felipe de Antuñano, Co-CEO, Intelli Site Solutions< Mariano Gomez, Vice President, NMS< William Ritchey, Executive Vice President, IIMT< Maria Scotti, CEO, Torrecom< José Sola, CEO, Mexico Tower Partners< Alex Wright, Managing Director, Nau Securities

12:20 Roundtable session III

13:20 Networking lunch

14:30 Roundtable session IV


16:00 The potential of Argentina (and a look at virgin markets)< Moderator: Arianna Neri, Head of Americas, TowerXchange< Miguel Ángel Arrigoni, President, First Capital Markets< Juan Cueria, Vice President and COO, Innovattel Torresec< Clarisa Estol, Secretary of Investment Promotion, Ministry of Telecommunications of Argentina< Guillermo Mulville, Head of TMT for Latin America, IFC

17:00 End of Meetup

TowerXchange Meetup Americas – Draft AgendaBoca Raton | 16-17 June 2016

| TowerXchange Americas Dossier 2016 | www.towerxchange.com/meetups/meetup-americas34

TowerXchange Meetup Americas 2016 | Roundtable sessionsCountry and regional focus:

< Country focus: Colombia - Mariano Gomez, Vice President, NMS

< Country focus: Costa Rica - Federico Lorenzana, Country Manager -

Costa Rica, Continental Towers Corp.

< Country focus: Argentina - Guillermo Mulville, Head of TMT for Latin

America, IFC

< Country focus: Brazil I - Roberto Piazza, General Manager - Brazil, SBA

Communications

< Country focus: Brazil II - Jose Augusto Varela, VP Operations LatAm,

Grupo TorreSur

< Country focus: Peru - Eric Ensor, COO, Torres Andinas

< Country focus: Dominican Republic - Dagan Kasavana, CEO, Phoenix

Towers International

< Country focus: Guatemala and Nicaragua - Maria Scotti, CEO, Torrecom

< Country focus: Mexico - Carlos Tilac, COO, Torrecom

< Country focus: Bolivia - Edgar Geidans, Group CTO, Trilogy International

Partners

< Regional focus: Colombia and the rest of the Andean region - Estrella

Zaharia, CEO, Andean Tower Partners

< Regional focus: Central America - Ricardo Ruiz, International

Operations Director, SBA Communications

< The role of the Ministry of Telecoms for the promotion of the telecom

and tower sectors in Argentina - Clarisa Estol, Secretary of Investment

Promotion, Ministry of Telecommunications of Argentina

< North America best practices: How to evaluate U.S. towerco

investments versus CALA - Sachit Ahuja, VP, Business Development,

Tillman Global Holdings

< North America best practices: Inorganic growth: finding value in

maturing tower markets - Alex Gellman, CEO, Vertical Bridge

Operational and financial focus:

< Project management best practices: from site acquisition to licensing - Eduardo Martins Pedro, COO, AlfaSite< How to build towers with maximum future sale value - David Porte, VP International, SBA Communications< Land aggregators: friend or foe? Michel Buhler, former VP Business Development - LatAm, American Tower< Ground lease management: maximising the value of land - Michel Buhler, former VP Business Development - LatAm, American Tower< How to successfully achieve scale in multiple CALA countries - Dagan Kasavana, CEO, Phoenix Towers International< Entering virgin markets - assessing risks and opportunities - Fernando Rodriguez, VP M&A and Corporate Development, Innovattel/Torresec< Investing in Brazil and beyond: opportunity or risk off? - Peter Bendall, Senior Vice President, Macquarie Group< What do analysts look at when they evaluate towercos and their performance - Alex Wright, Managing Director, Nau Securities< The investibility of Argentina - Miguel Ángel Arrigoni, President, First Capital Markets< Key driver of tenants growth for mature (or maturing) towercos in CALA - Marco Cordoni, Senior Partner, Analysys Mason< What’s next in LatAm Towers – geographic expansion, consolidation and more - Andre T. Laloni, Managing Director, Head of Brazil and Southern Cone, UBS< RAN Sharing - threats and opportunities - Flavio Siqueira, Senior Director - LatAm Business Development, SBA Communications< Master lease agreements best practices - Josh Koenig, VP & Associate General Counsel - International, SBA Communications< Listed towercos: what do equity investors focus on? - Mark DeRussy, VP, Finance, SBA Communications< Lobbying with government to obtain 1 “tower” permit - Senior representative, Mexico Tower Partners< How to scale IoT technology for cell sites while balancing opex and capex - Michael Sothan, Americas Vice President Sales, Acsys< Market landscape with Telesites & Telxius - Senior representative, Mexico Tower Partners< How to succeed at Build-to-Suit programmes in rural areas - Chahram Zolfaghari, CEO, Brazil Tower Company


Tower Industry Value Chain

TowerXchange Meetups bring together 250+ business leaders representing the entire telecoms and broadcast infrastructure ecosystem. TowerXchange engages with MNOs who retain their passive infrastructure, and with 151 independent towercos and network sharing joint ventures which between them have acquired or built over 2,032,800 towers worldwide.

TowerXchange also maintains relationships with over 500 investment and advisory firms who facilitate tower transactions.

TowerXchange explores the implications of tower transactions for the supply chain: from tower designers and manufacturers to tower construction and O&M firms. The TowerXchange community engages with every major telecom energy equipment and service provider worldwide, including an emerging class of credible ESCOs. We track over 30 different RMS and ILM solution providers, as well as leaders in access control and H&S solutions for cell sites. And we connect the passive infrastructure ecosystem with innovations in microcells, small cells and DAS as well as fibre, microwave and satellite backhaul.

The TowerXchange community is brought together by the renowned TowerXchange Journal, circulated to 15,000 tower industry leaders worldwide. The tower industry’s leaders gather annually at TowerXchange Meetups – we look forward to meeting you there!

Who you will meet

Fibre, microwave, satellite backhaul Microcells, small cells & DAS Active equipment

Tier 1 OEMs

Mobile Network Operators

Investors: private equity, DFIs, debt finance, infrastructure funds

Law firms

Group level strategistsC-suite & network planners at local OpCos

Outsourceto

Strategic consultancyDue diligenceDemand modelingAsset register audits

Independent TowercosSell co-locationsGenerate amendment revenueBuild-to-suitAchieve SLAsEfficiency programmesOptimise supplier contracts

Transfer assets to

Construction servicesTurnkey infrastructure rollout Tower design & manufactureImport, customs & delivery Site acq, leasing & permitting Installation of towers Tower strengtheningDecommissioning

Dynamic assets

Energy equipmentDiesel gensetSolarWindFuel cell

BatteriesRectifiersInvertersLine conditioningPIUs

Air conditioning Lightning protectionControllerVoltage regulatorAlternator

Managed service providers

ESCOs

Static assetsTowers & mastsSheltersBracketsEnclosuresLightingFencing

0&M servicesMaintenanceStaffingSpare partsSecurityRefueling

Energy as a service

Monitoring & managementRMSIntelligence/analysisSite managementJob ticketingAsset lifecycle platform

Access control

Subcontract

Opex modelsVendor financeDistributed generationCommunity power

Subcontract or in-house

Outsourceto

Investment management advisors


80-90% of the leading towercos and MNOs attend

At other telecom events, a maximum of around 10-15% of the CXOs who lead tower strategy for MNOs and towercos are in attendance. At TowerXchange we regularly attract multiple senior representatives from 80-90% of the towercos active in any region, as well as the majority of MNOs. And thanks to our unique structured networking round tables, everyone has access to these decision makers.

Laser beam focus on towers

Another problem with other telecom events is that passive infrastructure is typically hidden away as an under-appreciated small part of a broader show. The huge audience of middle management, device and VAS influencers at other events dilutes access to the few tower decision makers present. In comparison, TowerXchange has been described as a “networking club for tower geeks” – everyone you meet at TowerXchange is focused on towers, and everyone you meet is a decision maker.

Proven over seven past events attended by over 1,000 decision makers, TowerXchange Meetups are unique executive retreats for the most influential men and women in telecoms infrastructure. Held annually in Africa, Asia, CALA and Europe, we use small group round table breakouts to give participants unique access to the key stakeholders in the telecom tower industry in each country.

What is a Meetup?

Accelerate vendor selection

If you want to buy telecom tower structures and accessories, energy equipment, energy services, RMS, ILM, access control, H&S equipment, or if you want to contract with tower construction and O&M firms, then

Every TowerXchange expo has sold out

Curated expo of proven suppliers


the private expo at the TowerXchange Meetup provides a ‘who’s who’ of proven passive infrastructure equipment and service providers.

Identify opportunities for your business today…

TowerXchange introduces each Meetup with our proprietary research, defining the size of the tower market in each country, identifying who owns the towers today and predicting the future tower transaction pipeline. We also track network consolidations, extensions and densification, and

examine ownership of energy assets and the prospects for energy service providers.

…And opportunities for your business tomorrow

We use MNO and towerco CXO panel sessions to understand the future of the tower industry. What has been the progress of tower transactions and of portfolio integration? What future acquisitions are planned? How is capex being deployed? What are the priorities of efficiency programmes? Are opex-sharing models being explored? Are microcells, small cells and

DAS being rolled out?

Unique structured networking

TowerXchange’s renowned round table breakouts are led by an expert moderator, but everyone’s opinions and questions are welcomed. Each round table focuses on a specific country, financial or operational issue. You can attend three or four round tables at each Meetup. Register now to secure your choice of round table and tailor your agenda to meet your networking objectives!

Unique round table breakouts


Catalina Site Management, DirectorContinental Towers Corp, Information OfficerContinental Towers Corp, Country Manager - Costa RicaContinental Towers Corp, COODelmec, Chief Executive OfficerEI Towers, Chairman, TowerTelEI Towers, CFOEntel SA, Gerente de Construcción e Infraestructura de Red - PeruEurasia Telecom, CEOEVEN Telecom, CEOFirst Corporate Finance, ManagerFirst Corporate Finance, Chairman & CEOFlash Technology, Director - Business Development, International and AirportGreenPole, CEO

TowerXchange Meetup Americas 2016 - latest attendee list (17 May 2016)

Accruent, Regional Vice President - TelecomAccruent, Sr. Manager, Product Management & MarketingACSYS, CEO and FounderACSYS, VP Sales AmericasAJ INGENIEROS, CEO - PeruAJ INGENIEROS, CEOALFASITE, OwnerAmerican Tower Corporation, Head of Operations - BrazilIndependent consultant, Independent consultantAnalysys Mason, Senior PartnerAndean Tower Partners, CEOAscot Industrial, SVP Business DevelopmentAscot Industrial, VP & CEOASTEM, Managing DirectorBrazil Tower Company, Chief Executive Officer

Grupo TorreSur, Chairman and Chief Executive OfficerGrupo TorreSur, Vice President, Operations - Latin AmericaGS Yuasa Corp, Assistant Manager - Industrial Batteries DepartmentGS Yuasa Corp, Regional Manager - EMEAHeliocentris Industry GmbH, TBAHighline do Brasil, Business Development DirectorHightel Towers SpA, COOHightel Towers SpA, CEOIB Wave, Director of Sales CALAieng Group, COOieng Group, COOIIMT, Executive Vice PresidentInnovattel/Torresec, Vice President - Merger, Acquisition and Corporate DevelopmentInnovattel/Torresec, Vice President and Chief Operating OfficerInnovattel/Torresec, President & FounderInnovattel/Torresec, Vice President - ComplianceIntelli Site Solutions, SAPI de CV, Co-CEOInternational Finance Corporation (IFC), Head of TMT for Latin AmericaInternational Finance Corporation (IFC), Chief Investment OfficerInternational Finance Corporation (IFC), Global Head - TMTInvendis Technologies India Pvt Ltd, CTOInvendis Technologies India Pvt Ltd, CEOLulutech For Advance Technology co. ltd, GMMacquarie Group, Manager


Macquarie Group, Senior Vice PresidentMadison Dearborn Partners, DirectorMadison Dearborn Partners, Vice PresidentMadison Dearborn Partners, Managing DirectorMCM, Inc., ChairmanMer Group (Telecom Division), Latin America - Sales and Business Development DirectorMexico Tower Partners, Director of Operations and DevelopmentMexico Tower Partners, CFOMexico Tower Partners, CEOMexico Tower Partners, Director - Legal AffairsMexico Tower Partners, Director, Mergers and AcquisitionsMinisterio de Comunicaciones de Argentina, Secretaria de Promoción de InversionesMVP Capital, Managing DirectorMX Towers, CEOMX Towers, CFOMX Towers, COONau Securities, Managing DirectorNeptuno USA, Executive Vice Presidentnexsysone, Chief Executive OfficerNMS Towers, Executive Vice PresidentNMS Towers, CEONorton Rose Fulbright, TBANorton Rose Fulbright, TBANorton Rose Fulbright, TBAOrange, Manager of Towerco Relationships and ContractsPeppertree Capital Management Inc, Senior Managing DirectorPlanetary Power, CEOPlanetary Power, VP - ProductPhillips Lytle LLP, Partner

Phoenix Tower do Brasil, CEOPhoenix Tower International, Chief Executive OfficerPhoenix Tower International, VP Sales & Development, South AmericaPhoenix Tower International, Corporate DevelopmentPhoenix Tower International, LATAM General CounselPhoenix Tower International, Vice President, Mergers & AcquisitionsPhoenix Tower International, CFOPhoenix Tower International, Vice President - OperationsRBC Capital Markets, Managing DirectorRedFlow Energy Storage Solutions, VP Sales, AmericasSBA Communications Corp, CEOSBA Communications Corp, Operations DirectorSBA Communications Corp, Vice President -

Business DevelopmentSBA Communications Corp, Vice President - InternationalSBA Communications Corp, Business Development DirectorSBA Communications Corp, President and Chief Executive OfficerSBA Communications Corp, VP & Associate General Counsel - InternationalSBA Communications Corp, President, InternationalSBA Communications Corp, Vice President, Mergers and AcquisitionsSBA Communications Corp, VP FinanceSBA Communications Corp, Senior Vice President of Mergers & AcquisitionsSBA Communications Corp, General Manager - BrazilSummit Wireless Infrastructure, LLC, VPSummit Wireless Infrastructure, LLC, CEOTelesites, Operations DirectorTillman Global Holdings, Vice President - Business DevelopmentTorrecom, Chief Executive OfficerTorrecom, Managing PartnerTorrecom, COOTorres Andinas, COOTower Engineering Solutions, LLC, PresidentTrilogy International Partners, Group CTOUBS, Managing Director - Head of Brazil and Southern ConeVertical Bridge, CEOZamil Infra Pvt Ltd, Vice President- SalesZamil Infra Pvt Ltd, Business DevelopmentZamil Infra Pvt Ltd, CEO


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Access to MainMeetup room

Entrance /Camino Foyer

Floorplan


Our sponsors and exhibitors

Thank you to our 2016 sponsors

SBA Communications

SBA Communications Corporation is a first choice provider and leading owner and operator of wireless communications infrastructure in North, Central and South America. By “Building Better Wireless,” SBA generates revenue from two primary businesses - site leasing and site development services.

In our site leasing business, SBA leases antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts. SBA owns and operates over 24,000 towers across North, Central and South America. We build our towers at the request of wireless carriers, leveraging our in-house experience in site acquisition, zoning and construction. Our ability to offer carriers a comprehensive portfolio of communication sites is complementary to our tower ownership business. Currently, SBA manages approximately 5,000 communication site locations on behalf of third-party landlords.

Through our site development services, SBA offers wireless service providers assistance in developing their own networks. Our services include site identification and acquisition as well as obtaining zoning approvals and permitting for networks representing all technologies. SBA also provides a broad range of cell site equipment installation, optimization and integration services. Our extensive site development experience includes participation in the development of more than 45,000 communication sites.

www.sbasite.com or call 800.487.SITE

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Acsys

Acsys is a specialized towerco security and field service management software provider. Recognizing the telecom industry’s relentless drive to efficiency, we design solutions to accelerate you forward. Our software and mobile applications in combination with military-grade access control hardware form a 4 tiered tool for: Flexibility, Efficiency, Productivity, and Security. Our solutions are designed to improve your site operations through the near elimination of theft, reduced inefficiencies, vendor and ticket auditing, and real-time remote control of field technicians. In the age of Big Data, Acsys gives you the intel you need to offer your tenants a better experience while reducing your OPEX. Our expert team of mechatronic security, software development, and telecom professionals represent 14 nationalities and have combined their expertise to deploy the Acsys solutions in nearly 50 countries around the globe. Acsys is ISO 9001 certified and a preferred supplier of many of the biggest names in the telco industry. Acsys - solutions built to improve your bottom line.

www.acsys.com

Siterra, An Accruent Product

Siterra, an Accruent Product, addresses the software needs of tower companies to sell co-locations, upgrade capacity, build-to-suit, maintain accurate asset registers, manage maintenance, and collaborate with vendors operationally as well as consolidate and integrate tower-related software technically. Sixteen of the towercos and infracos that TowerXchange tracks are current Siterra customers, spanning 18 countries and five continents. The first version of the Siterra site management platform was released in 2001. 100,000 users later, Siterra has become the industry standard, must-have operating software for tower companies today. Accruent works with its leading towerco customers to jointly develop new features that are deployed regularly through the SaaS platform to constantly improve customer value. Accruent has developed global process standards with local flexibility to pair with best-in-class software functionality.

Accruent’s telecommunications division serves some of the world’s largest mobile network operators and service providers in addition to tower companies, helping link employees from different organizations in the industry to collaborate to projects. Accruent is the largest independent provider of commercial property management software, serving the telecom, retail, education, healthcare, and corporate markets with over 4,400 customers in 120 countries.

www.accruent.com

Invendis

Founded in 2007, Invendis Technologies India Private Ltd.

is an M2M/IOT company based out of Bangalore. Invendis

designs and delivers IOT technology-enabled business

solutions for Telcos & Towercos to provide seamless

services to their clients.

Our core products and services include front end

equipment, sensors, transducers, business applications,

systems integration, product engineering, installation,

maintenance and 24X7 Global Monitoring & IT

infrastructure services. Invendis also specialises in

deploying complete range of Remote Monitoring &

Energy Optimization services for the data sensitive

infrastructures.

Invendis pioneered customizable IOT enabled Front End

Monitoring & Controlling equipment, which empowered

Towercos with access to real-time Monitoring & Energy

optimization solutions in shortest possible time.

In a span of 8 years, Invendis has set a global footprint

with over 1 lakh remote assets across Asia, Middle-East,

Africa & Europe.

www.invendis.com

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Our sponsorsNexsysone’s all-encompassing software platform is used

by some of the largest technology upgrade roll-outs in the

USA, as well as some of the largest greenfield deployments

in Asia such as in Myanmar where operators and tower

companies use nexsysone to enable the sharing of network

infrastructure.

The nexsysone’s advance software module ‘towerone’

is specifically tailored to make easy the tower sharing

process that tackles the typical technical, contractual and

commercial complications that ultimately stop the common

objective of reducing operational costs via site sharing.

www.nexsysone.com

Vinson & Elkins RLLP

Vinson & Elkins is one of the oldest and largest

international law firms, with approximately 700 lawyers

located in 15 offices around the world.

Our global telecommunications team has extensive

experience advising on international telecoms and

telecoms infrastructure transactions. We have significant

industry experience, advising on telecoms transactions

in numerous countries. Our telecommunications advice

includes acquisitions and disposals, debt and equity

financing, infrastructure development, operational

arrangements, regulatory matters and dispute resolution.

We also have significant experience in the negotiation and

drafting of sale and purchase, debt and equity financing,

master lease, build-to-suit, site management and service

level arrangements; and have played a prominent role in

complex fibre transactions.

www.velaw.com

PHOENIX TOWER INTERNATIONAL and PHOENIX TOWER DO BRASIL

Phoenix Tower International (“PTI”) and Phoenix Tower

do Brasil (“PTB”) own and operate towers and other

wireless infrastructure and related sites throughout Latin

America, the Caribbean and the United States. PTI and

PTB currently own and operate wireless infrastructure in

Costa Rica, Panama, the Dominican Republic, Colombia,

the United States and Brazil.

PTI and PTB are devoted to helping our wireless

infrastructure partners—customers, sellers, landlords,

and communities—achieve their goals. Focused on the

principles of unwavering hard work and integrity, we

demonstrate this mission every day through the fair and

collaborative manner in which we deal with our business

partners and the dedicated operation of the wireless

infrastructure sites we own and operate.

www.phoenixintnl.com

AUSONIA

AUSONIA provides specific power solutions for any typical

telecom application (STANDBY GENSETS, OFF GRID BTS

POWER UNITS, HYBRID SOLUTIONS, MOBILE POWER

STATIONS, NO-BREAK POWER SYSTEMS, etc.), successfully

certified by 12 YEARS on FULL OPEX model.

Thanks to its unique technology, based on VARIABLE SPEED

DC GENSETS with mechanical efficiency, AUSONIA offers

a wide portfolio of modular HIGH EFFICIENCY ENERGY

SOLUTIONS, specifically designed to power off-grid / bad-

grid BTS sites and totally monitored and controlled by

remote through a dedicated web-based system. Such power

solutions are designed to significantly reduce the OPEX and

TCO of the Telecom Operators and Tower Companies.

www.ausonia.net

nexsysone

Nexsysone is your one-stop solution that harnesses the

power of its advance software modules through a single

unified interface to address the needs of operators and

tower owners in planning, efficiently maintaining and

effectively sharing their infrastructure, thereby saving huge

operational costs and enhancing ROI on their CAPEX.

Bronze Sponsor:

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Our sponsors and exhibitors

Ascot International

HYBRID GENERATORS DESIGNED FOR TELECOM and TOWER OPERATORS that want to enter into a multi-tenancy agreement – CAPEX & OPEX PACKAGES from 5 to 60 kW load. More than 30 years of experience in the power sector and 34,000 installations in the Telecom Market worldwide make Ascot Industrial a leader for tailor made solution to meet customer needs. A field-proven, modular, flexible, and scalable plug & play solution designed to guarantee cost-effectiveness and reduce maintenance expense - maximizing customer uptime and satisfaction.

Product Portfolio:< High Efficiency Diesel / LPG / Natural Gas AC Generators 5 kW up to 2 MW< Variable Speed and Scalable DC Generators 5 to 60 KW< Full Hybrid Solution (Generator + Battery + Renewable Energy Integration + Remote Monitoring)

www.ascotinternational.com

GS Yuasa

GS Yuasa is a Japanese company formed in 2004 by the merger of two large 100 year old battery manufacturers, Japan Storage Battery and Yuasa. At US$3.6B in sales, GS Yuasa is one of the worlds largest battery manufacturers.

GS Yuasa manufactures a full line of technologies including

lithium, lead acid, nickel metal hydride, and nickel cadmium for the automotive, industrial, and specialty battery markets. Especially for Telecom market, we have developed a 48V lithium ion battery module that has outstanding cyclic life and charge acceptance that can reduce the runtime of generators and the total cost of ownership of telecom base stations.

With 40 affiliates in 17 countries, GS Yuasa has a worldwide presence operating under the GS Yuasa, GS, and Yuasa brands

www.gs-yuasa.com

Abloy

ABLOY secures business operations on land, at sea, and in the air – in all circumstances. Abloy has a proven history of telecommunication business for decades. Along with the new technology in telecom business Abloy has introduced new methods and systems to create value and fast pay-back time to telecom customers. Abloy provides a complete solution including project management. Combining mechanical and electromechanical features ABLOY PROTEC2 CLIQ offers double security with wide internationally tested and approved product range. Remotely controlled PROTEC2 CLIQ system enables to control sub-contractors activities on sites reducing management costs and providing traceability. Several telecom customers have chosen ABLOY solutions to be leaders in fast developing telecommunication world.

www.abloy.com

NorthStar

NorthStar is an industry leader in designing and manufacturing high performance lead-acid batteries and high efficiency

telecom cabinets. The company has state-of-the-art facilities in the USA and Sweden, and their products are used in more than 120 countries worldwide. NorthStar premium thin plate AGM batteries deliver long life at elevated temperatures, with faster recharge and superior PSOC cyclic performance. NSB Blue Batteries are today reducing 85% of diesel generator run time in offgrid telecom applications. The newly launched NorthStar Academy program will help customers to prolong their battery life and save energy in their telecom network.

www.northstarbattery.com/1/2/3.php

Metalogalva

TELECOM TOWERS MANUFACTURER

Quality products at fair prices. Company with 42 years

experience. Young and flexible team. 400 employees; 30

engineers. 100 000 tons galvanizing capacity (year). 14 welding

and plasma robots. 6.6M€ Investment on new equipments.

Qualifications:

- QUALITY MANAGEMENT SYSTEM ISO 9001

- RDI MANAGEMENT SYSTEM CERTIFICATE NP 4457

- ENVIRONMENTAL MANAGEMENT SYSTEM ISO 14001

- MANAGEMENT SYSTEM CERTIFICATE

- OCCUPATIONAL HEALTH AND SAFETY OHSAS 18001

- SPECIAL CERTIFICATION FOR GALVANIZATION for German

- Norm DASt – GUIDELINE 022

Verification:

- QUALIFICATION OFMANUFACTURES TO WELD STEEL

STRUCTURES according to DIN 18800-7 Level “E” <EC

CERTIFICATE FACTORY PRODUCTION CONTROL (FPC) EN 1090

– 1/2 – EXC3

www.metalogalva.pt/pt/

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Our exhibitors

If you’d like to find out more and request a

bespoke proposal, please contact Annabelle

on +44 7423 512588 or email

[email protected].

Does your company provide products and services to the CALA telecom tower industry

Cotech Tower Services

COTECH was incorporated in 2006. We specialize in the

provision of ROPE ACCESS Inspection Repair and Maintenance

Services. Skills ideally suited to the vertical tower industry.

Our qualified, trained and highly skilled work force can

address your next project with safety, practicality and speed

to market. IRATA Industrial Rope Access * SPRAT -Rope Access

Approved * Comtrain Approved.

* Rope Access- For Safety, Speed and Cost Effectiveness

http://www.cotechtowerservices.com

Mer Group

MER Group is a global leader in wireless infrastructure. We supply cutting edge turnkey projects for cellular sites, from the design stage, tower manufacture and supply, site commissioning and installation. MER Group’s tailor-made solutions meet all the needs of a modern operator, and specializes in the growing need for rural low-cost sites supporting hybrid solar energy.

Established in 1948 Mer Group (TASE: CMER), has a substantial global footprint with approximately 30 subsidiaries (10 in Africa), and over 1,200 employees. The Group maintains a diversified portfolio focusing mainly on telecom, security and the CleanTech sectors.

www.mer-group.com/solutions/wireless-infrastructure

Redflow

Redflow Limited is an energy storage specialist that has developed the world’s smallest flow batteries. Redflow’s unique flow batteries are designed for stationary energy storage applications ranging from its ZCell home battery to its ZBM battery range for commercial, telecommunications and grid-scale deployment with installation globally. Redflow is a publicly-listed company (ASX: RFX) that operates R&D facilities in Australia, as well as offices in the US and Europe. Produced in North America by Flex, one of the world’s largest manufacturing companies, Redflow’s high energy density batteries are sold, installed and maintained by a global

network of system integrators.

www.redflow.com




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Country-specific analysis

Since the second edition of the TowerXchange Meetup Americas, we’ve continued to deepen and enhance our research and are now able to offer our readers updated content with regards to several CALA countries and their telecom tower industry.

In addition to TowerXchange’s editorial and roundtable reports, readers can find out the views of the International Finance Corporation on some of the countries where they are actively involved. This year’s dossier incorporates insights into some virgin markets such as Cuba and Bolivia

as well as new targets to the industry such as Argentina.

Don’t miss:48 Mexico53 Caribbean58 Central America75 Colombia79 Peru83 Bolivia86 Brazil93 Chile97 Argentina


Is Telesites a force to bereckon with?My views on the Mexican towerco and its growth potential

Necessity is the mother of invention and Carlos Slim had to create Telesites to address the regulator’s concerns about the dominant position of América Móvil in the Mexican telecom market. The story is well known to everyone but since its debut on the Mexican Stock Exchange, back in December 2015, Telesites’ shares have failed to impress and many jumped to the conclusion that the towerco was nothing but a financial exercise and a mechanism for the Mexican giant to keep operating and avoid IFETEL’s further restrictions.

The company’s trading debut was met with lukewarm reactions from the market and many analysts recommended selling as early as two days after its IPO on 21 December 2015. Another factor that drove the initial sale of shares was the initial assignment of Telesites’ shares to América Móvil’s shareholders as a condition of the spin-off. A fact that forced many investors to sell their shares to meet composition requirements for their portfolios.

Many investors sold their shares within one month of trading to re-balance their positions and drove the initial valuation of the stock down. In fact, Telesites started trading at MX$12.9 and is now stable in the 10s, with some analysts forecasting further drops within this year.

Telesites’ performance in the stock market received plenty of media coverage due to its link to Carlos Slim, the second richest man in the world with an estimated net worth of US$77.1bn, and the relative speed at which the spin-off came to life, mostly due to the pressure of the Mexican regulator.

Read this article to learn:< Expectations versus reality: Telesites growth pattern to date

< Is 1.5x a realistic tenancy ratio by 2020?

< How many towers are needed in Mexico by 2018?

< Towerco KPIs applied to Telesites: papers, assets, permits, rates and growth

Telesites isn’t just a new entity in the Mexican tower market, but a towerco evolved from the genes of one of the strongest mobile network operators in the Central and South American telecom landscape. A towerco which started trading with close to 11,000 towers in the unique Mexican tower market. Analysts have been underwhelmed with Telesites, and the company’s IPO was followed by a swift devaluation. However, closer analysis reveals a good reason for the volume of post IPO sales, while Telesites build volume has been impressive. The key challenge remains achieving the company’s bullish forecast of a tenancy ratio of 1.5 by 2020.

Keywords: AT&T, American Tower, Americas, América Móvil, Build-to-Suit, Carve Out, Co-locations,

Editorial, IFETEL, Investment, MLA, Mexico, Regulation, Telefónica, Telesites, Tenancy Ratios, Towerco,

UBS, Valuation

By Arianna Neri, Head of Americas, TowerXchange


Organic growth and tenancy ratio: expectations vs reality

But if we look beyond the dynamics of the financial market, how is Telesites doing as a towerco in Mexico? Did Mexico need it and if so, is the company likely to meet the goals it set for itself?

Telesites originally forecasted organic growth plans of as many as 1,000 new towers per year, exclusively for its anchor tenant América Móvil. A planned growth considerably higher than the expectation of any other listed towerco in the CALA market. Along with its organic growth plans, Telesites shared tenancy ratio goals of 1.5x by 2020.

In terms of organic growth, in 2015 the company has been overachieving and grew its portfolio from 10,865 (Q1 2015) to 12,874 (Q4 2015), adding 2,009 new sites in less than twelve months of operations. Its original plan to reach 18,000 new sites by 2020 seems more achievable now than when first announced.

If Telesites was to maintain this growth pattern, we would see its tower count surpassing 20,000 by 2018. However, beside América Móvil’s expansion plans, I am not sure the other carriers are likely to greatly contribute to the towerco’s growth.

On one hand Telefónica doesn’t have a history of high investments in Mexico and isn’t likely to bring seizable business to Telesites, particularly given that Telefónica is currently creating its own carve-out towerco, Telxius. And the remaining player in

the market, AT&T, is reportedly reducing its new build plans having audited assets acquired from Nextel and Iusacell.

In 2015 American Tower renewed a 14-year global MLA with AT&T which covers the U.S. as well as Mexico and referred to expectations for “double-digit organic growth” in the country, which hints that the alliance between AT&T and American Tower could include the carrier’s new sites in Mexico.

As said, AT&T isn’t likely to build aggressively in Mexico. In fact, they originally forecast around 3,200 new sites (between swaps and new builds)

by 2018 but this number could be reduced since sites acquired from Nextel have greater potential of utilisation than originally thought.

The government’s planned shared 4G network (Red Compartida) could further dampen the demand for new sites but for now the project is still up in the air. In fact, the bidding process has been postponed to give more time to the Secretariat of Communications and Transport (SCT) to deal with the requests for clarification submitted by the contestants. In order to function, it’s been estimated that the Red Compartida will require around 12,000 new sites at a cost of US$7bn. But to date, many seem sceptical with regards to the likelihood of this

Source: TowerXchangeTelesites tower count


10,865

12,55512,874

Q1 2015

15,000

12,000

9,000Q4 2015Q3 2015Q2 2015

mega-project ever reaching scale.

In terms of tenancy ratio, Telesites’ outlook to bring it up to 1.5x by 2020 seems bold. First of all, América Móvil’s new builds - which are likely to be 100% developed by Telesites - will dilute its tenancy ratio and, as previously discussed, Telefónica and AT&T may contribute only marginally to its growth.

Experts at UBS have forecasted the demand for new sites to reach 5,000 by 2020 and commented that

“even with Telesites taking 80% share we believe this will drive its tenancy ratio to only 1.24x by 2020.” This scenario is created on the premise of an AT&T/American Tower alliance which would exclude Telesites from any BTS project assigned by the U.S. operator.

As previously mentioned, Telefónica has a history of low investments in Mexico and many Mexican players have confirmed that to date, the Spanish operator hasn’t announced any change of strategy.

Telesites value considerations

Looking at critical considerations to maximise the valuation of a towerco, I’d like to compare them against Telesites’.

PAPER

América Móvil’s dominant position in the telecom sector has spread its effects on to Telesites, which is subject to peculiar rules aimed at de-risking its

Tenancy ratio to expand: 2015-2020

2015e

Total towers Tenants Tenancy ratio

22,000 1.5(x)

1.4

1.3

1.2

1.1

20,000

18,000

16,000

14,000

12,000

2016e 2017e 2018e 2019e 2020e

Source: UBS Estimates

“

“

Experts at UBS have forecasted the demand for new sites to reach 5,000 by 2020 and commented that “even with Telesites taking 80% share we believe this will drive its tenancy ratio to only 1.24x by 2020.” This scenario is created on the premise of AT&T/American Tower alliance which would cut out Telesites from any BTS project assigned by the U.S. operator


preponderance in the Mexican market. Specifically, Telesites must offer equal terms and prices to all its customers and publicise the terms and conditions as well as prices.

Additionally, Telesites is subject to ad-hoc regulatory inspections which are a definite incentive for the company to ensure its paperwork is always up to date and in order.

ASSETS

At the time of the spin-off, América Móvil didn’t transfer all of its assets to the new entity and possibly retained the core of its portfolio to avoid having to share it with its competitors. However, with close to 13,000 sites (or 50% of all sites in Mexico) in its portfolio, Telesites has much to offer to its customers.

It’s important to highlight that América Móvil didn’t

only build towers but added so-called telecom oasis to its portfolio. These sites are highly remunerative commercial centres filled with stores, restaurants and services, where cables are turned into works of art and towers become much more than steel and grass.

An example is the Green Corner, located in a building owned by Carlos Slim. It hosts a massive telecom switch on the last floor and has a tall telecom tower on top. There is a restaurant on the top floor whose rooftop is entirely covered by solar panels. Instead of hiding cables and equipment, they became part of the design, along with a monitor showing how many kW are being generated by the site.

This reminds us that Telesites isn’t just a towerco. But a towerco created by a King Midas whose empire encompasses virtually every industry in Mexico, including telecoms, education, health care,

real estate, media, retail and financial services.

It’s unclear whether these oasis have been transferred to Telesites but in any case I am convinced that the towerco will meet high quality standards and excel at building sites.

PERMITS

Permitting is one tricky business in most countries in CALA. And obtaining municipal permits in Mexico isn’t easy.

Having been in the business for decades, I am sure América Móvil knows its way around the complex local permitting system and Telesites can count on the experience of its parent company on this matter.

RATES

As previously mentioned, Telesites is forced to publicises its terms and conditions and offer fair prices to its customers by IFETEL, in light of its preponderance in the market.

Telesites rent prices are aligned with the typical lease rates charged by Mexican towercos. In fact, in 2015, the average net monthly rent per tenant in 2015 was MX$18,600 (~US$1,050) plus land rent pass-through of around MX$10,000 (~US$570).

GROWTH

Growth is indeed the most thorny aspect of

Five critical considerations to maximise towerco valuations

Paper Assets Permits Rates Growth


all. In fact, if on one hand Telesites might have overestimated its tenancy ratio growth as well as the demand for new sites by Telefónica and AT&T, we need to remember that Mexico still needs as many as 70,000 new sites to reach its desired coverage and enhance its capacity.

Even with the Red Compartida actually happening, we are talking about thousands of new sites needed to bring Mexico’s mobile services in line with the rest of OECD countries. And in my view, there is only one mobile network operator - for now - able to satisfy the cell site densification needs of the country. And that is América Móvil.

Far from the - sometimes abstract - dynamics of the stock market, Telesites is a tower company. And its business is to build towers in Mexico (and beyond). So far, Telesites has added 2,009 sites in Mexico in less than a year, which seems quite an impressive result to me.

There is much uncertainty about Telesites’ growth potential but I would argue that the CALA tower industry as a whole is an uncertain business, as shown by the hard times faced by Brazilian towercos after years of excitement. And Mexico is simply no different. With as many as twenty-three towercos ranging from Mom and Pop shops to listed companies such as Telesites and American Tower, the country is a complex place to do business and growth forecasts are unpredictable just like anywhere else in the region.

It must be added that Telesites is already expanding

beyond Mexico, with 300 sites being built on behalf of Claro in Costa Rica and the potential to start operations in fourteen other countries in CALA, a move which could turn the towerco into the largest and most regionally widespread towerco in the region.

Telesites is likely to face several challenges along its path towards success. Regulatory limitations, competition from the best in class such as American Tower, Mexico Tower Partners and SBA Communications (outside of Mexico), scarcity of new business from the second and third operators in Mexico… However, its DNA tells me that the company has a clear strategy in mind, in spite of what analysts think. And Telesites is poised to expand way beyond Mexico, even if the terms of its growth aren’t those that the stock market necessarily expects

“ “So far, Telesites has added 2,009 sites in Mexico in less than a year

Telesites may outperform their own forecast build volumes, but that will only make their target tenancy ratio of 1.5 by 2020 even more difficult to achieve. There are few precedents of carve-out, operator-led towerco driving tenancy growth of that magnitude over their first four years of existence, in fact none that TowerXchange are aware of. There are simply not enough tenancies up for grabs in Mexico to achieve that number, and those are available will be keenly fought for in this crowded towerco market.

But this doesn’t mean to say that we think the Telesites is a bad idea or a bad investment. A towerco adding 0.05 tenants per tower per year in investible markets can still be a bankable proposition. By 2020 Telesites could have a tenancy ratio over 1.2 and a footprint in half a dozen or more CALA countries. América Móvil is the most credit worthy tenant in CALA, and Telesites are optimally positioned to become their supplier of choice. The fundamentals of the tower business hold true: this is a growing infrastructure business, built on a proven business model, with long term contracts securing recurring revenue over a ten-plus year horizon. What’s not to like?

What we like about Telesites


Can towercos achieve scale in the Caribbean?From the Dominican Republic to Cuba: risks and opportunities of doing business in an island economy

According to several sources we’ve approached during the recent TowerXchange Meetup Americas, there are 10,500-12,000 towers in the Caribbean and more than half of them are located in the Dominican Republic and in Haiti. 98% of cell sites are still owned by operators and to date, TowerXchange has tracked only two active towercos in the Caribbean, namely Teletower Dominicana, with around 200 sites in the Dominican Republic, and Continental Towers, which owns a small portfolio in Jamaica.

On the operator side, Digicel and Cable & Wireless’ LIME are present in most countries with other portfolios of scale owned by Orange, Claro, Trilogy’s VIVA, AT&T, Satcom and Sprint. Digicel and LIME dominate the Caribbean island mobile markets but have so far been unable to reach a tower sharing agreement and have been mostly building their own sites on the islands where they operate. The competition among the two is apparently so strong that sources suggest that only a change in the law could force them to seal a sharing pact. With extensive coverage on most islands, the incentive for towercos reduced.

In terms of its business potential for towercos, there seems to be general consensus that there is limited growth opportunity for a towerco in the Caribbean as each market is quite finite in terms of organic growth opportunity, and is geographically limited by the sea. Geographical conditions also pose tough logistics challenges in terms of transportation of materials, health and safety and power availability.

Read this article to learn:< Key data on the Caribbean telecom industry< The Dominican Republic: towers for sale, consolidation and more< Could Haiti attract more foreign investments?< Prospects for a Digicel or LIME tower carve out< Cuba: the next big thing?

Seven hundred islands and almost forty million people. This is the Caribbean. For most people a dreamy vacation spot but for the tower industry; one of the few remaining untapped markets in the world. However, considering its fragmented geography and challenging logistics, are the risks worth the potential rewards? Could a towerco ever achieve scale in this region? And out of the myriad of islands, which ones are attracting more attention in terms of potential investments?

Keywords: Altice, América Móvil, Amzak Capital Management, Anguilla, Antigua, Aruba, Barbados, Bonaire, Caribbean, Central Bank Of Haiti, Claro, Continental Towers, Cuba, Digicel, Dominica, Dominican Republic, Editorial, ETECSA, Grenada, Guadeloupe, Haiti, Jamaica, LIME, Market Overview, Orange, Satcom, Sprint, Telefonica, Teletower Dominicana, The Cayman Islands, Tricom, Trilogy International Partners, United States, Viettel, Viva



From an investment standpoint, the Caribbean could serve as a cash-flow play rather than growth play - a business model potentially able to attract a different breed of investor; more likely infrastructure funds rather than publicly traded towercos. However, when asked about the Caribbean during the latest TowerXchange Meetup Americas, experts didn’t appear too excited about the opportunity… That said, conversations stirred around a few countries with interesting business conditions, investment opportunities and untapped markets. Lets examine them in more detail.

Dominican Republic: towers for sale?

The Dominican Republic is home to over 10 million people and up until a few months ago, had been host to four active carriers - Claro, Orange, VIVA and Tricom - with a SIM penetration rate of 99%. In terms of infrastructure sharing, Claro and Orange haven’t so far been open to enter any substantial agreements with other carriers, whereas Tricom and VIVA have sharing agreements in place. However, it’s yet to be seen how the agreements shape up now that Tricom is merging with Orange.

Between 2013 and 2014, Altice, a cable and telecommunications investor from Luxembourg, acquired both Orange Dominicana and Tricom via a US$1.5bn investment and is now in the process of merging the entities and deploying capital.

On the towerco front, Teletower Dominicana, whose key investors include Amzak Capital Management, owns and operates ~192 sites in the

country while offering BTS services to carriers and is the only active towerco TowerXchange has tracked so far.

An opportunity for new entrants could be represented by Trilogy’s VIVA, whose 500+ tower portfolio is up for sale. Despite several negotiations over the course of 2014, the portfolio is still available and could represent a great starting point for a towerco to launch its operations in the Dominican Republic and achieve scale in a swift manner.

On the other hand, América Móvil has recently carved out its Mexican assets and created a separate entity, Telesites, which is set to become an active towerco in their home country. Claro’s executives have in the past speculated that such move could be replicated throughout the CALA region, should the Telesites venture prove successful. Could Claro and Telesites open access to their towers in the Dominican Republic in the future? We have a feeling there are ‘lower hanging fruit’ markets which Telesites would address first. However, a carve out could completely change the dynamics of the local market but it will take some time to assess how the Telesites venture evolves and its replicability in other CALA countries.

Viettel’s role in Haiti and the potential for Digicel’s carve out

In 2010, the Central Bank of Haiti reached an agreement with Vietnamese operator Viettel

to provide telecom services in the country and contribute to the post-earthquake reconstruction. An investment of US$99mn was aimed at rebuilding the telecom infrastructure nationwide and starting the construction of over 3,000 km of fibre optic cable network.

The plan aims at increasing SIM penetration, which recently surpassed 75%, and reaching out to remote


Since this article was written, Phoenix Tower

International has completed two tower

transactions in the Dominican Republic,

acquiring Teletower Dominicana and their

190 towers from AMZAK, and acquiring 145

towers, plus marketing rights to a further

400 towers, from MNO Viva. PTI now owns

and operates 591 towers in the Dominican

Republic.

PTI now represents the most obvious

counter-party with whom Caribbean MNOs

could partner, opening the door to the likes

of Digicel and CWC - recently acquired by

Liberty Global - to outsource or monetise

their towers

Update: PTI entersDominican Republic

areas with internet and mobile services. Moreover, the Central Bank of Haiti signed the agreement with the expectation to stir further foreign investments in the country.

By looking at the shape of the Haitian telecom industry and its overall conditions following the devastating 2010 earthquake, it’s tough to imagine towercos entering the country anytime soon. With only two active operators, one of which, Digicel currently owns and operates the biggest and best infrastructure portfolio, a carve out could be the only option to initiate a tower market in Haiti. But is it realistic?

Prospects of a Digicel tower carve out

Digicel isn’t new to towerco ventures in tough markets and is currently operating in Myanmar as Digicel MTC, an infrastructure company which owns a portfolio of approximately 800 towers (rumoured to be for sale). Digicel has also formed deep partnerships with towercos in Costa Rica and Panama. With positive experiences from all three ventures, in the medium term Digicel could opt for a sale or carve out of all its Caribbean passive infrastructure assets, mimicking América Móvil’s recent move with the creation of Telesites. Such move could create the very first towerco of scale in the Caribbean by joining together - financially speaking - assets located in Anguilla, Antigua, Aruba, Barbados, Bonaire, the Cayman Islands, Dominica, Grenada, Guadeloupe, Haiti, Jamaica and more… But to date, there hasn’t been any practical move in this direction by the operator.

LIME, with a little less experience of towerco ventures, could conceivably follow a similar strategy.

Is Cuba the next frontier?

After the re-establishment of diplomatic relationships in December 2014, on 21 January 2015, the U.S. and Cuba started to discuss lifting the embargo which dates back to 1958 and has so far stopped any economic cooperation between the two countries.

The improved prospects of an end to the trade embargo generated a lot of buzz during the latest TowerXchange Meetup Americas for its potential

impact on the Cuban telecom industry which would certainly benefit from a wave of investment, know-how and infrastructure to modernise its telecom infrastructure, should the country open up.

The Cuban mobile telecom sector is by far the least developed in the Caribbean with an astoundingly low 20% SIM penetration rate, corresponding to just 2.3 million connections for the over 11.3 million inhabitants of the island (source: GSMA Intelligence, Q4 2014).

The government operates the only telecom service provider in Cuba, the Empresa de Telecomunicaciones de Cuba S.A. (ETECSA) and, in light of the fact that calls are being paid in the local currency (the Cuban Convertible Pesos), calls are still quite expensive in Cuba (US$0.35 per minute during peak hours) compared to the rest of the region.

Over the past few months, the U.S. have started to contribute to improving access to telecoms in Cuba by allowing the commercial sale of communications devices, software and hardware. In January, Telegeography reported that “Washington is allowing telecoms providers to establish the necessary mechanisms, including infrastructure, in Cuba to provide commercial telecoms and internet services, which will improve communication between the island and the U.S.”

Could this mean towercos might enter the Cuban market soon? The first step would be to issue one

“

“

The high growth, high risk towerco play in the Caribbean is to be found in Cuba. I don’t think I’ve spoken to an entrepreneurial CALA towerco owner who wasn’t interested in Cuba. When Cuba’s borders open and the first international MNO secures a license, expect the rollout to be led by one or more towercos, drawing inevitable comparisons to the current Myanmar rollout


Guatemala, Nicaragua, Myanmar and the DRC. Quite the opposite - the first mover advantage for a towerco daring to settle first in a virgin market can be quite striking as relationships have to be built from scratch and conditions can be negotiated with less pressure than in highly competitive markets.

So what are towercos waiting for? Everyone is waiting to see what the U.S. and Cuban governments agree and which brands jump on board first, once the embargo is lifted. As Rafael Fernández Quirós, VP of Communications for Coca Cola Latin America said in a recent statement: “As a U.S. company we’re completely governed by legislation, and we’ll fulfil it to the letter. If they do lift the sanctions, we’ll open new markets. Until that has been lifted, we can’t think in terms of opening bottling plants or distribution systems.” To date, Coca Cola is present in countries such as Somalia and Myanmar and is only absent from Cuba and North Korea and I feel most U.S. based towercos would agree with Mr Quirós and wait until the time is right

or more new licenses to mobile network operators willing to set up ventures in Cuba. Interested players could include the likes of AT&T, Digicel, América Móvil and Telefonica.

When asked, a few towerco executives expressed enthusiasm over the the possibility of doing business in Cuba for a variety of reasons. There is general consensus that the country will boom from a commercial standpoint as soon as the embargo is lifted. Thanks to its vicinity to the U.S. and a

well developed tourism sector, Cubans are well aware of what they’ve missed and would certainly jump at the opportunity of owning an affordable smartphone, navigate online and make cheaper, long distance calls to relatives overseas, should their disposable income allow it.

Entrepreneurial towercos aren’t particularly scared of challenging ventures in under-penetrated markets, as demonstrated by successes we’ve reported in the past in countries such as

Havana, Cuba

Percentage of population with access to electricity in selected Caribbean islands

Source: International Energy Agency, World Energy Outlook

Trinidad & Tobago 99.0

Cuba 97.5

Dominican Republic 96.1

Haiti 27.9


Making a towerco play work in the Caribbean is all about finding scale. There isn’t even much opportunity for BTS-centric towercos as most of the more attractive islands have mature networks and, until American Tower or, perhaps more likely, SBA Communications shows an interest in the Caribbean, there is no-one to build and flip to.

So are there investible islands within the Caribbean? The Dominican Republic offers sufficient scale and runway for growth to be worth a look – towercos are active in several smaller Central American countries. A Digicel or LIME carve out and asset sale would also be worth a look, but again with finite organic growth opportunities, even with thousands of Denis O’Brien’s towers on a hypothetical balance sheet, it feels like a cash flow play.

The high growth, high risk towerco play in the Caribbean is to be found in Cuba. I don’t think I’ve spoken to an entrepreneurial CALA towerco owner who wasn’t interested in Cuba. When Cuba’s borders open and the first international MNO secures a license, expect the rollout to be led by one or more towercos, drawing inevitable comparisons to the current Myanmar rollout

My commentary on the Caribbean tower markets, by Kieron Osmotherly, Founder & CEO, TowerXchange

Caribbean mobile markets Source: GSMA Intelligence, Q4 2014

Country Connections Population SIM penetration MNOs

Anguilla

Aruba

Bahamas

Barbados

Cayman Islands

Cuba

Curacao

Dominica

Dominican Republic

Grenada

Guadeloupe

Haiti

Jamaica

Martinique

Montserrat

Saint Barthelemy

St Kitts and Nevis

St Lucia

St Martin

Trinidad & Tobago

Virgin Islands (US)

Total in Caribbean

British Virgin Islands

Turks and Caicos Islands

St Vincent & Grenadines

St Maarten

Bonaire, Sint Eustatius and Saba

Antigua and Barbuda

24800

141500

314000

365700

95800

2300000

153000

107700

10500000

151200

741800

7900000

2900000

613900

4700

2100

99800

224800

8300

2000000

187000

29335400

50100

38600

133300

67000

37200

173100

14500

103700

385100

286800

59600

11300000

163200

72500

10600000

106500

469100

10500000

28000000

405200

5200

7400

55100

184300

30600

13000000

106800

39285300

28700

34000

109400

46500

19700

91400

171.03%

136.45%

81.45%

127.51%

160.74%

20.35%

93.75%

148.55%

99.06%

141.97%

158.13%

75.24%

103.57%

151.51%

90.38%

28.38%

181.13%

121.98%

27.12%

153.85%

175.09%

74.67%

174.56%

113.53%

121.85%

144.09%

188.83%

189.39%

Digicel, LIME

Digicel, MIO, Setar

BTC

Digicel, LIME

Digicel, LIME

ETECSA

Chippie, Digicel

Digicel, LIMEClaro, Orange (acquired by Altice), Trilogy (Viva)Digicel, LIME, Affordable

Digicel, Only, Orange

Digicel, Natcom (Viettel)

Digicel, LIME

Digicel, Only, Orange

LIME

Chippie, Dauphin, Orange

Chippie, Digicel, LIME

Digicel, LIME

Chippie, Dauphin, Orange

bmobile, Digicel

Digicel, LIME

Chippie, TelCell

AT&T, Choice, Innovative, Sprint, T-Mobile

Caribbean Cellular, Digicel, LIME

Digicel, Islandcom, LIME

Digicel, Telbo, Chippie

APUA, Digicel, LIME


TowerXchange’s guide to the Central American tower marketTower counts, towerco penetration and baseline data on Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama

SBA Communications leads the Central American market with 2,319 towers and has built its Central American portfolio through sale and leaseback transactions, primarily with Telefónica but also with Digicel, through trade acquisitions including from Mobilitie and Centennial, and through organic growth.

The number two towerco in Central America is Continental Towers. It is difficult to estimate Continental Towers’ tower count as the company is very guarded about releasing data or site lists. While our most recent research suggests Continental’s total tower count is around 1,000, just over 300 may be in Colombia, with 690 in Central America, their largest market being Honduras where they have ~200 towers. All other Continental Towers counts included in this analysis are estimates.

American Tower has 484 sites in Central America, all now in Costa Rica, which formed part of theiracquisition from Global Tower Partners (GTP), which also absorbed Centennial’s towers in thesame country. American Tower divested their 58 towers in Panama to Phoenix TowerInternational, which has now a total count of 71 sites in the country.

In addition to Phoenix, several ‘middle market towercos’ operate in Central America, including Torrecom (with 193 towers in Nicaragua and 194 in Guatemala), TOCSA (105 in Costa Rica), NMS with around 75 in Nicaragua, Catalina Inc, a recent startup in Costa Rica, and Torres de Panama (60).

Read this article to learn:< How many towers are in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, and who owns them?< Which MNOs have retained towers, which have sold to towercos?< Which towercos are active in each country?< What is the progress of 4G rollouts in each country?

Independent towercos own and market 4,133 of the 11,528 towers in Central America,representing penetration of 35.8%. Towercos building rather than buying will drive growth in the region, with the majority of “low hanging fruit” sale and leaseback transactions already complete. Potential inorganic growth is more likely to come from consolidation within the tower industry, with several ‘middle market’ towercos active in Central America and both SBA Communications and ‘new kids on the block’ Phoenix Tower International acquisitive.

Keywords: Editorial, MNOs, Towercos, Market Overview, 4G, LTE, Capex, Tenancy Ratios, Build-to-Suit, New Market Entrant, Carve Out, Sale & Leaseback, Infrastructure Sharing, Central Americas, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, kölbi, ICE, Claro, América Móvil, Movistar, Telefónica, Tigo, Millicom, Digicel, Hondutel, Xinwei, Cable & Wireless, SBA Communications, American Tower, TOCSA, Continental Towers, Catalina Inc, Torrecom, Message Center Management, NMS, Phoenix Tower International, Torres de Panama

Estimated tower counts, Central America



Guatemala3,593

Costa Rica 2,924

Panama 1,561

El Salvador 1,246

Honduras 1,200

Nicaragua1,004

Potential for MNO-led carve-outs? TowerXchange don’t think there is much potential for the Central American MNOs who retain their towers to spin them off into “operator-captive” towercos in the short to medium term. However, we note that Claro is present in all six Central American tower markets, and has to date retained all of its estimated 2,000+ towers in the region. If the Telesites towerco venture in Mexico achieves positive results, it is conceivable that Claro’s Central American towers could be rolled into América Móvil’s new towerco. Similarly, it is also conceivable that Telesites could be divested, before or after the injection of the América Móvil’s Central

Guatemala

Costa Rica

Panama

El Salvador

Honduras

Nicaragua

10% 20% 30% 40% 50% 70%60%

American passive infrastructure, although we doubt either strategy will play out in the near future. An even further “out of left field” thought is that Denis O’Brien’s satisfaction with Digicel’s inaugural towerco venture in Myanmar might persuade the entrepreneur to spin-off towercos from his existing assets, although such a venture would have more impact on the Caribbean than Central American markets. However, we must emphasise that the most likely scenario is that the Central American tower market remains led by independent towercos, with SBA Communications consolidating their leadership position.

Central American tower market snapshots Let’s take a closer look at each of the six Central American mobile network operator and tower markets:

Costa Rica Government-owned ICE, trading under the kölbi brand, dominates the market with Claro and Telefónica (Movistar) for competition. Telefónica entered the market using 100% co-location and BTS, so own few if any towers. The rollout of LTE is progressing steadily for all three MNOs, hence Costa Rica has one of CALA’s highest levels of broadband penetration, driving healthy tenancy ratios and

Towerco penetration



Who owns Costa Rica’s towers?

SBA American Tower Continental Towers

PTI TOCSA ICE Claro

24%

20%

20%

49%

47%

65%


573450

484~1000

180132

105

amendment revenue. Sutel has not ruled out the possibility of enabling a fourth operator to enter the market during the second phase of spectrum auctions.

Tenancy ratios in Costa Rica are generally in the 1.7 to 2.0 range, with the tower market led by SBA and American Tower, each with around 500 towers, American Tower having acquired their Costa Rican assets in the GTP transaction, which apparently also absorbed Centennial’s assets in the country. Like SBA and American Tower, local towerco TOCSA is growing fast, joined by new entrant Catalina Inc, run by GTP’s former Country Manager and the former head of TOCSA, José Escobar. Phoenix Tower International entered Costa Rica thanks to the acquisition of 25 sites from TOCSA and now owns

132 towers in the country. Continental Towers also has a footprint in Costa Rica.

El Salvador Tigo and Claro vie for market leadership in the healthily competitive El Salvador market. Tigo invested as much as US$100mn in 2015 and is expecting a similar financial commitment for 2016. Digicel El Salvador, which uses HSPA+, invested as around US$60mn in 2015 while Telefónica had recently completed a three- year US$100mn upgrade.

Given the presence of four credit-worthy tenants, it is perhaps surprising that El Salvador is one of the least penetrated tower market in Central America at

20%. SBA Communications and Continental Towers appear to be the only towercos active in El Salvador, SBA having acquired the majority of Telefónica’s sites.

Guatemala The most populated country in Central America, Tigo and Claro vie for market leadership in Guatemala, with Telefónica (Movistar) in third place and fourth operator Intelfon (Red) licensed but apparently inactive. Movistar invested US$100mn to launch 4G in October 2014 on the 1900MHz band, Tigo launched 4G LTE in May 2015.

SBA has the largest towerco-owned portfolio in Guatemala, with 599 sites listed in their last

Who owns Guatemala’s towers?Who owns El Salvador’s towers? Who owns Honduras’s towers?

Source: TowerXchangeSource: TowerXchange Source: TowerXchange

SBA Torrecom Continental Towers

Tigo Claro Telefónica

Operator-captive Continental TowersSBA Continental Towers Tigo

Claro Digicel Telefónica


221

400300

250~25

50

~1000

~200599

194~100

~2000

500

200

approximately 75 sites in the country.

Panama Four operator market, led by Cable & Wireless and Telefónica (Movistar) but with aggressive new market entrants Digicel and Claro claiming market share and driving tenancy ratio growth. Digicel sold all their towers, now relying entirely on co-location and BTS, enabling aggressive tariffs, whilst chasing down Movistar for second place.

The towerco market is led by SBA Communications and their 540 towers, acquired from Digicel, Telefónica and Centennial, who are believed to have exited the market. SBA are joined by Phoenix Tower International, who entered the market after acquiring 58 sites from American Tower and now owns 71 sites in the country.

site directory, having acquired the majority of Telefónica’s towers in the country. Torrecom owns 194 sites in the country and we estimated Continental to own approximately 100.

Honduras Honduras remains a duopoly, with subscribers split between Tigo (Millicom) and Claro, who represent around 800 towers between them. Both incumbents are in the early stages of rolling out LTE. Third mobile operator, state-backed Hondutel, plans to make considerable investments during 2016 to upgrade its infrastructure and for now is the third operator in the country with less than 1% market share.

Continental Towers are believed to be the only

active towerco in Honduras, with around 200 sites.

Nicaragua Nicaragua is another near-duopoly, with Claro and Telefónica (Movistar) dominating the market and new entrant Xinwei making little impression on the market. Telefónica sold the majority of their Nicaraguan towers to SBA, Claro has retained ~300, and Xinwei have used 100% co-location to date in a very limited launch restricted to a handful of isolated settlements in the North Atlantic Region.

Nicaragua is the most penetrated tower market in Central America, with towercos owning 65% of the country’s towers. SBA lead the Nicaraguan tower market with 386 sites listed in their last site directory. Torrecom owns 193 and NMS

“ “

There isn’t much difference between the tower cash flow in Brazil and Central America. In fact, the spread between the ground rent and the tenant rent is the biggest driver and pretty similar in both areas. Opex isn’t significantly different either – Kurt Bagwell, President, International, SBA Communications

Who owns Panama’s towers?Who owns Nicaragua’s towers?

Source: TowerXchangeSource: TowerXchange

SBA Continental Towers PTI

Torres de Panama Cable & Wireless Claro

Telefónica

SBA Torrecom NMS

Claro Telefónica


386

19375

300

50

540

71

90

60

550

150

~100

Central American tower market data summary

Country

Honduras

Source

Est tower count

1,200

TowerXchange Q2 2016

Towerco penetration

20%


Active MNOs

Tigo, Claro,(Hondutel?)

TowerXchange

Active towercos

Continental


Population SIM penetration Mobile broadband penetration

8.1mn 99% 29%

GSMA Intelligence,Q4 2015

GSMA Intelligence, Q4 2015

GSMA Intelligence, Q4 2015

Costa Rica

Nicaragua

2,924

1,004

47%

65%

kölbi, Claro, Movistar

Claro, Movistar, (Xinwei?)

SBA, AMT, TOCSA, Continental, PTI,

Continental, Catalina

SBA, Torrecom, NMS

4.8mn 155% 59%

6.1mn 135% 34%

Guatemala

El Salvador

Panama

3,593

1,246

1,561

24%

20%

49%

Tigo, Claro, Movistar, (Red?)

Tigo, Claro, Digicel, Movistar

Cable & Wireless, Movistar, Digicel, Claro

SBA, Torrecom, Continental

SBA, Continental

SBA, Continental, PTI, Torres de Panama

16.5mn 104% 25%

6.1mn 146% 25%

4.0mn 148% 33%

Conclusions

Central America is the fifth largest tower market in CALA (effectively the fourth largest as Argentina effectively doesn't yet count). Most of the "low hanging fruit" sale and leasebacks with the likes of Telefónica and Digicel have been closed in Central America. Remaining operator-captive towers are generally trapped on balance sheets by complex ownership structures, or by América Móvil’s reluctance to divest tower assets. However, there are no

shortage of strategic acquisition opportunities, with SBA Communications and Phoenix Tower International likely to bid on most quality portfolios.

Towercos are well established in the region and are building the vast majority of new towers in Central America, fuelled by the need for infill sites driven by data demand. The rollout of 4G is in early stages across the region (slightly ahead in Costa Rica), promising to create amendment revenue in addition to co-location revenue.

Investing in Central American towers has been a very fruitful endeavour for SBA Communications, attracting Tower Cash Flow comparable to Brazil, and healthy tenancy ratio growth. Efficiencies are created as resources are shared across operations in the six Central American countries, so in the long term we foresee Central American tower portfolios consolidating on the balance sheets of SBA, Phoenix Tower and (perhaps) American Tower. In the meantime, Central America remains a great environment for middle market towercos to execute a 'build and flip' strategy


Complexity andcontradictions of the Guatemalan telecom industryTowercos are yet to fully penetrate the country… But is worth it (and is it safe)?

The Guatemalan telecom landscape is dominated by three active carriers, Millicom’s Tigo (formerly Comcel) Telefónica’s Movistar and América Móvil’s Claro. There have been various attempts to introduce a fourth player in the country such as Digicel back in 2007 and more recently Intelfon’s Red, which currently has a few hundred thousand subscribers. In a country defined as “complicated” by many commentators, some carriers haven’t been exempt from troubles either.

This past October, the rating of Tigo - Guatemala’s number one carrier - has been put under review for downgrade by Moody’s in light of bribery allegations. According to news outlets, both Tigo and Millicom are under scrutiny for improper payments and Moody’s is following the investigation to estimate the overall risks from a financial and operational perspective.

And the story of Digicel’s attempt to enter the country is simply bizarre. Back in 2007, Digicel acquired Digicel Holdings Limited, a separate entity that had operated in El Salvador and had held an unused mobile license in Guatemala since 2003. Digicel received a full authorisation from the Superintendencia de Telecomunicaciones (SIT), the local regulator, and installed as many as 300 telecom towers across Guatemala. However, eight years have passed and Digicel has since ceased to operate in the country.

To fully understand Guatemala’s complexity, it’s important to remember that the country experienced an extremely violent civil war from

Read this article to learn:< An overview of Guatemalan telecom sector and its dynamics

< Troubles for Tigo and the attempted entrance of Digicel

< The saga of the 2015 telecom tax

< The tower sector: active players, penetration rates and tower counts

< The role of Mario López Estrada in Guatemala’s telecom and tower industry

Guatemala is not an easy country to do business in, with its history of contradictions and civil uprisings. And its telecom sector isn’t free from trouble either. In this article, TowerXchange analyse the current status of the telecom industry with a specific look at its sometimes complex dynamics and interactions with politics and social discontent.

Keywords: 4G, América Móvil, Americas, Build-to-Suit, Central America, Claro, Comcel, Continental Towers Corp., Digicel, Editorial, Guatemala, Intelfon, Millicom, Moody’s, Movistar, Red, Risk, SBA Communications, Superintendencia de Telecomunicaciones, Telefónica, Tigo, Torrecom, Urban vs RuralBy Arianna Neri, Head of Americas,

TowerXchange


1960 to 1996. Since the end of the war, the country enjoyed democratic elections, experienced a steady economic growth and saw the opening of many commercial sectors, including telecommunications. However, Guatemala’s ongoing struggles with poverty and crime are far from solved.

In fact, over 50% of the population live below the poverty line but at the same time, Guatemala enjoys a comparable GDP per capita in Central America. This extreme unequal wealth distribution makes the Guatemalan economy one of the most complex and heterogeneous of the region.

In the telecom sector, the investment of strong international operators such as Tigo, Movistar and Claro has contributed to extensive network

upgrades and infrastructure investments. In fact, all three carriers now offer, or are in the process of launching, 4G services across major metropolitan areas. In the case of Tigo, the company is expecting as many as 700,000 users to move to 4G per year and is investing an estimated US$50mn each year on network upgrades.

However, the lack of strong initiatives from either the government or the regulator has so far prevented rural areas from being fully covered. On the contrary, mobile coverage in areas deemed commercially unviable is still extremely low.

In early 2015, a newly introduced tax on mobile lines resulted in the disconnection of six million dormant lines by the network operators. However,

shortly after the introduction of the US$0.65 tax, the Constitutional Court suspended the collection after an appeal submitted by the three carriers along with the Chamber of Industry. To date, the tax hasn’t been reinstated and Guatemalan attorney Annie Dougherty told Prensalibre.com back in February 2015 that “...There is no clarity as to who should pay the tax for call centres or concentrated lines. Also, if the tax was transferred to the user, specifically prepaid services, this would increase the cost of services by over 50%.” Moreover, opponents of this measure commented that the tax

Antigua, Guatemala

The role of Mario López Estrada in Guatemala’s telecom and tower industry

Guatemala’s richest man and former Minister of Communications (1986-91) Mario López Estrada is President of Tigo Guatemala, in which he owns a significant minority stake. Tigo is Guatemala’s leading MNO with 50% market share. Mr López Estrada also owns a significant proportion of the land under Tigo’s towers, making him effectively Guatemala’s largest towerco with around 2,000 towers. However, Tigo Guatemala seems to have a strong preference to rollout their own tower network, seldom co-locating on third party towers and almost never entering into swaps or commercial co-location arrangements to allow other tenants onto their sites. As a result, Guatemala has a significant amount of parallel infrastructure, which cannot help tensions with local communities developing a NIMBY mentality


represents a form of double taxation as carriers already pay for the administration of lines.

Guatemala’s tower industry

There are almost 3,600 telecom towers in Guatemala and the level of towerco penetration is still fairly low at 24%. In fact, both Tigo and Claro still own most of their passive infrastructure portfolios and towercos are mostly involved in BTS activities.

SBA Communications, the number one towerco in Central America, holds a portfolio of 599 towers as a combination of the acquisition of most of Telefónica’s towers, the acquisition of Mobilitie, and organic growth. Torrecom operates 194 towers

and is currently receiving a high volume of orders from the likes of Claro, as recently disclosed by Maria Scotti, its CEO. TowerXchange estimates that Continental Towers owns approximately 100 towers in the country.

Local communities as well as municipalities themselves are crucial stakeholders in the tower industry. In fact, in spite of the efficiency of SIT in granting permits, towercos face problems at a local level where sometimes violent protests have been able to delay projects by weeks or even months.

Security is an aspect that local players take into serious consideration and recent political troubles have contributed to a series of vocal protests. In

fact, this past September President Otto Pérez Molina resigned over allegations of fraud and bribery. While Molina was charged and awaits trial in prison, new Presidential elections took place and saw the win of Jimmy Morales who, prior to launching his political career, was a comic actor.

Morales is now tasked with the attempt to improve things for Guatemala, starting with its economy. As explained by the World Bank, Guatemala collects the lowest taxes in the world and spends the least on health, education and infrastructure as a proportion of its economy.

In a recent editorial, the New York Times quoted Mario López Estrada, minority owner of Tigo and the first Forbes billionaire of the country, stating that “businesses should support the social movements that emerge from the nation’s soul.” Mr López Estrada was referring to the recent protests that saw over 10,000 people taking the streets of Guatemala City and were the drivers behind Molina’s resignation.

Citing the New York Times, Mr López Estrada “was half-serious when he joked that Tigo’s drive to switch Guatemalans to smartphones made the street movement possible, and he seemed to think that the new push toward greater accountability would continue.” And TowerXchange can only hope that local communities and municipalities realise how big of a change towercos can bring to the country by improving the level of coverage across the nation and empower the people to drive the change - also - via their smartphones

Who owns Guatemala’s towers?


200

SBA

Torrecom

Continental Towers

Tigo

Claro

Telefónica


599

194

~100

~2000

500

200

IFC on the Guatemalan telecom tower industrySecurity and poor infrastructure remain key challenges but the market shows signs of improvement

TowerXchange: What is your view on the current status of the Guatemalan telecom industry? And its tower sector?

Guillermo Mulville, Head of TMT for Latin America, IFC: Guatemala has the biggest telecom sector in Central America, which is consistent with the fact that it has the largest population in this region. The telecom sector generates revenues of about US$3billion per year which is about 5% of GDP.

The mobile market share is heavily concentrated between the three largest operators. The investment climate is improving but concerns remain regarding security and poor infrastructure. We expect the sector to continue expanding in the following years due to improving macro conditions. Potential opportunities will emerge around the deployment of 4G networks.

The independent tower market business model is not well developed yet. 80% of the towers are still owned by MNOs, which is higher than Central America’s average of 30%. However, operators are now focusing on using capex for their core business growth and the trend is to move their tower assets to independent tower companies. MNOs are investing less in passive infrastructure and creating potential opportunities for sale and leaseback agreements and build-to-suit projects. This is important so as to assure higher capacity in big cities and coverage in rural areas. Towerco penetration rate of 20% and tower density of around 4,500 subscribers per tower provides for a

Read this article to learn:< Plenty of growth potential for the Guatemalan telecom tower industry

< Poverty and security are key issues affecting industrial development

< Recent political developments and their possible effect on new investments

< IFC’s involvement in the Guatemalan telecom industry and beyond

< What is the outlook for the future?

IFC’s Guillermo Mulville, a regular speaker at TowerXchange Meetups and columnist in the TowerXchange Journal, shares with our readers his views on the complex Guatemalan telecom industry. With issues concerning security and lack of infrastructure, very low towerco penetration and plenty of room for growth, the local telecom tower industry is one we need to keep a close eye on.

Keywords: 3G, 4G, Central America, Country Risk, Guatemala, IFC, Interview, Investment, LTE, Market

Forecasts, Market Overview, Network Rollout, New License, Regulation, Sale & Leaseback


huge growth potential, particularly with the shift from 3G to 4G.

TowerXchange: How big of a problem is security in Guatemala? And how does that affect network and infrastructure development?

Guillermo Mulville, Head of TMT for Latin America, IFC: Security issues have historically affected investor confidence in Guatemala and they have obviously impacted telecom networks and infrastructure deployments.

Security concerns are somewhat correlated with extreme poverty and half of Guatemala’s population still lives below the poverty line, while 13% live in extreme poverty. A weak security situation would continue to obstruct economic development. The country ranks as 81 on the World Bank Doing Business Report 2016, showing no improvement compared to last year’s ranking but while the challenges of operating in-country are recognised by the investor community, the market consensus is leaning towards an expected overall improvement.

TowerXchange: What is the impact of political events such as the recent elections in Guatemala and its industrial development?

Guillermo Mulville, Head of TMT for Latin America, IFC: The country has recently faced corruption scandals that harmed the investment environment and investor confidence, especially during the last semester of 2015.

Jimmy Morales, the recently elected president, will commence his term on January 1, hopefully putting an end to the recent political uncertainty. Mr Morales’ posture is considered as pro-business. He has campaigned on the promise to clean up Guatemalan politics and to implement political reforms.

Regarding the telecom sector, relevant legislation and broad regulatory announcements have been passed in the last few years. In 2011, Guatemala’s regulator SIT announced that seven bands were suitable for the deployment of 4G, which opened the door for high speed data services. In 2014, the highly debated Law on Control of Mobile Telecommunications was meant to empower the SIT to regulate infrastructure installation, In 2015, a new tax regarding charges for each line in operation had an impact on the sector, with telcos returning to SIT a combined six million inactive lines. These inactive lines were mainly a consequence of the high percentage of prepaid customers in the sector. The market has a lot of margin to evolve and expand its postpaid accounts and therefore ensure a healthy growth in the following years.

TowerXchange: Is the IFC involved in any specific project in the country?

Guillermo Mulville, Head of TMT for Latin America, IFC: IFC has been investing in the country for decades. Currently we have an investment portfolio of US$255 million, mostly focused in the financial sector, with the balance being mainly in transport

and agribusiness companies. In the telecoms sector, IFC used to be a lender to Continental Towers, but the loans have been fully prepaid. A few years back, IFC also structured a US$135 million syndicated loan to Tigo, but has since been prepaid. Presently, we are analysing several investment opportunities.

TowerXchange: A relatively poor country with high rate of mobile subscribers and the need for major upgrades… What’s the outlook for its future?

Guillermo Mulville, Head of TMT for Latin America, IFC: Guatemala’s SIM penetration of 103% is above the regional average. ARPU is relatively low due to the prepaid nature of the market. However, we believe that Guatemala’s mobile market may gradually shift more towards postpaid so ARPU will remain steady.

The mobile market has already grown tremendously, by around five times between 2004 and 2011, with mobile broadband subscribers doubling in size for the period 2010-2012. As is the trend globally, mobile data will lead the growth of the telecoms industry.

This growth will need a significant investments in infrastructure. Although 2.5G still represents the predominant technology, 3G connections are rapidly catching up, driven by network upgrades and the affordability of smartphones. By 2017, 3G is expected to be the leading technology in the market, while 4G/LTE connections enter a rapid growth path


Can Xinwei break the Nicaraguan duopoly?Doubts raised about the Chinese giant plans, while the country falls behind regional standards

To date, América Móvil’s Claro and Telefónica Movistar have had it relatively easy in Nicaragua with Claro on 53% market share and Movistar following with 47% (over 4.8mn users). It must be noted that their market share changes quite often and, although we report Claro being the first operator in the country, different sources quote various shares as shown in the Mott MacDonald’s Share Square featured in this case study.

With SIM penetration at 135%, the potential for growth is still considerable and Xinwei could be the catalyst the Nicaraguan tower market has been waiting for. Or not...

Xinwei: the gap between expectations and reality

In recent news, the Chinese economy has been under scrutiny in light of the poor performance of the Chinese stock market. The share value of the telecom giant Beijing Xinwei Telecom Technology Group Co. didn’t pass the market test over the past few weeks and has dropped more than 50% during the month of June. In fact, according to official data of the Shanghai Stock Exchange, on Wednesday 8 July, Xinwei shares were valued at CNY31.60 (US$5.08) against the value recorded on June 17 of CNY60.66 (or US$9.76).

Xinwei is not only interested in establishing its telephony business in Nicaragua but is also one of the driving forces behind the Nicaragua Interoceanic Grand Canal, the shipping route currently being constructed through Nicaragua which should then connect the Caribbean Sea with

Read this article to learn:< The changing shape of the Nicaraguan telecom industry

< How Xinwei could change the mobile landscape and its challenges ahead

< The regulatory environment: how Telcor could take a more active role in Nicaragua

< Electrification challenges: covering rural Nicaragua

A country where a mobile market duopoly is in place is hardly attractive to investors and independent tower companies who usually look at potential to achieve scale, critical mass and competition among more than two carriers to launch operations. But if the same country grants a nationwide license to offer mobile, fixed, broadband, data transmission and pay TV services to a third carrier who promises to invest as much as US$700mn ahead of launching services, the game changes quite considerably. And Chinese Xinwei could be a real game changer in Nicaragua thanks to its considerable upfront investment, projected total US$2bn expenditure in the country and potentially disruptive role in breaking the duopoly while raising the glass ceiling on tenancy ratios beyond those originated from Claro, Movistar and a handful of non-traditional MNOs.

Keywords: Editorial, Nicaragua, Market Overview, Universal Access, Urban vs Rural, Infrastructure Sharing, Build-to-Suit, Market Entry, Country Risk, Off-Grid, Renewables, Community Power, Claro, Movistar, América Móvil, Telefónica, Xinwei, SBA Communications, NMS, Continental Towers Corp, Torrecom, Instituto Nicaragüense de Telecomunicaciones y Correos, Telcor, GSMA, Association of Rural Development Workers—Benjamin Linder



the Pacific Ocean for an estimated cost of US$40-50bn. Commentators are currently questioning whether Wang Jing, the Chinese billionaire behind Xinwei, and his pool of investors are actually able to support the infrastructure project as well as the carrier launch in Nicaragua in light of the CNY12,000mn credit line (or US$1.92bn) granted by the Development Bank of China and the debts the company is piling up.

However, Xinwei is currently rolling out its mobile network and Managua is the first municipality being covered by the Chinese giant. Moreover, local sources suggest that Xinwei is currently in touch with towercos such as SBA Communications and Torrecom to become a tenant on their towers and the financials discussed above would suggest that the company could have an interest in signing lease agreements rather than building its own towers.

Regulatory weakness doesn’t help market growth

It’s been noted how the Nicaraguan regulatory body, Instituto Nicaragüense de Telecomunicaciones y Correos, or Telcor, has so far failed to take strong measures to fully unlock the potential of the telecom sector in the country. In fact, Nicaragua does not have a specific regulatory framework with regards to towercos and infrastructure sharing.

Several local news outlets reported back in 2014 the inertia of Xinwei who at that point hadn’t started setting up its network after two years of licensing. Commentators were particularly critical about the absence of reactions from Telcor.

One voice was particularly loud in the crowd. As declared by the former director of Telcor, Ana Nubia Alegría, the failure to start any kind of operations within 180 days from the grant of the license would technically imply the nullification of the same, as stated in the concession contract. The 180-day term can actually be extended for just cause but in the Xinwei’s case, its silence lasted from November 2012, when granted the license to time of writing: significantly more than the 360 day limit!

Doubts were initially raised by the unknown terms of the concession contract which was assigned without divulging its financial terms.

Rural areas and electrification challenges

Compounding the complicated reality of a developing country still under a mobile duopoly, any carrier looking at entering or expanding its existing coverage will have to face the challenge of Nicaraguan poor electrification rates.

Nicaragua’s low electrification rate of 77.9% is above only Haiti but lower than any other country in CALA. But having improved from 73% back in 2010, the country is moving in the right direction, thanks to international projects developed by the World Bank among others.

León, Nicaragua


In spite of current efforts, 68% of Nicaragua’s rural population doesn’t have any access to electricity and is mostly served by diesel generators. However, it is to be noted that the country is pushing hydroelectric and solar projects thanks to conspicuous tax breaks programmes with the aim to reach out and connect remote areas.

As an example, the Association of Rural Development Workers—Benjamin Linder (commonly referred to as ATDER-BL), a Nicaraguan NGO, has actively involved local communities in the construction of various types of infrastructure to provide electricity. So far, ATDER-BL has developed tens of electrification projects across rural Nicaragua such as building thirty small hydroelectric plants and over 225km of power lines which have granted electricity of 40,000 people in remote areas.

Four towercos: are there too many?

To date, there are four towercos active in Nicaragua including SBA Communications, with approximately 386 sites, Torrecom owning a portfolio of 193 sites, NMS and Continental Towers Corp. So far, mobile network operators haven’t divested their tower portfolios and towercos are still mainly working in build-to- suit projects.

TowerXchange believes that the total tower count in Nicaragua should be around 1,000 sites, with both carriers still heavily involved in expanding their coverage and adding sites to their counts. In contrast, GSMA, in its early 2014 report titled

“Beyond Coverage: The opportunity for mobile operators to improve access to energy in Latin America”, mentioned that the two carriers in Nicaragua should own approximately 1,500 sites between the two.

What is clear is that whereas we doubt Claro is planning to divest its towers anytime soon, Movistar are believed to have already sold the majority of their Nicaraguan towers to SBA Communications, and are now estimated to own less than 100.

Conclusion

Nicaragua is one of the poorest countries in the region with approximately 60% of the population living below the poverty line. However, it has been experiencing a wave of economic growth since 2010, when its GDP started rising. Its overall conditions are still far from ideal and its mobile sector registers very low penetration rates if compared with the rest of the region.

The country needs international investment, business savvy and increased competition to properly stir its mobile sector, which has been so far limited to a duopoly dominated by Claro. The entrance of Xinwei as third player could very well disrupt the status quo but so far doubts have sparked with regards to the Chinese telecom giant’s plans.

Breaking the duopoly would be the first step towards modernising the national mobile sector and towercos would surely benefit from the entrance of a new player, for which speed to market will be essential, if and when Xinwei actually commits to a major rollout. However, all these potentially positive developments will need to be supplemented by a strong regulatory push in the direction of infrastructure sharing and enhanced competitiveness and transparency. The ability of Telcor to liberalise the Nicaraguan market has been under scrutiny and we can only wait to see if any positive developments follow

“ “What is clear is that whereas we doubt Claro is planning to divest its towers anytime soon, Movistar are believed to have already sold the majority of their Nicaraguan towers to SBA Communications, and are now estimated to own less than 100


IFC on the Nicaraguan telecom industry

TowerXchange: Guillermo, what is IFC’s view on Nicaragua?

Guillermo Mulville, TMT Sector Lead Latin America, IFC: Nicaragua is the largest country in Central America, although with only six million inhabitants it is not densely populated. A GNI per capita of around US$1,800 makes it a lower-middle income country.

Although the telecoms sector accounts for a comparatively high percentage of the country’s GDP, by regional standards it is quite small, with combined revenues of less than US$1bn. Despite its size, the sector is showing healthy growth and, as expected, mobile data is driving a significant part of it. Fixed line penetration in Nicaragua is very limited, and about three-quarters of industry

revenues are coming from mobile.

The mobile telephony sector is showing faster growth than in the rest of the region. Last year, half a million subscribers were added and SIM penetration is now around 120%. As expected, most of the subscriber base is prepaid, and ARPUs are around US$7, increasingly sustained by data. TowerXchange: What does the Nicaraguan mobile sector look like?

Guillermo Mulville, TMT Sector Lead Latin America, IFC: Nicaragua’s mobile telephony market is still very concentrated and is in essence a duopoly. Claro has a bit over half of all subscribers in mobile, but remains the overall undisputed market leader in the industry, to a large extent as a result of its early entrance following the privatisation of the state-owned incumbent in the 90s. Claro now offers multiple services, including fixed, mobile, Pay TV and broadband. The balance of the mobile market is predominantly in the hands of Movistar. To foster competition and sustain sector growth, regulator Telcor has issued a number of licenses. For example, both Claro and Movistar were awarded 700MHz spectrum in 2011. Interestingly,

Chinese telecoms group Xinwei was given a third mobile license in the 1785-1805MHz band. Despite having obtained its license in 2012, it has not launched yet, but it is already rolling out a network with the expectation of being operational before year-end 2015.

Xinwei is committed to making important investments. We expect them to compete based on price, but also to place particular focus in rural areas, thus helping reduce the large digital divide. Finally, the Nicaraguan mobile broadband market benefits from the presence of Russian-owned Yota, which obtained its license in 2009. TowerXchange: What is the likely impact of Xinwei on the local telecom and tower sectors?

Guillermo Mulville, TMT Sector Lead Latin America, IFC: Xinwei’s entry into Nicaragua is already having a catalytic effect on investments. Although it is unclear how much Xinwei’s network will cost, we believe the amounts will be significant. In any event, further to Xinwei’s network roll-out, Movistar and Claro would be expected to accelerate their LTE roll-out plans. Of course, the above dynamics should contribute to fuelling the demand for cellular towers.

Despite the relatively small size of market, Nicaragua has an active independent tower market, with four players. We understand that of the almost 1,000 towers in the country, more than half are owned by towercos. All such operators have regional operations, with SBA leading the pack

An active tower market which could expand further thanks to Xinwei


Lessons learned from theCosta Rica roundtable at the TowerXchange Meetup AmericasA success story for telecom market liberalisation

The Costa Rican telecom market has been undergoing a deep restructuring enabling KPIs to catch up to other countries in the CALA region quickly despite of the country’s late liberalisation of telecommunications. To date, the telecom sector is host to a healthy group of carriers with three strong players - State-owned ICE, Telefónica and Claro - and a wide array of towercos such as SBA Communications and American Tower and middle market towercos TOCSA, Continental Towers, Phoenix Tower International and Catalina Inc. The tower market is led by AMT and SBA, each owning around 500 sites with tenancy ratios in the 1.7 to 2.0 range.

To date, TowerXchange estimates that there are as many as 2,924 towers in Costa Rica and experts believe that this number could increase by 1,500 to 2,000 new sites over the next four years, with half of them likely to be built within the next 24 months.

With the advent of 4G, Costa Rica is likely to experience a wave of new infrastructure development and currently there are as many as 350 sites being built in the country.

Permitting remains a bottleneck but improving

In spite of a relatively healthy BTS market, the main bottleneck to new project rollouts is permitting. In fact, with as many as eight-seven public entities involved in the permitting process and an average of eight licenses needed, the process can be extremely complicated and takes a considerable amount of time.

Read this article to learn:< Permitting remains the main obstacle to BTS activities

< SUTEL could mandate infrastructure sharing

< The status of the national grid in environmentally friendly Costa Rica

< Vandalism in Costa Rica: a decreasing trend but still an issue for towercos and carriers

During the second TowerXchange Meetup Americas, around twenty experts involved in the Costa Rican telecom tower industry gathered to discuss key challenges and opportunities of this young and exciting market. Held under the Chatham House Rule, the roundtable touched upon discussion points such as the permitting system, regulatory environment and ICE’s infrastructure dominance. In this article, TowerXchange reports on key insights gathered during the session.

Keywords: 3G, 4G, Americas Insights, American Tower, Build-To-Suit, Catalina, Central America, Claro, Co-Locations, Continental Towers, Costa Rica, Country Risk, DAS, Editorial, ICE, Infrastructure Sharing, Insights, Leasing & Permitting, LTE, Market Overview, On-Grid, Phoenix Tower International, Regulation, Renewables, SBA Communications, Small Cells, Solar, SUTEL, Telefonica, Tenancy Ratios, TOCSA, Unreliable Grid, Urban Vs Rural, Wind


Telefónica was definitely one of the strongest lobbyists in favour of a new sharing regulation and encountered the backing of local communities that prefer infrastructure to be shared.

ICE is a powerful organisation with a very strong group of unions behind it. It’s not unusual to have massive public demonstrations against anything that would lessen ICE’s competitiveness. Moreover, ICE’s workforce is almost entirely unionised so the company cannot freely restructure their workforce without paying huge severance. This outdated system comes at a huge cost which represents a burden against the company’s modernisation. For example, ICE employs as many as 1,500 maintenance experts compared to Telefónica’s 500.

On a separate note, there are two different models that towercos adopt when it comes to their maintenance strategy. One model uses subcontractors for maintenance and is the one adopted by American Tower. On the other hand, SBA Communications does site maintenance in-house.

The status of the national grid in Costa Rica

The grid in Costa Rica is pretty stable and in general, outages are limited to rural areas and tend to last less than one hour. Sometimes, there could be planned outages, especially on weekends, of up to six or seven hours. However, sites tend to be equipped with backup power and there is an increasing interest in alternative energy sources such as solar. To date, only 10% of towers are equipped with backup gensets.

Since 2012, Costa Rica has jumped to international attention for its demanding environmental protection laws and regulations which make it one of the greener states in the world. The regulator, Sutel, went as far as shutting down the permit process for seven months, which resulted in a lawsuit being filed against it.

There have been concerted efforts by carriers and towercos to push for a more streamlined permitting process which includes environmental as well as civil aviation permits along with other formalities. However, municipalities are opposed to any simplification of it in light of the revenue stream related to each individual permit. And some municipalities - reportedly up to six - went as far as refusing to issue permits altogether and are now involved in lawsuits with towercos.

A variety of discrepancies and limitations create

a complicated environment for new entrants and has favoured established and more experienced towercos, able to cope with bureaucracy in a more organised manner thanks to larger teams and deeper relationships.

However, regulatory limitations are now clashing with the growing demand for service by the population and this is contributing to opening a dialogue channel with the regulators as well as local authorities.

Infrastructure sharing could be further regulated

Infrastructure sharing is mandated by law, with no fixed pricing structure. Therefore, lease prices are defined by market forces. The government had been working towards setting a price structure but to date the process has stalled and it isn’t likely to be concluded for the next couple of years. Tower industry investment is generally maximised where the government does not intervene in lease pricing.

On the regulatory front, SUTEL has been very active and has recently drafted a new regulation that would force carriers to share all of their sites. The new provision would make multi-carrier towers mandatory and enforce the shareability of fibre as well. However, the first draft was only released in March this year.

This change would allow Telefónica to co-locate. In fact, the carrier has tried in various occasions to become a tenant on ICE and Claro’s sites the cost of co-locating on other carriers sites to be prohibitive.


The Costa Rican tower model is a pure real estate business and carriers are in charge of supplying their own energy solutions. Carriers as much as towercos are now shifting to renewable energy solutions.

Companies like Catalina Inc. for example, tend to use a combination of hydro, wind and solar power and stated that as much as 90% of its energy will be provided via renewable sources. Fossil fuels are still used as backup but Costa Rica is pushing to reach 100% renewable energy by 2018.

In a country where communities are very involved and attentive to balance industrial development and environmental protection, alternative energy sources tend to be preferred as they provide a reliable and yet quiet solution.

In Central America, there is a traditional view on power and carriers tend to be very conservative. They want to keep control of their power supply and its pricing. If a towerco was to handle the power, they’d end up charging the customer more and carriers don’t see that as a value-added service.

In Africa, where towercos handle the power business, this has helped the development of new technologies as well as cost-cutting initiatives and an overall rationalisation of the energy model. But the African model was born out of necessity due to the almost total absence of a reliable grid in certain states.Fibre and small cells: not quite there yet

Another challenge the industry is experiencing is how to connect to fibre. The largest fibre networks in the country are owned by ICE and they are yet to open up access to competitors. Other fibre suppliers’ footprints are far from extensive and they will encounter an additional limitation as some municipalities are opposed to granting the right of way. As a result, fibre isn’t as extended yet and small cells are uncommon.

However, small cells are a promising reality especially for urban centres and the Costa Rican

tower industry does expect them to become an additional revenue stream.

Costa Rica is getting safer but theft is still a reality

Although not a major issue, vandalism can be a problem especially during certain times of the year. It was noted how around Christmas crime rates tend to raise and carriers have to deal with issues such as thefts of copper, batteries, lighting et cetera.

During those times, electrical systems are hit the hardest and that is why equipment is kept in cages. This extreme solution is adopted once a site is hit with a theft. It must be highlighted that overall crime rates have been decreasing in the country over the past couple of years.

Almost inevitably, there was a degree of theft within the supply chain, but stakeholder report that this has reduced since 2011 as the number of projects outsourced to international subcontractors has reduced.

Overall, Costa Rica is perceived as a safe country, especially compared to other Central American states. It’s a secure, dollar-based economy supported by a stable democracy. The tower industry has been developing swiftly also thanks to these factors and the absence of turbulence on the political and economical fronts. Costa Rica presents its challenges but it’s not a hard country to operate in and is very open to international investments and the wisdom of expatriates

“

“

Another challenge the industry is experiencing is how to connect to fibre. In fact, the largest networks in the country are owned by ICE and they are yet to open up access to competitors. Other fibre suppliers’ footprints are far from extensive and they will encounter an additional limitation as some municipalities are opposed to granting the right of way


Permitting and communityacceptance are key issues in ColombiaA summary of challenges and opportunities discussed during the Colombia roundtable at the TowerXchange Meetup Americas 2015

Colombia is the third most populous country in the region, after Brazil and Mexico, with an estimated 48mn people. The country is host to three strong carriers with Claro enjoying a dominant position despite shrinking market share since 2012. Claro holds 56% of the market (compared to 62% back in 2012), followed by Movistar with around 24% and Millicom’s Tigo with approximately 15% market share.

While Claro’s position has been slowly weakening, other players have entered the market, while Tigo merged with fixed line operator Une-EPM back in 2014. Additionally, a number of MVNOs players such as Virgin Mobile, Uff Móvil, Éxito and ETB are building subscriber bases while Satellite TV provider, DirecTV, started a 4G LTE service in July 2014. Colombia’s incumbent operators are already deploying 4G on the AWS band, but it’s very early days for the rollout. Tigo, Movistar and ETB have infrastructure sharing and roaming agreements in place to accelerate their 4G rollout.

Thanks to this dynamic carriers’ landscape, Colombia has attracted as many as twelve towercos, six of which are local and the rest international. The size and potential of the Colombian tower market attracted American Tower to enter the country, while other active towercos include Continental, Innovattel, Centennial and NMS. Torres Unidas, Phoenix Tower International and Torres Andinas were all in the early stages of opening up operations in Colombia at time of writing. Another of the region’s largest towercos is reportedly considering an entrance in the country which would create even

Read this article to learn:< The status of the Colombian telecom market: players and market share

< Colombia’s relatively low country risk attracts tower industry investment

< Local communities remain the biggest challenge to greenfield projects

< Why cell site security is often a greater challenge in urban than rural areas

During the second TowerXchange Meetup Americas, experts involved in the Colombian market gathered to discuss key trends, challenges and opportunities faced by the local telecom tower industry. With permitting and community acceptance of the towerco model high up on the list of top issues, Colombia is still a very profitable market for the telecom tower industry as a whole and one that has been able to attract as many as twelve towercos to serve the national territory.

Keywords: 4G, Americas, Americas Research, Build-To-Suit, Claro, Colombia, Country Risk, Densification, DirecTV, ETB, Éxito, Infrastructure Sharing, Investment, Leasing & Permitting, LTE, Millicom, Movistar, New License, QoS, Regulation, Research, South America, Tigo, TowerXchange Research, Uff Móvil, Une-EPM, Urban Vs Rural, Virgin Mobile

Claro

Movistar

Tigo

Virgin Mobile, Uff Móvil, Éxito, ETB, DirecTV

56%24%

15%

5%


Mobile market share


In terms of regulation, the government has been cooperating with the telecom industry to identify locations suitable for greenfield projects. However, there are still plenty of municipalities opposed to new deployments. Training sessions on the impact of radiation and the safety of towers have been organised within various municipalities with the concerted efforts of public entities and industry players.

Community acceptance remains the number one challenge in Colombia

The Colombia roundtable discussion dwelt at length on the community and the necessity to educate the population on the real value brought in by the telecom industry. In spite of the fact that connectivity is a sought-after service in Colombia, there are still plenty of rural and suburban communities fighting against the installation of new sites.

People tend to complain about Colombia’s poor QoS but on the other hand, oppose new sites because of the fear of radiation. The reality of working with and educating local communities tends to represent a bottleneck in terms of project timelines, but is also the only way to ensure that projects can be developed.

Local communities lobby not only against new sites but also in an effort to ensure that noise produced by generators is reduced. The industry has responded by reducing the noise emitted by generators and is now introducing smaller and

more competition.

While there is clearly great enthusiasm for the Colombian tower market, TowerXchange don’t see the obvious pathways to substantial sale and leaseback opportunities as Entel would appear to provide in Chile and Peru. Claro still sees the network as a competitive differentiator and even if, years into the future, they did decide to monetise their Colombian towers, their own towerco Telesites might be the most likely vehicle to bring those towers to market. Of Colombia’s other operators, Tigo has already sold most of their towers (to American Tower back in 2011), while Movistar

started monetising their Colombian towers in 2010 but discontinued the process in 2012.

Country risk is low compared to neighbouring Venezuela

On the political front, the country’s perceived risk is definitely lower than that of neighbouring Venezuela and the potential threat of asset nationalisation isn’t seen as realistic. However, the local currency - the Colombian Peso - has been fluctuating over the past year and it’s not uncommon for towercos to try to stipulate contracts in US$.


quieter equipment. Camouflaged towers are now increasingly popular in the country in an attempt to reduce the visual impact of new sites.

With each municipality able to establish their own rules, towercos certainly don’t have an easy task when it comes to obtaining permits. Colombia has not seen the same level of Central government involvement in standardising permitting processes as we’ve seen in Brazil and Peru.

The new 4G auction will push cell site densification

The upcoming 4G spectrum auction, which follows the auction held in 2013, will create an obligation for carriers to share infrastructure as well as provide coverage in 40 remote areas in the 1,900MHz band in 50 additional areas in the 900MHz. And with these obligations, more towers will be needed.

As previously mentioned, it’s been forecast that these coverage goals will require an additional 10,000 towers to be met. Coverage challenges are compounded by capacity issues; there is rooom for improvement in QoS in the country as users experience plenty of dropped calls on a daily basis.

Back in 2013, Claro, DirecTV, Avantel, Tigo Colombia (in a joint proposal with State-owned ETB) and Movistar were awarded several blocks to rollout 4G networks with substantial coverage obligations. However, to date only 5% of mobile users are actually connected to 4G. The upcoming auction will put a serious strain on carriers and require considerable investments as well as a dedicated effort to engage local communities in the process.

Government and regulatory challenges

The regulatory environment does not seem as favorable toward the towerco business model in Colombia as in other CALA countries. For example,

there isn’t the same pressure on dominant operator Claro as seen in Mexico, the National Law designed to ease permitting has not to date prevented local government entities and communities from blocking site construction or closing down sites, and it was only as recently as 2013 that the spectre of asset nationalisation was raised in a Senate proposal. The Colombian government also owns a 50% minus one share stake in the combined Tigo and Une-EPM entity.

Security: rural vs urban

Experts report that towers built in remote areas, where the logistics can be extremely tough, tend to be safer and protected by the local community which sees connectivity as a major leap forward. On the other hand, urban projects are sometimes hindered by corruption and we’ve heard reports of tower owners being asked to be asked to pay fees to criminal gangs in exchange of access to a certain neighbourhood.

Conclusion

In conclusion, in spite of some challenges represented by Claro’s dominant position, the huge number of towercos already present on the territory and the opposition of local communities to cell site construction, Colombia is perceived as a healthy market and one where towercos still have plenty of opportunities. With 10,000 new sites likely to be planned and deployed over the coming years, Colombia is one of the most active and attractive markets in the CALA region

“ “The upcoming 4G spectrum auction, which follows the one held in 2013, will create an obligation for carriers to share infrastructure as well as provide coverage in 40 remote areas in the 1,900MHz band in 50 additional areas in the 900MHz. And with these obligations, more towers will be needed


IFC on the Colombian telecom industryA positive growth pattern is creating an inviting environment for towercos

TowerXchange: Guillermo, what is your take on the Colombian telecom sector?

Guillermo Mulville, Principle Investment Officer, IFC: At IFC, we are bullish on the Colombian telecoms market. Mobile telephony currently represents 70% of the total telecommunications industry revenue, initially driven by growth in subscriptions, which now amount to over 53mn.

While mobile subscriptions may be reaching saturation levels, the sector still maintains a healthy growth rate as a result of operators offering additional services. Voice is becoming ubiquitous,

but the exponential increase in data demand is driving industrial growth, with several players (Movistar, the combined Tigo and Une-EPM, Claro and DirecTV) having already made 4G technology available to their customers.

As in other markets, we also see that broadband is enabling a wide array of additional services, including mobile banking, mobile health, e-education and entertainment.

TowerXchange: How is the government contributing to fostering a modern ICT industry?

Guillermo Mulville, Principle Investment Officer, IFC: The government has been actively supporting the sector, for example through ambitious Vive Digital programme, levelling the playing field by reducing interconnection rates for smaller players, and through auctioning spectrum.

Specifically, ICT ministry has recently published a draft document for public consultation on the bidding rules for the auction of a number of spectrum bands (i.e. in 700MHz, 900MHz, 1.9GHz and 2.5GHz). Winners will be subject to ambitious urban and rural coverage requirements. For

the next four to five years, private and public investments in the sector may reach up to US$10bn, inclusive of capex, spectrum and other investments.

TowerXchange: What are the effects on the tower industry?

Guillermo Mulville, Principle Investment Officer, IFC: The above dynamics bode well for the tower market.

The country has several healthy MNOs and wireless broadband providers which will need to expand their coverage and network capacity. This has already attracted a large number of independent tower operators. A high portion of Colombia’s 15,000 towers remain with MNOs, mainly explained by market leader Claro’s reluctance - up to now - to sell off towers. However, build-to-suit activity remains healthy and we should not discard sale-and-leaseback opportunities either.

TowerXchange: What investments has the IFC undertaken in Colombia?

Guillermo Mulville, Principle Investment Officer, IFC: Overall, Colombia is among the most lively telecom markets in LatAm. Over the last couple of years, IFC has invested equity and mezzanine across a number of sectors and companies including MVNOs such as Virgin Mobile, Mobile (Avantel) and Finch (Movilred and Recaudo Bogota). We generally see attractive opportunities in broadband, infrastructure sharing and smart cities, among others


Peruvian tower market primed for significant growth in next three yearsRecord breaking BTS, potential SLB, and 4G rollout under way, although regulatory amendments have met with a mixed reception

Entel shakes up mobile market Peru was effectively a comfortable, relatively slow growth duopoly between Movistar and Claro with Nextel only active in the big cities, but Entel’s acquisition and nationwide vision has stimulated network investment. One towerco suggested that their biggest concern was that carriers were spending aggressively on customer acquisition at the expense of investing in the networks – certainly the incumbents operators were reportedly nervous about competing with the new entrants. It is clear that there is plenty of room for tower market growth in Peru, which has one of CALA’s lowest SIM penetration rates (101% according to GSMA Intelligence, Q4 2014). There is currently a fledgling 4G market, but the three market leaders all have launched. Claro, Movistar and Entel’s 4G services already account for over 4% of subscribers. Movistar and Entel secured spectrum in AWS band and, although Claro bid unsuccessfully, they cleared spectrum in the 1900MHz band which had become largely redundant in the delivery of 2G services. More spectrum is coming with a 700MHz auction imminent. In terms of infrastructure sharing; Movistar has been the most inclined to share but Viettel have to date remained reluctant, while Claro is also less motivated. RANsharing has been observed in

Read this article to learn:< Who owns Peru’s towers?

< Entel’s market entry stimulates network investment, Olo and DirecTV also drive demand for

towers and tenancies

< Record breaking build to suit activity in 2014 may slow in 2015, before accelerating again

< Insights into the tower structures and fibre being deployed in Peru

< Regulator seeks to ease permitting, but concerns expressed over potential interference with

lease rates

Some of the critical stakeholders in the development of the Peruvian telecom tower market assembled for the annual round table at the TowerXchange Meetup Americas in May 2015. Here we share insights from their conversation, plus TowerXchange’s own analysis of a tower market poised for transformational growth in the next three years.

Keywords: 4G, Active Infrasharing, American Tower, Americas, Americas Insights, AT&T, Build-To-Suit, Capex, Claro, DirecTV, Entel, Fibre, Infrastructure Sharing, Innovattel, Insights, Leasing & Permitting, Market Forecasts, Market Overview, Masts & Towers, Movistar, New Market Entrant, NMS, Off-Grid, Olo, Pass-Through, Peru, Regulation, Rooftops, SLA, Tax, Telefonica, Tenancy Ratios, Torres Andinas, Torres Unidas, TowerXchange Meetup Report, Viettel


Telefónica (Movistar) have already sold 468 towers to American Tower back in 2010. Torres Unidas now claims to have over 600 sites in Peru, having acquired 350 from Telefónica. Torres Unidas has the right of first refusal to buy the Olo portfolio. In terms of growth potential, one towerco stated that “tenancy growth is huge, we’re building tremendously”. Over a three to four year horizon all the towercos were bullish about average tenancy ratios reaching around two, although, much of the predicted growth rates depend on whether AT&T is behind DirecTV. The Ministry of Transport and Communications has called for an increase from 9,000 to 22,000 cell sites over the next three years, an increase of almost 2.5x in tower stock.

Colombia, although not yet in Peru, although it may only be a matter of time until RANsharing is undertaken the country. Non-traditional tenants could play important role Peru has a good crop of non-traditional carrier tenants, including WiMAX provider Olo, which plans to rollout 1,000 LTE BTS. ISP Movilmax was also launched in early 2015. DirecTV also plans to launch an LTE fixed-wireless service on top of their content delivery systems, but may enter the mobile market in future. This raises the issue of what the implications will be if and when AT&T acquires the company. DirecTV tends to be taking tenancies at 120’, typically in clusters within cities, particularly in Lima. DirecTV had

previously issued search points instead of search rings, but they have since changed their outlook. Viettel is only building a fixed network; they’ve announced mobile services but were yet to launch at Q1 2015. Their tender requires deployment within one year. When they first entered the market, Viettel’s declared intent was to discount mobile rates by 25%, but rates have since reduced regardless. Viettel puts an emphasis on low cost, accelerated deployment, and has used a similar strategy in other countries such as Mozambique. At least one towerco in the region reported that they had sold co-locations to Viettel.

Stakeholders bullish about Peru’s tower market

Towercos currently own a little over 25% of Peru’s 9,118 towers. Ground rent is a pass through pro rata.

Who owns Peru’s 9,118 towers?

“

“

one towerco stated that “tenancy growth is huge, we’re building tremendously”. Over a three to four year horizon all the towercos were bullish about average tenancy ratios reaching around two, although, much of the predicted growth rates depend on whether AT&T is behind DirecTV


Telxius

American Tower

Torres Unidas

Torres Andinas

NMS

Innovattel

Claro

Telefónica

Bitel

Entel


900

618

600

1358

6002500

2342

1005050

Record breaking build to suit American Tower added a greater percentage of new sites in Peru than anywhere else worldwide in Q4 2014. Last year 1,300 new sites were deployed by Entel, which were all outsourced to towercos. There has also been plenty of capex deployed already, for instance carrier announcements suggest:< Claro is investing just under US$1bn to extend coverage and capacity between 2015-17< Telefónica is spending US$1.8bn between 2014-16; Telefónica added 1,432 new sites in 2014 alone< Entel is deploying capex of US$1.2bn between 2014-19< Viettel is spending US$400mn installing 2,000 towers and laying 15,000km of fibre Whilst one towerco suggested they anticipated a substantial build in Peru to continue steadily over the next two to three years, another towerco suggested that there would be fewer builds this year. They suggested that of the DirecTV search rings, 95% of rings could be served with one of their existing towers, summing up that they felt that around 200-250 new towers would be built this year in Peru. Two of the other towercos felt that estimate was pessimistic, one suggesting that Entel were likely to issue ~280 new search rings, requiring both GBTs and rooftop sites, albeit that permitting of many the required greenfield sites would be challenging as many are sites Entel were unable to secure and construct themselves. In summary, there was consensus that 2015 was likely to be slower than 2014, with 2016 likely to

be a better year for new site builds in Peru. But in general, Peru remains one of CALA’s fastest growing tower markets. Rooftops, masts and towers Quality contractors for rooftops, masts and towers are hard to find in Peru, and can be more expensive than other countries. One towerco suggested that most build-outs consisted of rooftops, typically with 6-9m structures, for which they had to reinforce a large number of roofs, complicated by the fact that a lot of neighborhoods didn’t have a registry of plans. The most in demand structures seemed to be 24-30m towers and 6-9m poles. Regulations require the use of particularly strong bases. Participants report that, to date, there there has been enough steel available locally to meet demand for telecom structures. Urban and rural fibre Peru has fibre all along the coast and in the big cities. A ‘National Fibre Backbone’ has been launched with a focus on connecting farther-flung regions where it hadn’t been economic to deploy fibre to date. Therefore, most round table participants didn’t see the National Fibre Backbone project having much impact on their more urban-centric activities. Meanwhile, it seemed that Viettel had been installing fibre all along the coast, typically hung

from electrical poles. Regulation; permitting eased, but looming spectre of regulator interference in pricing Peru’s previously notorious permitting regime should be eased by new legislation coming into law this year which creates a uniform administration process. The new regulation tries to regularise all towers before 2012. These regulations mean that if a tower operator applies to a municipality for a permit, and if that municipality doesn’t respond, then the tower operator has a de facto license. The new regulation creates exact parameters of how a permit application filing needs to look. As a result a file cannot be rejected unless there is a genuine failure in the filing. However, the municipality has up to two years to respond, but if they find an error in your application they can make you take the site down. The regulation also includes some common elements from the Chilean ‘Tower Law’, such as some potentially expensive guidance on concealment. This regulation was approved by the President a couple of weeks prior to TowerXchange Meetup Americas 2015, and is retroactive. Whilst the regularisation of permitting process is seen as positive, Peru’s tower regulation has not been universally welcomed due to a requirement to submit Service Level Agreements (SLAs) and lease


rates quarterly. The regulator also claims they have the right to “implement measures”. One towerco is working to modify the law and has refused to comply, suggesting that Ospitel cannot regulate the unregulated tower industry, and that “intrusion into lease rates is something none of us need.” The same towerco called for support from his peers in lobbying the Peruvian regulator: “it’s important all towercos sing from same songsheet”. As the conversation at the Peru round table evolved, it became apparent that Peru’s tower regulation is not enshrined by an Act of Congress, meaning the regulators are able to regulate only licensed operators. They cannot regulate an unlicensed operator. So companies are only required to comply if they register in national registry of tower operators. The incentive to register is that you get to use the new law to get permitting law. Alternatively, at least one tower operator has declined to register and be regulated, forgoing the new permitting law, using the old processes, but avoiding the obligation

to share SLAs and lease rates, and thus minimising the risk of the regulator interfering with lease pricing. It is reportedly more difficult to build under old regulations. While it should be easier to secure build permits under the new regulations, once you gain a permit you may still have to overcome community objections. No property tax is applicable in Peru unless you own the site, even then it’s relatively small Power and security Power in Peru is generally reliable, and backup gensets remain the responsibility of operators. Torres Unidas has nine off grid sites among over 600 sites, although there may be more needed as they move further inland. Connection to the national grid is usually undertaken pretty fast. There is also not much theft

reported in Peru. While one towerco had had a couple of sites attacked by drug traffickers, and like most countries there are a few small pockets where infrastructure builders would be reluctant to go, in general the security situation in Peru is good. Conclusions TowerXchange are bullish about the prospects for the tower market in Peru. Claro and Movistar’s comfy duopoly is already being challenged by the acquisition of Nextel by Entel, in particular their ambition to scale from an urban to a nationwide footprint. Entel could monetise their passive infrastructure in Peru to fund the nationwide expansion and 4G rollout. In addition Viettel and, in particular, Olo and DirecTV (potentially with AT&T) represent the potential for further builds and tenancies. There are good opportunities for organic growth in a market where the government has called for an increase from the current 9,000 to 22,000 towers. There have also been efforts to create an enabling regulatory environment, in part welcomed by towercos, intrusion into lease rates notwithstanding. Peru is now a priority market in the CALA tower land grab. Torres Unidas and American Tower are expected to face increased competition in 2015 from other acquisitive towercos. This will create investment and sale opportunities for independent developers

“ “Whilst the regularisation of permitting process is seen as positive, Peru’s tower regulation has not been universally welcomed due to a requirement to submit Service Level Agreements (SLAs) and lease rates quarterly


Virgin towerco markets: BoliviaAre towercos going to enter Bolivia in light of its complicated past?

Back in May 2008 Bolivian President Evo Morales decided to re-nationalise the Empresa Nacional de Telecomunicaciones (Entel), after months of disputes with its majority shareholder Telecom Italia. The move was in line with Morales’ plans to nationalise key sectors including telecoms, gas and power. Negotiations with Telecom Italia became tense when Morales demanded a payment from the Italian telco of US$60mn to cover unpaid taxes and fines for failing to provide good service in rural areas and complying with coverage obligations.

Telecom Italia brought the case before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in spite of the Bolivian government threatening to withdraw from it due its perception of ICSID often taking the side of international companies rather than governments.

The controversy settled a few months later when the Bolivian government agreed to pay US$100mn to Telecom Italia and the parties signed an agreement to cease any further demands.

Telecom Italia isn’t the only international organisation that Morales’ Administration decided to nationalise. Over the following couple of years, Morales celebrated International Workers’ Day - May 1 - by nationalising key companies in the hands of international investors such as Air BP, Pan American Energy, ELFEC, Rurelec and GDF Suez’s subsidiary Corani.

Back in 2013, the President did threaten to nationalise the other two mobile network operators

Read this article to learn:< The challenges of doing business in Bolivia

< Improved economic conditions trigger international investments

< The mobile sector: investments and expansion plans

< Could BTS towercos enter Bolivia?

Build to suit (BTS) tower companies tend to be attracted by densification plans, and the launch of 4G LTE usually entails substantial investments by carriers to enhance their network capacity. However, in spite of all three active operators having commenced their 4G rollout across Bolivia, the country has so far failed to attract independent towercos, possibly as a result of a history of nationalisation of key international organisations.

In this editorial, TowerXchange takes a look at the country’s mobile market, its promising growth pattern as well as its troubles to attract international towercos.

Keywords: 4G, Americas, Bolivia, Build-to-Suit,

Editorial, Entel, LTE, Market Entry, Market

Overview, Millicom, Nuevatel PCS, QoS, South

America, Tigo, TowerXchange Research, Trilogy

International Partners, Universal Access, VivaBy Arianna Neri, Head of Americas, TowerXchange


active in Bolivia; Trilogy’s Viva and Millicom’s Tigo. Specifically, Morales accused the two companies of avoiding cooperation with criminal investigations by providing useful information in a timely manner when requested by the police. While insisting that the operators were obliged to help the authorities, Morales never mentioned specific cases or referred to actual investigations. To date, both Viva and Tigo are active players in the mobile market.

Positive signs from the Bolivian economy

In spite of its natural resource wealth, Bolivia is still to date Latin America’s poorest country. However, its per capita GDP has risen by 25% since 2005 and is expected to grow by 4.5% in 2016 (vs 3.7% regional average).

In July 2015, Fitch upgraded its outlook on Bolivia to BB/Stable thanks to its improvements to the sustainability of its hydrocarbons production and its overall regulatory framework while the country’s inflation has been consistently below regional average (2016E: 4.9% vs 7.3% regional average).

Morales’ nationalisation strategy did limit the flow of international investments but since 2011, such investments have more than doubled (US$0.9bn in 2011 vs US$2.1bn in 2014) and, according to Fitch, the risks of nationalisation have considerably eased since 2013. It’s also important to note that the government has paid US$690mn in compensation to expropriated international companies.

Although still the poorest country in the region, according to the World Bank the percentage of people living below the poverty line decreased from 51.3% in 2009 to 39.3% in 2014.

No country for independent towercos?

Since its nationalisation, Entel has focused on granting universal access to the Bolivian population under its “Territory with Total

Coverage” initiative which has been pushing to enhance the role of mobile networks rather than fixed lines.

The lack of commitment to technological innovation has resulted in the level of service being considerably behind regional standards, network capacity being insufficient and SIM penetration being the lowest in the region at 98% (source: GSMA Intelligence).

Bolivia’s fast facts

Sources: TowerXchange, Economist Intelligence Unit 2015, Fitch Country Report, GSMA Intelligence, the World Bank

Population10.8mn (Q4 2015)

Economy

Mobile sector Carriers

$$$$$$$$$$$$$$$$$$

$$$

Foreign investmentsUS$2.1bn (2014)

Poverty headcountratio 39.3% (2014)

Fitch ratingBB/Stable

(July 2015)

98% SIM penetration(Q4 2015)

Connections 106mn(Q4 2015)

Entel

Tigo

Viva

Inflation 4.9% (2016E)

49.6%

30%

23.1%


The overall inadequacy of the Bolivian network has recently resulted in fines against the three operators. In fact, this past February, the national regulator, Autoridad de Regulación y Fiscalización de Telecomunicaciones y Transportes (ATT), has sanctioned each of them US$4.5mn for bad service and call drops during the year 2015.

As a measure to improve its offering, dominant player Entel has recently announced a US$1bn five-year investment plan which will focus mainly on enhancing the quality of mobile infrastructure and ensuring coverage of rural communities. Tigo invested US$130mn to expand its infrastructure across the country and Viva committed to US$80mn in 2015.

The emphasis on mobile infrastructure would usually have attracted BTS-focused towercos to enter Bolivia to support mobile network operators in their coverage extension and network densification plans. It should also be noted that one of Bolivia’s operators’ towers have been offered for sale on several occasions in recent years. However, there are still no international towercos in Bolivia, perhaps because doing business in the country isn’t easy.

Economy

Bolivia

Ease of doing business rank

157

Starting a business

178

Dealing with construction permits

150

Getting electricity

101

Registering property

143

Getting credit

126

Protecting minority investors

144

Paying taxes

189

Trading across borders

124

Enforcing contracts

136

Resolving insolvency

92

In fact, Bolivia ranks 157th (out of 189) in the World Bank’s ease to do business chart and it has so far failed to leverage its richness in natural resources, especially since nationalising gas and power companies. To date, the country’s GDP stands at US$6,500 or 156th out of 230 worldwide, which places Bolivia among the poorest countries in the American continent.

The ease to do business chart reports aspects such as starting a business and dealing with construction permits - which can take more than 200 days to expedite - for which Bolivia ranks in 178th and 150th place. These positions could well scare off BTS firms looking at doing business in the country, while the ability to enforce contracts isn’t one of Bolivia’s strength either.

The threat of nationalisation combined with a less than favourable business environment, especially in the construction sector, has so far hindered the development of the telecom sector and the entrance of independent towercos, although TowerXchange still feels that that the Bolivian market could present interesting opportunities for towercos seeking to acquire assets, especially since the launch of 4G LTE.

Bolivian telecom sector still poised for growth

The Bolivian telecom market is indeed growing fast and generated revenues of up to US$1bn in 2014 which could rise to US$1.5bn by 2019 according to a 2015 report by Pyramid Research.

As of December 2015, Bolivia had 10.2mnsubscribers out of approximately 10.7mn inhabitants with Entel leading the market share (46.9%), followed by Tigo (30%) and Viva (23.1%). Entel started offering 4G LTE services back in April 2014 and was soon joined by Tigo (July 2014). Viva announced its 4G LTE launch in July 2015.

With all three MNOs now rolling out 4G LTE across the country, cell site densification is a top priority and the entrance of BTS firms in Bolivia could positively impact the growth and overall modernisation of the local telecom sector.

Beyond the dynamics of the telecom industry and its growth projections and in spite of Fitch’s improved outlook on Bolivia, international tower companies might still seek a certain degree of reassurance before committing to any level of investment in the country. And that might be tricky to obtain

Source: World Bank Group - Doing business report


Brazilian tower industry isfacing its toughest year yetWhy organic and inorganic growth has slowed, and what it means for investors in Brazilian towers

Brazil was crowned queen of the CALA tower market thanks to its balanced carrier market, high site densification and rollout requirements, and sheer size. Towercos rushed to start operating in the country, invested in local teams and know-how in spite of Brazil’s tough tax regime and uncertain political situation. Investors bet high on its potential returns and everyone enjoyed a few years of tremendous successes.

However Brazil is currently facing the deepest recession since the 1930s and its effects are spreading across all industries including the tower sector.

Did Brazilian towercos underestimate the risks?

2011-2013 were phenomenal years for the CALA tower industry, especially thanks to Telefónica, Oi and Nextel which all divested several thousands towers in Brazil, Colombia, Mexico and Chile. We all knew that at one point the pace of sales and leaseback (SLB) transactions would slow down as the inventory of acquirable portfolios was reduced. But that didn’t stop - and if anything it helped promote - the proliferation of towercos especially thanks to the potential of the Build-to-Suit (BTS) market in the region.

This trend contributed to the creation of a new layer of middle market towercos, with less acquisitional buying power but specific know-how, regional connections and capabilities which made them the perfect partner for carriers with aggressive densification plans and reduced budget.

Read this article to learn:< The slowdown of the Brazilian tower industry in context

< 2011-2016: what changed in the Brazilian industry and why

< Is it possible to find an exit strategy during the crisis?

< What are BTS firms doing when there are no towers to build?

Back in 2013, TowerXchange estimated that independent towercos owned around 32% of the 140,000 towers in CALA. By 2014, those figures rose to 41% of 148,000 towers. Although estimated, these figures showed an impressive growth both in terms of towerco penetration and portfolio growth across the region. In 2015, the percentage went up just 1% to 44% (over 156,000 total sites) and to date, well into Q2 2016, we think that towercos own approximately 48% of CALA’s 165,000 sites. In 2013-14, inorganic growth of the tower industry in CALA was driven by Brazil. In 2015, organic growth in CALA was driven by Brazil. Both have slowed. Why?

Keywords: American Tower, Americas, Bankability, Brazil, Build-to-Suit, Editorial, Exit Strategy, Market Overview, Nextel, Oi, Private Equity, Phoenix Tower International, SBA Communications, Sale & Leaseback, South America, Telefónica, Towercos



To date, there are at least a dozen BTS-focused towercos in Brazil, as many as twenty in Mexico alone, around ten in Peru, and a mid-teen count in Colombia.

Most of these towercos are private-equity backed and built on the assumption that after a few years of BTS activity, they’d scale their business enough to flip to one of the larger towercos – most likely American Tower or SBA Communications. And not only they’d be acquired but they’d be able to sell for multiples in the twenties.

The first glimpse of consolidation among towercos happened back in 2014, when American Tower bought BR Towers and its 4,630 sites across Brazil for US$978mn. A transaction many saw as the first of many, but which to date has few sequels.

The trend of towercos entering the region, reaching a certain scale and succeeding at their exit strategy with high multiples seemed achievable until not long ago. Amidst this rush to scale, a growing swell of complaints could be heard that a complete set of paper and structural quality wasn’t always a priority in Brazil, with projects being awarded to the cheapest bidder regardless of the overall engineering standards.

Is 2016 going to be the quietest year ever?

Until 2013, Brazil made the headlines as one of the poster children of economic growth and industrialisation - the BRICS - but its GDP was already in decline. But 2015, with its -3.5% in GDP’s

growth was the year when finally the word crisis started to creep into the news.

There’s no need to revisit the recent story of troubled Brazil, whose economic stagnation, recession, inflation and political corruption allegations have all been widely discussed in recent news. However, 2015 was still a relatively good year for the Brazilian tower industry with an estimated 2,000 new sites being built in the country, the majority by the BTS-centric middle market towercos.

However, 2016 has started under a cloudier sky and is likely to become the toughest year to date for the local telecom and tower industry. There are very few BTS projects being developed in Brazil and most of those that remain are just backlogs from

2015. And although scenarios can vary depending on the towercos and their position in the market, not many can enjoy American Tower’s predictions of 11% organic growth in 2016.

If it’s true that towercos can invest some of their “free time” in cleansing their paperwork, reviewing underlying contracts, amending their revenues and marketing their towers to new tenants, this proposition isn’t as valid for towercos with relatively small portfolios hence unable to leverage their scale. And I’d doubt that their investors would be satisfied with a quiet year of paperwork.

On the other hand, whereas middle market towercos could still long for a high valued exit in the future, it’s unlikely that their potential buyers will want to cultivate a narrative to their investors


2013

2014

2015

2016 to date

Year

140000

148000

156000

165000

46011

61729

69850

80180

Est. total towers Towers owned by towercos

32%

41%

44%

48.5%

Towerco penetration

The evolution of the CALA telecom tower industry 2013-2016


of expansion and acquisition in Brazil under the current circumstances. The combination of the Brazilian foreign exchange crisis, its internal political and economic situation alongside the less than rosy outlook of the U.S. - and international - stock exchange don’t really call for bullish investments in Brazil or elsewhere.

The recent nomination of Mr da Silva, former President, as Chief of Staff to current President Ms Rousseff to protect him from the investigation related to the Petrobras’ scandal has just contributed to throwing the country into a black hole. Not even the upcoming Olympics are looking good with tickets on sale for as low as US$18 and commentators noticing how the sales campaign is falling considerably behind.

Under these conditions, I doubt anyone feels bold enough to buy in Brazil, but even if… Who would commit to a multiple higher than the multiple at which their own stock currently trades?

Although I am no expert in finance, I am left wondering whether the cheeky plan - which many seem to have adopted - of building towers in Brazil at whatever price, under whatever conditions to one day flip at high multiples is now shaking under the reality of these less than prosperous times.

Today’s conditions don’t help any towerco to function, whether they’ve been diligently following market rules or cutting some corners and working below market prices. But whereas

some towercos can afford to keep their Brazilian capital in the country, reinvest it or simply wait for better days to come, private-equity backed towercos - no matter how high quality their work is - are often under the pressure of a stringent investment lifecycle which rarely exceeds eight-nine years.

Long are gone the times when a tower with one tenant was already worth a premium!

I think everyone still interested in doing long term business in the country is likely to welcome this tough but much needed wave of rationalisation. And I do hope we’ll see more towercos diligently following the rules, compiling a complete set of permitting paperwork, working at market rates and spending time leasing up their towers.

If some towercos are just taking the foot off the gas and waiting for better times to come while focusing

their attention on their existing portfolios, some others really don’t have this luxury and weren’t created on the premise that the local industry would at any point get to such a deadlock.

The only option is to wait and see, if investors can be persuaded to have patience. For better times, more favourable conditions and an upswing able to instil a sense of confidence firstly into carriers. In fact, only a renewed wave of investments from the mobile network operators could revamp the BTS market in the country.

Will there be rationalisation and consolidation in the Brazilian tower industry? Probably not at the prices many investors had hoped for. There is a wildcard in the pack: could Phoenix Tower International rollup to scale whilst American Tower and SBA Communications are reluctant to re-invest in Brazil?

“ “whereas some towercos can afford to keep their Brazilian capital in the country, reinvest it or simply wait for better days to come, private-equity backed towercos - no matter how high quality their work is - are often under the pressure of a stringent investment lifecycle which rarely exceeds eight-nine years


The top ten challenges facingthe Brazilian tower industryPermits, standards, capacity… what’s keeping the leaders of the Brazilian tower industry up at night?

1. Permitting Brazil is notorious for the complexity and amount of time it takes to progress from permit application to permission to build. “I wouldn’t call permitting a challenge because there’s nothing fundamentally wrong, but the biggest opportunity is to fast track permitting,” said one towerco. Brazil’s Antenna Law, the Lei das Antennas, recently came into force, creating a standard approach to permitting across all municipalities, and introducing a 60 day ‘shot clock’. Even before the Lei das Antennas takes effect, another towerco suggested “It’s a myth that it’s almost impossible to permit green field sites in Brazil. As long as you understand the path you must follow, it’s not necessarily more difficult than permitting anywhere else – in fact, I’ve found permitting in the Northeast of Brazil, which is relatively under-developed, easier than in the US.” If securing a permit for a new site is not as complex as one might fear, there seems little doubt that fixing the legacy of permitting shortcuts remains Brazilian towercos’ number one challenge: “The rock you we most often fall on is permitting,” said one towerco. “Brazilian cell sites fall into three categories; fully permitted (which we call unicorns!) Permittable – sites that are compliant but for which a full set of permits were never attained. And unpermittable sites. The biggest challenges arise if the law changes and a site which was once permittable becomes unpermittable!”

Read this article to learn:< What are the REAL challenges in site permitting in Brazil?

< How unrealistic timelines put pressure on maintaining standards and best practices

< The criticality of revenue assurance to value creation

< The challenges raising capital at a rate that enables local developers to compete with US firms

The growth opportunities and the cash flow generated by Brazilian towers more than justify tower companies’ investment. However, on the Brazil round table hosted by David Porte, SVP of Operations for SBA Communications, the conversation turned to what was broken, and what needs fixing in the Brazilian tower market. Here the top ten challenges identified by an illustrious audience featuring five Brazilian towercos, as well as former tower strategists from Vivo, Oi and ON Telecom.

Keywords: Asset Register, Bankability, Brazil, Build-To-Suit, Debt Finance, Fencing, Foundations, Health & Safety, Insights, Leasing & Permitting, Masts & Towers, MLA, MNOs, South America, Stakeholder Buy-In, Towercos, Transfer Assets


industry to standardise best practices. For example, the majority of towercos would love to standardise on a principle that no-one builds towers without permits, but if aggressive competitors are going to cut corners with permitting to accelerate time to market and secure build to suit contracts, those standards and best practices can be sacrificed as people try to build market share. Long term revenue assurance is critical. This is why the robust MLAs of the established towercos are so important, and why it is critical that independent developers don’t deviate too far from the established business model. For example, if a carrier is granted a zero cost cancellation in their MLA, there’s zero revenue assurance, and that can be tremendously value destructive. Only a little less value destructive are cases where the carrier can

2. Poor standards of record keeping The poor standard of record keeping for the sites the towercos have acquired in Brazil has created a backlog of paperwork. Even where sites are fully permitted, documentation is not always complete, and municipalities seldom have duplicate copies. Whilst clearing the paperwork backlog remains a work in progress, a many of Brazil’s cell sites are not fully permitted. As a legacy of forgotten bi-lateral swaps, the paperwork for which may have been lost, it is not unusual for a carrier to not be aware that they had an operating BTS at a third party site until the towerco tells them (and sends them a bill!) Likewise, tenants seeking co-location report frustration that the towerco’s asset register might suggest that capacity is available, yet when they get to the site unregistered, often unused, equipment hanging on the tower means capacity is not readily available. 3. Standards One towerco complained that carriers pressing unrealistic timelines forced towercos to deviate from tower permitting and building best practices and standards. It was agreed that it was critical to adhere to common standards governing the capacity of structures and installation of fencing, standards for safe practice when working at height, and general standards for tower building. The standards challenge is accentuated when the original drawings of an acquired site have been lost.

We’ve heard of instances where a tower portfolio was offered for sale with no site drawings at all, which obviously makes it more complex to evaluate the structural quality of a portfolio. “We’ve acquired 35 year old sites where we don’t even know the rebar,” said one towerco. “So we have every level of standards compliance from fixing those kind of scenarios to green field sites which we’ve built to our own high standards from the outset.” 4. Competition leading to deviation from best practice As a function of the sheer amount of building and buying of towers in Brazil, and overheated competition, it again becomes difficult for the tower

Top ten challenges facing the Brazilian tower industry

1 Permitting

2 Poor standards of record keeping

3 Standards

4 Competition leading to deviation from best practice

5 Lack of visibility into medium term capex plans

6 “Still our towers” mentality

7 Access to capital

8 Lack of build capacity

9 Lack of network capacity

10 Uncertain future of Oi and TIM


cancel with payment of 20-30% of the remaining lease value. Even granting swap provisions, where a tenant has the right to swap 10% of their tenancies to other sites, adversely affects additional revenue potential. 5. Lack of visibility into medium term capex plans License obligations require that Brazilian carriers build in new areas, yet the towercos report that they have very little visibility into the medium term network capex deployment plans of carriers – the issuance of new search rings will often be the first towercos hear about network extensions. The Brazilian government has identified 5,570 ‘cities’ (municipalities) which must be served by mobile operators in the coming years, yet the operator with the greatest coverage, Vivo, provides coverage in only 67% of those municipalities, with the other carriers lagging even further behind. While market-driven network extensions are always going to be

unpredictable, extensions driven by compliance with ANATEL’s coverage obligations should be more predictable than they are. This lack of visibility implications for finance too, with a comparison to the US market made by one round table participant: “AT&T deployed huge capital in the US last year, but this year they’re buying DirecTV instead. When a big carrier hits the brakes, there’s a risk that the towercos can go out the window. Whilst it remains difficult to predict carrier’s capex over the medium term, the financiers always ask for a five year prediction.” 6. “Still our towers” mentality In the early stages of towercos participating in a market there is an immature, undefined relationship between towercos and carriers. We heard anecdotes where carrier’s staff had cut the towerco’s locks off a site and replaced them with their own – “they are still our towers” remains the

attitude of some carriers’ employees, even after the CFO has sold them! Attitudes change over time. Carriers come to understand that towercos are not just another supplier, they are a partner and landlord. “I’ve been into meetings where the carrier would slide their MLA across the table to us and demand we agree to their lease terms,” said one towerco. “It just cannot work like that. Because we share infrastructure, everyone has to be subject to same rules.” 7. Access to capital How can we structurally improve access to long term capital for the domestic Brazilian tower market? Securing debt financing at reasonable rates was highlighted as a particular challenge, and one which continues to make it difficult for Brazilian towercos to compete with US firms with access to low cost capital and cheaper interest rates; “it’s hard to borrow at 13% and make money in the long term,” complained one local developer. One round table participant reported that the BNDES (Brazilian Development Bank) loan programme could be accessed but that it only covered new build sites, and it required that BNDES own first title on the steel. 8. Lack of build capacity Despite the aforementioned overheated competition, voracious demand for new sites suggests that Brazil may have capacity for two to three times as many build-to-suit towercos

“ “Securing debt financing at reasonable rates was highlighted as a particular challenge, and one which continues to make it difficult for Brazilian towercos to compete with US firms with access to low cost capital and cheaper interest rates


as currently operate in the market. Certainly the sources TowerXchange have spoken to have suggested Brazil’s carriers would build more towers if they could! The Brazil round table discussion highlighted Brazil’s particular deficiency of transmission sites. 9. Lack of network capacity There is plenty of room for improvement in QoS in Brazil. Networks are maturing to the point where the carriers will compete less on coverage and more on capacity and QoS, which will improve medium term planning as networks densify. 10. The uncertain future of Oi and TIM Continuing speculation about the future of struggling #4 carrier Oi continues to create uncertainty. Oi reportedly has a negligible capex budget, has built very few new towers, and acquired no spectrum in recent auctions. The future of TIM Brasil also remains uncertain, although they have not been as hamstrung in terms of deploying capital. If consolidation in Brazil is inevitable, it can’t come soon enough. Conclusions Claro notwithstanding, Brazil’s carriers have sold almost all their towers. As with any industry where non-core activities are outsourced, the reality is that the carriers didn’t care as much about their towers as they did about their subscribers, so

improvement capex must be deployed. The costs of bringing towers acquired from Brazil’s carriers up to standard are embedded into towerco’s business plans – and accelerating the process of bringing those towers up to standard represents a critical opportunity for towercos to add value. Carriers are gradually learning how to co-operate better with their towerco partners, giving them better visibility into medium term plans, and therefore more time to deliver according to standards and best practices, ultimately delivering a better quality of service to both tenants and to their subscribers. Permitting remains Brazil’s number one challenge. It is critical that the Lei das Antennas be implemented swiftly and consistently by all municipalities to facilitate a predictable, accelerated permitting process, unlocking the carriers and towerco’s maximum investment in Brazilian telecoms infrastructure. Brazil has a legacy of short-cutting cell site permitting, and towercos are ideally positioned to clean that up. Amid a fiercely competitive market for build to suit opportunities, it is critical that Brazil’s independent tower builders don’t resume short-cutting permitting, or offer cancellation clauses within their MLAs, otherwise they risk harming or destroying the capital value of their sites. Some US investors have a view of the tower business based on 25 years of doing business in their domestic market – they turn their noses up at emerging markets because “it’s not the way it’s

done.” The reality is that there are sites in US with structural problems, and corners are cut when it comes to permitting everywhere in the world, the US included. The top ten challenges faced by the Brazilian tower industry are not greatly different from the top ten facing the US market, and if this article’s attempt to explain “everything you always wanted to know about the Brazilian tower market*” (*but were afraid to ask) has made you less bullish about the opportunity in Brazil, then that was not our intent. The Brazilian tower industry is lead by an accomplished group of people with an acute understanding of these challenges, and I believe the best way to overcome such challenges in any market is to hand the towers over to a professional tower company and let them clean them up

“

“

The Brazilian tower industry is lead by an accomplished group of people with an acute understanding of these challenges, and I believe the best way to overcome such challenges in any market is to hand the towers over to a professional tower company and let them clean them up


Chile tower market heats upEntel holds the key to the Chilean tower market achieving scale

Current state of Chile’s mobile market and network By most metrics, Chile is the most mature mobile market on the Pacific Coast of South America, boasting 144% SIM and 35% mobile broadband penetration (Source: GSMA Intelligence, Q5 2015). Chile is host to three credit-worthy prospective BTS / co-location / sale and leaseback counterparties in Movistar, Entel and Claro, and features a well-balanced competitive environment to stimulate capital investment. Having recently come through a spate of legal challenges, Chile’s operators are now selecting equipment providers to rollout 4G on newly acquired 700MHz spectrum, spectrum which came with extra coverage obligations including connecting 1,281 remote regions. This supplements the 2.6GHz band which all three operators have utilised to launch 4G. Participants in the Chile round table at the TowerXchange Meetup Americas expected 4G to drive a surge in lease ups (often at lower tower heights than existing tenancies), and large scale new build programmes within 24-36 months. In terms of prospective non-traditional MNO tenants, there is not much outside Chile’s core urban areas, where a public safety group has some tenancies, while Santiago is home to the usual smattering of local USPs, fixed wireless and last mile players.

Read this article to learn:< An overview of Chile’s carriers and their spectrum

< How Chile’s Towers Law has suppressed BTS and increased the value of existing towers

< The shareability and investibility of Chile’s broadcast towers

< Macro economic factors which suggest Chilean telecom towers are a safe haven for investment

< Who owns Chile’s telecom towers, who could be selling, who could be buying?

The CALA tower land grab is gravitating toward the three countries on the Pacific Coast; Chile, Colombia and Peru. How investible is the Chilean tower market? With the ‘Towers Law’ having stifled many tower build programmes, at the same time increasing the value of existing towers, what are the prospects for a substantial sale and leaseback in Chile? This analysis combines TowerXchange’s own research and commentary with insights learned from the Chile round table at the recent TowerXchange Meetup Americas.

Keywords: TowerXchange Research, Americas Research, Construction, 4G, Valuation, Tenancy Ratios, Co-locations, Network Rollout. Build-to-Suit, Bankability, Pass-Through, Densification, Leasing & Permitting, Regulation, DAS, Sale & Leaseback, Infrastructure Sharing, Americas, Chile, American Tower, Torres Unidas, Torres Andinas, SBA Communications, Claro, América Móvil, Movistar, Telefónica, Entel


Macro economic factors Economic headwinds, which suppressed foreign investment into Chile in 2014, appear to be easing. Chile is host to a very modern economy and capital city, generating the kind of disposable incomes that facilitate consumer investment in mobile devices. Smartphone penetration will pass 50% in 2015, and Chilean users are sophisticated users. With pricing in UF (Unidad de Fomento, a unit

Broadcast infrastructure Chile’s broadcast infrastructure assets are not really “in play” as prospective telecom co-location sites. Chile’s broadcast network typically consists of large towers perched on Chile’s mountains overlooking the big cities – while a handful may be of use for telecom co-location, most are too distant and too high to be of much to RAN planners and, with decent fibre connectivity in Chile, broadcast assets would be unlikely to be used for backhaul. There might be a “cash flow opportunity” rather than a “growth opportunity” associated with Chile’s broadcast infrastructure, and that probably means the assets are of minimal interest to towercos. Regulatory environment A tower entrepreneur with recent experience of the licensing regime in Chile reported that a towerco license was required, that fees were reasonable, but that the process took considerable time. In some ways, a licensing barrier to entry can be a good thing – keeping out players too small to add significant value. However, the principle topic of conversation around Chile’s regulatory environment concerns Law No. 20.599, commonly known as the ‘Towers Law’. The Towers Law has suppressed Chile’s build to suit market with its onerous restrictions on building in saturated or sensitive areas, its somewhat heavy-handed attempt to mandate infrastructure sharing, and its requirements both to invest in camouflage,

and at times to compensate local communities. While the ‘Towers Law’ has stifled tower build rates in the short term (market leading towerco American Tower reported a net increase in their Chilean tower count of <1% over the last two years), strict zoning rules tend to have an aggregate positive impact on the tower industry as they force network planners to share existing structures, even at sub-optimal locations, rather than build their own. Another effect of the Towers Law has been to reward local knowledge; as one independent developer put it “getting a tower built in Chile is no more challenging than it is in the wealthy suburbs of the US, demanding a similar sensitivity to aesthetics. While it’s tough to permit large volume BTS programmes, strict zoning protects and adds value to the tower once built.” Most commentators agree; if you can prove a tower is needed in Chile, you can get it built, although you may have to be prepared to invest in camouflage. In TowerXchange’s experience there are four priorities for the healthy regulation of tower markets – here’s how Chile fares against each: < Fair, fast licensing of towercos: average< Permitting regime that protects the zone around existing towers yet expedites new builds, ideally incorporating a ‘shot clock’ or similar: below average< Regulator should not interfere with market pricing of tenancies: above average< Clearly defined real estate law with online land registry: above average

Source: Quarterly reports

Mobile subscriber market share, Q4 2014

37.3%

21.4%

39.5%

1.8%

Entel Claro

Movistar Others


of account indexed daily against inflation), investments in Chile are insulated against inflation and currency risk. Independent tower companies are generally recognised as an established business model, so local commercial debt availability is good, with round table participants reporting debt could be sourced in Chile with interest rates in high single digit percentages. Using the words of one Chile round table participant to sum up: “as long as you have more conservative expectations for growth, Chile is a safe place to park capital and from which to repatriate capital.” Chile’s tower market At first glance at a map of Chile, the simple

observation occurs: this is a long, skinny country, with lots of terrain to cover and lots of sites needed. There are currently around 8,500 towers in Chile, but the majority are concentrated in Santiago, Viña del Mar, Antofagasta and Valparaíso – thousands more towers are needed, particularly in rural areas. All-in, a green field, ground based tower is reported to cost US$90-120,000 in Chile, depending on location and logistics, while lease back rates are reportedly in the US$800-1,300 range, depending on what equipment is being hung. Treat those costs and lease back rates as “back of envelope” estimates – such data is both confidential and subject to huge variation depending on circumstances, so it is always difficult to elicit hard numbers. Ground leases and energy costs are both a pass through to the operator, and grid power is both extensive and reliable.

American Tower is the largest towerco in Chile with 1,212 towers as of Q1 2016, followed by Torres Unidas, newly created Telefónica’s carve-out Telxius (328) and Torres Andinas. TowerXchange are tracking a couple of prospective new entrant independent developers. There have been a couple of tower deals in Chile, although too long ago to set a meaningful valuation precedent today. In early 2012, American Tower announced the acquisition of 558 towers from Movistar for US$96mn (US$172k per tower), while later that year Torres Unidas acquired a further 400 towers from Movistar in a deal whose terms were not disclosed. Informed estimates suggest the tenancy ratio on the Movistar towers acquired in 2012 was very close to one at acquisition, with just a few bi-lateral swaps to convert, and might be as high as 1.5 today (Q2, 2015), although it should be noted that neither American Tower nor Torres Unidas would verify that number. While co-location revenues have reportedly grown steadily, the Chilean tower build market is about to emerge from a period of relative stasis. For example, the largest towerco in Chile, American tower, made zero net additions to their Chilean tower count in the twelve months to April 2015, and added just nine towers in the preceding twelve months. Despite the challenges presented by the Towers Law, no-one expects this building hiatus to continue – Chile simple needs a lot more towers for 4G – indeed the regulator has required the

Who owns Chile’s 8,511 towers?


American Tower

Torres Unidas

Telxius


Estimated MNO captive tower


~120

6371

1212

480

328

most recent spectrum auction winners to make commitments to connect 1,281 remote regions. Quoting Jake Grant of BMI in a recent edition of the TowerXchange Journal (my italicisation): “In order to meet these commitments, the three main operators will need to invest heavily in infrastructure, expanding their current portfolios by three to four times their current size. With higher costs of construction due to the Towers Law, operators could look to divest non-core tower assets to third parties in order to fund this heavy capex burden”. Inorganic growth opportunities in Chilean towers So which stakeholders are most likely to sell Chilean towers, thus offering the most obvious path to scale for any aspiring new entrant towerco? Claro has no history of divesting towers and, with the formation of Telesites, seems more likely to transfer Chilean tower assets to their own towerco rather than auction them on the open market. It is believed that Movistar Chile has a few tower assets remaining on their balance sheets, having divested almost 1,000 towers in 2012, with subsequent builds largely undertaken by their towerco partners. Telefónica has a long history of tower sales, so a further modest tower transaction from Movistar would not be a surprise. This leaves Entel as the most likely counterpart in any substantial Chilean tower transaction. Entel are still building their own towers sometimes, at other times issuing search rings and having towercos build new sites, although

they are not working exclusively with any apparent preferred partner. In terms of strategic acquisitions, American Tower is almost always a buyer not a seller, especially in an attractive market like Chile, so don’t hold your breath for their 1,159 towers to become available. The management team at Torres Andinas have a successful track record of “building to flip”, so their assets could probably be acquired for the right price, albeit their Chilean portfolio remains small. Torres Unidas have the backing of Berkshire Partners, which gives them access to capital to drive to scale, although they may be more likely to seek to exit in around three to five years. With an estimated 1,080 towers in the three most attractive West Coast tower markets, and with towers permitted and built with co-location in mind from the outset, the Torres Unidas assets are already looking attractive! Finite opportunities for DAS Chile round table participants felt there were opportunities to deploy more DAS in Chile, but not at scale. One of the three leading MNOs reportedly has only 20 robust DAS in shopping centres. TowerXchange’s verdict on the Chilean tower market Investment in Chile is a priority for American Tower, and potentially for SBA Communications, which means it’s also a fertile market for independent developers to build-and-flip. But SBA is not going to achieve scale in Chile, nor are American

Tower going to defend their market leadership, by rolling up a few hundred independent towers – the next sale and leaseback deal may well define which towerco leads the Chilean market. Entel’s need to raise capital for 4G, and their need to deleverage after the acquisition of Nextel Peru, could provide the impetus to monetise their Chilean towers, particularly whilst the Towers Law has inflated the value of existing assets. American Tower and SBA Communications may seem to be jockeying for position in a race to 5,000 Chilean towers, but both have the discipline to walk away from overpriced deals. Chile may be an attractive market, but there are bigger fish to fry, so if the price isn’t right, AMT will stand pat and SBA will invest elsewhere. TowerXchange simply don’t see the compatibility of Chile’s current Towers Law with the country’s need for over 10,000 towers to densify networks for 4G and to meet the obligations to connect 1,281 remote regions set out in the recent spectrum auction. The regulator cannot fine Chile’s operators if the main reason they struggle to meet coverage obligations is because they cannot permit enough new builds fast enough, nor build economically. Whether or not the Towers Law is amended, with the Chilean carriers’ 700MHz spectrum supplementing the 2.6GHz already rolled out, the country’s towercos are posed for a surge in co-location sales and amendment revenue in 2016-17, so there is pressure on a sale and leaseback taking place sooner rather than later


IFC on the Argentiniantelecom tower industryImproved investibility of the country’s telecom sector in light of the new Presidency

Argentina has the fourth largest population in Latin America and is the third largest economy after Brazil and Mexico, representing around 10% of Latin America’s GDP. The local mobile telecom sector accounts for less than 4% of the country’s GDP, indicating that there is strong growth potential.

The new Government is actively working to improve the business environment and to re-build external relations. In just a few months, President Macri’s administration has liberalised the foreign exchange market, devalued an appreciated currency, and reached an agreement on the long-standing dispute with sovereign debt hold-outs, opening up the international capital markets to the corporate sector.

However, resumed economic growth is only expected for the second half of the year. Inflation remains stubbornly high and the Government is taking a gradualist approach to addressing the huge fiscal deficit it inherited from the prior administration. In the telecoms sector, the Government has appointed very professional and committed teams at the ministerial and regulatory levels in order to tackle the challenges ahead.

At IFC we are very bullish on the country and its telecoms sector. The recent spectrum auctions, added to the new political and economic environment, provide the ingredients for a new phase for the sector following a long period of underinvestment. Approximately US$9bn of investments are now expected by MNOs in the next five years.

Read this article to learn:< How Argentina is changing under the new Presidency

< Investments and divestments ahead for MNOs

< The new telecom regulator and its key role in promoting infrastructure sharing

< The growth potential of the local telecom sector

< What is in it for towercos? Assessing risks and opportunities

IFC’s Head of TMT for Latin America, Guillermo Mulville is based in Buenos Aires and has an in-depth knowledge of Argentina’s dynamics. Much has changed since President Macri came into office and his attempts to re-open doors to international investors are being positively perceived. However, the country still has to prove itself and in this analysis, Guillermo shares with TowerXchange readers insights into its telecom sector, MNOs’ investment plans and potential for the creation of an independent tower market.

Keywords: 3G ,4G, ARPU, Americas Insights, Argentina, Build-to-Suit, Capex, Carve Out, Country Risk, Debt Finance, IFC, Infrastructure Sharing, Insights, Investment, MLA, Market Forecasts, Market Overview, Network Rollout, New License, Opex Reduction, Private Equity, QoS, Regulation, Risk, Sale & Leaseback, South America, Tax


Carriers - what’s changing and why?

The new authorities took the immediate decision to merge the sector’s two regulators, AFSCA and AFTIC, into the National Entity for Communications (ENACOM). And last month, ENACOM received congressional approval to begin a reform of the Digital Argentina Law which was passed in 2014. The new context is expected to promote convergence and competition, and eliminate discretionality.

MNOs had been starved for spectrum for many years. Economic mismanagement under the Kirchners affected investments, resulting in serious QoS issues as MNOs were ill-equipped to deal with increased traffic.

The allocation of 4G spectrum in 2015 was well-received by MNOs, which ended up paying a total of US$2.2bn, 13% above the base price. While capacity and QoS are improving, the new phase of infrastructure deployment has only recently commenced. Mobile broadband investments will be key. According to GSMA, current 3G and 4G subscriber penetration will increase from 37% to 56% by 2020. This context provides for a favorable outlook for infrastructure sharing business models.

Argentina’s mobile market has a structure which should also favor infrastructure sharing. SIM penetration is around 140%, with 90% of unique subscriber penetration and over 28mn mobile broadband connections. Blended ARPUs, even after the recent devaluation, stand above US$7. Market share is evenly distributed between the three main

operators: Claro (América Móvil) with 33% of market share, Movistar (Telefónica) with 32% and Personal (Telecom) with 32%. Nextel, recently bought by Grupo Clarin’s Cablevision, has a 3% market share but is expected to become more prominent once it invests beyond iDEN. But for this it will require additional spectrum.

Are towercos likely to enter Argentina anytime soon?

Argentina has over 16,000 cellular towers, the third-largest tower count in the region after Brazil and Mexico. However, practically all towers are MNO-owned. Historically, there have been many

inhibitors to the development of an independent tower model. These included long periods of macro instability, limited long term financing, high inflation coupled with inadequate inflation adjustment indices, regulatory uncertainty and an interventionist government policy and high levels of perceived corruption (Argentina ranks 107th among 168 countries ranked by Transparency International). In particular, foreign exchange restrictions meant that MNOs accumulated substantial Peso-liquidity, which in a high inflationary environment with FX constraints prompted them prioritise capex over opex. Local MNOs, previously skeptical of infrastructure sharing, now seem open to embracing

140%

SIM penetration

1,500-2,000new sites neededper year 2016-2018

16,000existing towersin Argentina

US$2.2bn:Raised during the 2014

4G spectrum auction

$$$$

US$9bn:expected combinedMNOs investmentsin the next five years

$$$$

35%

Incometax rate

VAT

21%

Wealthtax

1%

1:BTS firmactive inArgentina(Innovattel)

US$7+averageARPU

32-33%:the marketshare of eachof the threetop MNOs

the newregulatorENACOMresultingfrom themerge of

AFSCA

andAFTIC

1


the model. MNOs face accelerated build-out needs, for which they need built-to-suit partners. Without considering Nextel, we estimate that the three large MNOs will pursue a combined 1,500-2,000 new sites per year in the next couple of years alone.

In our view, the outlook has changed completely in just a few months, but this will not imply an avalanche of new independent tower operators until the new landscape is assimilated. So far, there have only been few announcements of signed master lease agreements, Innovattel/Torresec being the first independent tower operator to announce that they have secured BTS contracts with two of the leading wireless operators in Argentina, for which they have raised financing from Albright Capital Management.

Interestingly, the Ministry of Telecommunications and ENACOM are working with the city of Buenos Aires to make available public building rooftops for mobile antennas, helping improve capacity in one of the highest populated areas of the country. Furthermore, they are in negotiations with other municipalities to improve the tower permitting process.

The development of the sector will also depend on the continued improvement in the overall business environment. High inflation rates and still unreliable indices imply that leases will likely be US$-denominated over the medium term, which is of course beneficial for towercos but which constitutes currency mismatch risks that MNOs typically want to avoid. Also, while restrictions on future

repatriation of funds has in theory been addressed, banks are wary of such risks and still require political risk mitigation, such as that provided by multilateral financiers like IFC. Taxation is another issue which may delay a faster development of infrastructure sharing. An income tax rate of 35% is particularly hefty in Sale-and-Leaseback transactions, in which the towers have been carried in MNO books at cost in an accounting context of no adjustment for inflation. Also, operational taxes, such as 21% VAT for any lease operation, a wealth tax of 1% on the book value of assets, added to gross income tax, corporate income tax and various stamp taxes, are obstacles to faster sector growth.

Finally, while we see strong interest in Argentina from many middle market towercos, the market is watching closely the decisions of América Móvil and Telefónica of creating their own infra-cos.

Country risk vs opportunity

Country risk is evidently high on investors’ minds. However, having been an outcast from the international markets for such a long time does provide interesting investment opportunities now that the Government is undertaking market friendly policies through credible and highly committed technical teams.

Agreement with the debt holdouts [Note of author: this is expected mid-April, so we assume already achieved by the time this article is published] was arguably the last impediment in terms of allowing Argentina to graduate from an “exotic market” to

an “emerging market” once again. Presently, we see a short window of opportunity in which equity and debt investors can expect to obtain high risk-adjusted returns.

High inflation, high fiscal deficit and the perceived risk of repatriating funds are still worries for international investors but in our mind these risks are offset by the sectorial opportunities arising after a decade of underinvesting.

At IFC we have a long history of investing in Argentina. Our current portfolio amounts to over US$1bn, while we have mobilised additional third party funds in excess of US$550mn. The bulk of such portfolio is in infrastructure projects, with financial markets, agribusiness and technology accounting for the balance

“

“

Local MNOs, previously skeptical of infrastructure sharing, now seem open to embracing the model. MNOs face accelerated build-out needs, for which they need built-to-suit partners. Without considering Nextel, we estimate that the three large MNOs will pursue a combined 1,500-2,000 new sites per year in the next couple of years alone


TowercoperspectivesTowerXchange loves to talk to the industry leaders to find out more about what’s really happening and how they are contributing to shaping up the market. In this dossier, we offer our readers exclusive insights into leading listed towercos, investment banks, advisors and fast-growing middle market companies such as SBA Communications, American Tower, Torrecom, First Corporate Finance, Phoenix Tower International, UBS and more.

Additionally, we include reports from the towerco panels held at the 2015 edition of the TowerXchange Meetup Americas, featuring high level

perspectives from key towercos operating in the CALA region.

Don’t miss:101 Insights from AMT, SBA, GTS and Digital Bridge106 Insights from Innovattel/ Torresec, Torres Andinas, Catalina Inc., IIMT, Square1 Infrastructure, Torrecom and Brazil Tower Company111 AlfaSite113 American Tower120 Andean Tower Partners124 First Corporate Finance128 Grupo TorreSur131 Innovattel/Torresec

133 Mexico Tower Partners and Digital Bridge137 NMS140 Phoenix Tower International 145 SBA Communications on Costa Rica150 SBA Communications on Guatemala 152 Telxius158 Torrecom162 Torres Andinas166 UBS

Keynote insights from AMT, SBA, GTS and Digital Bridge Management The future of CALA telecoms according to the leaders of the region’s largest towercos

Reintroducing the leaders of CALA’s leading towercos

Grupo TorreSur (GTS) is an independent towerco active in Brazil with a portfolio of approximately 6,500 sites accumulated through six acquisitions since 2010 and supplemented by BTS. Jim Eisenstein, its CEO and President, is a pioneer of the U.S. tower industry and is one of the original cofounders of American Tower.

Marc Ganzi is a serial tower entrepreneur who sold Global Tower Partners to American Tower for US$4.8bn in 2013. Marc retained the Mexican towers from GTP, known as Mexico Tower Partners, or MTP, now with 1,531 towers, as a key component of his latest venture, Digital Bridge Management. Digital Bridge is also an investor in Vertical Bridge (with 3,700 towers in the U.S.), Q Towers (with 320 towers in China), with interests in other towercos worldwide.

American Tower (AMT) is the largest independent towerco in the CALA region, with 33,782 towers across Brazil, Colombia, Chile, Peru and Costa Rica. After announced deals close, AMT will operate 140,000 sites across Europe, Africa, Asia, North and South America. Alejandro Messmacher is in charge of AMT’s financial performance in LatAm.

SBA Communications runs a portfolio of 25,623 towers in the U.S., Canada, Brazil and Central America, where SBA is the clear market leader. Its HQ is in Boca Raton but SBA is now organised via

Read this article to learn:< How the leading towercos will extend their growth narrative in the CALA region< Mexico: the Telecom Reform, AT&T and Telesites< Success stories and further opportunities on the West Coast of Southern America and in Central America < The Brazilian tower industry: the next wave of M&A coming up?< Argentina and Cuba: views on frontier markets

It doesn’t happen every day: four executives representing the top towercos in the CALA region in terms of size of portfolio, geographical footprint and company valuation, debated the future of their industry at the second TowerXchange Meetup Americas. Jonathan Atkin, Managing Director of RBC Capital Markets moderated a panel discussion between Kurt Bagwell, President, International at SBA Communications, Jim Eisenstein, CEO and President of Grupo TorreSur, Marc Ganzi, CEO of Digital Bridge Management (which owns a controlling stake in Mexico Tower Partners) and Alejandro Messmacher, CFO LatAm, American Tower. Here is a summary of what we learned during this exclusive session.

Keywords: American Tower, SBA Communications, Grupo TorreSur, Digital Bridge Management, RBC Capital Markets, Mexico Tower Partners, Vertical Bridge, Q Towers, Brazil, Mexico, Chile, Peru, Colombia, Costa Rica, Ecuador, Argentina, Cuba, 3G, 4G, Acquisition, LTE, Capex, Market Overview, Tenancy Ratios, Co-locations, Infrastructure Sharing, Build-to-Suit, Business Case, DAS, Small Cells, C-Level Perspective, Sale & Leaseback


six local offices which contribute to harnessing local talents.

How does your garden grow? Acquisitions vs amendments vs new leases

The four market leading towercos represented on the panel are always seeking the right transaction to grow their portfolios and TowerXchange’s data on the last four years of M&As illustrates the wave of tower transactions in the region. However, the CALA region has been relatively quiet over the past few months in terms of sale and leaseback deals, also in light of various regulatory and carrier consolidation events which forced carriers and towercos alike to pause and assess their next moves.

As an example, Mexico’s Telecom Reform Act, the creation of Telesites along with acquisition of Iusacell and Nextel Mexico by AT&T have been disruptive factors changing the shape of the Mexican industry. For now, towercos are sitting back and waiting to see what happens next but most stakeholders predict a wave of new build and co-location generated by AT&T, and supplemented by government wholesale LTE and public safety networks, in the future.

Mexico Tower Partners was formed in 2013 and has grown considerably thanks to 27 small acquisitions. On the BTS side, the company has completed about 300 sites and has now 127 under development for all major carriers.

Whereas amendment revenues have been positive

in Mexico especially thanks to LTE overlay, there hasn’t been as much activity in 2015 in terms of new co-locations.

In Brazil, Grupo TorreSur saw an increase in its BTS activity over the past six months and expects to have built 2,000 new sites by the end of 2015. Jim Eisenstein commented that BTS is likely to be their core activity in 2016-2017 but added that the M&A side has been quiet in 2015 mainly due to the scarcity of carrier portfolios available for sale. In fact, only Claro retains a significant amount of towers in Brazil - but isn’t expected to sell - hence towercos will refocus on growth through new builds. (Editor: or on the acquisition of other towercos!)

Continuing uncertainty around the possible

consolidation of Oi and TIM seems to have caused their capex to decrease, although Vivo and Claro are still investing substantially in new sites and network upgrades and Sky has been driving significant lease-up revenue.

Kurt Bagwell commented on SBA’s activities which have been mainly focused on the closing of the recent Oi deal (1,641 sites). SBA company scaled from zero to 7,000 Brazilian sites in two years and now is focusing most of its attention on integrating those assets. Bagwell agreed that Vivo is still driving both BTS and new lease revenue in Brazil and that Oi has been a very quiet fourth player over the past few months.

Commenting on its Central American activities, Bagwell explained that SBA built over 200 towers


over the past year in the region. With as many as 40mn residents across the region, Central America represents significant potential growth for SBA and carriers are far from done in terms of reaching optimal coverage and capacity, which allows towercos to still seize opportunities such as the 100 new sites being built in Costa Rica.

American Tower stressed that the fundamentals remain very solid in Latin America. 3G and 4G deployment and new spectrum availability contribute to an overall expectation of solid growth over the next 24-36 months. Messmacher highlighted that the company is still in an acquisitive mode, following its successful 2014 acquisitions and that, in spite of some carriers experiencing financial difficulties, other Brazilian operators are still investing in their networks.

The Mexican revolution: from telecom reform to AT&T

Mexico’s recent telecom reform is the only real piece of telecom reform that Mexico has ever experienced and it has already had a significant impact on the tower market with América Móvil’s carve out of their towers into Telesites.

Over the next few months, AT&T will be integrating the operations of recently purchased Nextel and Iusacell but when ready, the new organisation will become a key player with huge investment power. The company is bringing to the table its U.S. experience in offering competitive packages, unprecedented incentives and superior handsets. If

successful in introducing subsidised handsets into the country, AT&T would substantially disrupt the Mexican carrier market as we know it.

On the other hand, Telefónica’s near term strategy for Mexico is yet to be defined. On one hand, the operator is focusing on rural coverage but also devoting its attention to small cells. Unable to compete with Telcel’s strong macro-coverage strategy, Telefónica is planning to tackle indoor coverage and has issued a comprehensive list of 25,000 buildings they would like to cover. However, so far, Mexican towercos haven’t gotten much involved in IBS.

Telcel remains the top performer in Mexico with focused and disciplined operations and a strong capex plan focused on LTE expansion. The company is investing in greenfield projects as well as amendments and new co-locations and its outlook for the future is still very positive. Concluding on Mexican carriers, it was noted that AT&T is a very serious competitor to Telcel and in the near future it could outpace Telefónica and become the second player of the country.

Could DAS spread in Mexico?

Panelists agreed that there is potential for DAS and small cells in Mexico. Mexico is still heavily underserved in terms PoA per subscriber with the U.S. average at 1,000 subscribers per site and the Mexican average around 2,500. DAS could therefore represent an ideal solution for metropolitan areas, major cities, indoor locations et cetera but to date,

although interested, carriers are still primarily focused on building macro sites.

Once more, the entrance of AT&T is mentioned as a disruptive factor. By creating real competition among players, they will force everyone to work the extra mile to enhance coverage and improve on the quality of networks and services.

According to Messmacher, AT&T will take up to three years to fully assess what they can do with the networks, assets and people they have acquired in Mexico, so a comprehensive modernisation process is likely to take some time.

What is the future of Telesites and what is the likely impact for towercos?

Up until now, Telesites hasn’t really made any move towards opening sites for co-location. Therefore, it’s very hard to comment on whether it will really

65% of independently owned CALA towers on stage

Source: TowerXchange Q2 2016

AMT 33,782

SBA 9,487

GTS 6,500

MTP 1,531

Total 51,300


On the carrier side, ARPUs have been steadily declining so now the time could be right for some consolidation. However, carriers don’t seem to be inclined to divest their towers yet, so SBA’s M&A attention has been focused on independent developers and their assets.

Meanwhile, American Tower decided to deploy its capital elsewhere and divested 60 Panamanian towers to Phoenix Tower International back in October 2014 for an undisclosed amount.

Colombia and the rest of the west coast

After buying Millicom’s towers back in 2011, American Tower entered into a joint venture agreement with a subsidiary of the operator. However, the attempted venture didn’t go through and, as commented by Messmacher, Millicom exited the JV shortly after its announcement back in 2013.

AMT still operates over 3,400 sites in Colombia and remains the largest towerco in the country. When asked about its potential interest in the Pacific coast, SBA’s Bagwell commented that the company’s plans are to keep expanding and countries like Colombia, Peru, Chile and Ecuador are all on the radar. On the other hand, Bagwell added that Argentina is still far from investible due to political, financial and country-risk.

The west coast of Latin America presents the right macro conditions for towerco investment, with most countries hosting at least three carriers or more, relatively low country risk and strong economics.

achieve independence or will remain a financial engineering exercise similar to the creation of Reliance Infratel in India.

On the other hand, Ganzi added that Carlos Slim has proven to be a formidable competitor in all industries and has always played for first place – hence the assumption that Telesites will be a strong organisation once fully operational.

To date, Telcel is still working with towercos as Telesites won’t be able to support the nationwide network rollout by itself and both American Tower and MTP are still securing new business with the carrier. In spite of the carve out, to date, Telcel retains anything between 2,800 to 3,700 of strategic sites on their books, possibly representing their microwave, fibre and switch facilities. Therefore, the carrier is still playing hard to retain its advantage against competitors.

According to panelists, Telesites’ model won’t expand into other countries any time soon.

The US$10bn 700MHz Mexican mobile broadband network

The creation from scratch of the new broadband network could be in the hands of either Ericsson or Alcatel Lucent and plans seem to be moving faster than in the U.S., where FirstNet is in charge of building the first high-speed nationwide network.

According to the panel, Ericsson’s consortium released an RF plan including 12,000-14,000

sites of which 65-70% would be co-locations and 35% greenfield and rooftops. Less information is available on the second consortium and its plans. (Editor’s note: the Mexican government has subsequently suggested that 8,000 sites will be adequate).

The Government would like to select the winning organisation before October 2015 to proceed with the funding before the end of the year. Search rings and network design would take place during 2016 and the actual execution in 2017. The plan is therefore moving along relatively quickly and panelists commended the Government for its push towards a serious modernisation of the telecom sector which is changing the shape of the industry.

Scaling a towerco in Central America

With offices in five Central American capitals, SBA Communications has been organically expanding in the region and is now working with all major carriers such as Claro, Telefónica, LIME, Tigo and Digicel. SBA commented that carriers tend to treat each local market differently but the towerco has succeeded in establishing a stable relationship with most local opcos the region and is now experiencing more demand than ever for new builds, amendments and lease ups.To date, SBA has 350 BTS projects in process, which is a substantial number in light of the scale of the region. Lots of towers are required in light of the geographical conditions of the region, where mountains and hills jeopardise the quality of the signal.


to Eisenstein. Panelists agreed that players like Sky and ON Telecom rep-resented a growing supplemental source of revenue beyond Brazil’s four traditional carriers. American Tower went on to comment that the AT&T - DirecTV deal was a U.S. driven business which could be replicated in other countries. If AT&T was to eventually take a turn towards a fixed wireless strategy, the potential for involvement of the tower industry would increase.

Beyond macro-sites, are towercos diversifying into DAS in CALA?

DAS is an optimal solution beyond indoor locations such as shopping malls, airports and public buildings, however the industry for now is focused on iDAS (indoor DAS) more than oDAS (outdoor DAS). AMT’s Messmacher stressed that carriers need to seek alternatives to offload networks, and that DAS, small cells and other products are the ideal alternative.

The Brazilian telecom industry is still active in investing ahead of the 2016 Olympics but there isn’t much time to get projects done and investments in stadiums and other venues are competing against other priorities such as network rollout. This capex dilemma is helping motivate carriers to get towercos involved to provide them with the capacity to execute all these short term project priorities.

In CALA, whereas AMT is actively looking at DAS, SBA highlighted that for now, its priority is to integrate its existing tower portfolio and focus on macro-sites while keeping an eye on alternatives

TowerXchange expects SBA Communications to enter one or more west coast markets in the near future.

You can read more detailed coverage of the tower markets in Colombia, Chile and Peru in the round table reports also featured within this edition of the TowerXchange Journal.

Are further M&A opportunities in sight in Brazil?

Brazil presents considerable opportunities for larger towercos looking at acquiring small to mid-sized independent developers’ portfolios. Moreover, BTS projects as well as amendments are still high on the shopping lists of carriers.

Panelists agreed that the towerco landscape is divided between larger towercos and a middle market of BTS-focused towercos which could sometimes be willing to accept tougher conditions from carriers in order to scale their businesses and acquire new clients.

Eisenstein commented that their BTS portfolio has been growing at a pace and under terms that the company always felt comfortable with, which sometimes meant they were prepared not to work on certain projects offered on less favourable terms. Bagwell agreed on this point and added that accepting tough conditions is a risky business in the long run as it could harm independent portfolios’ sellability in the future.

According to SBA, the Brazilian market is almost

ready to welcome a new wave of M&A, with independent towercos selling their portfolios or even their entire business to larger entities.

With an average of over 4,000 subscribers per tower, Brazil is still far off from achieving its capacity needs and American Tower added that so far, its BTS business has been consistently growing thanks to the constant demand for new sites. In spite of the presence of 10 to 15 BTS firms, Brazil remains an underserved market where 3G is yet to reach full capacity and 4G has only just started to be deployed.

AT&T’s investments in Brazil: where is Sky heading?

Demand for towers and tenancies from Sky was significant in Brazil even before AT&T’s investment, thanks to a growing customer base and a bold expansion plan primarily in São Paulo, according

“ “According to SBA, the Brazilian market is almost ready to welcome a new wave of M&A, with independent towercos selling their portfolios or even their entire business to larger entities


CALA’s thriving middle market towercosSeven top middle-market towercos share insights in a panel session at the TowerXchange Meetup Americas 2015

The middle market towerco segment in the CALA region has been rapidly expanding over the course of the past few years. Established tower builders are driving toward scale, and new build to suit (BTS) firms have been formed by experienced telecom and tower professionals from Mexico all the way to Brazil and Chile.

During the middle market towerco panel, leaders from seven towercos took the stage to discuss the dynamics of the CALA region from a BTS perspective, moderated by analyst Jon Atkin from RBC Capital Markets.

On stage, TowerXchange gathered top representatives from Innovattel/Torresec, Torres Andinas, Catalina Inc., IIMT Mexico, Square1 Infrastructure, Torrecom and Brazil Tower Company - seven firms representing the BTS industry in Brazil, Colombia, Chile, Peru, Ecuador, Puerto Rico, Mexico, Guatemala, Nicaragua and Costa Rica.

Innovattel / Torresec operates in Puerto Rico, Ecuador, Peru and Colombia and owns 200+ sites across all these markets. The company was created by Manuel A. Aviles, an entrepreneur with a passion for telecom infrastructure, who took the stage during the panel.

Torres Andinas is active in Colombia and Peru while assessing market opportunities in Ecuador and Chile. Focused on the west coast of Latin America, the company was represented by Eric Ensor, its COO.

Read this article to learn:< What has changed since the last TowerXchange Meetup Americas in the CALA market< Key opportunities in Mexico since the entrance of AT&T and the creation of Telesites< Which factors towercos consider before entering a new market < Demand drivers in the region and proportion of business from BTS vs SLB

At the TowerXchange Meetup Americas held in April in Hollywood, Florida, key executives from top middle market towercos operating in the CALA region gathered and shared their views on the status of the CALA tower industry, opportunities for new market developments and the effect of AT&T entrance on the shape of the Mexican market.

Keywords: Americas, Americas Insights, Central Americas, Insights, South Americas Tagged 3G, 4G, América Móvil, AT&T, Brazil, Brazil Tower Company, Build-To-Suit, CALA Insights, Catalina Inc, Central America, Chile, Co-Locations, Colombia, Costa Rica, Ecuador, Editorial, Guatemala, GVT, IIMT Mexico, Infrastructure Sharing, Innovattel, Insights, Iusacell, Market Entry, Market Forecasts, Market Overview, Mexico, Network Rollout, New License, New Market Entrant, Nextel, Nicaragua, Peru, Private Equity, Puerto Rico, RBC Capital Markets, Regulation, Sale & Leaseback, South America, Square1 Infrastructure, Telefonica, Telesites, Torrecom, Torres Andinas, Torresec, Towercos, Transfer Assets, VIVO


Catalina Inc. is a newly formed towerco focused on the Costa Rican market. José Escobar, its President, joined the panel and shared insights gathered after several years of operations in the country with GTP and TOCSA.

William Ritchey, Executive VP of IIMT, was on stage representing the Mexican towerco. With a growing tower portfolio (450+) and the right to use towers owned by the electric utility company, widely known as CFE, IIMT is one of several BTS firms currently active in Mexico.

Dan Ryan is a serial tower entrepreneur who has already launched ventures in South Africa and Myanmar. Now assessing opportunities on the west coast of Latin America via his company, Square1 Infrastructure.

Torrecom is a U.S.-backed towerco with operations in Mexico (208), Guatemala (194) and Nicaragua (193). Maria Scotti, the company’s CEO, has been active in the wireless space since 1992 and is now in charge of the company’s expansion in the tower and small cell business.

Last but not least, Brazil Tower Company is purely focused on the Brazilian market and rural areas and currently operates 923 towers in the country. Dr Chahram Zolfaghari, the company’s CEO, joined the panel and shared his views on the country’s supply and demand dynamics.

Here is an overview of key findings these experienced professionals shared with us at the

second TowerXchange Meetup Americas.

What has changed over the past six to eight months in the CALA region?

Mexico is currently undergoing crucial changes as a result of the creation of Telesites by América Móvil and the entrance of AT&T through the acquisition of Nextel and Iusacell. The towerco community has great expectations for AT&T’s role as a disruptive and positive force in the local market and local towercos expect an increase in BTS projects.

That said, Mexico is still in need of plenty of new infrastructure to achieve optimal coverage - William

Ritchey from IIMT referred to a total of as many as 80,000 tenancies being needed in the country - so the path towards a modern infrastructure system is still a long one.

In terms of Nicaragua, one of the main news has been the start of a much needed regulatory reform process. The country is experiencing dynamics such as infrastructure sharing for the very first time and the regulator was simply not equipped for it. Maria Scotti from Torrecom reported that one of their main tenants, Telefonica, has been extremely active in the BTS space - a process in line with Telefonica’s strategy of not owning sites and being a pioneer in divesting its tower portfolios and outsourcing


to towercos across the CALA region. Torrecom also mentioned that Nicaragua and Guatemala are both shifting from 3G to 4G testing which for towercos should mean more BTS projects to ensure proper coverage in underserved areas and adequate capacity in dense urban areas.

Touching upon Colombia, the BTS market is very active and the market has been developing very fast over the past couple of years. However, it is also extremely competitive due to the presence of so many towercos. In fact, TowerXchange reports that as many as eight towercos are present in the country including American Tower, Torres Andinas, Continental Towers Corp, Innovattel, NMS as well as new entrants Phoenix Tower International and Torres Unidas.

In neighbouring Peru things have been developing

at a slower pace due to local politics but to date, the market is expanding and is moving in a positive direction.

Lastly, when discussing Brazil, Chahram Zolfaghari, CEO of Brazil Tower Company commented that the BTS landscape has changed significantly over the last twelve months. In fact, almost all carriers have embraced the BTS model which resulted in BTS firms sharing almost equal portions of the market.

Furthermore, the imminent purchase of GVT by Vivo is likely to have an impact on the BTS market as large mergers tend to create a significant slow down in activities for the carriers. The announcement of the approval of the deal by of CADE, the Administrative Council for Economic Defense, was released this past March.

Lastly, Brazil’s recently approved Antenna Law is creating a single process for all municipalities to release permits for greenfield projects. Players active in the Brazilian market judge this change as highly positive for the overall shape of the industry. TowerXchange previously reported that the effects of this law will very much depend on the swift adoption by each municipality of the new text.

The status of telecom infrastructure in Mexico

Most of the Mexican telecom infrastructure is in good condition but is over ten years old, which creates tension with the usual habit of carriers to load as much technology as they can on a tower, often with minimal regard for its usefulness. This

dynamic requires a double effort, from carriers to really pay attention to which equipment they load onto a tower, and from towercos to reinforce existing assets and build stronger towers taking into account future load requirements.

Investments and opportunities for carriers

Carriers have reportedly already invested over US$10bn to operate in Mexico, but the market is now looking even more promising thanks to the entrance of AT&T and the creation of Telesites. However, the Mexican tower market has hitherto been characterised by a lack of communication and cooperation between players such as América Móvil’s Telcel, Telefonica’s Movistar, Iusacell and Nextel; it remains to be seen whether the entry of AT&T and creation of Telesites might open up more infrastructure sharing and other opportunities.

AT&T: what are the company’s plans for the future?

It will take some time for AT&T to figure out their total network asset base and they will definitely need to bid in the next spectrum auction to further enhance their position in the market. Panellists agreed that it will take at least six to eight months for the company to understand the market, its dynamics and what are the next necessary steps.

The perceived risk is that AT&T will stop working with quite a few vendors in the near future as they re-assess their business model and asset base before starting any BTS activity. However, up

“ “Carriers have reportedly already invested over US$10bn to operate in Mexico, but the market is now looking even more promising thanks to the entrance of AT&T and the creation of Telesites


Another issue is represented by security and in Torrecom’s experience, Guatemala is a typical example of a country where it can be hard to develop projects, especially in remote areas. On the other hand, Torrecom encountered less problems in Nicaragua. On the security side though, the CALA region doesn’t present as many security challenges as TowerXchange has encountered in SSA, for example, at least in the most developed CALA countries where towercos tend to operate.

A chapter of its own should be devoted to Argentina

until now, Nextel has been operating as usual and continuing on with its BTS plans, as are Iusacell. Panellists agreed that the Mexican model is very different to what AT&T is used to and it will take the company quite some time to adjust and get up to speed, especially when it comes to permitting and regulatory issues. Therefore, while waiting for AT&T to become fully operational, towercos might end up with less business in the short term, but expectations are quite high for the mid-term.

Is CALA an integrated tower market or not?

Panellists had different takes on the shape of the CALA tower market and whether that can be treated as one or not. Generally speaking, regional operators such as América Móvil and Telefonica seek multi-country vendors able to work with them throughout the region.

Eric Ensor, COO of Torres Andinas commented that each country presented very different conditions in terms of country risk, political framework and regulatory environment. For Torres Andinas, each market where they operate - namely Brazil, Colombia, Chile, Peru and Ecuador - is very different and has to be treated separately.

With regards to a possible replication of Telesites’ model in other countries beyond Mexico, it was pointed out that the reality of Telesites will be hard to replicate throughout the region. In fact, Claro doesn’t necessarily have the capacity to build as much as they’ve done in the past and especially, as widespread as in Mexico. Therefore, it was

felt that it was likely that Claro would continue to rely on third party towercos to fulfill their BTS requirements in the future.

Which factors play a key role when towercos are considering entering a new market?

Forex risk is definitely on top of the list and all towercos on stage agreed that it is the biggest risk they have to take into consideration. In fact, once invested, it can be very hard and financially inefficient to take money out of a country.

CALA has a uniquely mature class of middle market towercos, with over twenty BTS-centric towercos supplementing the build capacity of American Tower, SBA, GTS, MTP and Telesites, who own the region’s largest portfolios and who, along with Phoenix Tower International, appear the most likely buyers of any middle-market towerco inclined to monetise their assets.

It’s a good time to be a manager or an investor in a middle-market towerco in CALA. Regulations are being reformed to ease permitting and encourage investment in telecom infrastructure, and demand for towers and tenancies is strong. The mindset of CALA’s carriers has shifted to a preference whereby they generally prefer to lease rather than build, and prefer third parties to build and own assets where necessary.

However, the increasingly competitive landscape for middle market towercos means this is not a market for the feint-hearted nor for unproven management. Tremendous capital value can be created by building a portfolio of robust assets in unique locations on soundly negotiated, readily transferrable leases. But at the same time, capital value can be destroyed if middle market towercos succumb to the temptation to deviate too far from the established business model in order to differentiate themselves and win business.

2015 will be about driving to scale. 2016-17 will see a wave of middle market towerco acquisitions, which will be very rewarding to towercos, and their investors, who stick to the established towerco playbook

Commentary by Kieron Osmotherly, Founder & CEO, TowerXchange


which was mentioned by panellists as a very attractive country for the competitive dynamics within its telecom market. However, its currency risk, political instability and overall future outlook haven’t allowed any towerco to make an entry yet.

What is driving demand in the region?

José Escobar commented that co-location is a key driver in Costa Rica. Costa Rica’s carriers primarily operate following a BTS model as they are so swamped by data demand that building passive infrastructure is not a priority. Carriers in the country - and throughout the Central Americas - are desperate for more capacity and coverage and this creates the perfect storm for towercos, also thanks to a very favourable regulatory environment.

The future for middle market towercos is perceived as quite positive. In fact, as consumers keep purchasing new technology, demand for new products and enhanced networks is occurring much faster. And this is where towercos and their expertise come into play, stronger than ever.

In markets such as Colombia and Peru - where both Innovattel/Torresec and Torres Andinas operate - BTS is the prevalent line of business. Carriers are still in charge of most of the projects and towercos serve them on demand. However, the relationship between carriers and towercos is maturing and changing regulatory environments contribute to the acceptance of the independent towerco model. Deep changes at a regulatory level might push carriers to cooperate with towercos even further, especially since penalties in case of failure to meet coverage requirements can be very high.

In Brazil, the demand is such that tens of thousands of sites are needed to ensure the right level of coverage and capacity. As shared by Chahram Zolfaghari, Brazil Tower Company is able to build around 500-600 sites per year and this is in line with others BTS firms in the country. However, supply in Brazil is heavily outweighed by the demand. Brazil Tower Company insisted that their strategy is to reach out to areas with zero coverage. By doing so, the probability of gaining new tenants without marketing their portfolio is very high

“ “In markets such as Colombia and Peru - where both Innovattel/Torresec and Torres Andinas operate - BTS is the prevalent line of business. Carriers are still in charge of most of the projects and towercos serve them on demand

Find out more about CALA middle market towercos

For more information and insights on each towerco, you can read the following interviews:

Brazil Tower Company: http://www.towerxchange.com/why-building-rather-than-buying-towers-creates-more-value/ or Issue 11 page 75

Catalina Inc.: http://www.towerxchange.com/costa-rica-a-new-tower-market-with-a-first-class-business-environment/ or issue 10 page 165

IIMT Mexico: http://www.towerxchange.com/70000-towers-needed-to-achieve-90-coverage-in-mexico/ or issue 7 page 76

Innovattel/Torresec: http://www.towerxchange.com/the-core-competencies-key-to-success-in-bts/ or issue 12 page 81

Square1 Infrastructure: http://www.towerxchange.com/how-square1-infrastructure-is-building-new-towercos-in-ssa-and-myanmar/ or issue 10 page 105

Torrecom: http://www.towerxchange.com/the-evolution-of-vertical-real-estate-in-central-america/ or issue 9 page 123

Torres Andinas: http://www.towerxchange.com/torres-andinas-creating-a-successful-build-to-suit-business-in-colombia-and-peru/ or issue 9 page 140 and issue 13


Being small and local could be a plus in BrazilInsights into the BTS market, and the realities of site acquisition and permitting in Brazil

TowerXchange: Eduardo, please tell us about yourself and your professional background.

Eduardo Martins Pedro, COO, AlfaSite: I am a civil engineer and I started working in the telecom infrastructure sector back in 1996, at the very beginning of the digital era here in Brazil. Specifically, I worked as a site hunter, as a field engineer in various telecom plants and as site acquisition coordinator until 2009, when I joined Alfa ERB. In 2012, I founded AlfaSite along with other partners.

TowerXchange: Can you share some details about AlfaSite, its activities and footprint in Brazil?

Eduardo Martins Pedro, COO, AlfaSite: AlfaSite is part of Grupo Alfa which includes Metal Alfa, which is a tower manufacturer, Alfa ERB, a managed service provider and Alfa Energía, a power generator rental and electrical panels designer. AlfaSite owns and operates 150 sites in major cities and we focus on build-to-suit activities as well as offering co-location services. AlfaSite is 100% Brazilian and is owned and funded privately by us.

TowerXchange: What is the status of the build-to-suit market in Brazil? How many towers did AlfaSite build in 2015 and how many are being planned for 2016?

Eduardo Martins Pedro, COO, AlfaSite: The Brazilian build-to-suit market is indeed affected by the current economic instability but we’ve seen some opportunities coming up at the beginning of March.

Read this article to learn:< AlfaSite, its footprint and activities in the Brazilian build-to-suit market

< A late start for 2016 BTS projects in Brazil

< How the Lei das Antenas is being implemented at a local level

< The challenges of site acquisition in Brazil

AlfaSite might be a small entity in the Brazilian tower landscape but is able to leverage its ownership by a larger local holding, Grupo Alfa, which incorporates a managed service provider, an energy equipment company, a tower manufacturer and a tower company. Thanks to its local expertise and easy access to materials and manpower, AlfaSite has been able to win build-to-suit (BTS) projects in 2015 and has bold goals for 2016, in spite of the current challenging conditions the market is facing.

In this interview, TowerXchange discuss with the company’s COO, Eduardo Martins Pedro, what it means to do business in Brazil today; technical and operational challenges as well as opportunities.

Keywords: Alfa ERB, Alfa Energía, AlfaSite, Americas, Americas Insights, Brazil, Build-to-Suit, C-level Perspective, Grupo Alfa, Insights, Leasing & Permitting, Private Equity, Regulation, Site Acquisition, Skilled Workforces, South America, Tower People

Eduardo Martins Pedro, COO, AlfaSite


I am talking about a very small number of projects that have come to market relatively late, at the end of Q1.

In 2015, AlfaSite built fifty-eight new sites and we are hoping to build more than one hundred during 2016. Being a local, privately funded company is definitely a challenge, especially when competing against large companies with foreign investments. This year is being extremely tough and BTS opportunities were only assigned to towercos that presented some sort of financial or technical innovation to their customers.

TowerXchange: From a technical perspective, is it hard to build towers in Brazil, and to source partners and materials?

Eduardo Martins Pedro, COO, AlfaSite: Being part of Grupo Alfa is actually one of our strengths as this allows us to utilise products manufactured by companies within our group. Specifically, from towers to electrical panels, skids for installation or even construction manpower, we are able to source everything “in-house”. Therefore, sourcing isn’t an issue for us. The licensing process is the tricky part for us!

TowerXchange: What has been the impact of the Lei das Antenas for towercos seeking permits?

Eduardo Martins Pedro, COO, AlfaSite: When applied correctly, the Lei das Antenas does accelerate the process of obtaining licenses. However, the analysis on the viability of a license

within each municipality isn’t always done by specialised technical teams which often results in dubious interpretations of the Law and a lack of understanding of the project itself. This is where the process becomes lengthy and licenses hard to accomplish.

TowerXchange: Which characteristics should the “perfect” tower portfolio have?

Eduardo Martins Pedro, COO, AlfaSite: I think that an ideal portfolio consists of sites structurally able to host at least three tenants. Having all the licenses and permits in place is another key point as well as having constant availability of power and a good level of security to protect equipment.

TowerXchange: How challenging is site acquisition in Brazil?

Eduardo Martins Pedro, COO, AlfaSite: Site acquisition is definitely a challenging activity in Brazil. Training capable professionals is a key component of this process as we need experts who are able to select good sites, negotiate competitive deals and analyse property documentation.

Planning an optimised deployment project is critical as well, especially since it affects the speed of the licensing process. Being able to present all necessary documents does increase the chances of a fast response from the municipality and in any case, a professional team does need to constantly keep monitoring the status of the application.

The underlying relationship with landlords is another key aspect. We need to deal with transparent landlords and most of all, ensure that sites are leased or sold with all the property documentation otherwise obtaining licenses is virtually impossible

One of AlfaSite towers


The guiding principles of American Tower’s international strategyHal Hess explains American Tower’s investment criteria, and how the towerco business model has evolved in EMEA and LatAm

TowerXchange: What have been the guiding principles of American Tower’s International expansion? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: When we initially launched our International business in 1999-2000 in Mexico and Brazil it was largely exploratory. Mexico was a natural extension beyond our domestic business, and Brazil was the largest economy in Latin America. With the recession in 2000-1 everyone retrenched. We still had our businesses in Mexico and Brazil but we didn’t invest further in new international markets. Following our SpectraSite merger in 2005, we made a strategic decision to pursue international expansion to complement our U.S. business. We felt there were certain, predominantly developing, international markets that were especially attractive. These markets were in much earlier stages of wireless development than the U.S at the time, but we felt strongly they were poised to replicate a similar growth path over the long term. As a result, we made the decision to start deploying capital in these markets in order to position ourselves to be key beneficiaries. In terms of guiding principles of international expansion, we have a three pronged threshold test: 1. We’re looking for markets with a relatively stable political and macro-economic environment. No emerging market is as stable as the U.S., so we’re

Read this article to learn:< American Tower’s three pronged threshold test which guides international investment< Africa: The full turnkey power value proposition as a competitive differentiator< LatAm: Growth opportunities in Brazil, Peru, Columbia and Mexico, where the impact of Telesites, AT&T and the 700MHz wholesale LTE network are discussed< Europe: perspectives on deal flow, broadcast towers and decommissioning economics

Hal Hess, EVP International and President, EMEA and LatAm, American Tower generously granted TowerXchange an hour to pick his brain about American Tower’s international market evaluation criteria, the evolution of the emerging market towerco business model toward provision of power as a service, and his views on growth opportunities in SSA, MENA, Latin America and Europe.

Keywords: Africa & Middle East, Anchor Tenant, Best Of TowerXchange, Build-To-Suit, C-Level Perspective, Country Risk, DAS, Decommissioning, Energy Efficiency, ESCOs, Europe, Insights, Investment, Market Entry, Pass-Through, Sale & Leaseback, SLA, Small Cells, South America, Tenancy Ratios, Towercos, Uptime, Valuation, Who’s Who

Hal Hess, EVP, International Operations and President, EMEA and Latin America,

American Tower


looking for environments in which we can operate with a degree of certainty when it comes to rule of law, enforceability of contracts, land rights, and certain other factors.2. We’re seeking markets with robust wireless sectors. Multiple operators, strong, but rational competition, and attractive metrics such as growing wireless penetration, long term subscriber growth, and an accelerating pace of wireless adoption and data growth are all things that we look for.3. Finally, we look for a compelling transaction opportunity. This includes a high quality counterparty, well-located, structurally sound assets, and an attractive valuation. We also need to ensure that we have sufficient internal operational capacity to effectively execute on the opportunity. Passing all these threshold tests is necessary for us to be confident in our ability to deliver our business plans and meet the risk adjusted return thresholds for each market. For example, while American Tower has invested in South Africa, Ghana, Uganda and Nigeria, in other African tower markets we have yet to be able to find opportunities which satisfy the aforementioned threshold tests. In some instances we declined to participate in processes because of concerns about political or macro-economic environments. In other instances we declined to participate because of timing; a new market entry on top of multiple recent acquisitions posed too much organisational risk on our capacity to execute. However, in most cases it was simply a function of valuation – we weren’t able to get comfortable with the price

necessary to emerge as the successful bidder, while still meeting our return criteria. TowerXchange: It’s notable that almost all of the tower transactions to date in Africa have been with tier one MNOs. Is there a market for tier two MNOs to monetise their towers in Africa? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: There is an opportunity, but since tier two MNOs typically have smaller portfolios, we become more sensitive to how compelling the market and

transactions are. In Nigeria, for example, MTN, Airtel and Etisalat recently divested tower portfolios of thousands of assets, whereas the tier two MNOs’ portfolios number in the hundreds. Second, although acquiring assets from a tier two MNO may result in heightened credit risk, this can be partially offset as it probably means a greater proportion of future leaseup will come from tier one MNOs. Finally, it’s easier to roll-up tier two MNOs’ assets in an existing market where it’s an incremental add

Percentage of tower gross margin by country, Q215*

*Excludes the impact of American Tower’s recent Airtel Nigeria transaction, which closed on July 1, 2015

USBrazilMexicoIndiaSouth AfricaGhanaColombiaGermanyUgandaChileCosta RicaPeru

73.6%

8.2%

7%

3.4%

1.8%

1.6%1.3%

1.3%0.8%

0.2%0.4%

0.5%


monitor best practices to improve efficiency and to create additional opportunities to provide power as a service. The opportunity for us to provide power as a service declines as the reliability and consistency of the local grid increases – for example in Mexico the grid is reliable enough that power is not an issue, and is largely provided by our customers. TowerXchange: What is American Tower’s philosophy for investments in energy efficiency? For example, when acquiring a new portfolio of towers in a market where you’re providing power as a service – such as Nigeria – is your preference to squeeze every last runtime hour out of legacy energy systems, or is your preference to upgrade equipment and optimise energy efficiency as soon as possible? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: We’re in the latter category, but you can’t replace everything on day one after an acquisition closes. However, investing in energy efficiency is very much part of our business plan in Nigeria. We plan to upgrade power management systems on most sites to maximise efficiency in the long term, a few remote sites perhaps notwithstanding. At the end of the day it’s about meeting the expectations of our customers and being able to get comfortable with our investment thesis. The entry into any new market is a function of an opportunity matching our return targets, and if

on. It will be more difficult to justify the investment to enter a new market on the back of an acquisition from a tier two MNO as we need a minimum scale to justify the investment and the commitment of resources. One way to address that would be to operate several smaller markets through a central location – for example in Latin America, our Chile, Peru and Costa Rica businesses have the majority of operational back office functions run centrally. TowerXchange: How are the capabilities of American Tower’s operations enhanced when operating in a market like Uganda or Nigeria where DC power service is provided in addition to ‘steel and grass’? Is the full service power model adopted out of necessity in Africa and India, or are American Tower open to providing power+tower in other emerging markets?

Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: While the full service power model was initially adopted out of necessity, the emerging market tower industry has evolved in a way such that people have realised the full service power model can be a competitive differentiator if you can do it well. We have found that it can also be a way to generate additional revenue and profit. Whilst we were closing our transaction with MTN in Ghana it became obvious that, given the power challenges in SSA, you cannot have a successful tower business unless you can provide power to meet SLAs. When you appreciate that in emerging markets our MNO customers’ subscribers are

primarily prepaid, the economic cost of downtime quickly becomes apparent.

We feel that we have put together the leading power solutions team in Africa, supplemented by power solutions proven in India. So our full turnkey power value proposition in Africa has moved from a necessity to the delivery of market leading capabilities over the last four years, and we now see it as a source of competitive advantage. Ensuring that our customers’ uptime SLAs are achieved frees them to focus on their core business. American Tower has also assembled a cross regional power team, comprised of representatives from our Africa, India and Americas businesses, to

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While the full service power model was initially adopted out of necessity, the emerging market tower industry has evolved in a way such that people have realised the full service power model can be a competitive differentiator


the business model assumes a level of investment in power infrastructure, that impacts valuation. Indeed, that may be one of the reasons we couldn’t justify reaching the valuation thresholds necessary to secure the assets in certain emerging markets. TowerXchange: Given American Tower’s lower cost of capital than private equity backed towercos, are you more inclined to invest your own capital in energy efficiency or are you open to partnering with ESCOs? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: We’re comfortable investing our own capital in energy if we see a long term return, but we’d look at any possible partnering solution where the economics and value proposition were compelling. So our appetite to partner with ESCOs depends on market specifics and service costs.

TowerXchange: It seems like the independent towerco business model is penetrating into MENA, with the maiden transaction in Egypt recently and further opportunities in KSA, Kuwait and, potentially, Algeria. Do you see MENA towers as a growth play or as more of an infrastructure-play, given that many markets are host to only two or three carriers? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: We believe there could be an opportunity in MENA, and we will look at each opportunity and market but look through the lens of those three threshold tests I mentioned earlier. For example, the political environment remains of concern in certain MENA markets.

We’re active in other markets with only three MNOs, so that factor alone would not preclude

our participation in MENA towers, although this is indicative of the finite potential for long term leaseup, which will influence our appetite for, and valuation of, MENA towers. TowerXchange: Moving on to LatAm and one of your maiden international markets: with the creation of Telesites, ~91% of Mexico’s towers are now owned and operated by towercos. What impact do you feel this will have on the market? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: We see it as an affirmation of the opportunity for the towerco business model in Mexico, signaling the growth potential of the market over the next five to ten years. Telesites will make the market more competitive, but there are several unanswered questions about their operating behavior, so the specific impact of the creation of Telesites remains

Tenants per tower in selected American Tower international markets

Brazil

~1.5 Mexico

~1.5SouthAfrica

~1.9Colombia

~1.6

Germany

~1.8


that they were initially not saleable. Eventually the internal view of the strategic importance or the legal characteristics of those towers change and they come to market, but there are not significant numbers left in Brazil other than with Claro. That said, based on the demographics and current subscriber per cell site density, we believe Brazil still needs a significant number of additional sites. We see a long term opportunity to build more sites and, frankly, for smaller companies to build sites and sell them to larger towercos. When evaluating strategic acquisitions, our fundamental framework doesn’t change – the valuation must yield projected returns above specific market and transaction thresholds. When acquiring an existing towerco, a proportion of growth potential has inevitably been realised and priced in. We were able to get comfortable with the valuations of BR Towers and Z-Sites, which we’ve acquired in

unclear. Telesites maintains heavy ownership connections to América Móvil and in our experience operator controlled towercos typically do not match the third party revenue potential of true independent towercos. TowerXchange: Some of the other key stakeholders we’ve spoken to about the Mexican tower market had suggested that the market’s true growth potential was stymied by uncertainty concerning how the regulator would address the preponderance of Telcel. Do you therefore feel the full organic growth potential of the Mexican tower market could now be realised? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: Until Telesites is fully up and running and until the preponderance issue is resolved (for example, we still don’t know whether there might be a new market entrant or one or more MVNOs), there is still uncertainty in Mexico so it’s not yet ‘business as usual’. However, with AT&T’s acquisitions of Iusacell and Nextel, they have publicly said they’ll start investing in Mexico, so we do expect this to partially unlock pent up demand. TowerXchange: Will Mexico’s 700 MHz wholesale LTE network present another significant opportunity for tower market growth, if so when? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American

Tower: Until we have clearer picture of the how and what of the wholesale network, I’m not sure you can estimate what the impact will be, much less when. I understand the logic of what the Mexican government is trying to do, but it remains unclear how it will evolve in terms of who owns the network, who builds it, and the value proposition and economics for parties participating in its development. I recently met with the regulator and was impressed with the way they’re thinking about this; it is very logical, serious and driven by good intentions. However, huge challenges remain to be overcome when you’re fundamentally changing the way a business model is structured. With the execution challenges ahead, there is a chance of delay, and it could look very different by the time Mexico’s wholesale LTE network ultimately is deployed. TowerXchange: Although American Tower will have over 18,000 Brazilian towers when the remainder of the TIM towers close, it seems to me that there is a ‘long tail’ of disaggregated, independent tower developers in the country. Given that most of Brazil’s operators have sold their towers, how do you find value when rolling up selected independent developers? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: Most of Brazil’s towers owned by tier one operators have been sold. Carriers typically retain some towers for strategic reasons or because the legal characteristics of those sites are so complex

“ “When acquiring an existing towerco a proportion of growth potential has inevitably been realised and priced in


recent years in Brazil, and PTI’s acquisition of T4U illustrates there are still opportunities for strategic consolidation, but our appetite remains transaction-specific. TowerXchange: Is it a reasonable generalisation to suggest a hierarchy in which American Tower would prefer to deploy capital into organic growth, followed by sale and leasebacks to acquire assets with greater leaseup growth potential, then strategic acquisitions where much of the growth has been realised and priced in? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: It is a generalisation, but it’s generally true. On an asset level basis there may be more upside in build to suit, but it obviously takes less time to buy than build 5,000 towers. The acquisition of carrier-owned assets, or the strategic acquisition of a towerco, gives us the ability to accelerate the realisation of a market’s economic potential. But at the end of the day it all comes down to valuation. TowerXchange: How much appetite does American Tower have for further inorganic growth in CALA beyond Brazil and Mexico - within countries on the West Coast for example? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: As a company one of our highest inorganic growth priorities is to expand within our existing markets. We’re already in Chile, Peru and Colombia

where, if the valuation makes sense, we definitely have an appetite to expand and enjoy more benefits of scale and increasing relevance to our customers. We have a healthy appetite for new markets but I wouldn’t say we’re aggressively pursuing any specific new markets in Latin America right now. We feel Argentina could become interesting in the long term depending, among other things, on the outcome of upcoming elections. Our relationships with Telefónica and Millicom also could give us the opportunity to expand into other South American markets, but wherever they are, new markets and smaller add on acquisitions would have to provide incremental value in order for us to pursue them. TowerXchange: Is there an optimal time, perhaps in terms of country risk and the maturity of a tower market, for American Tower to enter a new market? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: The optimal time depends on the size of the market and our appetite for risk. I personally am not opposed to looking at virgin markets like Myanmar and Cuba, but from a shareholder value perspective it is a challenge to invest in the early stage of an evolving tower market when the pace of development remains unclear – that can be a tough threshold for us to overcome.

TowerXchange: American Tower has a foothold in Europe with 2,031 towers in Germany - what do you like about Germany that made it your maiden market, and what is your appetite for further acquisition opportunities in Germany? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: We liked the opportunity in Germany because of the size and economic stability of the market, the absence of other independent towercos, and an attractive valuation that allowed the portfolio to yield over 8% on day one. The acquisition made economic sense for us despite the acquisition of E-Plus by Telefónica – we knew this was a likely scenario, so when we structured the transaction we made adjustments to be able to meet our objectives. Our German business continues to perform above the expectations we set out in our acquisition business case. We are very interested in further transaction opportunities in Germany, provided of course they meet our investment criteria. We feel it may make sense for an independent towerco to be involved in the consolidation and rationalisation of the other national tower portfolios. We also bought into Germany so we could see how the European tower market evolves from the inside, and figure out the right long term plays to create shareholder value. TowerXchange: Given the maturity of the European tower market and the amount of


had hybrid wireless, broadcast and transmission business models. But, given the recent acquisition of the Wind assets by Cellnex and the successful Inwit and Cellnex IPOs, everyone in European wireless is rethinking their long term opportunities. I think the European MNOs increasingly recognise their tower assets as something they can divest or IPO, so we may see more M&A and public listings of telecom infrastructure assets over the next few years, generating public currency to use for expansion. TowerXchange: Do you see broadcast towers as natural bedfellows with telecom towers, or will the latter remain American Tower’s focus for the foreseeable future? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: We don’t necessarily see international broadcast towers as a natural bedfellow. The broadcast and transmission business operates on lower margins than telecom towers. We have some broadcast towers in our portfolio, but telecom tower assets, and extensions like indoor DAS, will remain our primary focus. By the end of this year, we will have more than 125 iDAS systems in our International portfolio and, while oDAS and other small cell installations have not historically been a significant component of our international business, we will continue to explore such opportunities in order remain the primary infrastructure provider to our customers

parallel infrastructure, many of the European towerco business plans we’ve seen feature a significant decommissioning play – how convinced are you as to the potential to create value by rationalising tower networks? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: I think the decommissioning play, which I interpret more about cost management and EBITDA growth, theoretically makes a lot of sense in mature markets. The challenge is to understand the economics of decommissioning as it represents another layer of risk and uncertainty. On top of

forecasting future leaseup growth, you now have rationalisation risk – there is no certainty that the upfront capital you’re committing and the cost saving potential of decommissioning you are counting on will yield returns within your forecast timescale. The cost of taking assets out of the ground, and extricating oneself from leases (which is where most of the cost resides) is seldom clear until you start executing. If you’re committing capital to decommissioning, your return on remaining assets has to compensate. Our understanding is that in some markets decommissioning is proving significantly more challenging than anticipated: costs are higher than estimated, which typically results in projects taking much longer than expected to complete and to realise savings. That said, there will be decommissioning processes in many European tower markets, and that will have to be taken into account in our valuation modeling. Decommissioning could be a legitimate extension of our historical business model – if we can get comfortable with the economics, we’re interested in participating in the process. TowerXchange: How do you see the broader European tower market evolving? Hal Hess, EVP, International Operations and President, EMEA and Latin America, American Tower: The European tower market is very dynamic right now. Historically we had seen very few pure wireless towercos: Arqiva, TDF and Abertis

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there is no certainty that the upfront capital you’re betting on the cost saving potential of decommissioning will yield returns within your forecast timescale


Andean Tower Partners:a new towerco with solid foundations and bold plansPart of the Digital Bridge group of companies, ATP is a new disruptive force in the tower industry

TowerXchange: Please tell us about ATP’s footprint, operations and plans for expansion.

Estrella Zaharia, CEO and President, Andean Tower Partners: Andean Tower Partners (ATP), founded by Digital Bridge Holdings, is headquartered in Boca Raton with an office in Bogota and a planned opening in Lima. During 2016 ATP will start operating in Colombia and Peru with plans to expand in Q3 2016 in Chile and in Q1 2017 into Ecuador.

In Q4 2015, ATP acquired two companies which secured us a base of 300 towers in Colombia as well as relationships with most of the carriers in the country. One of the two companies we’ve acquired had a track record in dealing with remote and technically challenging sites so now we have gained this specific skill which will give us a competitive edge in Colombia. Thanks to these 300 sites, we already cover 25% of the Colombian territory.

In addition to macro sites, we are also focused on deploying small cells for our customers. Thanks to Digital Bridge’s acquisition of ExteNet Systems in the U.S., we will offer neutral-host services throughout Latin America, where this concept is still in its infancy. ExteNet is the leading independent provider of Distributed Network Systems (DNS) in the U.S. and we will surely benefit from working side by side and expanding this business in South America.

TowerXchange: Estrella, tell us about your background and expertise and the journey to ATP.

Read this article to learn:< Andean Tower Partners: bold expansion plans and highly skilled professionals

< Find out why Colombia and Peru are likely to be the top tower markets of 2016

< Chile: a more mature market in need of innovation

< The tower market: just like the internet boom?

< ATP’s growth projections beyond macro sites

Estrella Zaharia, CEO and President of Andean Tower Partners is a skilled business leader who exudes confidence and knowledge. Interviewing her gave me the clear perception that ATP is likely to become a strong competitor to the other towercos operating in Colombia, Peru, Chile and Ecuador. And this comes as no surprise considering the track record of Estrella’s boss Marc Ganzi, from GTP to Digital Bridge.

Keywords: 3G, 4G, Active Infrasharing, Andean Tower Partners, Americas Insights, Build-to-Suit, C-Level Perspective, Chile, Colombia, DAS, Digital Bridge Holdings, Ecuador, Infrastructure Sharing, Insights, Leasing & Permitting, Market Entry, Market Overview, Network Rollout, Peru, Regulation, Small Cells, South America, Tenancy Ratios, Tower People

Estrella Zaharia, CEO and President, Andean Tower Partners


Estrella Zaharia, CEO and President, Andean Tower Partners: In my career, I have gained in-depth expertise in operating telecom companies and, specifically, in building both satellite and fibre networks. As COO for Grupo Salinas’ Azteca Comunicaciones, I worked on the deployment of fibre in Mexico which connected over 1mn customers in Mexico City. Then we won two large public-private projects to build fibre in Peru and Colombia. In Colombia, we are talking about a 20,500km fibre network which covers 80% of the national territory while in Peru I followed the first two phases of the project and worked on the installation of 3,000km of fibre across the Sierra.

Then Marc Ganzi contacted me and I decided to join ATP which represents a new format of tower company, not only focused on towers but on serving its customers as a business integrator – that’s where I hope my expertise will be useful.

TowerXchange: Who else joined the ATP team so far?

Estrella Zaharia, CEO and President, Andean Tower Partners: The Digital Bridge team is made of phenomenal professionals and we can count on the likes of Marc Ganzi who serves as our Chairman, and Alex Gellman who is the Director of the Board as well as CEO of Vertical Bridge in the U.S.

We are now forming ATP’s team and we are delighted with the way it’s shaping up. To name a few, Piero Busani is the Chief Legal Officer with a wealth of experience as general counsel for multi-

billion dollar organisations and Leo Sarria, VP of M&A, has been with Marc since GTP and dealt with many transactions at Vertical Bridge too. On the operational side, Saira Ballesteros, former Head of Operations at Azteca Comunicaciones, has joined us as VP and Cecilia Reissmeier, an experienced B2B marketer, is in charge of marketing and sales. We are very pleased with our team and will look to expand further as we grow.

TowerXchange: What were the drivers for Digital Bridge’s entrance into the Andean region and specifically, for each country?

Estrella Zaharia, CEO and President, Andean Tower Partners: After our success in Mexico with MTP we believed the Andean Region was the next logical geography to continue serving our carrier partners. We’ve decided to enter Colombia and Peru first as they are growing very fast and they both need at least an additional 10,000 towers each to comply with their coverage needs. Chile is the more mature market where we will enter later and focus more on DAS and small cells.

Colombia

With regards to Colombia, market drivers include the (delayed) spectrum auction for 700MHz, 900MHz, 1900MHz and 2.5GHz bands which is likely to set new compulsory coverage targets to awarded companies. On the consumer side, we’ve seen that data adoption is still a growing and positive trend for the tower market. In fact, the volume of SMS and MMS has lowered 52.3% YOY and resulted in an exponential increase in internet usage, which for us is great news!

Our expertise in dealing with difficult sites is giving us a technical advantage against our competition and we believe this will be a major differentiator for our success. Our expertise includes working on tailor-made solutions such as low budget infrastructure, small cells, monopoles et cetera.

The October 2015 local elections are likely to cause the renewal of local planning normatives and this is a delicate phase where stakeholders can support the creation of rules beneficial for the telecom industry

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We’ve decided to enter Colombia and Peru first as they are growing very fast and they both need an additional 10,000 towers each to comply with their coverage needs. Chile is a more mature market where we will enter later and focus more on DAS and small cells


as a whole and to enhance connectivity.

The National Development Plan (Art. 193) is already helping the deployment of infrastructure, ensuring a positive shot clock of 60 days for permits and licenses, and by eliminating barriers against deployment of infrastructure in local legislation.

Peru

We believe Peru will become one of Latin America’s top markets in terms of tower growth in 2016-2017, especially since market trends as well as government support are leading to large investment outlays from carriers.

The telecom regulatory environment has been improving and contributing to speed up investments in infrastructure, thanks to a simplified administrative process to acquire permits and licenses. The government is playing a role in expanding towers coverage, as it aims to provide universal service for its citizens through relaxed regulation, the introduction of a fourth operator, and the auction of 700MHz spectrum that has been delayed to 2016.

The fibre optic backbone project will contribute to providing connectivity to 5.1mn citizens thanks to its 31,716km network. In the meantime, carriers are planning huge investments and towercos are likely to see a wave of new business coming in.

To give you an idea, Claro is planning to invest US$980mn to enhance its coverage and capacity

as well as offering its customers new value added services. Telefónica is investing as much as US$1.8bn in the biennium 2014-2016 to deploy 4G and keep its competitive edge. Entel Chile announced investments of US$1.2bn over the period 2014-2019, as it looks to turn its Nextel assets into a national operator. And finally, new entrant Viettel, operating as Bitel, is installing as many as 2,000 new towers and laying 15,000km of fibre to reach 80% coverage with its 3G services.

With this hyper-dynamic scenario, it’s pretty clear ATP is very excited about being part of the Peruvian tower market!

Chile

Coming to Chile, the situation is a bit different. In fact, the market is more mature and we won’t focus as much on macro-sites but on supporting innovation via small cells and DAS. We believe that one of the features of 2016 in the mobile market will be the battle for subscribers among smaller players such as WOM (editor: formerly known as Nextel Chile and now owned by UK-based investment fund Novator) and MVNOs VTR and Virgin.

TowerXchange: Colombia is a very crowded market with more than ten towercos operating… Why? And is there really room for everyone?

Estrella Zaharia, CEO and President, Andean Tower Partners: In the mid-term, Colombia needs as many as 10,000 towers so we consider it a good-sized market and one where there’s room for several players. Over the long run, however this will not be sustainable and only the scale players will survive.

What we are seeing in the tower market in Colombia - and elsewhere - is pretty similar to what we experienced with the internet boom. Suddenly dozens of companies started crowding the market but after a few years, only the best ones remain. In the tower market we are likely to see a comparable pattern with larger towercos acquiring middle market players and consolidation becoming the

Bogotá, Colombia


norm in the future, as those with the lowest cost of capital usually win.

We expect ATP to be among the larger and more relevant players in Colombia and beyond thanks to our access to long term capital, flexibility and expertise.

TowerXchange: With Tigo, Movistar and ETB sharing 4G rollout, which business opportunities are still available for towercos?

Estrella Zaharia, CEO and President, Andean Tower Partners: The trend of infrastructure and network sharing goes way beyond Latin America and is becoming a global strategy as carriers explore new, more cost efficient ways of doing business. I don’t see network sharing as a threat for towercos. If anything, it’s a good opportunity to get involved with carriers in innovative projects such as small cells and DAS.

TowerXchange: Peru is definitely a less developed market. Tell us what ATP aims at achieving in the country. And is there potential for acquisitions on top of organic growth?

Estrella Zaharia, CEO and President, Andean Tower Partners: We definitely see the potential for acquisitions in Peru and hope to close some deals before the end of H1 2016. Our goal is to acquire 5% market share in Peru by the end of 2020.

TowerXchange: What are the expectations of ATP in terms of growth in the next two years?

Estrella Zaharia, CEO and President, Andean Tower Partners: The Andean region presents plenty of substantial market opportunities both in terms of organic growth and potential acquisitions. The key is to first listen to your customers and understand their needs. Our goal at ATP is to continue to grow via BTS, M&A and working with new technologies such as small cells to help our carrier partners densify their networks.

TowerXchange: What are the challenges ATP is likely to face from a sales and operations standpoint?

Estrella Zaharia, CEO and President, Andean Tower Partners: In Latin America there’s still a technical knowledge gap in the engineering field. It’s not easy to find experts in the tower sector capable of designing and building sites as well as deploying and incorporating new technology. Working side by side with carriers and suppliers, we hope to fill

some of those gaps.

On the community side, we aim at providing a participative plan to offer information and help local populations and governments to understand our business and overcoming any reservation. There’s a lot of resistance with regards to new sites, their visual impact et cetera and our goal is to work closely with local communities while we develop new sites for the carriers. I believe this is a differentiator for ATP in this industry and will contribute to building a stronger reputation in the market.

TowerXchange: What tenancy ratio would you’d like to achieve in Colombia? And what about Peru?

Estrella Zaharia, CEO and President, Andean Tower Partners: Our goal is to reach 1.4x in Colombia and Peru within two years

“ “We definitely see the potential for acquisitions in Peru and hope to close some deals before the end of H1 2016. Our goal is to acquire 5% market share in Peru by the end of 2020


Investment opportunitiesin Argentinian towersChairman and CEO of Argentina’s first investment bank on the country’s investibility and financial outlook

TowerXchange: Miguel, please introduce yourself and your professional background.

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: I started working in finance forty years ago, when I was just seventeen. I worked within BDO, one of the largest audit firms in the world and then created Arrigoni y Asociados whose team became part of Ernst & Young in 1997 and subsequently Deloitte & Touche. I ran the corporate finance division for Latin America for EY and then Deloitte until 2013, when we decided to separate our entity and create First Corporate Finance.

The core team of First has been together for over twenty-five years and to date we number ninety experts, making up the largest corporate finance office in Argentina.

Back in 2013, we decided to create our separate firm because we were expecting certain economic and political changes to happen and wanted to be able to serve the market independently. To date, these changes are indeed happening under the Macri presidency and we are able to serve our clients in a variety of financial fields.

First Corporate Finance is specialised in investments, M&A, raising debt through the capital markets – in securitisation we own 80% market share in Argentina. In fact, we’ve performed around 1,400 transactions without one single default which is quite impressive by Argentinian standards!

Recently, we’ve created First Capital Markets, which

Read this article to learn:< First Corporate Finance and its role in the Argentinian financial landscape

< Key data about the Argentinian telecom tower industry

< The carrier landscape: poor QoS in spite of high demand

< What should investors expect from the Argentinian financial market

< A look at Argentina’s investibility, legal threats and currency mismatch

Financial advisors, bankers, securitisation experts and strategic consultants, First Corporate Finance is riding the wave of Argentina’s newly found openness to international investors. Miguel Arrigoni, its Chairman and CEO, has a long standing experience in the financial sector and is now ready to launch the very first investment bank in Argentina.

Just over twelve months ago, Arrigoni flew to Boston to meet with investors who asked him about the tower industry in Argentina, about which there was then very little to say. After a year of in-depth analysis and studies, he spoke to TowerXchange about trading conditions in the country, its readiness to open doors to international investors and the prospects for international investment in Argentinian towers.

Keywords: Americas Insights, Argentina, Best of TowerXchange, Build-to-Suit, Business Model, Carve Out, Country Risk, Debt Finance, Deloitte & Touche, EY, First Capital Markets, First Corporate Finance, Insights, Investment, Investors, Market Overview, Network Rollout, Private Equity, Regulation, Sale & Leaseback, South America

Miguel Arrigoni, Chairman & CEO,First Corporate Finance


is specialised in brokerage and trading, putting us on the way to become one of the first local investment banks in Argentina.

Our goal is to serve local and foreign investors. You see, back in the nineties, the international financial community was very involved in Argentina whereas now 80% of all financial activities are performed at a local level. We all know the history of Argentina and its closed economy but right now, things are changing and the market is definitely opening up to foreign companies.

TowerXchange: When did you first start looking at towercos and their business model?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: We are very active in the infrastructure sector as a whole. Argentina is an underdeveloped country with plenty to do in all fields including energy, mining, highways et cetera. And this definitely includes telecoms and telecoms infrastructure.

To date, there are about 1.5 mobile phones per

person in the country. We are talking about 144% SIM penetration rate and 62.7mn connections for about 43.6mn inhabitants.

Last year, we visited some investors in Boston and were asked questions about the passive infrastructure business. At the time, we really had no idea that the lack of investment in the telecom sector was so deep.

Our studies show that to reach decent quality of service (QoS) in Argentina, we’d need about 30-40,000 towers and to date, we can count on approximately 15,000 sites. We are talking about 20,000 new towers and an investment in the short term of US$2bn, if not US$3bn.

With 4,000 subscribers per site, we are miles away from the U.S. standards and although we know that many countries in the region have similar averages, I don’t think the QoS is as bad as in Argentina. Especially if we consider that certain areas aren’t underserved but literally disconnected, such as many villages in Patagonia with 1-2,000 inhabitants.

TowerXchange: How do you foresee the Argentinian tower market shaping up? And when?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: I think the biggest change that needs to happen is in the way operators do business. So far, we’ve been used to the traditional model of each operator owning their towers but the sharing concept does need to be adopted not only to

Buenos Aires


improve efficiency but also to, hopefully, respond to new regulatory requirements.

In fact, the government is definitely pushing for a new telecom regulation to come into play and we hope this will mandate infrastructure sharing. Argentina has a long way to go to become competitive - I foresee at least ten years from now - and only a strong push from the government can speed things up.

From its side, the government is now assessing ways to use state-owned real estate for telecoms. In fact, finding locations for telecom sites has historically been a problem for the telecom industry and the government is now experimenting alternative ways to find suitable spots, also by utilising public land.

TowerXchange: Do you think that Argentinian carriers are inclined to sell their towers?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: Maybe they aren’t inclined yet but it’s the logical move they should aim for. The level of investment by operators has been quite low over the past few years, with the exception of perhaps Claro.

When the new telecom regulation will come into force, it will push for network enhancement, improved QoS and cell site densification so carriers will have to invest. Selling towers is a logical solution to finance network rollout.

The QoS in Argentina is so poor that if you travel

from downtown to any centric neighbourhood in Buenos Aires - I am talking about a five mile ride - your call will drop at least four times. Even in Buenos Aires, call drop rates are very high. Black holes in the city are everywhere!

With regards to towers, the recent spin-offs of Telefónica and Claro might not call for pure sale and leaseback operations but my point is that one way or the other, operators have to improve their service and invest in the country. The tower business is clearly not the core activity of operators but they do have options. They can sell, spin off or start sharing… Whatever works!

TowerXchange: And how many towers are we talking about? Who owns what in Argentina?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: Operators say that there are as many as 15,000 towers in Argentina but we’ve analysed the status of the market and believe that there are no more than 12,000 active sites in the country. I am referring to sites that actually work!

Interestingly enough, the top three operators have very similar market shares (around 30-33%) and each of them owns one third of all existing towers. And in spite of its really bad service, charges have been quite high from all three operators.

TowerXchange: How investible is the Argentinian telecom industry? What are its threats?

Miguel Arrigoni, Chairman & CEO, First Corporate

Finance: The legacy from the past governments isn’t all negative. In fact, Argentina enjoys very low level of debts. Specifically, we are talking about less than 15% foreign debt compared to the national GDP.

On the downside, this has corresponded to very little or zero investment but right now, we have the ability to easily increase the level of debt. The question is how do we use that money. If used wisely and spent on infrastructure projects, Argentina has all the potential to become a leading force in the CALA and global economic landscape.

As we all know, the past government restrained the freedom to move capital out of the country and this has contributed to the country’s crisis. In fact, we’ve lost two third of capital resources as a result of this imposition.

Now we just need to become “normal”. Technically speaking, investors are already free to take their money out of the country but obviously the market is cautious. The image of Argentina has been poisoned by nationalisations that took place between 2008 and 2013 but many facts were misinterpreted.

In fact, the Argentinian government did pay Repsol US$5bn to compensate for the expropriation and, talking about our national airline, Aerolineas was a disaster under the management of Grupo Marsans, with as many as 80% of flights being cancelled on a daily basis. So the government takeover wasn’t a negative move, if you ask me.


Don’t get me wrong; Argentina has a negative track record in many areas but also a very bad brand whose image is possibly worse than reality. Its reputation needs to be restored to boost the confidence of investors and the international community as a whole.

I think it will take the whole year for international companies to reassess the status of things here in Argentina, before making any more investments. Investments are more likely in 2017. But with regards to towercos, it could be that some players - also in light of the entrance of Innovattel - look at the industry and decide to go for some smaller investments. This could also be pushed by a very good local offer in terms of labour and suppliers.

TowerXchange: From a legal standpoint, many fear it might be difficult to enforce contracts. What’s your take?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: The securitisation law was created back in 1996 (Trust Law N. 24,441) and is quite sophisticated. In fact, it’s an exact replica of the U.S. securitisation law. It’s a strong weapon that has been used a lot in the country; specifically, 90% of the financing we do is developed using it.

I believe towers can fall under the REIT (Real Estate Investment Trust) model and the securitisation legislation does help to guarantee those investments. Additionally, foreign entities investing in a trust such as a REIT aren’t taxable according to local law, which helps considering our levels of

taxation can be quite high.

TowerXchange: And with regards to currency, how would you advise international companies looking at investing in the country?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: There are several financial tools that protect investors from inflation and currency fluctuation. There are some new rules that allow indexing and inflation adjustments for example. And if you bring US$ into the country, you could purchase a swap insurance here in Argentina to protect your investment.

Additionally, contracts now can be stipulated in US$ but I’d also like to remind international investors that local banks hold very high level of liquidity to leverage investments made in Argentinian pesos. There is quite a lot of local capital that is just waiting to be invested in the country!

TowerXchange: Do you have any advice for towercos now assessing a move into Argentina?

Miguel Arrigoni, Chairman & CEO, First Corporate Finance: I think Argentina represents a wonderful opportunity for towercos and I believe it all depends on timing. My advice would be to start studying the market sooner rather than later, especially since I believe 2017 will be a great year for various local industries, including telecommunications.

I’d also like to remind foreign investors that Argentina has a long history of highly productive and successful overseas businesses. The many national crises did erase much of its memory but now Argentinians are ready to embrace progress and this is an unmistakable signal for the telecom industry to start investing to boost its presence and level of service in the country

“ “I believe towers can fall under the REIT (Real Estate Investment Trust) model and the securitisation legislation does help to guarantee those investments. Additionally, foreign entities investing in a trust such as a REIT aren’t taxable according to local law, which helps considering our levels of taxation can be quite high


The Brazilian tower sector:the current economic downturn and the opportunity it createsFrom BTS to consolidation, business goes on for Brazilian towercos

TowerXchange: Do you expect BTS to be the core of your activity for the next two years? And if so, what are your targets in terms of new builds?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: Build-to-Suit is certainly an important component of our activity, but our core focus will always be on adding new co-locations on our existing portfolio of towers and adding equipment on sites on which carriers have already deployed.

In terms of targets, we have a certain range of new towers we’d like to build each year, but we are much more focused on building good towers rather than just towers. So we’d rather build fewer great sites than try to hit an artificial target number.

Jose Augusto Varela, Chief Operating Officer, Grupo TorreSur: BTS represents a meaningful part of our growth over the next couple of years, but the most important business area for us is to grow organically our existing portfolio. We will keep building new sites but looking at the economics behind each project. One of GTS’ core strength is how careful we’ve always been with how we invest our money.

TowerXchange: How many towers or tenancies are required to deliver full economic coverage and a high standard of QoS in Brazil?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: I think it’s hard to determine what constitutes good service or full economic coverage for each carrier. But with greater data usage, there will continue to

Read this article to learn:< Grupo TorreSur’s current activities: BTS and co-locations

< A look at coverage and QoS issues in Brazil

< The impact of economic uncertainty on the local telecom and tower sectors

< How likely is consolidation among carriers and towercos?

< Investments and acquisitions in today’s troubled economy

Jim Eisenstein and Jose Varela run one of the most successful towercos in Brazil, Grupo TorreSur, with its 6,500 towers located in São Paulo and across the country. In this interview, they’ve agreed to discuss with TowerXchange the status of the Brazilian tower industry in light of the current economic downturn, as well as the opportunities still available for disciplined yet well capitalised towercos.

Keywords: Acquisition, Americas Insights, Brazil, Build-to-Suit, C-Level Perspectives, Capex, Carve Out, Co-locations, DAS, Exit Strategy, Grupo TorreSur, Infrastructure Sharing, Insights, Investment, Market Overview, Network Rollout, Private Equity, QoS, Sale & Leaseback, Small Cells, South America, Universal Access

Jim Eisenstein, Chairman and CEO, Grupo TorreSur & Jose Augusto Varela, Chief Operating Officer, Grupo TorreSur


be an increased need for greater capacity, which in turn will continue to require the need for more sites. We think the easiest way to look at it is to compare Brazil with the United States, where there are an average of 1,100 subscribers per site versus over 4,000 subscribers per site in Brazil. I don’t think we are likely to see the Brazilian rate go down to anywhere near 1,100 in the short or intermediate term. However, Brazil certainly needs a substantial number of new sites over the next five years, not just to add capacity but also to enhance coverage.

TowerXchange: What is your take on the effect of Brazilian economic uncertainty on the local tower industry?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: The economic downturn has significant effects on the overall Brazilian business environment. However, I’d say that the crisis has probably affected the wireless industry less than other sectors, especially since wireless devices are not considered a luxury or a desire anymore, but rather a necessity. Having said that, there is a negative impact on the wireless industry which is starting to have effects on the tower sector as a result. We have been fortunate not to experience much of the pain to date, but with the carriers now feeling the effects of the crisis more than they have over the past couple of years, the reduced capex allocated to new projects will have an impact on our sector too.

Jose Augusto Varela, Chief Operating Officer, Grupo TorreSur: This crisis will also potentially precipitate consolidations not only among carriers but also

towercos, which could create opportunities for us. Times like these present opportunities for some companies and I think this is the case for GTS. Thanks to our large portfolio of sites, we are able to offer creative solutions to carriers looking at expanding their networks and reducing their capex. But the same might be challenging for smaller companies with less substantial portfolios.

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: Carriers began selling their tower portfolios in 2010. These carriers have made the fundamental decision of leasing versus owning their sites. And as towercos are becoming more and more

sophisticated, carriers trust us not only to own and operate their sites but also to develop sites for them. This is particularly important at times when the carriers have capex constraints. The economic crisis has solidified their thinking that for each tower they don’t have to develop on their own, they can co-locate on someone else’s site with a far smaller burden on their capex. In that regard, this difficult period is contributing to the leasing versus owning decision.

TowerXchange: Whilst the devaluation of the Brazilian Real has inevitably slowed the flow of capital from the US to the Brazilian

Jaragua Peak, São Paulo


tower industry, does it open up opportunities for domestic Brazilian investors to get more involved? Are there Brazilian investors with an appetite for towers?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: Every difficult situation presents an opportunity for some. Some companies might need to sell and accept a lower valuation and this would present the right conditions for investors willing to enter the market at a competitive price. But I think it’s fair to say that no tower owner would look to sell when the market presents difficult conditions.

Jose Augusto Varela, Chief Operating Officer, Grupo TorreSur: I think any investor, whether international or local, always looks at their potential returns. Those looking at investing in Brazil right now are definitely willing to take risks, but they also have the opportunity to garner some very significant returns down the road.

TowerXchange: When we spoke with Dr Zolfaghari of BTC last, he said that every towerco in Brazil beside AMT and SBA has an exit strategy… Do you agree with his view?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: I can’t comment on how other tower companies might think, but it’s fair to say that any company backed by private equity at some point will be looking for an exit, either through a sale, merger or a public offering.

TowerXchange: How do you foresee the

consolidation of Brazilian towercos playing out – how many towercos does Brazil need in the long term?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: Drawing a comparison with the U.S., there are a multitude of successful tower companies beyond the three large public ones (editor: Crown Castle, American Tower and SBA Communications). I don’t think there is a right number of towercos for the U.S. and I don’t think there is a right number of towercos for Brazil. Every company is different and each company has its own goals.

We haven’t done any significant acquisitions since the middle of 2013 and chose not to go after certain deals which we didn’t think would provide the appropriate ROE for our investors. We would like to believe that these were the right decisions, but time will tell.

Jose Augusto Varela, Chief Operating Officer, Grupo TorreSur: Much will depend on whether a towerco has the option to wait or their investors are looking for liquidity. As Jimmy explained, the consequences of each decision in the tower business - such as entering or not entering into a deal - tend to show themselves after a period longer than many other businesses. Therefore, all business decisions made in previous years will have repercussions in the next year or so. That’s why it’s key to have a very clear strategy and to know how to create value, not only in the short but also in the mid and long term.

TowerXchange: After the AMT-TIM transaction,

what is left to acquire - if anything - in Brazil? And considering that Claro still retains its portfolio, would you expect the carrier to carve out its towers and create a Telesites branch in Brazil?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: At one point, América Móvil might decide to carve out their sites and either create a spin-off company or sell to a third party. This would be their decision of course, but beside those assets, there isn’t that much left to buy in Brazil.

TowerXchange: Are you seeing more ‘special structures’ integrated into the Brazilian network? We’re seeing a growing portion of infill sites in Asia and Europe being fulfilled through ‘Smart Poles’ / lamp-posts and microcells – are they starting to be used in Brazil?

Jim Eisenstein, Chairman and CEO, Grupo TorreSur: I think that the need for macro sites in Brazil is such that carriers aren’t likely to start focusing their primary attention on microcells or DAS in the near term. There are still far too many areas where macro sites are needed for capacity, in-fill and coverage, but at some point well down the road, carriers will start focusing on alternative options.

Jose Augusto Varela, Chief Operating Officer, Grupo TorreSur: There are some companies offering sites to deploy microcells but I don’t think the market is there yet, at least not in a way to achieve scale. We are likely to see carriers continue to focus mainly on macro sites in the short term


Innovattel/Torresec on Cubaand ArgentinaThe Puerto Rico based towerco on its entrepreneurial venture into new markets

TowerXchange: Please reintroduce Innovattel/Torresec for any readers unfamiliar with your company. Juan Cueria, VP & COO, Innovattel/Torresec: Innovattel/Torresec is a Puerto Rico based tower company active in Ecuador, Peru, Colombia, Puerto Rico and Argentina.

TowerXchange: Tell us about your recent experience in Cuba.

Juan Cueria, VP & COO, Innovattel/Torresec: Jose Arana, our VP of Operation and Fausto Leon, our Sales Director have recently participated in Informática 2016, the IT and telecom forum held in Havana, Cuba. Innovattel/Torresec was one of a few U.S. firms approved to exhibit at the event and we were able to showcase our business model, meet several government officials and various executives from the local telecom industry.

TowerXchange: What do you think about the potential of the Cuban market? Is it likely to open to carriers and towercos? And when?

Juan Cueria, VP & COO, Innovattel/Torresec: There is a lot to be developed in the Cuban telecom sector and the tower industry will be the next to follow. Cuba is entering a crucial phase with many changes happening at all levels. And at this stage, the pace of things still suggests that it will take some time for the Government to give access to new carriers and, as a consequence, to towercos.

Our view is that it will take about three to five years for

Read this article to learn:< Views on the path to an open telecom market in Cuba

< What challenges may lie ahead when doing business in Cuba?

< How are things going for Innovattel/Torresec in Argentina?

< Permitting, regulatory conditions and contracts in Argentina

Over the past year, Innovattel/Torresec has announced its entrance in the Argentinian market. Since then, the towerco has participated in a telecom fair in Cuba as one of the very few U.S. companies invited to join. In this interview, TowerXchange catches up with its COO, Juan Cueria, for an update on the status of things in Argentina and to find out the real potential of the much discussed Cuban telecom market.

Keywords: Americas Insights, Argentina, Build-to-Suit, Business Model, C-Level Perspectives, Caribbean, Central America, Country Risk, Cuba, Ecuador, Innovattel, Insights, Leasing & Permitting, Market Entry, Market Overview, New License, New Market Entrant, Peru, Puerto Rico, Regulation, South America, Tax, Torresec

Jose Arana, VP of Operations and Fausto Leon, Director of Sales, Innovattel/Torresec with a guest at Informática 2016


“ “any real change to happen and for any new carrier to enter and start operating in Cuba.

TowerXchange: Has the Government expressed any interest in awarding spectrum to foreign companies and opening up the mobile industry?

Juan Cueria, VP & COO, Innovattel/Torresec: We don’t think that the Cuban Government is interested in awarding spectrum to international operators for the time being. This is a crucial step that will completely reshape the telecom industry and we believe it will require some time to materialise.

TowerXchange: Do you know how many towers are in the country right now? Are they suitable for sharing or how many could be needed by a new entrant?

Juan Cueria, VP & COO, Innovattel/Torresec: Our first studies indicate that there are approximately 500-700 structures installed in the island of Cuba. We are talking about towers that are shared by radio companies, TV stations and ETECSA, which to date is the only operator active in the country.These sites are currently being shared so they could potentially be used by multiple telecom tenants. However, we don’t even know how many additional sites are needed as there aren’t any actual plans for additional spectrum to be assigned or anything alike.

TowerXchange: If you were to enter Cuba today, what would be the top three challenges to solve and deal with?

Juan Cueria, VP & COO, Innovattel/Torresec: To date, accessing the Cuban telecom market is a very hard task. There aren’t well defined commercial agreements with the U.S. as of now and local telecom regulations as well as property laws do need to be amended and modernised. Having said that, these are changes that tend to happen relatively quickly once things pick up momentum.

Some key challenges of doing business in Cuba under present conditions relate to how to register a corporation and how to complete all the required paperwork, how to import steel structures and other construction materials as well as how to ensure security at sites.

TowerXchange: How are you doing in Argentina?

Juan Cueria, VP & COO, Innovattel/Torresec: We are making progresses every day. Construction has begun in several locations and we’ve been assigned search rings in many different areas of the country. We are now working very closely with municipalities and other entities across each territory to ensure our sites are deployed timely.

TowerXchange: Do you foresee carriers divesting towers anytime soon in Argentina?

Juan Cueria, VP & COO, Innovattel/Torresec: This is a crucial discussion in Argentina but it does present considerable tax implications for the seller. At this time, this is definitely a hurdle for operators in their decision making process.

TowerXchange: How are you dealing with issues such as permitting and land management in Argentina? How challenging is it to obtain permits and negotiate with landlords?

Juan Cueria, VP & COO, Innovattel/Torresec: In Argentina, more than 80% of existing sites don’t have permits. The new government is working on a telecom regulation that should considerably improve things in the very near future. However, today we are building on a pre-feasibility basis.

These are very challenging conditions and we are moving ahead with precautions and trying to avoid very high risks but dealing with landlords is no harder than in any other country where we operate.

TowerXchange: In terms of currency and inflation, how are contracts being negotiated?

Juan Cueria, VP & COO, Innovattel/Torresec: Currently, we are negotiating contracts in Argentinian pesos with adjustment factors to be calculated twice a year

In Argentina, more than 80% of existing sites don’t have permits


Mexico: a tale of two citiesMarc Ganzi and José Sola on MTP, AT&T, Telesites and what is going on in Mexico

TowerXchange: José, please share with us the latest developments in MTP.

José Sola, CEO, Mexico Tower Partners: Mexico Tower Partners has been growing steadily over the past couple of years. Our headcount grew from 11 people in 2013 to the current count of 40. Every year we’ve been doubling our staff, which is a good sign.

On the other hand, MTP is still a very lean towerco and we outsource most of the site acquisition and construction work to a network of trusted partners. I’d say 80% of our workload relates to managing the existing portfolio while the remaining 20% of the time we spend dealing with outsourced contractors.

Over the past few years, we have built strong relationships with third party companies that serve us with what is known in the U.S. as a build to flip model. We basically work with local towercos that build towers to then sell them to us. This is an extremely efficient model especially since these partners tend to find it easier to work in difficult regions, have an experienced approach when it comes to Mexican logistics and are very reliable in terms of time to market.

Thanks to this lean and efficient structure, we have both the capacity and resources to build up to 500 new sites per year. And we are able to guarantee our clients a fast and yet high quality service thanks to our long standing expertise and the quality control we do on outsourced partners.

TowerXchange: How do your investors perceive the Mexican market and MTP performance?

Read this article to learn:< How is MTP doing, its future plans, expectations and relationship with investors< AT&T’s potentially disruptive impact on the local market and the opportunity AT&T represents for towercos< Which further regulatory changes are needed in Mexico< Telesites: does anyone know what the towerco is planning to do?< The 700MHz shared LTE network could need 8,000 sites in Mexico

TowerXchange is excited about Mexico like everyone else in the industry. But let’s be realistic. AT&T is likely to be great news for everyone but its network plan is yet to be finalised. Telesites has made international and local headlines but hasn’t been approved yet by IFT (which stated in recent news that the session to discuss the approval isn’t likely to happen in July), and the shared LTE network could mean thousands of new towers, but plans are still unclear. To shed some light on what’s really happening in Mexico, we’ve reached out to two of the most knowledgeable tower people in Mexico: MTP’s CEO José Sola and Marc Ganzi, CEO of MTP’s lead investor Digital Bridge Holdings.

Keywords: 3G, 4G, Americas, América Móvil, American Tower, Americas Insights, AT&T, Build-To-Suit, C-Level Perspective, Capex, Digital Bridge Holdings, IFETEL, IFT, Infrastructure Sharing, Interview, Iusacell, Leasing & Permitting, LTE, Macquarie, Market Entry, Market Forecasts, Market Overview, Mexican Infrastructure Fund, Mexico, Mexico Tower Partners, New License, New Market Entrant, Nextel, North America, Regulation, Telcel, Telefonica, Telesites, Vertical Bridge

Marc Ganzi, CEO, Digital Bridge Holdings and José Sola, CEO, Mexico Tower Partners


José Sola, CEO, Mexico Tower Partners: Digital Bridge created MTP with Macquarie Mexico Infrastructure Partners. Digital Bridge is one of the leading global investors in communications infrastructure with five different investments in tower companies around the globe. Macquarie is an experienced investor here in Mexico with its Mexican Infrastructure Fund and is very familiar with our business model and the tower industry both in Mexico and at an international level. Both Digital Bridge and Macquarie have always seen Mexico as a good opportunity and have been our founding equity partners since day one.

Our investors perceive the changes happening in the Mexican telecom industry as very positive and trust that we are well positioned to make the best out of the entrance of AT&T. On that note, AT&T is a great disruptive element in the telecom landscape. MTP was founded at the end of 2011 and the Mexican market has been pretty quiet since then. Expectations were extremely high in terms of deployments from carriers but in reality most projects have been kept on hold while waiting for the telecom reform to happen. Therefore, I’d say we are coming out of a sequence of disappointing years for the industry in light of the conservative approach carriers took, but the outlook from 2016 looks bright.

The entrance of AT&T has brought a breath of fresh air in the market. Expectations are higher than ever and in general, there has been a change in the mood of investors who are now eager to look at plans for the next three to five years.

TowerXchange: How did the entrance of AT&T and the creation of Telesites change the build to suit dynamics? And what are MTP’s expectations for the future?

José Sola, CEO, Mexico Tower Partners: To date, we only have three clients in the BTS market. On one hand, most of Telcel sites will be built by Telesites so we are left with residual projects with them. Telefónica has been very quiet over the past year and we believe they are now analysing the impact of AT&T on the market before making a concrete plan of action. Their 2015 has been very slow in terms of deployment so we cannot really guess what their plans for 2016-2017 will be.

On the other hand, AT&T is a real potential opportunity for us and we expect to do a significant amount of work with them. They are working very ambitiously and already expect to build 800 towers during the course of 2015. In theory, their 2016 plan should be ready by September and they’ve already launched an RFP for equipment which is clearly a positive indicator.

TowerXchange: Beside the creation of Telesites, are there additional measures being taken by IFT that are easing towercos’ activities?

José Sola, CEO, Mexico Tower Partners: I don’t think there is a real interest in further regulating the industry for now.

One thing we are trying to do is to create an Association among key players to promote certain

regulatory changes and push for infrastructure sharing in Mexico. However, this hasn’t been a priority of the regulator and so far little has been done on this front. I think IFT won’t have an interest in looking at the tower industry in the near future beside deciding on the approval of Telesites.

However, permits can be a significant problem for Mexican towercos and this is something we are trying to address. There is a lot of uncertainty when it comes to the procedure to follow as there isn’t a federal regulation on it. Everything is done at a municipality level and there are as many as 2,438 of them in the country! Each of them has their own

One of MTP’s sites in Mexico


rules and it can be extremely difficult to comply and even find out what the rules are! This is an element that needs to be addressed quite urgently along with clarifying the rules regarding zoning.

Right now, the regulator is very focused on implementing and monitoring various measures of the telecom reform that affect the role of the preponderant player in the wireless space, such as the elimination of interconnection rates, whereas infrastructure is less of a priority, especially since the creation of Telesites.

TowerXchange: What kind of uplift does the 700MHz shared wholesale LTE network provide in terms of organic growth and co-location potential?

José Sola, CEO, Mexico Tower Partners: It is estimated that the shared LTE network will require a minimum of 8,000 sites to operate. This is an ambitious project that will require the joint effort of the managing operator, financial sponsors and OEMs. Whoever wins the project will want to minimise the deployment of new sites by using as many existing sites as possible in order to have the network up and running swiftly. However, it is anticipated that there will be also demand for new sites to complete the project.

TowerXchange: Did the entrance of a new strong player such as AT&T stir the arrival of new towercos in the country?

José Sola, CEO, Mexico Tower Partners: Yes. In fact,

we are now seeing a variety of small, relatively inexperienced players setting up towercos, and they are putting huge pressure on prices. In fact, these companies are offering their services at very low rates which we fear could become the new benchmark carriers use in their selection of BTS partners.

We see these rates as artificially low and honestly, I assume the quality of these projects must be compromised to stick to those budgets! It is critical that carriers understand the difference in quality of work of serious and committed towercos such as MTP.

We believe that carriers do care about quality of service and expertise, especially in a complicated market like Mexico. So our track record is a critical differentiator when it comes to negotiating with them. No one wants to work with a partner that isn’t qualified to execute the project, and which has shaky financial backing.

It’s a fact: everybody loves the tower industry these days. It’s an attractive and profitable business and we all know it. But it’s not for everyone and it’s not easy. As soon as a towerco is granted a project, they have a certain value in their hands. The simple assignment of the project is a huge cheque but then you need to prove yourself and be able to finance the build, contract the right partners, deliver the project within the deadlines and pass a variety of quality control tests. Only towercos with experience succeed after the assignment phase, this is a fact!

MTP is certified under the Foreign Corrupt Practices Act (FCPA) which is extremely important, especially for U.S. companies. So we are in a great position to work with the likes of AT&T and can ensure we have strong plans in place to comply with FCPA guidelines. We perform yearly reviews of our standards with our internal committee, we organise workshops with specialised law firms to instruct new team members on FCPA standards, and we perform audits and background checks on vendors and subcontractors. This process is time consuming and yes, could delay our operations, but we see it as an extremely important component of our credibility in the market.

TowerXchange: Thanks for joining us Marc! What is your view on the arrival of AT&T, the shared LTE network and the creation of Telesites both as an expert in towercos, Mexico and as the lead investor in MTP?

Marc Ganzi, CEO, Digital Bridge Holdings: Mexico is really a tale of two cities and the present time demonstrates it more than ever. You have AT&T which is clearly amazing news for everyone in the market and tower companies like MTP, American Tower and Telesites will surely benefit.

AT&T could spend as much as US$3bn in Mexico

The transformation of Nextel and Iusacell into one stronger entity pleases us all. And who wouldn’t be pleased with expected capex by AT&T in Mexico reported in the range of US$3bn? If we translate that figure into macro-sites, we could project as


approved entity yet (from IFT) and the next step is to understand whether they get the green light or not. Our belief is they will be approved to operate. Once they are operational, we will be able to really assess their plans for the future and how they will manage the huge task of upgrading their single purpose tenant sites (that only serve Telcel) to be able to host additional carriers. Running a tower business focused on co-locations is a complicated business, no matter what everyone thinks. The Slim family has a terrific track record in Mexico entering new businesses in the telecommunications industry, so I would not bet against their potential for success.

We look forward to partnering with AT&T

The good news for all tower companies is that AT&T is getting ready with a significant operational plan and is likely to negotiate leasing terms with towercos in the near future. We expect AT&T to be eager to work with towercos that have a proven track like ourselves and American Tower and we have already begun delivering new towers and co-locations for them.

You see, we have been in Mexico and the U.S. for twenty-one years with Apex, SpectraSite, GTP and now with MTP. The reality of this country and sector opportunity seems perfect in press releases and news but often there is a gap between the excitement and reality. We are keen to find out more about all these changing elements, AT&T, Telesites and the Red Compartida project, while still being realistic and focused on getting the job done of providing our carrier partners with site solutions

many as 8,000 new co-locations and towers just to put AT&T at parity with Telcel. We all know that Telcel has been building quite aggressively at a rate of about 1,000 new sites per year. So AT&T has a lot to do if they want to achieve coverage parity.

The 700MHz shared LTE network

In Mexico, we are all eager to find out more about the Red Compartida (or shared LTE network) project for which two separate consortia are bidding. This could be another considerable revenue stream for towercos in the country, since 80% of the sites needed (which could be around 8,000, although some rumours suggest as many as 15,000) would be co-located on MTP, American Tower and Telesites’ existing infrastructure. The rest of the sites will be greenfield and that could result in 1,500 to 2,000 new towers being built.

Mexico still tracks behind compared to regional standards

But as I was saying, Mexico lives a double reality of good and bad news and if we look at the numbers, 51% of Mexican mobiles still work on 2G or 3G. The demand to switch to 4G is growing by the second but we aren’t there yet. And Mexico tracks behind regional standards with regards to most indicators, from SIM penetration (82%) to smartphone penetration (37%). There is so much to be done and things are still moving slower than they should, but all of this is exciting news for the consumer and the towercos.

Let’s not forget that Telesites hasn’t been approved yet

The creation of Telesites has brought lots of speculation to the market, especially since no one really knows what their plans are. They will start with over 11,000 towers, which makes them an overnight dominant force in the market, but we don’t have an indication yet of what their strategy will be. We have heard in the market that they plan to control all of the construction of new Telcel’s towers. This is obviously not great news for the other Mexican tower companies. If this is the case, we will see this towerco growing their tower count pretty quickly… And the market will need to discuss whether some additional restraints are needed from a competition perspective. This will really be a question for the Mexican government to ponder.

In reality, we must remember that Telesites is not an

“ “

Running a towerco is a complicated business, no matter what everyone thinks, so whether Telesites will be able to compete with experienced towercos in the Mexican landscape only time will tell


NMS’ recipe for successSustainable growth, fair pricing and skilled personnel

TowerXchange: Mariano, please tell us about NMS, its footprint and future plans.

Mariano Gomez, Executive Vice President, NMS: NMS was founded back in 2011 by Tatum Martin and myself. Soon after the creation of the company, executives Omar Vallecillo and Carlos Barrantes joined the team.

Our executive team is formed by tower professionals who prior to NMS were engaged in tower manufacturing, turnkey services and network development all over the Caribbean and Latin America. Therefore, our team features a unique combination of technical and strategic skills, all very relevant to the local tower industry.

To date, NMS is focused on the Central American market, Mexico, Colombia and Peru. We have staff based in every country where we operate with a great level of synergy between our head office and subsidiaries.

TowerXchange: Out of the countries where you operate, which ones are leading the expansion of the tower model in the region and why?

Mariano Gomez, Executive Vice President, NMS: To date, I’d definitely say that Mexico, Colombia and Peru are leading the expansion for us and for the tower industry as a whole.

The entrance of AT&T, as well as a dated network in need of upgrading, are the main growth drivers in Mexico. Colombia and Peru both require substantial

Read this article to learn:< NMS’ footprint, portfolio and capabilities

< Which markets are driving NMS’ business in the CALA region and why

< Views on pricing: from aggressive premiums to excessively low bids

< NMS’s top strength: its skilled in-house team of professionals

Network Management Services (NMS) has quietly built 600 towers across Central America, Mexico, Colombia and Peru since 2011. NMS pride themselves on their ability to execute build-to-suit programmes entirely in-house. Only recently, TowerXchange managed to speak on the record with Mariano Gomez, Executive Vice President and one of the Founders of NMS, about the company’s activities, outlook for the future and challenges CALA towercos face in terms of fair competition.

Keywords: Americas Insights, Central America, South America, Caribbean, Network Management Services, NMS, Mexico, Colombia, Peru, AT&T, Who’s who, Interview, Build-to-Suit, Capex, Opex, Lease Rates, Market Entry, Business Model, Business Case, Regulation, Skilled Workforces, Small Cells, DAS Mariano Gomez, Executive Vice President, NMS


improvements to their networks to satisfy the ever-growing demand for coverage and improved quality standards.

TowerXchange: Do you feel CALA towers are changing hands for a justifiable premium price? And talking about build-to-suit (BTS) projects, do you think they are fairly priced?

Mariano Gomez, Executive Vice President, NMS: Some tower companies active in the region are very hungry for assets, no matter what the asking price is. Whether the price is justified or not, it’s all a matter of financial projections… And I have always believed that numbers don’t lie!

The CALA tower market is very energetic and customers demand seamless wireless service from

carriers virtually everywhere. The ever-increasing pressure on carriers has stimulated the growth of the towerco model and, as a side effect, the level of prices we have been witnessing for sale and leaseback transactions are pretty high.

On the other hand, I believe BTS prices are decreasing, and not for the right reasons. Prices often go down due to the irresponsible decision of small companies to lower their bids beyond sustainable levels just to sign a contract and obtain search rings.

Unfortunately, way too often we see purchasing teams within carriers exclusively focused on their opex rather than the quality of service a towerco can offer. If a new towerco arrives in town offering lower prices, some carriers will take the opportunity and force all of us to revisit our pricing.

Sometimes, the same dynamic happens due to tower giants who own hundreds if not thousands of sites in a country and are able to offer heavily discounted lease rates on their existing portfolios in exchange for search rings.

Both these strategies are technically legal but can cause a great deal of damage to the tower business from a revenue perspective and by shrinking our capex budget. This is particularly relevant nowadays when multiple regional governments are adopting laws demanding that we conceal sites, which result in even higher costs.

BTS is a beautiful and proven business model, I believe all tower companies must preserve its attractiveness by fulfilling contract scope, preserving reasonable market prices and providing seamless service to carriers.

NMS’ executive team

“ “

BTS is a beautiful and proven business model, I believe all tower companies must preserve its attractiveness by fulfilling contract scope, preserving reasonable market prices and providing seamless service to carriers.


TowerXchange: What are the key challenges you are encountering in the countries where NMS operates from a regulatory/permitting perspective? Mariano Gomez, Executive Vice President, NMS: Although with differences among countries, I’d say one common challenge is the Not In My Back Yard (NIMBY) mentality, whereby communities are often opposed to greenfield projects due to misconceptions related to the risk of radiation. The region still lacks awareness on the actual issues around radiation and I believe communities need an educational resource to inform them which can only partially be fulfilled by towercos.

TowerXchange: What is the ratio between portfolio acquisitions and BTS for NMS? And if you rely exclusively on BTS, how many towers are you building per year and what are the key capabilities that allow you to win projects with carriers?

Mariano Gomez, Executive Vice President, NMS: NMS operates exclusively in the BTS market and to date, we have the capacity to build 800 sites per year in the countries where we are active. The demand for tower sites across the region is still very high and this is why we are sticking to what we do best.

That said, we see small cells as a growing market trend and have been evaluating the opportunity to get involved.

TowerXchange: So is the entirety of NMS staff

in-house or do you outsource any function to trusted partners?

Mariano Gomez, Executive Vice President, NMS: We rely exclusively on our in-house staff. NMS is a fully integrated company which owns every single phase of the tower management business, from bidding all the way to construction.

Our staff is our greatest asset. From civil work technicians to C-level executives, we are all committed to delivering the best possible final product to our clients and our relationship with carriers is very much based on trust, a proven track record in the region and quality control.

Over the course of the years, NMS has acquired a deep understanding of the regional telecom industry and our staff brings to the table years of experience in market analysis, regulatory issues, demand and business case modelling.

TowerXchange: Our research tells us that NMS owns over 400 towers in the region. Is that correct?

Mariano Gomez, Executive Vice President, NMS: Actually, we are getting close to the 600 mark thanks to our solid financials which have been helping us to scale our business exponentially.

We firmly believe that the right combination of performance, excellent customer relationship and seamless team integration gives us the right edge to achieve our growth goals


Meetup Africa 2016

Meetup Asia 2016



Meetup Europe 2017


13-14 December, Singapore

16-17 June, Florida

4-5 April, London

How PTI grew from startup to 2,127 towers in six countries in just over a yearUnderstanding the unique vision and energy of Phoenix Tower International

TowerXchange: For readers unfamiliar with PTI, please re-introduce yourself, your team, PTI’s portfolio and the capital structure of the business.

Dagan Kasavana, CEO, PTI: Phoenix Tower International is devoted to helping its wireless infrastructure partners – customers, sellers, landlords and communities – achieve their goals. Focused on the principles of unwavering hard work and integrity, we demonstrate this mission every day through our dedicated operation of the wireless infrastructure sites we own and operate, and the fair and collaborative manner in which we work with our business partners, helping them achieve their goals and thereby creating long lasting business relationships with PTI. Most of the team behind PTI previously worked together at Global Tower Partners (GTP) prior to the US$4.8bn sale to American Tower. I met PTI’s co-founder Natalya Kashirina working together in M&A at GTP, PTI’s Chairman Tim Culver was SVP and General Counsel at GTP and a partner of mine for ten years now, PTI’s CFO Orlando Porras was an advisor to GTP with EY and PTI’s VP of Operations, Shylesh Moras was an advisor to GTP with Morrison Hershfield. This core team has been working together for years in the tower space and represents the engine of growth for PTI. PTI will own over 1,600 towers across the Americas upon the closing later this year of our announced deal to acquire 600 towers in the U.S. from T-Mobile. By the end of 2015 we anticipate having 600-700

Read this article to learn:< PTI’s vision, management team and tower count across six countries< Combining BTS, acquisition and developer partnerships to drive growth in Brazil< Why PTI invested in the Dominican Republic< How build to flip tower entrepreneurs can increase valuation< How to create a multinational towerco from day one: the three P’s

In just over a year, Phoenix Tower International (PTI) has accelerated from launch to owning 2,127 towers across six countries in North, Central, South America and the Caribbean. CEO Dagan Kasavana, his team and his backers at Blackstone have written a new playbook for the creation of a towerco that combines acquisition with developer partnerships and BTS to create a new proposition for carriers, sellers and communities across the Americas.

Keywords: Acquisition, Altice, Americas, Americas Insights, Amzak Capital Management, Asset Register, Brazil, Build-to-Suit, C-Level Perspective, Colombia, Costa Rica, Dominican Republic, Due Diligence, Insights, Multi-Country Partner, New Market Entrant, Operational Excellence, PTI, Panama, Phoenix Tower International, Sale & Leaseback, Stakeholder Buy-In, T4U, Teletower Dominicana, Towercos, USA, Who’s Who

Orlando Porras, CFO, Natalya Kashirina, VP, Mergers & Acquisitions and Dagan Kasavana, CEO, PTI


towers in Brazil, plus a further 400-500 in the rest of CALA including in our current territories of Costa Rica, Panama, Colombia and the Dominican Republic. PTI could not have achieved this phenomenal growth without the support of Blackstone through their Tactical Opportunities business, who are bullish on the tower sector, and who have shown tremendous confidence in our business plan, enabling us to build a unique new towerco. TowerXchange: Where will that forecast growth in Brazil come from – all organic or another acquisition in addition to the recent acquisition of T4U? Dagan Kasavana, CEO, PTI: Blackstone’s Brazilian footprint owned through the affiliated company to

Brazil

U.S.*

Costa Rica

Panama

Colombia

100 200 300 400 500 600 700 800

PTI, Phoenix Tower do Brasil (“PTB”) includes the 529 towers acquired from T4U, other small developer acquisitions we have in the pipeline, plus substantial build to suit (BTS) activity. We have a pipeline of 250 BTS towers in Brazil, with 15-20 new towers going up every month since the closing and for the foreseeable future. TowerXchange: Was the acquisition of T4U in Brazil primarily an asset acquisition, or have you drawn substantially from their team and experiences to launch Phoenix Tower do Brasil? Dagan Kasavana, CEO, PTI: One of the things that we and our colleagues at Blackstone were excited about in the T4U acquisition is that we acquired a platform in Brazil, not just assets. We were impressed by T4U’s large portfolio of well-located towers, many with multiple co-locations already, and the management

team in Brazil is fantastic. We knew we needed a strong operational team to manage those assets and realise our aggressive growth plans in Brazil, so we took our existing management team and merged it with T4U’s strong team and employee base to run the business in Brazil. We have a significant team of tower professionals and a management team based locally in São Paulo and across the country that can manage the assets and the carrier relationships professionally and grow the business significantly which allows us to look at opportunities of all sizes in Brazil in the future with confidence. We also believe that by leveraging the local team’s experience building and operating hundreds of towers in Brazil we can better control the messaging to and experience of our customers, and we can better control vendor relationships – we want our employees and management team to develop direct relationships working with our customers and provide a unique relationship to our business partners in Brazil.

TowerXchange: What’s your vision for Phoenix Tower do Brazil, leveraging the T4U acquisition as a starting point? Do you have appetite to acquire more assets from Brazilian tower builders?

Dagan Kasavana, CEO, PTI: When we look at the tower market in Brazil, we think we’re one of the few companies with significant appetite both for acquisitions and for significant BTS with carriers. PTB is the new entrant in Brazil, but we have significant capital and are seeking the right opportunities to grow, through a combination of BTS,

PTI tower count

Source PTI - May 2016*pro forma for signed T-Mobile transaction

DominicanRepublic

675

591

132

71

635

23


acquisition and developer partnerships. There are a lot of developers looking for capital in Brazil and the carriers are looking for BTS partners that can execute in a challenging environment. We understand the tower financing market and offer a wide palette of alternate forms of financing to developers. We can provide anything from full financing to enabling developers to provide a greater inventory to carriers with PTI behind them to help them grow and be successful. Different developers need different models to be successful in different markets – we like to find out what they want and need, and form a proposal to meet those needs.

Additionally we are constantly discussing and understanding the needs of our customers and how we can best help them. Domingos Almeida, PTB’s VP of Sales and Development promotes this collaborative approach with each of our customers as we grow in Brazil through direct BTS arrangements. While others may be under-capitalised given the challenging market, PTB is able to meet the significant network demands of our carriers and we believe this helps differentiate us from some of the other developers.

TowerXchange: Tell us about PTI’s entry into the Caribbean. Is there an opportunity to create a towerco of scale in the Caribbean, or is Dominican Republic one of a few markets that offer the right scale?

Dagan Kasavana, CEO, PTI: We acquired 189 towers through the acquisition of Teletower Dominicana

from majority investor Amzak Capital Management in June 2015. The Dominican Republic is a very attractive market with no other independent towercos – we see a lot of opportunities there. Teletower Dominicana, which has since been renamed Phoenix Tower Dominicana is a great business with a strong management team and a great customer base. Our main counterparty in the Dominican Republic, Altice, is a strategic partner with whom we want to do more business with in the future and we value the relationship with them and the other operators in the Dominican Republic. There are some other markets which we like in the Caribbean. Generally we’re looking for markets with at least three wireless carriers and some existing adoption of co-location. We are able to leverage our operations in the Dominican across the Caribbean which is interesting and allows us to be more opportunistic to execute other tower transactions across the Caribbean given our close proximity in the Dominican Republic. In every market PTI has local representation that carriers know and trust – one of the hallmarks of our growth structure is that we always have local business strategies with people on the ground who carriers and vendors can call. Of course there are certain resources and operational aspects of the business we can centralise and leverage to oversee other markets. For example our Central America and Caribbean land acquisition programme, whereby we partner with carriers and landlords to acquire land and related rights under wireless infrastructure,

is based in Costa Rica but we have local people in Panama and the Dominican Republic executing the programme locally – we never want the customer to feel they don’t have local people in each country who can help with any infrastructure problems.

TowerXchange: PTI has completed several acquisitions from BTS towercos – what advice would you give a ‘build to flip’ tower entrepreneur – how can they make it easier for companies like PTI to acquire them?

Update - May 2016

Since we last spoke with Dagan Kasavana, PTI has acquired ownership of 145 towers as well as marketing rights of over 400 sites from Viva in the Dominican Republic and increased its tower count from 1,608 to 2,127.

When reached by TowerXchange for comments, Dagan Kasavana highlighted that “With Altice, Claro, Viva and Wind all investing in their networks in the Dominican Republic we are finding many opportunities to continue to grow our tower portfolio in the country and potentially expand to other Caribbean markets.”

PTI is the fastest growing independent towerco in the region with a portfolio, comprising of Phoenix do Brasil’s assets, that went from 58 sites in Q3 2014 to over 2,000 in less than eighteen months and is a Bronze Sponsor of the 2016 edition of the TowerXchange Meetup Americas. Click here to find out more.


Dagan Kasavana, CEO, PTI: My advice to the build to flip tower entrepreneur would be to focus on the details that make the sale process easier. Where developers have accrued significant value they have had a robust approach to permitting, entitlements and ground leases. They use high quality steel to build strong towers with capacity for additional tenants. Having a thorough approach to site files and recordkeeping makes the due diligence and sale process immeasurably easier and

ultimately increases valuations. Having done hundreds of tower transactions with some developers who were organised and some who were less organised, I’ve found that those who focused on replicating the U.S. tower business model attracted the highest valuations and encountered less surprises. That means negotiating long term ground leases, investing in high capacity towers, and acquiring all the necessary permits to the extent that they are able – and organising site files in a cohesive

manner. We have closed deals and will continue to with sellers that have less than 100% of the required site files and through our diligence process will focus on improving the portfolios both pre-closing and post-closing through various creative solutions and hard work. However, I would recommend sellers focus on both obtaining and organising their required site files to make the process as smooth as possible. TowerXchange: In terms of organisational structure and governance, how do you separate the complexity of overlapping small to medium sized acquisitions whilst still investing in substantial organic growth? Dagan Kasavana, CEO, PTI: Our business plan was to create a multinational towerco from day one. This challenge is to grow and scale and operate as a best in class tower company while retaining the energy of an entrepreneurial start-up – that energy that carriers, developers and landlords love. It comes down to the three P’s: process, people and passion. We need processes, and supporting IT, that can be scaled and customised to meet the needs of each market. A one size fits all approach will not work – every region has different norms, different regulations and different guidelines to be a good partner to our customers, sellers and communities. When a carrier gives us a co-location or BTS order, we need to fulfil it quickly and efficiently. When a carrier expresses interest in a site location we

The new office of Phoenix Tower International


need to get them on that tower as quickly as possible. When undertaking a new transaction, we use a process driven formula we’ve been using for years and years to push through negotiation, due diligence and integration but also which is customised to each country we do business with, relying on local expertise with our local operations teams and transaction advisors. We’ve hired great people who are well versed with significant experience in towers. We have tremendous transaction experience and provide oversight and process support from our HQ in Boca Raton. Our M&A team, led by Natalya Kashirina, focuses on opportunities and transactions in the U.S. and Latam overseeing multiple opportunities in various stages of vetting, diligence and closing with a unique mix of professionalism and a friendly honest approach which really resonates with our business partners. We have separate legal teams for the U.S. and Latam – each market has its own General Counsel. Our Finance team led by Orlando Porras is overseeing tax structuring and compliance, collections, payables and cash management across all six of our markets. Our operations team, led by Shylesh Moras has resources in country overseeing various BTS implementations and the maintenance of our existing sites. Lastly, our local teams in each market have been in the tower business in these countries for a long time – that experience has been critical to us scaling appropriately and professionally.

Lastly but most importantly: passion. You can’t replicate it or fake it. Our team works long nights,

tireless hours on behalf of customers, sellers, landlords and communities. We are professional, hard-working, and we genuinely passionate about what we are building together with the various partners we do business with. There are no shortcuts in this industry – we have to hire the right people who buy in to an energy that the management team has established and which has enabled us to rollup 1,600 sites in just under a year. That passion drives us, and I’m very proud of the management team and regional teams we have hired and the unique relationship we have developed with our business partners. TowerXchange: Congratulations on entering into a contract to acquire 600 towers from T-Mobile in the U.S. Do you have a specific vision, or remit from your investors, in terms of the balance between PTI’s domestic and international portfolios? Dagan Kasavana, CEO, PTI: We have a clear business plan, but there is no specific vision concerning the balance of U.S. and international assets. Our focus has always been to first simply build a bigger sandbox – to seek out the best transactions across a wider geography – that could be a BTS in Brazil, a developer investment in Central America, a ground lease buyout in Colombia or a carrier sale and leaseback in the U.S. The tower industry is a global industry – if we were focus on one or two tower markets we feel we’d be doing ourselves, our customers and our investors a disservice.

We don’t need to raise new capital every time we see a new market opportunity – this enables us to be a more flexible partner to support carriers in the markets they want to develop, or to partner with developers to help carriers in a different more strategic way. The publics are doing many of the same things of course but at a larger scale. PTI is able to be a more flexible, entrepreneurial partner for our customers. We can help with a 100 tower BTS – that will have my full attention. We can help a local developer secure the capital he needs to drive to scale. We’ll buy five towers in Panama! We will work with a landlord in Costa Rica to monetise their ground lease payments that they can use to pay off their mortgage! We’ll do what publics don’t have time to do, or what smaller, geographically restricted towercos don’t have the remit to do. We saw a vacuum in the market – an opportunity to build a towerco that does things differently. We wanted to focus on building partnerships with carriers, landlords, vendors and developers. We want to provide lawful support of our communities by obtaining all the appropriate entitlements. And at the same time we want to execute the best possible transactions across the region. If we stick to that original business thesis, we will continue to grow organically and inorganically in a way that is logical and well balanced over time

Dagan Kasavana is the latest tower industry leader to join the TowerXchange ‘Inner Circle’ Informal Advisory Board.


Liberalisation creates strong market for Costa Rican towercosAfter selling his Costa Rican towerco to SBA, Nick Van Slyck reveals his top five tips for towercos to achieve successful exit

TowerXchange: Nick please tell us about your background and career path.

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: I would describe myself as an internationalist by trade. I started my professional career as a U.S. Peace Corps volunteer in Honduras and then spent three years with an NGO involved in the promotion of democratic institutions across Africa, Latin America, South East Asia and Eastern Europe.

After completing an advanced degree in international public and private law, I relocated with my family to Panama in 1999, where I founded a billboard company, Colite Outdoor. By 2004, the company had over 200 structures across Central America, from Panama to Guatemala. This business was sold in 2014.

In 2008, I transitioned to the tower industry, intrigued by an interesting article I read about it. At the time, Costa Rica was holding a referendum regarding the possibility of joining CAFTA-DR (the Dominican Republic-Central America Free Trade Agreement) and one of the requisites to join was the liberalisation of the insurance and telecom sectors.

Once the resolution to join CAFTA-DR was approved, I got involved in the creation of a business plan for a start up towerco, Alta Vista Towers, along with an equity investor. Alta Vista Towers was acquired by SBA in November 2010 and I have acted as the General Manager for SBA in Costa Rica ever since.

Read this article to learn:< Five key points to create a successful towerco with an exit strategy< The evolution of the Costa Rican telecom industry since 2008< How open are Costa Rican carriers to infrastructure sharing?< Is there room in Costa Rica for more towercos?< SBA’s successful land ownership strategy

Nicholas Van Slyck is a lawyer by training and a skilled entrepreneur whose Costa Rican towerco was sold to SBA Communications back in 2010. Since then, he has worked for SBA as General Manager for the Costa Rican market and has recently spoken with TowerXchange about the characteristics of this small and yet exciting country, plus some compelling insights into what it takes to succeed as a small towerco with an exit strategy.

Keywords: 3G, Acquisition, Alta Vista Towers, American Tower, Americas Insights, Build-To-Suit, CAFTA-DR, Capacity Enhancements, Catalina, Central America, Claro, Co-Locations, Costa Rica, DAS, Due Diligence, Exit Strategy, Guatemala, ICE, Infrastructure Sharing, Insights, Investment, Kölbi, Lease Rates, Market Overview, Movistar, New License, On-Grid, Panama, Phoenix Tower International, Regulation, SBA Communications, Small Cells, SUTEL, TOCSA, ValuationNicholas Van Slyck, General Manager - Costa Rica, SBA


TowerXchange: As a tower entrepreneur who has completed a successful sale to a U.S. listed towerco, what lessons would you share with other entrepreneurs with a similar exit strategy?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: As an entrepreneur, I noted many similarities between the outdoor advertising and tower businesses. Therefore, when I created Alta Vista Towers, I felt I was quite knowledgeable with regards to how to create valuable assets while complying with rules and regulations, whether they were towers or billboards.

Five critical considerations to maximise towerco valuations on exit

PAPER - Get the paperwork done right: it’s really important to have strong ground leases and good tenant agreements in place, especially if you plan on eventually selling the business.

ASSETS - Don’t cut corners on the construction: I have seen quite a few entrepreneurs opting for cheap solutions when it came to building sites. But in the long run, this strategy won’t pay off. Building robust, multi-carrier towers with plenty of capacity will position your business on the right track to be acquired at a fair price. If a buyer has to reinforce your towers, this will have a negative impact on your ROI.

PERMITS - Ensure your permits are in place: some towercos start building sites without the necessary permits in an attempt to speed up the process. But permits create immense value for your portfolio and, especially in a place like Costa Rica where sometimes as many as eight or nine permits are needed, you’d better get things right from day one.

RATES - Negotiate the right rental rates with tenants: I have seen some small towercos agreeing very low lease rates in an effort to gain business but again, this strategy won’t pay off and will affect

the payout on exit. Aim for good, fair market rates with all your tenants.

GROWTH - Lease up: a good tower professional needs to keep an eye towards acquiring a second, a third and even a fourth tenant if possible. That’s where the real value is. If your plan is to build single tenant towers in rural areas with limited lease up potential, you might want to re-think your business model.

TowerXchange: You’ve been active in Costa Rica since 2008, before the market liberalisation, can you talk us through the evolution of the mobile and towerco industry?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: Costa Rica changed so much since 2008 it’s hard to sum it all up.

When I arrived in July 2008, coverage was lacking. Mobile penetration was just over 30% and there were no prepaid lines. The first mobile I had was via a friend who owned a company and had an extra line. Both my wife and I had a phone in the name of a third party company as we couldn’t even transfer the lines into our names. This is how bad things were.

Now there are more lines available than people need or use. Penetration is constantly growing and is now around 130%. It’s normal to drive around to see people from all sorts of social and economic backgrounds checking their phones. The change is just tremendous.

Five critical considerations to maximise towerco valuations on exit

Paper Assets Permits Rates Growth


In 2010, ICE rolled out their 3G network and that represented a huge leap forward with new sites being built at a fast pace. Coverage and technology improved massively, and that simply raised the bar for any carrier willing to participate in spectrum auctions. Since then, standards have been consistently improving, penetration is rising and the latest technology has been rolled out.

When Movistar and Claro switched their networks on, suddenly Costa Rica was flooded with lines and handsets and competitive pricing plans for the consumer. It was unprecedented and such a change for the public.

Open competition was a key factor. In fact, it pushed ICE to get ahead of the auction with a robust

network, equipped with the latest technology. I don’t think the market would have transformed this fast otherwise.

TowerXchange: Sutel has never ruled out the possibility of welcoming a fourth operator in the market - do you see that as a realistic possibility in the near future now that 4G is being deployed?

Nicholas Van Slyck, General Manager - Costa Rica,

SBA Communications: The initial 2010 auction was held for three licences but received bids only from Claro and Movistar. To be honest, the Costa Rican market is well served by three carriers and I don’t foresee the entrance of a fourth player in the near future.

A fourth player would need to make substantial investments to be able to grab any meaningful share of the market, considering how solid the existing carriers are. It’s important to remember

“

“

Open competition was a key factor. In fact, it pushed ICE to get ahead of the auction with a robust network, equipped with the latest technology. I don’t think the market would have transformed this fast otherwise

San Jose, Costa Rica


the larger, more entrenched towercos with their regional relationships with carriers.

TowerXchange: TowerXchange estimated that Kölbi owns at least 1,000 sites and Claro approximately 450 - do you think Kölbi will divest them anytime soon, and do you think Claro could extend the Telesites business model to Costa Rica and run their build programmes through their own towerco, potentially making their assets available to multiple tenants?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: I don’t see ICE divesting anytime in the near future. Being a State-owned organisation, any kind of sale would be very complicated and time consuming, plus it would require a lot of effort in terms of government lobbying. There are very powerful and influential unions within ICE and I am inclined to assume they wouldn’t be in favour of such a divestiture.

In terms of Telesites, I don’t think it will be a competitive reality in the near future, primarily because of the aforementioned complex regulatory and permitting environment. It would be quite hard for them to enter the market without any local experience and really make an impact, especially since there are already quite a few towercos with the right track record and know-how.

TowerXchange: José Escobar (Catalina) shared with us his views that at least 2,000 new sites are needed in the country. Do you agree with that figure?

that there are only 4.8mn people in Costa Rica, which means a finite potential for subscriptions. Plus, geographical conditions don’t help as mountainous areas require a lot of sites to achieve decent coverage. The investment for a new player would be very high.

TowerXchange: Are the main MNOs all embracing co-location? And are they supplemented by tenancies from non-traditional MNOs?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: The co-location model has been embraced by all carriers, with some more active than others. The sharing model is a new concept which was introduced in 2010 and, in spite of its recency, it is now quite deeply rooted and accepted.

At the time of the auction, ICE already had a lot of

towers so their needs weren’t even comparable to those of new entrants Movistar and Claro.

In addition to the carriers, there are a handful of secondary and tertiary clients. They don’t represent a huge portion of our business but they remain important customers, and there are maybe four to five other companies which require co-location services. I see this as a growing trend.

TowerXchange: A small country with plenty of competition… SBA, AMT and then middle market towercos such as TOCSA, Catalina and PTI being acquisitive - is there enough business for everyone in Costa Rica?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: Costa Rica is a relatively small market and BTS activities have considerably slowed down over the past couple of years. Back in 2011-2012, towercos were extremely busy with plenty of build outs but now things have changed. However, there are still some BTS opportunities for towercos that really understand the legal framework and complex regulatory and permitting environments, which is one of most complex we know of.

I think it would be quite difficult for an inexperienced towerco to come in and expect to get a lot of business, especially since competition is already quite fierce. You see, companies like SBA with solid regional relationships can leverage them in various markets. Small, entrepreneurial towercos would have an uphill battle against


required to connect a site. This is a factor to take into consideration when working on your project timeline and it very much depends on who you are working with as an energy provider.

TowerXchange: How would you summarise your views and experiences of the Costa Rican tower market?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: We are quite happy with the results of our ongoing investment in the Costa Rican tower market.

First of all, the fact that the co-location model is widely accepted makes it relatively easy for us to do business here and acquire new customers. Secondly, Costa Rica is one of our most stable international markets in terms of legal framework, land ownership, permitting regulation et cetera.

You will always find a few municipalities opposed to telecom towers, wherever you do business. We are working with them to help carriers get their network up and running while spreading knowledge about the industry. Four years ago, there were quite a few municipalities, I’d say a third of them, opposed to permitting new towers but things have been progressing in the right direction

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: I think 2,000 new sites is an overly optimistic estimate, in light of the recent flow of BTS activity. There is definitely room to grow but I would be a bit more conservative than that.

To date, towercos are still very much focused on supporting carriers in covering the national territory with macro sites but I can see that heterogeneous networks will be an appropriate solution in certain metropolitan areas. However, we need to wait for carriers to evolve their business need to see a real expansion of small cells and DAS.

TowerXchange: How much of the land under your sites do SBA own in Costa Rica? And is the trend moving towards trying to acquire most of it? If so, how is the purchase process?

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: SBA developed a very aggressive ground-lease buyout programme back in 2011 and has worked on it ever since. To date, we own a substantial amount of the land underneath our towers. In fact, we strongly believe this is a great way to deploy our capital and we will continue to pursue the land ownership as a strategy. We reserve the right of first refusal in case a landowner decides to sell the land under one of our towers, so we are well protected against ground lease aggregators here in Costa Rica.

TowerXchange: Please tell us about the quality

and availability of grid power to Costa Rican cell sites.

Nicholas Van Slyck, General Manager - Costa Rica, SBA Communications: Power isn’t an issue in the country as the national grid is quite reliable and complete. I can count on one hand the number of power cuts we had in our house last year.

Sometimes carriers do use backup power generators on backbone and hub sites but this is just an additional measure to protect their operations.

The real challenge is that there are as many as eight energy distribution companies in Costa Rica and this can have an impact on the time

“

“

SBA developed a very aggressive ground-lease buyout programme back in 2011 and has worked on it ever since. To date, we own a substantial amount of the land underneath our towers

SBA Communications is the Diamond Sponsor of the 2016 edition of the TowerXchange Meetup Americas, taking place in Boca Raton, 16-17 June. Click here to find out more


SBA Communications on the challenges and opportunities of doing business in GuatemalaExperiences in building, maintaining and leasing up SBA’s portfolio of 600+ sites

TowerXchange: Please introduce yourself and your role at SBA Communications.

Ricardo Ruiz, International Operations Director, SBA Communications: I have been in the telecom industry for the last eighteen years, focusing on Central America. For the past six years, I have worked for SBA Communications where I am in charge of multiple countries in Central and South America. Currently I am based in Guatemala City.

TowerXchange: Please give us some context on the tower industry in Guatemala. What are the competitive dynamics among MNOs and indeed among the country’s three towercos? How would you characterise the regulatory environment?

Ricardo Ruiz, International Operations Director, SBA Communications: SBA has been doing business in Guatemala for the last six years. The tower industry is competitive and it’s incentivised by a stable socio-economic environment, as well as the demand for the latest generation data services and smartphones. Currently there are two other competitors in the market, but both are much smaller.

Guatemala has a fairly strong regulatory environment, with diverse initiatives from the authorities to establish a clear framework to build and operate towers, which is attractive for the network operators and towercos too.

TowerXchange: What are the main demand drivers in Guatemala, both for new builds and for co-location?

Ricardo Ruiz, International Operations Director, SBA

Read this article to learn:< SBA’s operations in Guatemala and in Central America

< BTS and co-locations drive the tower industry in the country

< Best practices in dealing with local communities and permitting

< Opportunities for heterogeneous network solutions in Guatemala

< What is SBA’s future outlook for its Guatemalan operations?

Ricardo Ruiz, International Operations Director for SBA Communications, is based in Guatemala and has spoken to TowerXchange about the local tower industry, its dynamics and which growth perspectives SBA has in the country.

Keywords: 3G, 4G, Americas, Americas Insights, Build-to-Suit, Central America, Claro, DAS, Guatemala, Insights, Market Overview, Mobilitie, SBA Communications, Small Cells, Telefónica, Tigo


Communications: We believe that opportunities for new builds and co-locations are driven mainly by the carriers rising demand for 3G data services, and also moving forward with 4G networks. There is a huge need for capacity sites at the main cities and busy suburban areas. In certain areas, coverage sites continue to be built as well. Site growth has been strong over the past few years and carriers are still pushing hard.

TowerXchange: What are the main operational challenges you face building and maintaining towers in Guatemala?

Ricardo Ruiz, International Operations Director, SBA Communications: Building sites at Guatemala can be very challenging. The team must know the various communities and follow up closely with the different authorities to make sure the sites are built timely and with all the permits required.

There are local community groups called COCODES which have a big say in whether or not a site gets local approvals. From an operations perspective, there are good reliable contractors we use at our sites in addition to our own employees. Labor costs are good and work quality is high. There is some vandalism but it can be controlled. There are also some security issues in certain areas that people visiting the sites must beware of. For SBA, our large scale helps to control our costs in Guatemala. With a dense footprint of 600+ sites we have been able to create a maintenance plan that is very cost effective.

TowerXchange: What is SBA’s footprint in Guatemala, how did you acquire the portfolio and how is it growing?

Ricardo Ruiz, International Operations Director, SBA Communications: We own and operate more than 600 sites with nationwide coverage, in urban, suburban and rural areas.

In 2011, SBA entered the market through an acquisition from Telefónica. In 2012, SBA acquired Mobilitie in Guatemala and Nicaragua, and since then we have been growing our portfolio with over 150 BTS sites completed, and many more co-locations.

TowerXchange: Having acquired the majority of Telefónica’s towers, what are the prospects of Claro’s or Tigo’s towers coming to market, given the preferences of both organisations to retain towers and retain control?

Ricardo Ruiz, International Operations Director, SBA Communications: With Claro and Tigo in Guatemala, we have been focusing on co-locations. These two carriers prefer to continue to build and own towers but they both have been good co-locators on our sites, both old and new ones.

TowerXchange: How would you contrast the market and the opportunity within SBA’s five Central American operations?

Ricardo Ruiz, International Operations Director, SBA Communications: Guatemala brings a lot of scale to SBA in the Central America region. Claro and Telefónica have regional headquarters here as well, so it is a hub market for them. We also have local offices in El Salvador, Nicaragua, Costa Rica and Panama, that give us the ability to properly serve our regional and local customers in each market. This provides a lot of benefits in terms of standardised management,

operations and processes across our organisation.

TowerXchange: Have you seen much appetite for microcells, small cells, IBS and DAS across Central America?

Ricardo Ruiz, International Operations Director, SBA Communications: Somewhat, but most small cells here take the form of short macro sites. We have done some small poles in certain core areas, but have found that low rooftops and short towers, with high capacity macro equipment on them, are still the biggest part of the carrier’s designs. DAS opportunities are very limited, most areas can be properly served by more cost effective macro sites. Sometimes carriers will self-deploy limited in-building solutions for key corporate clients but most facilities can be handled by macro cells nearby.

TowerXchange: Finally, please sum up your three to five year vision for the Guatemala tower market.

Ricardo Ruiz, International Operations Director, SBA Communications: We believe that carriers’ networks will continue to grow, especially as the region catches up with smartphones and data services penetration. SBA is focused on continuous growth in Guatemala and the rest of Central America, but also focused on running our existing portfolio efficiently. We expect to continue to build and buy towers and other sites here for the foreseeable future

SBA Communications is the Diamond Sponsor of the 2016 edition of the TowerXchange Meetup Americas, taking place in Boca Raton, 16-17 June. Click here to find out more


The evolution of Telefónica’s TelxiusWith the O2-Three merger less likely, Telefónica considers tower IPO

By Laura Dinnewell, Head of TowerXchange EMEA

Increasing financial pressures on Telefónica Telefónica have been coming under increasing financial pressure with weak Latin American currencies and the performance of their opcos in the region hitting the company’s revenues hard. The operator has amassed a significant amount of debt following a number of acquisitions across Europe and Latin America, including an €8.6bn takeover of German rival E-Plus and the acquisition of Brazilian broadband provider GVT for $9bn (€7.9bn), resulting in almost doubling of the company’s debt over a ten-year period. Telefónica’s most recent financial results show debts of €50.2bn. The rise and fall of Hutchison’s takeover of Telefónica’s O2 UK business In March 2015, Telefónica reached an agreement with Hong Kong’s Hutchison Whampoa for the sale of Telefónica’s O2 for an initial £9.25bn with an additional payment of £1bn once the cumulative cash flow of the combined company in the UK reached an agreed threshold. The deal was hoped to go some of the way towards reducing Telefónica’s debt burden. However, in the face of concerns about reduced competition in the UK mobile market, a full scale review was launched by the European Commission Competition Commission, with UK regulator Ofcom, urging them to block the takeover. Whilst a final decision has not been announced, the April deadline set by the commission has passed and reports that Hutchison’s lawyers have been called in to mount a challenge suggests that a negative verdict has all but been reached.

Read this article to learn:< Key dates and milestones in the formation of Telxius

< The composition of Telxius’ portfolio of infrastructure assets

< The potential value of Telxius portfolio

< What may be next for the infraco including a potential listing on the Madrid Stock Exchange

Keywords: Americas, Americas News, Argentina, Brazil, CETIN, CTIL, Carve Out, Central America, Chile, Colombia, Decommissioning, Europe News, Exit Strategy, Germany, Investment, MNOs, Mexico, Multi-Region News, New Market Entrant, News, Peru, Spain, Telefónica, Telesites, Telxius, Tower Count, Towercos, UK, Valuation, Venezuela

The past 12 months have been an eventful period for Spanish operator, Telefónica. After reaching an agreement with Hutchison in March last year to sell their UK O2 business to help alleviate debt, it now looks increasingly likely that the merger will be blocked by the European Commission. Their “plan B” of raising capital from the monetisation of their towers and subsea cabling has sprung into action. Following the formation of Telefónica’s infrastructure business, Telxius, in February 2016 originally incorporating the operator’s ~11,000 Spanish towers and 31,000km of subsea cabling, further towers from the Chilean, Peruvian, Brazilian and now German businesses have been sold to the unit. On 28 April 2016 it was reported that Telefónica had appointed banks to prepare Telxius for an IPO.


With the collapse of the takeover so goes the opportunity to knock £10.25bn (€13.1bn) off Telefónica’s €50.2bn debt. In February, the company announced a €2.9bn early retirement plan to help cut its employment costs but further measures are required to bring the debt back under control. Ever since CFO Angel Vila hinted at a potential tower sale during his Q3 2015 investor presentation, monetisation of Telefónica’s passive infrastructure has been viewed as one of the key steps that the operator would inevitably take - it just seemed a question of when. Tower monetisations show their worth With the carve out and IPO of a 40% stake in Telecom Italia’s INWIT raising €875.3mn for the business, and on the other side of the Atlantic, the carve out and IPO of America Movil’s Telesites raising north of €2bn for the the Mexican operator, a precedent has been set. Telecom Italia have since moved to monetise their tower business further with an additional stake in the business being fought over by Italian broadcaster EI Towers and towerco Cellnex in conjunction with infrastructure fund F2i.

The towerco business model is becoming increasingly popular as operators observe the >12-18x EBITDA multiples publically listed towercos currently trade at (versus the typical 3-4x EBITDA of MNOs). Turkey’s Turkcell has been the latest operator to follow suit, announcing on 28 April that it has initiated the IPO process for its infrastructure business Global Tower. In Germany, Deutsche Telekom has also expressed an interest in investigating a potential IPO of their infraco,

Deutsche Funkturm.

What do we know about Telxius’ assets and Telefónica’s plans for the unit? The first infrastructure assets to be carved into the business were ~11,000 Spanish towers and 31,000km of subsea cabling. On 24 March Movistar Chile (Telefónica’s opco in the country) agreed the sale of 328 towers to Telxius for CLP7.85bn (€10.4mn). This was followed a week later by Telefónica Peru’s sale of 849 towers to the unit and Telefónica Brasil’s sale of 1,655 towers for BRL760mn (€192.6mn). On 21 April, Telefónica Deutschland announced the sale of 2,350 towers to the infraco for €587mn (the rest of the German opco’s sites, an estimated ~12,000 rooftops have not been transferred to Telxius). These transactions bring Telxius’ total tower count to 16,154 (figure one) with the company also managing

a network of over 65,000km of submarine fibre optic cables, of which ~31,000km are owned.Telxius reports pro forma FY15 revenues of €600mn, with 60% attributed to the submarine cabling components of their business and 40% to towers. Of that 40% from towers, 15% comes from their Latin American towers and 85% from their European towers (figure two). Calculating the average revenue per tower we arrive at the figure of just under €17k per site - in line with the revenues reported by leading European independent towerco, Cellnex. Alberto Horcajo, former CFO of Telefónica Brasil, has been announced as Telxius’ new CEO. In a press release it was stated that the formation of Telxius was part of a strategy to optimise Telefónica’s asset portfolio, taking a more specialised and focused approach. The group plans to increase the number of services they provide to other operators,

Source: TowerXchangeFigure one: Telxius’ portfolio of 16,154 towers

Spain 11,000 Germany 2,350

Brazil 1,655

Peru 849 Chile 328


improving their return on capital invested and is looking at taking advantage of further growth opportunities in the sector, including the possibility of incorporating third party assets. Whilst an IPO of the unit has not formally been announced, TMTfinance report that Telefónica have hired Goldman Sachs and JP Morgan to join UBS in running the process. An early July listing on the Madrid Stock Exchange has been mooted and, given how quickly the process has moved to date, we expect such time lines to be feasible.

What could Telxius be worth? The valuations ascribed to injected assets are seldom a good guide to the future value of the combined entity - on the MNO’s balance sheet towers are a

depreciating asset with opex - they’re a cost centre, whereas the proposition Telxius represents to prospective investors is a set of robust long term contracts deriving revenue from the leasing of towers and subsea cable capacity to Telefónica and to third parties.

Only the values from the sale of towers in Telefónica’s subsidiaries in Germany, Brazil and Chile have been disclosed and with widely differing average tower prices it makes it difficult to extrapolate values for their Spanish and Peruvian transactions. Comparing Spain and Germany, the German transaction is thought to be exclusively composed of ground-based towers, whereas the Spain number is thought to include rooftop sites. As such, one would expect the average value of the Spanish sites to be lower.

Perhaps the nearest equivalent with which to benchmark might be CETIN in the Czech Republic, which also carved out towers and other infrastructure from O2 Czech Republic - although availability of meaningful data is limited as O2 Czech Republic had been sold to local investor PPF, who drove the carve out and swiftly re-privatised it after a brief listing on the Prague Stock Exchange.

In regards to what valuation Telxius could achieve at IPO, initial press speculation has suggested that they are targeting a range of €4-6bn, which seems aggressive when compared to Cellnex; a more mature towerco of similar scale valued at €3.34bn (at the time of writing). The listing of a 66% stake in Cellnex, Abertis Telecom’s infrastructure business, saw shares

Figure two: breakdown of Telxius revenue

Investor RelationsTelefónica, S.A.

• One of the leading telecom infrastructure service providers in Europe and the Americas

• Secular industry trends and revenues visibility levered by long-term contractual relationships

• Strong cash conversion driven by high profitability and low recurrent maintenance CapEx

Revenue OIBDA

~45%

OIBDA margin

Total Revenue

~40%

Tower Revenues~€680m

~€300m

International network: >65,000km submarine fiber-optic cables (~31,000km are owned)

1

~16,000 telecom towers in Spain, Germany and selected countries in LatAm2

~60%

Operations breakdown (2015PF)Financial highlights (2015PF)

Telxius: a leading telecom infrastructure Co.

23

Created with selected assets from TEF… … formed by fiber-optic submarine cables and mobile towers

Balanced portfolio & exposed to mature and emerging markets

Substantial and profitable

Europe~85%

Latam~15%

Submarine Cables Towers

Table one: Telefónica asset sales to Telxius

Spain

Germany

Brazil

Peru

Chile

Country

11,000

2,350

1,655

849

328

Number of towers sold

587,000,000

192,600,000

10,400,000

Deal Value (€)

249,787

116,727

31,707

Price per tower (€)

Sources: Press releases, Company reports

Source: Telefónica quarterly results


surge 12% on the first day of trading, valuing it at €3.5bn (US$3.8mn). The IPO of a 40% stake in INWIT (Telecom Italia’s infrastructure unit) the following month, saw shares rise more than 9% on its trading debut on the Milan stock exchange, giving the company a market cap of around €2.4bn, and raising a gross €875.3mn (US$956.7mn) for Telecom Italia in the process. INWIT has 11,519 towers on the balance sheet, whilst Cellnex have 15,140, yet differences

in their market cap at their trading debuts can largely be attributed to (amongst other factors) Cellnex’ proven track record in the acquisition and management of third party towers. Similar to INWIT, the newly created Telxius does not come with this experience and whilst multiple tenants do exist on Telefónica’s towers, we have generally seen that it can take a full year for a new carve-out towerco to genuinely start thinking and behaving like an

independent towerco. Looking across the Atlantic to Mexico, the recent carve out of America Movil’s 12,555 towers into new infrastructure business Telesites may serve as a cautionary tale considering the fall of its stock (from Mex$13.38 to approximately Mex$11.00 during the third week of January) since its listing on 21 December. Its target price and overall financial

Figure three: Timeline of the creation of Telxius

Pre March 2015

Feb 2016

March 2015

March 2016

Sept 2015

March 2016

Oct 2015

April 2016 April 2016 April 2016 April 2016 April 2016

Dec 2015 Jan 2016 Jan 2016

Telefónica’s net debt more than doubles over the course of a decade following

numerous acquisitions across Europe and

Latin America

Telefónica announces the creation of Telxius saying it will initially consist

of about 15,000 phone towers and an international submarine-cable

network covering 31,000 kilometers with more assets being included gradually over coming months.

Telefónica’s ~11,000 Spanish towers are known to be included. Alberto

Horcajo is announced as CEO

Telefónica reaches an agreement with

Hutchison to sell UK O2 business for

£10.25bn to help tackle escalating

debt

Movistar Chile announces the sale of 328 towers

to Telxius for CLP7.85bn (€10.4mn)

CFO Angel Vila hints at a potential

monetisation of Telefónica’s towers in his Q3 investor

presentation

Telefónica Peru announces the sale of

849 towers to Telxius

The European Commission launches

an investigation Hutchison’s takeover

of O2

Telefónica Brasil announces the

sale of 1,655 towers to Telxius

for BRL760mn (€192.6mn)

Bloomberg reports Telefónica to be

considering a carve out of “60,000 towers” into an infrastructure

unit

Speculation mounting that

the EC will block Hutchison’s

takeover of O2 as the deadline for their review

approaches

Ofcom’s Sharon White meets EU Competition

Commissioner Margrethe Vestager to urge her to block the

O2 takeover

Telefónica Deutschland

announces the sale of 2,350

towers to Telxius for €587mn

News circulates that Telefónica is carving out

its ~11,000 Spanish towers into new infrastructure unit, “Wireless Towers”

Telefónica Q1 2016 results presented with net financial

debt sitting at €50.2bn

Reports circulate that Telefónica

plans to list Telxius on the Madrid Stock Exchange in

early July



goals for 2016-2020 have been considered bold by analysts, especially if compared with its listed competitors such as SBA Communications and American Tower. TowerXchange would be inclined to reserve judgement on Telesites; co-location growth may not reach the aggressive targets set out in Telesites’ IPO, but the towerco’s close relationship with Telcel has enabled them to build over 2,000

new towers in their first year. At present it is also unknown what sort of equity Telefónica would look to retain in Telxius, should they list the company on the Madrid stock exchange. Considering the fierce competition for INWIT’s assets between EI Towers and Cellnex (with American Tower having reportedly been involved in

early bidding stages), leaving the door ajar to sell a future stake in Telxius to a strategic investor could certainly be attractive and so an IPO followed by a later strategic sale may be an option that Telefónica would consider.

Within the European market (where 85% of Telxius revenues from towers are generated), Cellnex represents the only sizeable independent towerco with a presence in multiple markets. A portfolio such as that of Telxius would offer an attractive opportunity for not only Cellnex to extend its strong hold but it would also present an opportunity for a well capitalised European towerco to reach scale or an international player to mark their entry into the European market. Given the presence of a number of major international players at the recent TowerXchange Meetup Europe, we feel there would be no shortage of interested parties!

What other towers could be incorporated into Telxius?

Prior to the Telxius transactions, Telefónica had sold 21,553 towers to date, raising just under US$2bn at an average of US$162,536 per tower (table two). TowerXchange estimate there are approximately 32,200 sites left on Telefónica’s balance sheet, excluding those already transferred to Telxius.

Telefónica retains around 12,000 rooftop sites in Germany, but landlords make it difficult to co-locate rooftop sites in Germany, so these assets are unlikely to be transferred to Telxius.

Telefónica O2’s UK towers now sit on the CTIL

Asset transfer

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Not disclosed

98,118

193,548

Not disclosed

222,500

171,875

131,799

150,000

172,043

98,100

207,851

208,904

144,000

151,694

162,536

Not disclosed

419,650,000

18,000,000

Not disclosed

178,000,000

33,000,000

252,000,000

225,000,000

96,000,000

49,050,000

323,000,000

122,000,000

18,000,000

206,000,000

1,939,700,000

7700

4277*

93

400

800

192

1912

1500

558

500

1554

584

125

1358

21,553

Deutsche Funkturm

Cellnex

American Tower

Torres Unidas

SBA Communications

American Tower

BR Towers

American Tower

American Tower

Cellnex

American Tower

American Tower

American Tower

Grupo TorreSur

Total

Germany

Spain

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Chile

Spain

Mexico

Mexico

Colombia

Brazil

2015

2014

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

Year Country Buyer Tower count

Deal value US$

Cost per tower US$

Deal structure

*Includes an undisclosed quantity of Yoigo towers Source: TowerXchange

Table two: A history of Telefónica transactions up to the creation of Telxius


balance sheet, a joint venture infraco with Vodafone. Managed as an integrated portfolio, with significant decommissioning continuing and RANsharing being overlaid, extraction of the O2 towers would be a complex task, and would be rendered moot if Telefónica persevered with their plans to divest O2; if not to Hutch then perhaps to a new entrant regulators would find less objectionable, such as Liberty Global.

So if UK and further German assets are unlikely to be included in Telxius, what else could be? Telefónica has ~5,000 towers in Argentina, where an independent tower market is just starting to emerge. However, even though Argentina’s new government is making significant progress in opening the market to international investment, it may be too soon to test the resolve of the European and U.S. pension funds who will ultimately buy Telxius stock; Argentina remains a bit too frontiersy to fit with the narrative of de-risked, long term recurring telecom infra revenues.

However, we don’t think Telefónica has injected all their Peruvian and Chilean towers into Telxius, nor any of their towers in Colombia, Venezuela, Ecuador and Central America, nor the few Telefónica has left in Mexico. The Telxius balance sheet could be swelled by ~10,000 additional CALA towers prior to IPO. It’s not going to be the 60,000 tower giant speculated earlier this year, but Telxius could be big, it could be valuable, and Telefónica clearly think the time is right to monetise their assets on the public markets. TowerXchange are inclined to agree!





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Debunking myths about NicaraguaTorrecom on its successes and positive experience of doing business in the country

TowerXchange: Maria, please share with us your views on Nicaragua, its telecom sector and the expansion of the tower industry. Maria Scotti, CEO, Torrecom and Director, MCM: First of all, it’s important to stress that the first thought often associated with Nicaragua is the danger related to doing business there. Well, this is a good occasion to debunk this assumption and highlight the good points of the country. In reality, I have found Nicaragua to be one of the best markets for Torrecom and, ironically, one of the most progressive and safe to do business. We played a role in amending the regulation a couple of years ago and we’ve helped to put in place a system that is working pretty well for towercos. There are challenges just like everywhere else but we are pretty content with our business in Nicaragua so far. TowerXchange: How is the carriers’ landscape in the country? Maria Scotti, CEO, Torrecom and Director, MCM: To date, there are “two and a half carriers” in the country. Claro and Telefónica have been sharing the market pretty equally over the past few years and now we are witnessing Xinwei gearing up to launch towards the end of the year. Torrecom has been building for Telefónica and, on a smaller scale, for Claro. Xinwei, on the other hand, is purely focused on co-locating at the moment in order to speed up its launch. Xinwei

Read this article to learn:< Nicaragua: a market poised for growth, and a market without the country risk many assume< A country with “two and a half” carriers: Xinwei’s path to launch< From permitting to property registrations: challenges of doing business in Nicaragua< Nicaragua versus Guatemala: a comparison< The Nicaraguan government and its commitment to connecting rural and remote areas

Maria Scotti has shared with TowerXchange the pros and cons of the tower industry thanks to her substantial experience and outspoken personality. And this interview on Nicaragua was no exception. The CEO of BTS firm Torrecom discussed with TowerXchange the reality of building telecom towers in Nicaragua, the misconception that it is a dangerous country, and the relative ease with which Torrecom has been able to do business there.

Keywords: Americas Insights, Build-To-Suit, C-Level Perspective, Central America, Claro, Costa Rica, Guatemala, Infrastructure Sharing, Insights, Interview, MCM, Movistar, New License, New Market Entrant, Nicaragua, Off-Grid, Regulation, Renewables, SBA Communications, Solar, Telcor, Telefonica, Telesites, Torrecom, Towercos, XinweiMaria Scotti, CEO, Torrecom and Director, MCM


has been moving at a reasonable pace over the past six months and looking at co-locating on all existing structures of interest to them. On the other hand, we are all still waiting to see them ramping up their marketing initiatives. Only when they start acquiring a considerable subscriber base we will be able to assess their performance. TowerXchange: What are the specific challenges related to doing business in Nicaragua? Maria Scotti, CEO, Torrecom and Director, MCM: Nicaragua presents a variety of logistics challenges just like every other country in the region, especially when we look at remote areas. However, it is not a dangerous country in which to develop projects. It’s a country open to renewable energy solutions to overcome its off-grid problems and

there are quite a few programmes in place right now to connect remote areas. However, I am constantly surprised by Nicaragua. For example, sourcing reliable and capable staff throughout the region is tricky. There aren’t a lot of really skilled professionals out there, especially since the towerco model is relatively young. In Nicaragua we’ve been able to scout really good engineers and administrators to form critical parts of our local team. Very dedicated and diligent team members. The only real challenge we face in terms of the country’s legal system is related to property registration, which is still a bit complicated. Land and property ownership hasn’t always been straight-forward in the country but things are

progressing and getting smoother. It’s a process that will still require some time to improve. TowerXchange: How is the infrastructure sharing market going in the country? Maria Scotti, CEO, Torrecom and Director, MCM: Telefónica is very open to sharing in Nicaragua and beyond. I’d say the company is extremely progressive when it comes to infra-sharing and has embraced the co-location model throughout the region. I will also add that Claro has ramped up its co-location appetite and this speaks to the importance of the regulation in place. It is important for the environment and experience tells us that multiple towers within close proximity of each other will create an even more difficult permitting process in the future. There isn’t much inventory left in Nicaragua. In fact, Telefónica does hold on to some major assets but not many, after their sale to SBA. Claro is retaining approximately 300 towers and there are questions as to whether they could be transferred to Telesites in the future. However, this is far from realistic at the moment as Telesites is still in the process of setting up its operations in Mexico, which will take some time. On the other hand, Claro did issue an RFQ for 300-350 new sites in Costa Rica and Telesites won it. So we will need to wait and see whether they start entering other markets in full force. TowerXchange: What are your expectations for the entrance of Xinwei in the market as third

“ “There isn’t much inventory left in Nicaragua. In fact, Telefónica does hold on to some major assets but not many, after the sale to SBA. Claro is retaining its 300 towers and there are questions as to whether they could be transferred to Telesites in the future. However, this is far from realistic at the moment as Telesites is still in the process of setting up its operations in Mexico, which will take some time… On the other hand, Claro did issue an RFQ for 300-350 new sites in Costa Rica and Telesites won it


operator? Are they likely to start building any sites? Maria Scotti, CEO, Torrecom and Director, MCM: I don’t foresee Xinwei becoming a large build-to-suit client. I know much depends on their network growth but for now, I see them focusing on co-locations as much as possible. Their equipment is smaller if compared to that of traditional carriers, which allows them to co-locate quite comfortably. So that helps from a technical standpoint. On the other hand, much depends on how well they do on the subscriber front and how much they manage to grow in the near future. If you ask me, I don’t see them building a lot of new sites over the next three years. That said, I don’t exclude the possibility of them building a few sites here and there but we aren’t talking about anything of scale. We need to keep in mind that Xinwei has a lot of network to build and an enormous quantity of equipment to bring in, just to get started. So for now, I don’t see them focusing on requiring new sites in a BTS program. We have started working with Xinwei a few months ago and from a tenant perspective, they’ve been very good. They are a good customer and, since they’ve been around in Nicaragua for two years prior to starting any operations, they have a strong local team, supported by a few engineers that travel from overseas to assist them. Xinwei has been installing “clean and quietly” and we cannot complain. The critical missing piece is to

see how well they will perform marketing their products and we, just like all the other local towercos, really hope they do well! TowerXchange: Is Xinwei representing a real threat for Claro and Telefónica and how have the competition dynamics between the two been so far? Maria Scotti, CEO, Torrecom and Director, MCM: Claro and Telefónica are extremely comfortable in Nicaragua as the country presents a very stable market for them to do business. Both companies have been doing consistent network upgrades and BTS programmes and right now it is business as usual. They aren’t in a rush to do any major work ahead of Xinwei’s launch. Their deployment pace has been slow but steady, nothing comparable to the rush we are now seeing in Mexico and Guatemala. From a competition perspective, their way of competing is very similar to that of AT&T and Verizon in the U.S. They are fairly even at the moment with Claro being slighly ahead due to their longevity in the market and because of their other telecommunication asset holdings. TowerXchange: The World Bank has been working on a Nicaragua Rural Telecom project for quite some time now and there are more projects being developed to connect remote areas. What are your thoughts on them and how likely are they to become reality?

Maria Scotti, CEO, Torrecom and Director, MCM: There are a variety of projects being developed in Nicaragua to provide coverage in remote areas, to provide energy in off-grid locations as well as to improve the country’s logistics and connectivity. The World Bank has been developing some projects but in general, most plans have proven more expensive and technically challenging than originally thought, hence are progressing slower than anticipated. That said, the local government is extremely committed to making these projects happen. They simply won’t let go because of financial or logistic challenges and this is what is contributing to the country’s development. At the beginning, we were skeptical about some projects being realised but now, I can tell you most of them will be developed one way or the other. It will just take time. The government acknowledges that by empowering local communities, the results will be huge from an economic growth standpoint. Nicaragua is quickly growing as a tourism attraction as well as being a retirement haven for those opting for remote locations to settle down. And so now there is much emphasis on bringing services to those areas such as new gated communities. There is a strong dedication to bringing communications to the citizens of Nicaragua for educational, medical, banking and retail services by accessing wireless technologies. All this is happening with considerable logistics and financial challenges but the government’s


mantra so far has been to bring communication to the citizens wherever they are, and to deal with each issue, whatever they are. TowerXchange: Being active in Nicaragua and Guatemala, could you compare the two and their respective regulatory, telecom and tower environments? Maria Scotti, CEO, Torrecom and Director, MCM: Nicaragua is a very stable country compared to Guatemala. In fact, Telcor, the telecom regulator, has done a very good job in structuring the permitting system in a way that actively involves municipalities and empowers them in a positive way. The system takes time, it can be complicated, but it works. You see, Telcor aims at providing

some consistency across the board and keep things under control. And this is noticeable from a permitting and general business perspective. On the other hand, the Stuperintendencia de Telecomunicaciones (SIT) in Guatemala has the power to release permits but this doesn’t mean municipalities accept them without protesting. Quite the contrary, municipalities are often opposed to greenfield projects in spite of their local communities literally begging for coverage. We face protests, sometimes violent ones, and building outside of the city is very dangerous. And keep in mind that moving around Guatemala City isn’t easy either. Doing business in Guatemala isn’t easy and it’s such

a pity. In fact, the country is technically richer than Nicaragua and right now there are a lot of plans to develop new sites and enhance coverage across the country. The problem is to get them done safely. It’s a shame because Guatemala City has some greatness to it with its high-rise buildings, beautiful gated communities and marvelous scenery out in the countryside. There are a lot of people that would want to progress and get things done! Bear in mind that it tends to be even more difficult during the pre-election phase. Hopefully after the elections in September things may move faster during the regulatory process but it won’t get easier logistically and safety of our team members is in the forefront of our minds as well as the carriers’

“ “the government’s mantra so far has been to bring communication to the citizens wherever they are, and to deal with each issue, whatever they are

Torrecom tower count

Torrecom is a Bronze Sponsor of the 2016 edition of the TowerXchange Meetup Americas, taking place in Boca Raton, 16-17 June. Click here to find out more.

Nicaragua

Guatemala

Mexico


193

194

208


Why Colombia is so attractive to towercosPerspectives on the Colombian and Peruvian markets according to Torres Andinas

TowerXchange: Eric, we’ve spoken about a year ago about the status of the markets where Torres Andinas operates. Can you give us a quick run-through what has changed and what is Torres Andinas’ current footprint in each of them?

Eric Ensor, COO, Torres Andinas: Torres Andinas remains active in Colombia and Peru. In Colombia, we now have contracts with all the operators whereas when we last spoke, I believe we had three in place. This is a major step forward for us as we are finally able to develop projects for all five operators.

The Colombian market is moving on quite well. It’s still a game of trial and error with carriers as we both adjust to the BTS and co-location model. But it’s part of the process and we are satisfied with where we are now.

To date, we have 200 sites either built or in the pipeline in Colombia with an average of about ten sites built a month or more, depending on the flow of activities from carriers. We tend to build in coastal areas mostly, plus some sites in major cities like Bogotá and Cali.

In Peru, we are now at the search ring stage on a number of sites for two carriers. In the meantime, we are working to establish a stable relationship with the others. Our business has definitely progressed since last year but we have noticed that some carriers in Peru are more interested in second tenancies rather than BTS so will jump on board once the towers are up and running.

Read this article to learn:< Torres Andinas: what has changed since last year and where the company is heading< Why is Colombia such an attractive market for towercos?< Peruvian carriers: less BTS and more second tenancies in future< Are there too many towercos in Colombia? And are more towers likely to be sold in the future?< The regulatory environment and the community relations challenge in Colombia< Colombia vs Peru: comparing the pros and cons

TowerXchange spoke to Eric Ensor, COO of Torres Andinas, back in August 2014 and ten months later he agreed to speak with us again to give us an update on what is happening in Colombia and Peru, where his towerco is active. Since last year, the Colombian tower industry has been expanding at a swift pace and the Peruvian market has been steadily growing. In this interview, Eric shares his views on the considerable opportunities presented by Colombia and the positive growth pattern of the Peruvian market.

Keywords: 3G, 4G, Acquisition, Americas, Americas Insights, Avantel, Build-To-Suit, C-Level Perspective, Capex, Claro, Co-Locations, Colombia, DirecTV, Ecuador, Insights, Interview, Investment, Leasing & Permitting, LTE, Market Entry, Market Overview, Millicom, Movistar, Network Rollout, New License, Peru, Regulation, Sale & Leaseback, South America, Telefonica, Tigo, Torres Andinas, Urban Vs Rural, Valuation

Eric Ensor, COO, Torres Andinas


Last year, Entel was the most active carrier we’ve worked with, but business has slowed down from them lately. Entel is now assessing what’s next and we expect their BTS activity to pick back up in a few months. On the other hand, DirecTV has entered the market, creating an additional potential business stream for towercos.

We have 50 to 60 sites in development in Peru and we’ve received two thirds of those orders over the past few weeks so I can definitely say things are moving in the right direction. However, downward pricing pressure is huge in Peru. I am sure this is a positive factor for carriers especially with the rumoured entrance of an additional towerco into the country but for us, it’s definitely a risk factor.

TowerXchange: Specifically, we’d like to speak about Colombia. And why is Colombia such an attractive market for towercos?

Eric Ensor, COO, Torres Andinas: After Brazil, I believe Colombia is the most exciting telecom market in the region. With five licensed carriers for 4G and plenty of activity scheduled for all of them, many towercos saw the great potential of the country and decided to launch their operations here.

Claro has been able to outbuild all the other carriers, leaving both Telefónica and Tigo behind in terms of coverage. However, Claro agreed to build sites in as many as 1,000 small towns and villages as part of its 4G license package and now has to step it up and work with towercos as well as developing

its own projects. Moreover, Avantel and DirecTV are new entrants who are starting to build as well.

With quite a few large cities where connectivity isn’t yet up to standard and very stringent rural coverage requirements, Colombia is now witnessing a huge volume of activity.

TowerXchange: Do you think there’s enough BTS opportunities in the Colombian market for more towercos, or will some of the existing companies will end up being squeezed out of business in the country?

Eric Ensor, COO, Torres Andinas: Most towercos in the country are involved in BTS projects. However, I believe Colombia is getting pretty crowded. My prediction is that some towercos might gain some initial work in the country but will end up moving

on as the market gets too tough for them. Right now, it seems that everyone is winning some business but the question is whether this trend will continue or not as carriers start to work steadily with one towerco or another.

Carriers do need a lot of sites and there are great expectations for the two years to come. However, the process of building a tower in Colombia is long and time consuming, starting with extensive search rings all the way to land leases and permitting. Most of the success of a project depends on the ability of a carrier to approve projects in a timely manner. For instance, we do have a number of sites waiting for approval and it’s in the hands of carriers to make them happen at this point.

TowerXchange: How many towers do you think are still operator-captive in Colombia, and do

“ “Last year, Entel was the most active carrier we’ve worked with, but business has slowed down from them lately. Entel is now assessing what’s next and we expect their BTS activity to pick back up in a few months. On the other hand, DirecTV has entered the market, creating an additional potential business stream for towercos


you have a sense of the potential for sale and leasebacks?

Eric Ensor, COO, Torres Andinas: Right now, I don’t see the potential for considerable sale and leaseback transactions in Colombia. Claro does own a large portfolio but as we all know, they aren’t typically a seller. On the other hand, after having sold most of their towers, Telefónica and Tigo are now developing some projects themselves which is quite interesting. I think they might look at monetising them but it’s not imminent. I would estimate they could make a move over the next couple of years. Recently Telefónica organised a bid for a BTS project but there was no talk whatsoever about any tower sale.

There has been some speculation about Claro and what they might do with their towers in the region, in light of the creation of Telesites. However, I haven’t heard anything with regards to Colombia and actually, the only rumour I heard was regarding Costa Rica! In any case, I’d be surprised if they sort out their Mexican operations before the next couple of years. Plus, regulators in other countries might not be as open to the model as the Mexican one. What was great news in Mexico would still be seen as a dominant position in other parts of the region.

TowerXchange: Last year, you mentioned that Torres Andinas’ goal was to build an average of 20-25 new sites per month. Is that still the case?

Eric Ensor, COO, Torres Andinas: Yes, the goal is still to build as many as 20-25 sites per month.

To date, we haven’t reached that goal simply because we don’t have enough work from the carriers. However, we do have the capabilities and resources in place to achieve that volume.

Our investors are still very positive about our activities in Colombia and Peru and we are confident we can build a good-sized portfolio in both countries.

TowerXchange: How would you characterise the regulatory environment for towercos in Colombia? Has the National Law to ease permitting been implemented and had much effect at local level?

Eric Ensor, COO, Torres Andinas: With regards to the National Law, we believe it’s a good starting point but much depends on how fast local municipalities embrace it. The situation is similar to Brazil with its Antenna Law. However, in Colombia we deal with very strong local communities, and civil disturbances protesting against new towers can be a real issue.

The telecom industry is well aware of the problem and we get involved in socialisation projects to educate the population to our business, its characteristics and the safety of radiation emissions. It’s key to get a well organised educational plan in place to avoid getting stopped along the way.

Any towerco that doesn’t think the socialisation process is necessary is short lived in the country.

TowerXchange: How mature is the 3G rollout in Colombia, have the early 4G rollouts on the AWS band had any effect on demand for towers and tenancies, and what effect do you feel the 700 MHz auction will have?

Eric Ensor, COO, Torres Andinas: Things are very intense right now and the ramp up of new service is extremely demanding. Legacy carriers such as Tigo and Telefónica need to build sites in areas that will allow them to compete with Claro. In the meantime, urban networks are getting overwhelmed, particularly for data, and carriers are building quite a few infill sites in major cities in an attempt to offload existing sites. Then we deal with a third variety of players with a niche approach, such as Avantel and DirecTV, who have identified certain areas they want to cover and who are concentrating on those.

I’d say there are three different demand drivers which vary from carrier to carrier and create plenty of activity for all of us in the tower industry.

TowerXchange: On a side note, are you currently active in Ecuador or still assessing a possible move there?

Eric Ensor, COO, Torres Andinas: Yes, we are still looking at Ecuador but have been so busy in Colombia and Peru that simply didn’t have time to do much there.

Claro’s dominant position doesn’t help the towerco model spreading in Ecuador and we are still trying


towerco acquiring a carrier portfolio knows they’ll need to inject capital into those assets.

Another problem is that most of these towers have 2G, 3G and 4G antennas spread over various heights and aren’t maximising the use of space. Therefore, it’s hard to put additional equipment on them even if structurally speaking, the tower could support it.

Legally speaking, much of the consideration regarding the value of a tower depends on the permitting, the length of the land lease and the existence of renewal clauses. These are factors that a towerco will always take into consideration, whether they are building from scratch or buying an existing site, and will have a huge impact on the valuation.

In some areas, carriers have been very precise with these bureaucratic aspects but we’ve also seen towers built without permits and which are basically illegal. I don’t know of one single towerco that would accept to buy them except at a significant discount - this reflects how much they are worth.

So, if you consider that a tower acquired from a carrier may not have much spare load capacity, what space it does have might be sub-optimally used, and it may not come with a full set of documentation, you can see why a tower built by a towerco is typically worth so much more given its ample structural capacity, with space sold to maximise use of space, and with a full, clean set of permits with a long lease term and sensible renewal terms

to understand how to position ourselves there. So far, we haven’t been able to answer that question entirely as we aren’t sure about how much business we can get there.

TowerXchange: Can you a draw a comparison between Colombia and Peru?

Eric Ensor, COO, Torres Andinas: We definitely have more activities in Colombia as we started earlier and the country is host to a larger carrier base. We entered Peru at a later stage and we aren’t as developed in terms of carriers’ relationship. As previously mentioned, we don’t have contracts with everybody yet but we are getting there.

In both countries we were able to build strong core teams and can acquire local steel, which is a great price factor. Plus we’ve done a good job identifying quality contractors we are working with on the construction phase.

Torres Andinas has a good reputation in both Peru and Colombia and our sites are delivered up to standards. We aren’t the lowest price player in these markets but we aren’t interested in that. We provide quality services which is appreciated by our customers.

Geographically speaking, Peru is harder than Colombia with less cities and lots of smaller, rural communities to serve, where the potential for second and third tenancies is lower. In Colombia, there are a lot of large cities which makes it very attractive for BTS firms.

TowerXchange: Finally, whether it’s in Colombia, Peru, Ecuador or Brazil, why is a tower built for sharing and built by an independent towerco generally worth more when sold than a tower built by a carrier?

Eric Ensor, COO, Torres Andinas: Generally speaking, it’s harder to forecast a straightforward way to create revenue from a second or third tenant when we deal with a tower acquired from a carrier. Most of these towers are built for one, or a maximum of two tenants and in order to meet their full co-location potential they might have to be reinforced if not rebuilt from scratch. So any

“

“

if you consider that a tower acquired from a carrier may not have much spare load capacity, what space it does have might be sub-optimally used, and it may not come with a full set of documentation, you can see why a tower built by a towerco is typically worth so much more


How investible is the CALA telecom tower industry? An analysis of the current conditions of the regional market and its potential for growth

TowerXchange: André please tell us about yourself and your experience in the telecom investment arena.

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: I have been an investment banker for almost seventeen years, specifically since 2000 when I started working with UBS in New York in their global industrial group. In 2003, I moved back to Brazil where I joined Telecom Italia for a few months to then go back to investment banking with Unibanco, Goldman Sachs, Barclays and then again with UBS, where I now run their investment banking division for Brazil and Southern Cone.

Telecoms is one of the sectors I have always been covering throughout my career. It’s one segment where I have always been involved. I have participated in the majority of the transactions that shaped the tower industry in Brazil, more frequently advising carriers in divestiture processes, negotiating with towercos.

TowerXchange: Why are certain MNOs increasingly inclined to carve out and keep their towers rather than sell and leaseback? What are the relative merits of each model?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: This is a very relevant and hot topic at the moment and I see that most carriers take one direction or the other as a function of three key underlying motives. Capital needs: if and when a carrier does need

Read this article to learn:< The rationale behind divesting or carving out passive infrastructure

< Perspectives on Telesites, its performance and site demand in Mexico

< The status of the Brazilian telecom tower industry: troubles ahead for middle market towercos?

< Which countries could drive future sale and leaseback transactions

< New markets: Argentina, Paraguay, Uruguay and Cuba

< Key components of the perfect towerco

Investment banker André Laloni is now Head of Brazil and Southern Cone Investment Banking for UBS. He has been covering the telecom sector for almost seventeen years and has been a key contributor to shape the tower industry in the country, advising most of the transactions in the sector. In this interview, André shares with TowerXchange his views on Brazil, the likelihood of new markets including Cuba, Argentina and Paraguay opening up and key factors that determine the decision for carriers to sell or carve out their tower portfolios.

Keywords: American Tower, Americas Insights, América Móvil, Antel, Argentina, Brazil, Build-to-Suit, Capex, Chile, Claro, Co-locations, Copaco, Crown Castle, Cuba, Debt Finance, ETECSA, Exit Strategy, Grupo TorreSur, IDT Telecom, Infrastructure Funds, Insights, Investment, Investors, MLA, Millicom, Movistar, Network Rollout, Nextel, Oi, Paraguay, Personal, Peru, Phoenix Tower International, Regulation, SBA Communications, South America, T4U, TIM, Telecom Argentina, Telecom Italia, Telefónica, Telesites, Tenancy Ratios, Tigo, UBS, Uruguay, Valuation, Verizon, Vox

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS


financial support as a result of its capex outlook and/or indebtedness, it will compare the cost of a sale and leaseback operation with the cost of other funds available in the market for them. Not every carrier can easily access capital, so the decision behind selling towers will depend on the cost of alternative funding.

Regulatory environment: we’ve seen this happening in Mexico last year, contributing with the creation of Telesites. In this instance, there’s no need for upfront cash hence a spin-off is a good alternative. On the pro side, the carrier will still retain a certain degree of control on its portfolio and there is an upside in terms of value as towercos tend to trade around 15-18x while carriers trade within 5-8x. On the downside though, there’s always the risk of being perceived as not completely independent from the parent carrier company which could hinder the attractiveness of the portfolio to potential tenants. This could result in a lower degree of growth than originally expected.

Unlocking value: as I mentioned, towercos trade at higher multiples than operators so creating a spin-off gives an opportunity to generate considerable value. Whether the spin-off is a result of regulatory demand or elected to create value, the new entity will face the same challenges and will need to prove itself as truly independent and focused on maximising the potential of the tower portfolio.

TowerXchange: Why do you think Telesites made an underwhelming debut on the stock exchange? André Laloni, Managing Director, Head of Brazil and

Southern Cone Investment Banking, UBS: Telesites is a young company and I wouldn’t necessarily call its debut underwhelming. I believe the company has great potential and it’s the beginning of a new story with very strong DNA.

Telesites did have some price drop after its IPO during the first few weeks of operations and I believe it’s now trading at about 10-15% discount to the likes of AMT, CCI and SBA. But again, this is the normal evolution of a young organization.

However, I’d say there are a couple of factors to be taken into consideration with regards to Telesites’ future outlook. First, their forecasted demand from the carriers might not be as high as originally expected.

IFT did estimate that Mexico would need 70,000 sites on top of the existing 25,000 to densify the network and bring it to mature market standards. However, there are various factors that might reduce this forecast. Specifically, according to research analysts, AT&T originally planned to add around 3,000 new sites by 2018 but they’ve now found that the sites acquired from Nextel have greater potential of utilisation than originally thought. So they might actually be up for less co-locations and less new builds than predicted.

Telefónica doesn’t have a great narrative of investments in Mexico and won’t necessarily become a major tenant on Telesites sites. And lastly, the Government is currently working on the 4G shared network and for now, they’ve estimated that 12,000

new sites will be built in Mexico by 2023. If that’s the case, this could further reduce and dampen the demand for Telesites portfolio.

Some of the global investment funds have restrictions to invest in emerging markets and sometimes their investment mandate comprises ETFs, index, overall broad equity-linked instruments instead of a single ticker only. Since Telesites didn’t issue ADRs, some of these funds, former investors of AMX, wouldn’t be allowed to be a shareholder of Telesites. (At the time of the spin-off, América Móvil shareholders received one Telesites share for every twenty América Móvil shares held, consequently AMX investors became also investors of Telesites)

TowerXchange: And with regards to the company itself, do you think it will expand its operation beyond Mexico and into Brazil and other LatAm states?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: Telesites did announce they’d expand into other LatAm countries and they have recently announced new towers to be built in Costa Rica through their build-to-suit contract with Claro Costa Rica.

With regards to Brazil, the situation is a bit different in light of the presence of large and very established independent towercos - American Tower, SBA Communications and Grupo TorreSur - and due to the competitiveness of the local market. That said, there’s definitely room for growth and Telesites could leverage Claro’s portfolio by putting it up for share.


Claro has about 8,000 sites in Brazil which could serve the market and Telesites could definitely look into that. Current market conditions don’t necessarily help the move though.

In Brazil, the number of subscribers per tower is still much higher than in developed markets such as the U.S. - 4,500 vs 1,000 - and the average tenancy ratio is around 1.2/1.3 while it reaches 2.5 in the U.S. so there’s definitely still a lot to be done.

TowerXchange: What is your perception of the status of the Brazilian telecom tower industry in light of the country’s economy? Are towercos progressing towards consolidation?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: Brazil is going through very tough times both economically and politically but I hope that the situation can be defined once and for all and finally improves. The international and local investment community definitely needs more clarity on the direction of the country.

With regards to towercos, high interest rates combined with inflation pressure and difficult access to credit do have a direct impact on the industry, especially on smaller companies that see their margins and ROIC compressed.

In the past M&A activity has been intense in Brazil with Telefónica, Oi and TIM all divesting most of their assets as a solution to fund their capital needs.

To date, the only intact portfolio is Claro’s which has no intention to sell so I’d say that on the carrier side, most transactions have already taken place beside some residual assets which could get sold in the future.

On the other hand, we’ve also seen some degree of consolidation happening among towercos with BR Towers being acquired by American Tower and T4U which was recently bought by Phoenix Tower International. So yes, I’d say there is the potential for consolidation among towercos.

However, the mismatch in terms of currency is affecting international players and their capital returns. Investments made in Brazil in U.S. dollars return cash in Reais and the exchange is obviously hurting companies so this is a very delicate financial phase for everyone. In spite of the current situation, I’d still say that Brazil is up for a lot of growth with stronger companies well positioned to ride through these volatile times.

I’d also add that smaller towercos such as family businesses and privately funded entities could do relatively well in spite of the crisis. In fact, they can still generate significant profits for their shareholders no matter how small their portfolio is.

The hard place to be right now is in the middle… I am referring to those towercos purely focused on build-to-suit that haven’t reached enough scale to be relevant targets to larger towercos but whose investors do have certain expectations in terms of growth rates to be achieved exclusively via BTS

rather than with acquisitions. These companies hardly have any competitive advantage to win BTS projects over larger, more structured organisations. So I am not sure what kind of multiples they can expect if they were to be acquired today. I think some of these towercos could potentially be acquired but for the value of their portfolios rather than their value as “ongoing businesses” hence taking into consideration their specific know-how. Or they could get sold and become platforms for new entrants but considering there isn’t much else to acquire in Brazil, I am not sure they’d serve as a good entry card to significantly grow a new portfolio.

TowerXchange: Is Argentina the next big thing for the tower industry? We know of one BTS firm (Torresec) that got into the country in 2015, do you think we are likely to see any other towercos entering Argentina?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: Argentina is definitely an interesting place which is now presenting some positive conditions for towercos and in general, for the investment community.

On the telecom side, the market is quite big, seizable and with lots of competition. Claro, Telefónica and Telecom Argentina all share similar proportions of the market ranging between 30% and 35%, rising and falling year to year. Nextel (Cablevision) is the fourth largest player with over 3% of market. The country has so far lacked significant investments


so there’s lots of room for growth in virtually every industrial segment. To date, Torresec is the only firm operating in Argentina and there isn’t any large towerco yet.

The industry is lacking education… There’s no pattern, no rule, no precedent. Everything has to be created from scratch just like in Brazil eight years ago. I participated in shaping up the industry here in Brazil and I can see the same history repeating in Argentina. There’s an increased appetite for its assets not only in terms of towers but as a potential investment destination across multiple industries since the change in government.

On the financial side, there are extremely high interest rates and lending is very expensive which represent a positive factor for potential M&A as carriers will find it more convenient to sell their towers rather than to source alternative ways of funding their businesses. However, there are crucial issues related to land agreements, leases and permitting as the country lacks any kind of regulation over it.

The other challenging factor is that contracts cannot be indexed with inflation which is really high. In Brazil, MLAs do factor in inflation but the same cannot be done in Argentina for now. As a solution, contracts could potentially be dollarised but, even when contracts are stipulated in U.S. dollars, this has proven really hard to enforce.

So I’d say that there is a legal framework that needs to prove itself but this has to be done during an

actual negotiation rather than theoretically. Once the opportunity presents itself, players will look into it and sit down to negotiate terms that are beneficial for the telecom tower industry as a whole.

In terms of timeline, I think that although the industry is showing an interest in Argentina, no one is ready to act just yet. There are some ongoing conversations and we’ll need to wait to see how they go over the next few months.

TowerXchange: The sale and leaseback scenario has been extremely quiet… Where do you foresee the next deals to happen (we are keeping a close eye on the Andean States)?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: There’s the potential for transactions in a number of Andean countries and it all depends on their economic and political stability really… Carriers across all countries need to invest in their networks and the cost of debt is high in most countries beside Chile.

The attractiveness of any local market depends on various factors including the competitive landscape among carriers, prospects for network investments and the cost of lending. As said, where lending is expensive, sale and leaseback is usually a more economically viable option. Legally speaking, having


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SBA Communications

Grupo TorreSur

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Remaining big 4 operators

Other operators including Nextel, Sky Brasil,

Algar Telecom, Sercomtel and ON Telecom

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a strong framework for contracts and some degree of protection against inflation do help towercos to invest more comfortably.

I’d say that Peru, Paraguay, Uruguay and Argentina all present interesting conditions but are at very different stages of market development.

TowerXchange: How about Paraguay and Uruguay? Are they likely to experience any towerco activity in the near future? Although out of your geographical coverage, we are looking at Cuba as well, any opinion about that?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: In Paraguay, there are four operators - namely Millicom’s Tigo, Telecom Argentina’s Personal, América Móvil’s Claro and state-owned Copaco, trading as Vox.

Tigo has recently announced its plans to invest as much as US$2.5bn over the next few years and usually once a carrier announces this kind of investment plans, the others follow… The stable economic and political environment of the

country definitely helps capital investments and the development of a strong tele-com sector so I do foresee some towerco activity there in the future.

In Uruguay, Antel is the state-owned incumbent which does have a monopoly of landline telephony and broadband but it does compete with Movistar and Claro in the mobile market. Thanks to the country’s competitive landscape, Uruguay could also be a target for towercos.

Cuba is a completely different ballgame. With just over 20% mobile penetration rate, the telecom industry is massively behind any other state in Central America. There are some signs of development but the entire legal, political and industrial framework has to be designed from scratch.

Back in February 2015, IDT Telecom and ETECSA closed a deal to provide long distance calls and in September 2015, Verizon won the contract to offer roaming services. So it’s clear that there are quite a few movements and much to be done in the country but the challenges remain when it comes to its legal system, local financing and we all need to see

whether contracts stipulated in Cuba can really be enforced before making any move.

TowerXchange: If you were to pick a towerco to invest in and could draw its top four characteristics, what would they be (geo-spread, tower count, management, clients, tenancy ratio, liquidity, debt et cetera)?

André Laloni, Managing Director, Head of Brazil and Southern Cone Investment Banking, UBS: I would say there are four key components that determine the success of a towerco.

Portfolio: the company’s portfolio needs to have a good size, strategic locations, solid tenancies and infrastructure available for co-location

Client base: a growing, credit-worthy clientele is key to drive the profitability of the portfolio

MLAs: the quality of contracts, their duration, structure and guarantees are absolutely fundamental. An MLA needs to secure cash-flow to the towerco and the same portfolio could give very different returns depending on the structure of the underlying contract

Management: as an overarching element, towercos need to have very strong and competent expertise, especially local one. In fact, although there are common denominators to the industry, the specifics of the business differ region by region and local expertise and management is a very relevant factor

MLA Assets ManagementClient base

Four must-haves of a tower portfolio






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“TowerXchange is doing a tremendous job for the tower industry in Latin America. The opportunity to get together in one location and exchange ideas over several days with all of the tower companies in our region is truly invaluable”- Jim Eisenstein, Chairman and CEO, Grupo TorreSur

Abloy’s successful track record in Latin AmericaThe access control company discusses its high quality products and local know-how

TowerXchange: Please tell us about Abloy’s activities in Latin America. Which countries are you active in?

Jussi Ahvalo, General Manager, Abloy Latin America: Abloy is active in all major Latin American markets. Specifically, we have our own sales units in Mexico and Colombia and operate in twelve countries in the region. The other countries are covered through a wide network of well trained distributors.

Abloy is dedicated to adding value to its customers by supplying cutting edge security solutions. We have a deep understanding of the telecom industry and its dynamics in the CALA region, thanks to our twenty-five years of local experience.

In light of our local know-how, we understand the specific needs of our customers beyond security. Operational efficiency is a top priority; operators constantly need to improve their business operations to remain competitive in today’s challenging market.

TowerXchange: Who are your main clients? And how does the demand change between operators and towercos?

Alejandro Valderrama, Managing Director, Abloy Colombia: Abloy is working with top tier telecom operators in CALA and worldwide.

Requirements do differ between operators and towercos and that’s why at Abloy we offer a wide

Read this article to learn:< Abloy’s history and footprint in Central and South America

< How security requirements vary between operators and towercos

< Urban compared to rural sites and their specific risks

< The award-winning Abloy CLIQ Connect and other top range products

Keywords: Abloy, South America, Mexico, Colombia, Access Control, Urban vs Rural, Batteries, Risk, Site Visits, Who’s Who

With twenty-five years of experience in Latin America, Abloy is well equipped to serve operators and towercos looking for top solutions to secure their sites and equipment. In this interview, the regional General Manager, Jussi Ahvalo, and Alejandro Valderrama, MD of Abloy Colombia discuss with TowerXchange the company’s range of products, their characteristics and why clients have selected Abloy as their security partner.

Jussi Ahvalo, General Manager, Abloy Latin America and Alejandro Valderrama, Managing Director, Abloy Colombia


array of solutions and products which can adapt to different business environments and meet the needs of all kind of players in the telecom industry.

Even though operators and towercos pertain to the same business segment, their core business is fundamentally different and so are the solutions we offer to each of them. For example, operators tend to have security departments with supervisors who have similar access rights to the infrastructure, while towercos don’t necessarily have security departments and instead tend to work with several

outsourced suppliers. For towercos, we need to consider flexible access rights and real time control and keep in mind that towers are their core assets.

TowerXchange: What kind of security issues is the CALA region exposed to? And how can Abloy help solving them?

Jussi Ahvalo, General Manager, Abloy Latin America: Towercos face various issues in terms of security and beyond, most of which can be effectively solved thanks to our access control

solutions. Problems such as robberies of equipment, sabotage of sites as well as the lack of control on subcontractors can all cause losses for towercos.

At Abloy, we recognise the importance of all these aspects and always ensure the highest level of security. Thanks to the Abloy CLIQ Connect solution, towercos can control subcontractors and their access to the site, while also checking the number of hours spent on the job.

Abloy has been recognised as a leading security


brand worldwide and our customers’ feedback confirms it. According to their comments, our access control solutions guarantee the continuity of their business more efficiently than any other product in the market.

TowerXchange: Is security a problem in cities as well as remote areas in Latin America?

Alejandro Valderrama, Managing Director, Abloy Colombia: The nature of the problems tends to differ between cities and remote areas. Within cities, problems depend on the level of security of specific neighbourhoods.

The main problem in remote areas is the time needed to reach the site and react so we need to try and implement solutions that are strong enough to resist to any attempt of non-authorised access. Abloy offers solutions to both rural and urban infrastructure and is well aware of the specific dynamics of each area.

According to our customers, urban sites are actually more vulnerable if they aren’t properly protected and just closed with a lock or padlock. These sites are easy targets for urban crime. Equipment, batteries and any other subcomponent should be secured as well as they are in high demand on the black market.

Thefts happen in rural areas as well but actually communities tend to give value to sites and the connectivity they ensure, which to an extent mitigates the risk. And rural areas tend to be less

connected with the black market.

TowerXchange: How does the demand for security solutions differ between LatAm countries? And between LatAm and other regions such as Asia?

Jussi Ahvalo, General Manager, Abloy Latin America: This varies from region to region. Some countries have adopted U.S. standards while others prefer European ones.

And much depends on the specific problems faced by each local market and their socio-economic environment. For example, in spite of many cultural differences within Asian countries, there are several similarities across the region and the demand for our solutions tends to be the same.

TowerXchange: How does your product differ

from others in the market?

Jussi Ahvalo, Latin America General Manager, Abloy: Abloy develops and manufactures the most advanced locking technology in the market. Our Abloy CLIQ Connect is a revolutionary product and has been recognised worldwide with prizes such as the Golden Award in the Access Control category at the Merlion Awards in the Safety & Security Asia 2015 Exhibition and the Gold Medal in MTP Securex 2016 in Poznan, Poland.

Abloy has a proven track record for producing strong products apt against physical attacks, which work very well under any environmental conditions. Our products exceed many quality and performance standards, such as the Super Weather Proof padlocks which are the only mechatronic locks in the market certified IP68

“ “urban sites are actually more vulnerable if they aren’t properly protected and just closed with a lock or padlock. These sites are easy targets for urban crime. Equipment, batteries and any other subcomponent should be secured as well as they are in high demand on the black market


How to improve cell siteproductivity and workforce managementData is the key to productivity

TowerXchange: Please can you provide an introduction to Acsys and why they are now looking to expand beyond access control?

Michael Sothan, Vice President, Americas, Acsys: Acsys was originally a general access control and workforce management solution provider. In the company’s early days we did a lot of work with the government and military sectors but after seeing a strong fit in the telecom infrastructure space, we developed a telecom-centric access control and workforce management system specifically for the sector which has now become well recognised by the industry.

Whilst security is always a concern for tower owners, and we are aware of very high rates of vandalism in some Latin American countries like Brazil, the market is shifting towards an increased focus on efficiency and opex reduction. With customers demanding ever more data at lower costs, ARPU is being driven down and capex on the increase operators are putting more focus on their bottom line, looking at ways to make savings.

In order to improve efficiency on site one must first understand what is happening on site; to date it has been hard to get a clear picture on this. There has been a real lack of data detailing what is going on – even to the extent of knowing for certain whether a job has actually been done! If a job is being done, it is useful to know factors and metrics such as when it was done, who did it, how long it took, did it take longer than it has in the past? When you start to obtain and interpret this data you start to develop a

Read this article to learn:< How Acsys is expanding their focus outside of security to better monitor workforce patterns at

cell sites

< Which third party systems and metrics can be integrated to develop a holistic picture of cell site

operations

< How data can be used to develop job based KPIs and SLA clauses to monitor and improve

productivity

< What trends are starting to be observed on optimal completion times for key maintenance tasks

< How Acsys’ system is being adopted and customised by infracos

Keywords: ARPU, Access Control, Acsys, Brazil, Business Case, Capex, Change Management, Energy Efficiency, How to Guide, Installation, Investment, Job Ticketing, KPIs, Managed Services, Monitoring & Management, O&M, Opex Reduction, QoS, RMS, ROI, Rooftop, SLA, Site Level Profitability, Site Management System, Site Surveys, Site Visits, Skilled Workforces, South America, Uptime

To date, monitoring of workforce activity on cell sites has been reliant on the use of disparate systems, paper records and word of mouth. Acsys, best known in the telecoms sector for their access control systems, is now expanding their focus to develop a platform which integrates access data with data points from multiple third party systems, offering infracos the opportunity to better track activity and productivity on site. TowerXchange spoke to Acsys’ Michael Sothan to understand the platform, what data it can capture and how it is set to revolutionise productivity at telecom cell sites.

Michael Sothan,Business Development Global Accounts, Acsys


meaningful picture of site operations.

Operators deploy lots of different pieces of software such as OSS systems, trouble ticketing systems, billing systems and remote site management software systems to monitor what is happening on site, but these systems don’t talk to each other. Acsys’ solution, while focused on managing physical activity on-site, is to provide an open platform which can integrate with one or all of these third party systems to give a more holistic view of site operations. This fills in the vacuums of data that have existed and presents a complete picture of what is happening at your cell site.

TowerXchange: How long have Acsys been working on this software?

Michael Sothan, Vice President, Americas, Acsys: It has been very much an ongoing evolving process but something which we have begun to shift our focus more heavily towards in the past year.

TowerXchange: Prior to such a platform being developed by Acsys, how have tower owners been able to monitor operations?

Michael Sothan, Vice President, Americas, Acsys: What we’ve realised is that whilst the telecom industry is a very high tech industry, when it comes to O&M they have relied on a very piecemeal and low tech approach. Infracos have been amalgamating multiple types and sources of data from digital records to paper based reports right through to word of mouth – all with the aim of

increasing visibility and control of their operations. Infracos have been putting in place processes to oversee what is happening but where a lot of inefficiencies have been coming in is that these separate processes are not integrated. There have been a lot of gaps in the data and as such guess work has had to take place. This has made enforcing their processes a real challenge.

Putting in place the Acsys system means that each time a job is being done there is real time data correlated with that job which can then be integrated with further data points. This not only allows for the creation of more effective processes but, perhaps even more importantly, allows for their enforcement.

TowerXchange: How have you worked with clients to develop the solution and what has been their reaction to the system?

Michael Sothan, Vice President, Americas, Acsys: As we work with clients they give feedback on what data they would like to capture to enable us to create them a tailored system. Generally what most of the clients really want is an increase in the data generated about their O&M and an increase in the efficiency of their O&M. Key questions they’re looking to answer include the obvious; who is on site and what asset are they accessing? This is critical for tenants who want to monitor their active infrastructure, to the less evident; which vendor is doing the job more efficiently? What is the average time spent on site? How many sites can be serviced a day under routine or preventative maintenance?


In terms of the appetite for such a system, we have realised that companies are much more willing to budget for and buy a solution that increases productivity in their operations. Security is an essential component to a towerco business but it is not something that people are excited to purchase. When we can provide a solution that saves people money by reducing their opex, it becomes much more interesting for the client to invest in it.

TowerXchange: Have you developed the solution in partnership with third party software providers? Can most main systems be integrated into Acsys’ solution?

Michael Sothan, Vice President, Americas, Acsys: With a lot of work still under development, I can’t name all the vendors that we are working with but what I can tell you is that we are working with a number of major remote monitoring system providers from across the U.S., Europe and Asia. With several of them we have already completed integrations and a few have already been deployed in the field. We’ve also been working with some of the major ticketing providers and are now beginning to look at specific billing softwares and larger scale ERP platforms.

The idea is to keep our system as open as possible, using open APIs and web services which allow for integration. The challenge is that we cannot simply make a pre-made system, because every client is using a different mix of softwares and vendors. Instead, on a per project basis, we work with each individual client to see where they are finding gaps

in data and look to create a customized solution to fill in those gaps.

The strategy is not to create a pre-made system but to be able to discuss on a project by project basis what each client is using and which gaps they are finding, so that we can create something customised.

TowerXchange: What kind of metrics are clients looking to obtain through using Acsys’ system?

Michael Sothan, Vice President, Americas, Acsys: Clients are interested in a number of factors. The most critical, but possibly the most overlooked, is very simple - a hard verification of if a vendor visited a site. Without this, how does the infraco, or MNO, know that an assigned task was completed? It all links back to SLA adherence – if you can’t verify whether the visit was even made it makes it impossible to enforce the SLA clauses you put in place.

Next would be vendor time to site and time on site. They want to gain a hard verification of how long it takes a given vendor to reach a site, especially in the case of emergency maintenance, and also how long a given supplier or contractor spends on site. Even if the client is not paying on an hourly basis, they need to have a clear picture of this. If you are putting in place service level agreements you need to be able to monitor this in order to be able to enforce the clauses you put in place. Vendors also need to know they are being monitored. This creates a greater sense of accountability which naturally increases quality.

Another useful feature of this is that you can develop job based KPIs, working out how long it should take, on average, to complete a specified task. This allows you to better plan your routine maintenance and also enables you to budget more accurately, setting aside a set amount of time for a contractor to do a job, and avoiding overtime payments when they go outside of this.

“ “Clients are interested in a number of factors. The most critical, but possibly the most overlooked, is very simple - a hard verification of if a vendor visited a site. Without this, how does the infraco, or MNO, know that an assigned task was completed? It all links back to SLA adherence – if you can’t verify whether the visit was even made it makes it impossible to enforce the SLA clauses you put in place


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As well as assessing response and service times or vendors you can also use this to benchmark the equipment itself. For example, if you take a diesel genset you can look at the number of call-outs that it needs on an annual basis and compare the MTTR following a fault. This enables you to make more informed decision making when it comes to equipment procurement.

TowerXchange: From deployment of your systems to date, has Acsys started to observe benchmarks for given tasks and is there anything that you can share?

Michael Sothan, Vice President, Americas, Acsys: We try to be as consultative as possible in working with our clients but the amount of data that we have access to depends on how independent our client wants to be. In some instances they prefer to keep everything in-house whilst in others we work very closely with them in analysing their data. At the moment the amount of information that we can share is dependent on NDAs that are in place, but we are ultimately very happy to help the client analyse and interpret the data they obtain.

We have however started to see certain trends in different regions. For example, in India we’ve noticed that because of traffic, especially when it rains, there was a certain client which couldn’t get more than one site serviced per day as they were driving back and forth to collect keys. This problem could be rectified by installing our mechatronic locks, taking the number of sites that could be serviced up to as many as four! As such, this also

gives us an indication of the number of sites that a client should be able to have serviced in a day.Another example I can give is in Africa where we did a study on three different vendors carrying out oil filter changes. One vendor was taking 20 minutes to do the change, a second took an hour and a third took two hours. When the client inspected the sites it became clear that the vendor that was doing the job in twenty minutes was frequently not changing the filter at all, whereas the vendor taking one hour was doing a good job. From this we could elucidate that the required time to do an oil filter change was one hour, much less and the job wasn’t being done properly and any longer and the vendor should be more efficient.

TowerXchange: How much analysis is required to extrapolate meaningful findings from the data? Is there a degree of automation?

Michael Sothan, Vice President, Americas, Acsys: There are certain elements which can be automated, for example with our system you can pre-set alarms if, for example, people are on site too long or are requesting access outside of their normal zone. The system can go as far as automatically blocking access until the vendor’s geo-location is at the correct site. For certain clients we have even built custom reports and automated alarms based off of what they find critical.

If you want to break down findings and connect them to other data points, some of this is still being done manually. Importantly, all of our different reports can be automatically exported in an Excel-

ready format, which means clients can utilize all of Excel’s built-in analysis tools to also analyze our data.

Acsys can offer a service whereby our engineers run analysis every week and send a report back to the client and we are always working to add in more ways to further automate the process.


TowerXchange: Why is it so important to improve the way in which infracos can better understand workforce patterns on cell sites?

Michael Sothan, Vice President, Americas, Acsys: From a very general perspective if you look at the advent of management science you have all these innovative concepts that were developed like systems theory, value based management and lean manufacturing which have been adopted by various industries and are being taught in the world’s top management schools. The approach to managing operations in telecoms infrastructure shouldn’t be any different.

We are trying to equip infracos with the skills to adopt lean O&M in the same way you hear about lean manufacturing – working to achieve more

with less, reducing costs and acting more efficiently. Companies that can use tools like ours to identify patterns in workforce behaviour can than weed out the inefficiencies, create optimised processes and obtain a competitive advantage, resulting in them becoming leaders in their field.

A more specific answer to the question is that understanding workforce patterns enables you to better manage staff and subcontractors on site, not only verifying that work is being done in timely and accurate fashion but also enabling you to better plan and forecast work that needs to be done. When you have an indication of how long a job should take you can put in place job based KPIs – planning the amount of time and cost required for a given job, avoiding overtime payments. Similarly by having a definitive answer on whether a job is

being done you can enforce SLA clauses, with a data trail in place vendors know that their activities are being monitored. Knowing this means vendors are now required to follow processes established by management which they may have previously ignored.

TowerXchange: Do any other companies have a similar offering to Acsys?

Michael Sothan, Vice President, Americas, Acsys: There are companies offering wired or Wi-Fi dependent solutions which require a lot of hardware to be installed on site. These companies are generating a lot of data which has the potential to be integrated but the issue is they don’t have the reach to be able to install it on the majority of sites. A high level of expense and time is required to install these systems and as such, the solutions are usually only being installed on a few critical backbone sites. Such systems lose much of their value as they can’t correlate what is happening on those handful of sites with what is happening on the other 90% of the network. No other vendors have the ability to not only install a solution on every single site – from critical backbone sites, to rooftop sites to remote sites out in the middle of nowhere – but also on every asset on the site.When it comes to other mechatronic lock providers, we don’t see any other companies going the extra mile to utilise or exploit the data that is being generated by the system. They focus exclusively on the security aspect but to us that is just the foundation. Pulling out as much data as possible and making that data work for you!


Ascot: All in one, plug & playhybrid generator with solar and AC/DC generators for mobile telecom sitesAscot’s ‘Flying Doctors’ ensure successful installation and integration

TowerXchange: Please introduce where Ascot Industrial fits into the telecoms infrastructure ecosystem.

Dr Michele Greca, CEO, Ascot Industrial: Choosing Ascot today means trusting an organisation with twenty-seven years of international market experience with a brand name that means quality and reliability. Our typical products include hybrid generators: AC and DC generators designed by a team of in-house, highly skilled engineers in accordance with our customers’ specifications, which work with advanced controls and energy storage, often incorporating renewable energy sources.

Telecommunication companies historically recognise Ascot as a leader in the sector thanks to its innovative products and technologies for generators and for the family of hybrid solutions deployed globally in thirty-eight countries.

This is the true know-how of Ascot competence and flexibility. It’s only by visiting remote sites and looking at how they are configured that we can apply our knowledge to optimise hybrid systems to benefit both the operator and ourselves!

TowerXchange: How did Ascot Industrial get into the hybrid energy for telecoms market?

Dr Michele Greca, CEO, Ascot Industrial: From the inception of Ascot Industrial from 1986 until 2000, our core business was developing generators for the military, oil and gas, power plant and marine sectors. The defence sector has been for us like

Read this article to learn:< How to meet the changing energy requirements of multi-tenant tower operators

< Tailoring solutions to meet the power needs of sites with varying climactic conditions and grid availability

< Deploying a significant number of hybrid solutions across African and American portfolios

< How the business case for solar and wind power is justified by logistics and the criticality of coverage

< What it will take for demand for hybrid energy to reach the ‘tipping point’

With eight years of experience and thousands of installations in critical markets throughout Europe, the Middle East and Africa, the Ascot hybrid energy solution for telecom is considered one of the most reliable and proven hybrid solutions on the market. Ascot has been active in the South American market for many years and recently entered the U.S. off-grid and backup power market, with innovations from different continents driving technology innovations. Approved and widely used by the Vodafone Group, Helios Towers Africa, IHS Tower, STC Saudi Telecom, Ooredoo, Zain and Sudatel in their critical operations, Ascot’s technology has been proven as the right product for harsh environments such as in Saudi Arabia, Iraq and Sudan – as well as mountain top sites in Nevada.

Ascot’s certified performance has been proven over a decade of accumulated system data thanks to a sophisticated and efficient remote control system embedded in the Ascot Hybrid Power Unit (HPU).

Keywords: Americas, South America, Peru, Haiti, Caribbean, Ascot, Energy, How To, Opex Reduction,

Power, Renewables, Site Visits, Solar, Unreliable Grid, Off Grid, Who’s Who, Wind, Opex, Capex, Fuel

Security, Batteries, Energy Efficiency, Hybrid Power, Solar, LPG, Wind, Logistics


Formula One is to Ferrari – a cutting-edge R&D function we’ve applied to the telecoms sector.

For example, back in 1997 we developed an application to charge the huge batteries on submarines while in port. Ten years later I was speaking with a manager at Zain who challenged me to produce an engine with low fuel consumption to power his cell sites. At first I thought it was impossible, but from his words came the idea to apply the same technology we used to charge submarine batteries to charge cell site battery banks, even when the generator is switched off.

Having proven our application in large scale projects such as the submarine one, it was relatively simple

to adapt it to charge the 600-1550 amp hour batteries at cell sites, and we quickly developed and sold our first hybrid solution in 2008, which was installed in very harsh physical and maintenance conditions in Sudan.

Between 2008 and 2009, we installed fifteen units in as many countries for various telecom operators, so we tested the solution in different temperatures, humidity and altitude scenarios – it was a good challenge that pushed us to invest in the project.

When we were working with the operators in the field, Ascot was fixing the problems of today and of tomorrow. Ascot is well established to meet the specific needs of telecoms. A cell site in a remote

location is like a forward communication base in war – reliability is critical and maintenance visits must be kept to an absolute minimum. As competition becomes more aggressive in telecoms, battles will be won by whoever can provide the best service at the lowest opex, so it’s critical to improve energy efficiency.

TowerXchange: Why do telecom operators need to reduce opex?

Dr Michele Greca, CEO, Ascot Industrial: The role of the operators is to provide subscribers with an always-on service, grow usage and reduce customer churn. In order to gain more market share than their competitors they need to have a reliable network operating at the lowest possible operating expense.

A decade ago when the competition was minimal, operators expanded rapidly and the cost of phone calls was high. At that time operators did not pay very much attention to opex, concentrating on building their infrastructure rather than finding an optimised power solution. Very inefficient energy solutions, based on standard and often “disposable” diesel generators as the primary energy source, were installed with very high servicing costs – especially for off-grid and weak grid sites.

That era is now over. To be and remain competitive in the future, operators and tower companies have to find and implement new strategic energy solutions to enable lower opex than their competitors.


Subscriber revenue generated by telecom operators has a direct impact on opex. In fact, only with lower expenditure and reliable service can the operator decrease call tariffs, acquire more subscribers and generate more revenue.

TowerXchange: Can you tell us more about the hybrid solutions already in the market?

Dr Michele Greca, CEO, Ascot Industrial: As hybrid technology is relatively new, today’s market offers different solutions made by combining different brands of products to form a hybrid package: ie. X Controller and Y Batteries combined with Z generator et cetera.

The result of that mix is the manufacturer of each single part guarantees their part as a stand alone item, not associated with other components, hence the controllers available on the market are not specifically designed for the scope and the integration of the parts to combine into a hybrid package - resulting in cell site energy being very expensive and inefficient, and with no single point of accountability.

The innovative Ascot patented DC-HPU is an integrated “plug & play” power solution designed to supply energy to telecommunication sites using up to 68% less fuel than the current diesel generating sets running 24 hours a day and using up to 98% less fuel when integrated with solar solutions.

We have recently deployed our first fleet of U.S. hybrid sites including generator, solar and battery storage for remote locations. These unique off-

grid sites can include a non-penetrating tower foundation, rapid deployment multi-tenant monopole tower and our hybrid power system. It can be constructed and commissioned in less than one week but run autonomously for six months – a design necessity for mountain top cell sites which are inaccessible for many months throughout the year.

Minimal site disruption achieves speed and environmental goals; no power lines are necessary where they do not exist and are terribly expensive, and the optimum RF site coverage objectives were achieved in one case with one off-grid site rather than four sites that were located near existing power. The opex and capex savings are compelling

and our solution is applicable for difficult sites throughout the Americas. We are active in Haiti, Peru, and other Latin American and Caribbean networks.

TowerXchange: How has your offering evolved as the off-grid tower market changes?

Dr Michele Greca, CEO, Ascot Industrial: In the last couple of years, hybridisation has attracted the increasing interest of the telecom operators. They have pushed the market to propose hybrid solutions to power their sites. However it’s not easy to replace a traditional generator with a hybrid solution because most of the current hybrid solutions on the market are new and also the local maintenance teams are not prepared to manage these sophisticated systems. Operators want hybrid power solutions but once installed, they can face a lot of problems if they don’t fully understand how the system works.

To overcome that resistance, Ascot offers a “plug & play” hybrid solution, which utilises the same interface as standard generators - typically a DeepSea Control System - that can dialogue with the internal logic of the hybrid component.

In addition, today we include a service called “Flying Doctors” which means that once our clients have purchased the technology we can offer installation, training and operational support along with the package (for example we used this on the 1,500 sites we recently upgraded for Vodacom). We also offer a package where our team and local partner will go side by side installing the machines and doing

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Subscriber revenue generated by telecom operators has a direct impact on opex. In fact, only with lower expenditure and reliable service can the operator decrease call tariffs, acquire more subscribers and generate more revenue


onsite training in order to guarantee the machines’ installation and performance. We use this team to identify the main difficulties faced in the field by our clients. Our “Flying Doctors” team report back this information immediately allowing us to continually improve the difficulties faced in operations. For example, if they don’t like the control panel we can change it to work better for them. This helps us to provide our clients with the solutions they need.

For tower operators, we created and integrated a distribution box which just didn’t exist before, meaning the client had to supply it. Now it’s integrated into the system so the output of the machines matches the output for the tenants so you can have one, two or more different tenants. It’s a market-proven product especially in Africa; network owners like Helios Towers Africa and Vodacom are using our hybrid systems and are making referrals and giving references to use Ascot products as they are so easy to install, manage and maintain.

Our solution easily integrates with PV or wind power so these energy sources can plug and play with our machine. We’re also offering a remote monitoring and control system so our clients can remotely manage the performance of our machines.

Ascot is a manufacturing company so originally, our business model was just to supply the equipment and leave the client to organise other details – namely financing packages. Now some clients want a capex-based model and some want an opex model with integration in a financial package. We can now offer both and have the flexibility to provide what our clients desire.

TowerXchange: How do hybrid solutions compare to running diesel generators 24/7?

Dr Michele Greca, CEO, Ascot Industrial: The magic number of fuel savings is 68%, achievable with the Ascot Hybrid. You can reach 98% in combination with a Solar PV System.

Operators were only using diesel generators off-

grid because there were no other financially viable solutions until recently.

When a consumer goes out to buy a hybrid car, those cars are not competing with normal cars. They are serving different needs and there is simply no comparison in terms of fuel consumption.

The telecom sector is just like the automotive industry – in the future no-one will use diesel (or petrol) engines – hybrid power is the future. Why don’t people use hybrid now? Price, performance and availability – and Ascot is at the forefront of improving all three.

Telecoms operators want hybrid power already, but like consumers changing their normal car for an electric car, they want to know how the change will affect their operations. Once telecom operators are sure hybrid power works, it will only be a matter of time before all off-grid and weak grid cell sites are upgraded to hybrids.

Essentially hybrid solutions are big battery chargers. Their role is to produce, store and reuse energy. As the price comes down and the performance and reliability is proven, the business case for hybrid energy becomes more compelling at more and more cell sites.

There will be a tipping point where demand for hybrid power rises very quickly. At the moment, innovators are still finding competitive advantages, which they don’t want to share, but when innovations are collated, everyone will want it and it will stimulate that big jump in demand. Investors


aren’t afraid of those consolidated technologies.

TowerXchange: How do the power requirements differ between single and multi-tenant cell sites?

Dr Michele Greca, CEO, Ascot Industrial: Towercos often have to invest in power solutions before they know how many tenants will be on the tower and before they know their total power requirements.

So energy systems for shared sites need to be modular, with a low initial capex investment for single tenant sites, and a small increase in investment for each additional tenant. Towercos don’t want to deploy the capex to support multiple

tenants right away, they need scalable modules with a few small extra parts for additional tenants.

Ascot’s tested and proven power solution for towercos, our modular DC-HPU for one to three BTS of up to two kW, has an engine capable of supplying power to three banks of batteries, so the main change to accommodate multiple tenants is just to add extra battery stacks. We also enable metering to bill tenants for their own energy consumption. We allow customers to right-size their power systems and then stack on new systems only when needed. This drives fuel efficiency and sequences capex properly.

TowerXchange: Tell us about the innovative LPG

solutions Ascot is bringing to the market?Dr Michele Greca, CEO, Ascot Industrial: Our innovations are always driven by market demand. Today the main challenges are fuel theft and the possibility to deliver our systems to remote and difficult areas. To overcome these challenges we have developed a range of Liquefied Petroleum Gas (LPG) hybrids – we now offer LPG powered engines.

In markets like Nigeria, LPG is cheap and easily available, and it’s also far more complicated to steal. The LPG hybrid project was developed for the United States market and now we’re making it available for the African market where we foresee a lot of uses.

In terms of delivering the system to remote areas, today we offer two solutions: a semi-knock down product that can be hand carried and then easy reassembled on site and a containerised cargo package which is a complete and mobile telecom site; both are effective and very popular solutions.

Other advantages of LPG include eliminating fuel degradation and associated damage to diesel generators (LPG does not degrade over time) and more acceptable environmental aspects – we are deploying these systems into sensitive ecosystems such as U.S. Government public lands.

We continue to evolve and expand our portfolio by quickly learning and adapting to the most difficult site requirements, based on both the most rough and remote conditions as well as sites with the most difficult environmental and government approval processes


Ausonia: the Italian(r)evolution of energy solutionsAusonia explain their switch from capex-only to offering a full opex solution to the market

TowerXchange: Please introduce Ausonia – where do you fit in the telecoms infrastructure ecosystem? How did you get started in this business? Massimo Ombra, CEO, Ausonia: Ausonia has a very long history, we were the first company to produce diesel generators in Italy, starting our activities in 1932 thanks to the efforts of my grandfather. We are still a family company today and following the management of my grandfather and my father, I have now the role to lead and manage the company, keeping client satisfaction as our main priority. Since the outset, we have continuously invested into R&D activities and we expanded our product portfolio to meet all the specific needs of our customers, who come from many different industries and countries, and who always need tailored products. Thanks to this, over the years we provided power solutions to critical sectors such as telecoms, oil & gas, defence, healthcare and many others. Specifically for the telecoms market, we provide different kinds of gensets for powering Base Transceiver Stations, BSC/MSC, data centres – all kinds of cell sites, as well as mobile power units for energy recovery and no-break power systems for TOC sites. More recently, we added into our portfolio High Efficiency Power Units dedicated to remote areas and off grid, BTS power supply applications. With such wide flexibility, we can definitively say that Ausonia is not only a product manufacturer, but it’s also a solution maker.

Read this article to learn:< How Ausonia has grown in the tower industry

< The driving factors fueling their growth in telecom towers

< The importance of flexibility when developing solutions for clients

< How high efficiency solutions can reduce opex costs and O&M demands

As towercos consolidate their portfolios and search for proven power solutions which fit with their need to reduce opex, Ausonia talk us through their long history in the market and how they developed both capex and full opex offering to enable them to deliver power solutions worldwide. Drawing on over 80 years of R&D experience, Ausonia’s hybrid solutions are proving successful for both towercos and MNOs.

Keywords: Ausonia, South America, Central America, Batteries, Energy, Energy Efficiency, Energy Storage, ESCOs, Fuel Security, Hybrid Power, Installation, O&M, Opex Reduction, Site Visits, Unreliable Grid, Who’s Who

Massimo Ombra, CEO, Ausonia


TowerXchange: How has Ausonia grown in the tower market and what has fuelled that growth? Massimo Ombra, CEO, Ausonia: Ausonia entered the tower market through the supply of power units to MNOs and towercos on a pure capex model basis. After many years of experience in this industry with this business model approach, in 2003 we got the opportunity to enter into a big challenge which definitively changed our way of approaching the telecoms market. That was when we were awarded a contract by Vodafone Italy for the supply of energy to their off-grid BTS sites in Italy through a full opex business model. This was something new to us, but we structured ourselves in order to give Vodafone the utmost power availability on site and achieve their complete satisfaction for the energy services we had to provide. We then created our energy service company (MediPower, ndr) and developed a genset model specifically designed around the needs of this activity and able to optimise our operational costs. Since then, we have continuously expanded this business by signing power lease agreements also with TIM, Wind (Vimpelcom) and H3G. Furthermore, in 2010, we have also developed a family of high efficiency diesel gensets solutions dedicated to off grid and bad grid cell sites, in order to further reduce our opex and share this advantage with the telecom operators, enjoying of a continuous growth which has been possible thanks to the high quality standards of our products and the excellent service levels offered to the Italian operators. Today we can say we power almost 85%

of the off grid, base transceiver station BTS sites in Italy. We realised that the solid experience we gained directly from the field could allow us to start offering and replicating the full opex business model also in foreign countries. TowerXchange: How have you found customer response to Ausonia’s solutions in the African market?

Massimo Ombra, CEO, Ausonia: Honestly, very positive and with excellent forecasts for the future. Being very flexible in our offer, going from a pure capex offer to the full opex business model, we can now satisfy different kind of demand for power. After the testing we directly performed on the sites we service in Italy, today we have a proven technology which has been installed in several


to add deep cycle batteries for CDC operation, and this makes our customers more than happy, especially when they think about their sites located in harsh climatic conditions, where they can eliminate the costs of the batteries and of the ACU needed for the battery cabinet, further reducing both the power and fuel consumption on site. TowerXchange: In a sector where opex is kept to a minimum, can you talk us through the numbers which make your solution stack up? How does capex and opex compare? Massimo Ombra, CEO, Ausonia: There are multiple advantages to our high efficiency solutions for powering cell sites. Thanks to the significant reduction in fuel consumption and different capacities of our integrated fuel tank, we can extend the refueling interval of our power units up to three to four months. On top of this, our high efficiency solutions can be configured to have a preventive maintenance interval of up to 2,000 hours, which is more than 80 days and requires only four or five trips to a site per year to perform maintenance activities. Additionally the systems can be controlled and managed remotely through a web-based dedicated system which can be integrated to the Network Operation Centre (NOC) to track alarms, ticketing and escalation. Moreover, thanks to the scalability of our modular solution, we can deliver systems to power multi-tenant sites, in which each operator can be billed singularly for

countries with different temperature, humidity and altitude scenarios, guaranteeing extreme reliability and power continuity. Remember that we are not only a producer of these power solutions, but also first users in performing the Energy as a Service model, so we are perfectly aware of the importance of the reliability of a product, as well as its capability of maintaining unaltered performance over its lifetime. Our customers know this and in recent years they asked us to provide them with our High Efficiency DC gensets, which are based on variable speed DC generator technology we developed internally in Ausonia for the telecom industry. With our units on their sites, our customers

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realised that this technology can guarantee them huge opex reductions, both in terms of fuel cost savings and number of maintenance and/or refueling trips to site.

They clearly understood our technology went beyond the typical concept of “hybrid solutions”, in which a genset needs to cycle with batteries in order to achieve the desired opex reduction. In fact, we are able to achieve even more savings than the typical hybrid power units available in the market by directly operating our variable speed DC generator, which automatically adjusts the engine speed according to the load existing on site and following the most efficient point of its power curve. All this is done without the necessity

Fuel consumption trends over three years (l/kWh)Traditional AC gensetsHybrid system where batteries lose efficiency over timeAusonia variable speed DC gensets


its energy consumption. Considering all this, if our customers compare our DC gensets solutions with the traditional solutions installed around the globe, they realise that the payback period is often less than one year and the product lifetime goes over five years, making it therefore an excellent investment even in preparing short term business plans. TowerXchange: Do you always work directly with the operator or towerco or do you also work closely with managed service providers in the market as well?

Massimo Ombra, CEO, Ausonia: All these scenarios are possible in this market. We have supplied directly to operators when they owned the passive infrastructure assets, but we have sold our units also to towercos when the sites were on lease. In some other cases, we offered our solutions to local managed service providers who wanted to add a ‘plus feature’ into their current offers for services. So, I have to say we are totally open to work in all possible directions with any reliable partner, given for us it is mandatory to keep our clients happy - what’s best for them is also the best for us!





COTECH: offering rope-accessexperienced climbers in Brazil and beyondA skilled workforce and local knowledge are top priorities in today’s fast changing market

TowerXchange: Please introduce yourself and your role within COTECH.

Jon Stouffer, Vice President, COTECH Tower Services: I am the Vice President of COTECH Tower Services with more than twenty years’ background and experience in the vertical tower space. My role as the VP of COTECH Tower Services is to guide and direct the organisation to business opportunities that meet our objectives while exceeding our customers demand for on time delivery with the highest safety and quality standards.

In today’s vertical tower space there are many choices for service oriented companies but COTECH Tower Services by far exceeds the competition through its constant demand for training to ensure the safety of every rope access experienced climber while delivering a quality product to each customer based on the specifics of the contract.

TowerXchange: Give us some background about COTECH, its activities and footprint.

Jon Stouffer, Vice President, COTECH Tower Services: COTECH Tower Services has a global footprint with offices both in the U.S. and Brazil and strategic partners around the globe, thanks to whom we are able to provide resources to meet our customers’ needs within a reasonable period of time. To date, we are actively engaged with most carriers and vertical space operators in the region.

Nowadays, time is money therefore the demand for

Read this article to learn:< COTECH’s expertise and footprint

< What’s driving the demand for tower services in CALA

< The technical characteristics of new builds

< Why is retrofitting the best option in today’s market

Keywords: Americas Insights, Brazil, COTECH Tower Services, Construction, Foundations, Greenfield, Health & Safety, Installation, Loading, Logistics, Managed Services, Masts & Towers, O&M, Operational Excellence, RF Design, Site Surveys, Site Visits, Skilled Workforces, South America, United States, Who’s Who

With operations in the U.S. as well as Brazil, COTECH’s expertise stands out because of its focus on utilising rope-access experienced climbers rather than lifts and other machines to perform the job. Ranging from tower surveys to maintenance and new site builds, COTECH serves the telecom tower industry with its highly experienced climbers and local knowledge. In this interview, Jon Stouffer, the company’s VP, shares with us his insights into why manpower is better than machines.


a qualified, skilled and highly trained workforce is the key to business success. COTECH Tower Services thrives on our ability to understand the customer and deliver the product through our rope access trained professionals.

We provide certified, trained and qualified rope access experts to services vertical structures where most would utilise aerial lift supports such as cranes or man lifts. Due to our level of expertise and ability to service the elevated work area through rope access we can deliver a product faster while maintaining a higher level of the safety and quality as a result.

We can perform aerial surveys, structural modifications and upgrades and general routine carrier adds through our highly skilled and trained workforce.

TowerXchange: What is driving the demand for engineering services in Brazil?

Jon Stouffer, Vice President, COTECH Tower Services: Many of the demand in Brazil is brought to light through the acquisition and capital funds invested through U.S.-backed companies. We believe that this market will continue to grow and generate a higher demand for tower inspections and upgrades will follow suit.

TowerXchange: Are you looking at expanding beyond the country in other South American markets?

Jon Stouffer, Vice President, COTECH Tower Services: COTECH Tower Services is always entertaining new growth opportunities and as they unfold we will certainly take a closer look at the positioning of COTECH Tower Services at the front line of the industry. We believe with each opportunity there must be a level of commitment on our part, in order to give our customers the level of service they have come to expect. We will continue to evaluate each opportunity as they are presented but I believe it’s a safe bet that you will see COTECH Tower Services in other South American markets soon.

TowerXchange: In terms of new builds, which types of towers and in which locations are more in demand?

Jon Stouffer, Vice President, COTECH Tower Services: In today’s greenfield market, we see a variety of new builds comprising of virtually every structure typically designed. Most new builds today are largely focused on increasing capacity, requiring an additional vertical space for added channels and data use, as opposed to the old school days where we built tall structures to flood the area with RF.

The need for higher quality services demands the ability to adequately cover the market space in peak and off peak hours, therefore the demand for capacity-capable structures has been the build plan forward.

Stealth design of the structures has become a vital component as well in this build model due to the tighter constraints on where you can build and what it must look like. COTECH Tower Services has built virtually every structure capable of supporting antennas in order to propagate an RF signal. It’s exciting to build the uncommon structure although each one tends to bring a unique challenge.

TowerXchange: Are there many single tenant towers in Brazil compared to those capable of hosting multiple tenants? Do you do a lot of retrofitting?

Jon Stouffer, Vice President, COTECH Tower Services: Like in virtually every part of the world there are single tenant structures. When the structures were built they were built with a primary focus in mind and years back no one was interested in shared vertical space nor did the business model exist that presents itself today.

In today’s world the demand for greater capacity is driven by the desire for faster data speed. This demand has created the need for structures to support greater loads. Over time the wind speeds haven’t changed nor has the soil bearing capacity. However, the increased weight and wind resistance has changed and has been driving changes in terms of structural calculations, in light of the increased loading of antennas and radios.


The ability to retrofit a structure provides customers the possibility to maintain services to its subscribers while the work is carried out. Until a few years ago, retrofitting a structure was viewed as the last resort but quickly has become a normal means of doing business in today’s vertical tower space.

TowerXchange: What is your competitive edge? Why should towercos work with COTECH?

Jon Stouffer, Vice President, COTECH Tower Services: COTECH Tower Services provides a unique competitive edge in this space by forging two highly skilled and trained qualifications into one package.

COTECH Tower Services delivers the SPRAT and IRATA trained professional combined with

highly skilled and experienced communications professional. The scope of work can involve an RF upgrade to pathing of highly sensitive microwave, COTECH Tower Service’s continues to deliver the customer the product they have come to expect.

Our ability to bring a level of skill and training to the industry that has been plagued with safety infractions has been the constant for our customers. When our customers engage with COTECH Tower Services they expect nothing but the highest caliber professional that will adhere to the demands of the safety industry while delivering their product on time and within budget. We believe in those values and will only employ folks of the same mind set. We are an extension of our customer therefore the commitment to safety, value and the highest of quality will be the driving forces that push us forward

“ “The ability to retrofit a structure provides customers the possibility to maintain services to its subscribers while the work is carried out. Until a few years ago, retrofitting a structure was viewed as the last resort but quickly has become a normal means of doing business in today’s vertical tower space

Meetup Africa 2016

Meetup Asia 2016



Meetup Europe 2017


13-14 December, Singapore

16-17 June, Florida

4-5 April, London


Lithium ion batteries could eliminate the need for diesel generatorsPerspectives on a new generation of energy storage solutions

TowerXchange: Tell us about GS Yuasa and its footprint in Asia.

Soichi Hanano, General Manager, Industrial Battery Department, Marketing Division, International Business Unit, GS Yuasa: GS Yuasa is a Japanese company formed in 2004 by the merger of two large, 100-year old battery manufacturers; Japan Storage Battery Co., Ltd., known as GS, and Yuasa Corporation. At US$3.5 billion in sales, GS Yuasa is currently one of the world’s largest battery manufacturers.

GS Yuasa manufactures a full line of technologies including lithium ion, lead acid, nickel metal hydride, and nickel cadmium for the automotive, industrial, telecommunications and specialty battery markets. With thirty-six affiliates in sixteen countries, GS Yuasa has a worldwide presence operating under the GS Yuasa, GS, and Yuasa brands.

GS Yuasa’s major achievement in terms of supplying long life VRLA and lithium ion batteries in the Asian telecommunication market come from our relationships with major MNOs in China, India, Bangladesh, Pakistan, Australia, Thailand, Hong Kong and Japan, where we have been supplying lead acid batteries for several decades and where lithium ion is rapidly gaining acceptance.

TowerXchange: Who are your key clients and which products are they showing their interests the most?

Read this article to learn:< GS Yuasa’s footprint, client base and evolution

< Why lithium ion batteries are the right choice for off-grid sites

< How the right battery can support green initiatives

< The evolution of the industry business model and the arrival of towercos and ESCOs

GS Yuasa is a leading manufacturer and distributor of energy storage solutions which has been serving various industries for decades prior to its final merger back in 2004. The company has been supplying mobile network operators with its solutions and is now actively doing business with independent towercos and ESCOs.

In this exclusive interview, GS Yuasa’s General Manager, Mr Soichi Hanano, shares his views and insights on the dynamics of the energy business and how the company can support green targets as well as cost reduction initiatives.

Keywords: GS Yuasa, Southeast Asia, Japan, Southern Asia, East Asia, China, India, Bangladesh, Pakistan, Australia, Thailand, Hong Kong, Asia Pacific, Interview, Batteries, Opex Reduction, Energy Storage, Lithium, Off-Grid, Unreliable Grid, ESCOs

Soichi Hanano, General Manager, Industrial Battery, GS Yuasa


Soichi Hanano, General Manager, Industrial Battery Department, Marketing Division, International Business Unit, GS Yuasa: Our key clients in the telecommunications sector are mobile network operators who own telecom towers to whom we have been supplying batteries for many years. However towercos and ESCOs, who have started managing passive equipment including batteries, are becoming a very relevant part of our business. We are aware that the independent towerco model is widely accepted in developing countries, where the need for cell site densification and extension is urgent and capex intensive.

In terms of customers’ requirements, we experience a variety of scenarios. Although our principle service is to supply batteries for site backup, the choice of product depends on a combination of factors, including peripheral devices, renewable generation, remote monitoring, electricity condition and grid stability.

GS Yuasa is a well established battery manufacturer with exceptional experience of supporting new applications. It is our strength to have a wide line-up of products such as long life VRLA, advanced VRLA with superior cyclic life performance and lithium ion batteries. Our new lithium ion products have cutting edge performance, which allows us to offer new approaches to energy storage that were not previously feasible.

The lithium ion battery has especially superior characteristics for cyclic life performance, quick charging and deep discharging and is attracting

a huge amount of interest from MNOs as well as towercos, who use lithium ion batteries as a core power component for the telecom base stations in areas with poor electricity networks.

TowerXchange: What is the percentage of your business coming from MNOs versus towercos? And how big of a change the entrance of towercos represented for your business?

Soichi Hanano, General Manager, Industrial Battery Department, Marketing Division, International Business Unit, GS Yuasa: I’d say to date 60% of our business comes from MNOs and 40% from towercos. However, the percentage of business coming from towercos has been increasing and we presume the trend will continue in the future, as the business

One of GS Yuasa solutions

model for managing telecom towers continues to change.

Today towercos are focusing intensely on reducing opex as this is the primary way for them to increase profitability. GS Yuasa has had to provide much support to towercos in their pursuit of efficient operation as we have considerable project management experience in terms of recognising and analysing telecom base station load patterns by data logging and proposing the most suitable power system, depending on the site condition. We then follow up with a field trial and, eventually, with the commercial implementation. Our approach is particularly useful for MNOs and towercos who have experienced site instability due to poor power quality.


GS Yuasa is working not only as a battery manufacturer and supplier but also proposing green power solutions that can contribute to reducing opex as well as CO2 in the long term.

TowerXchange: How does GS Yuasa address the environmental issues in markets where green initiatives are flourishing?

Soichi Hanano, General Manager, Industrial Battery Department, Marketing Division, International Business Unit, GS Yuasa: Our batteries are usually deployed as components of larger systems. Their use in the power delivery system of a telecom base station is a typical example. We believe that the environmental impact of our products should be evaluated as part of the whole assessment of a particular application, rather than a narrow definition of battery production and disposal impacts.

In off-grid and unreliable grid scenarios, the choice of battery can strongly influence the selection of the primary energy source. Our lithium ion technology is allowing our clients to avoid utilising any fossil fuel based solution thanks to its high charge acceptance and long cycle life at elevated temperatures. In some sites we are able to avoid the deployment of diesel generators altogether by harnessing intermittent grid supplies or renewable power sourcess more effectively.

Having an overall cost benefit, in addition to environmental advantages, generally helps promoting green initiatives. Luckily this isn’t hard

when diesel generators are involved!

Local operating conditions can have an enormous impact in the choice of the appropriate green storage solution. The lead acid battery is often perceived as an environmental hazard because of its heavy metal content. In reality, lead is exceptionally recyclable, therefore we can easily demonstrate its advantages as long as a safe recycling infrastructure is locally accessible.

Our company is unique in our range of traditional and new battery technologies, which allows us to provide an unbiased view of the most appropriate green solution to a particular application.

TowerXchange: What performance and RoI can be achieved with lithium-ion batteries at unreliable or off-grid sites? How do life-cycles compare with lead acid batteries?

Soichi Hanano, General Manager, Industrial Battery Department, Marketing Division, International Business Unit, GS Yuasa: Utilising lithium-ion batteries in unreliable or off-grid sites can deliver great opex savings and overall financial benefits. In fact, full charge can be obtained in less than two hours, which means that even in the case of frequent power outages, the need for diesel fuel purchases and delivery costs can be greatly reduced or eliminated altogether. For some sites we have shown that DG capex can also be avoided which allows companies to achieve the payback point within one or two years.

The lifecycle of lithium-ion batteries is five to ten times greater than currently utilised lead acid technology and their performance is not degraded, even if they never experience a full charge. These characteristics greatly improve the flexibility of operation and reduce maintenance requirements of our products. Soon after the payback period, our clients start realising the advantageous opex savings which last for many years until replacements are required.

Finally, the electronic state of health monitoring system is an integral component of our products. It allows remote monitoring to be applied throughout the life of a telecom base station to provide long term operating efficiencies. In particular it means that there is no need for local input from skilled technicians to maintain the operation of the battery. The optimum performance and replacement strategy can be applied to every site across a whole network

“ “The lifecycle of lithium-ion batteries is five to ten times greater than currently utilised lead acid technology and their performance is not degraded, even if they never experience a full charge


How RMS adds value to multi-tenant towersInvendis enables separate energy bills for each tenant, resolves SLA disputes, reduces manpower costs and gives management visibility into tower performance

Satish Kulkarni, CEO, Invendis

TowerXchange: Where do Invendis fit into the telecoms infrastructure ecosystem?

Satish Kulkarni, CEO, Invendis: Invendis started its operations in 2007 as a telematics company for vehicle tracking and mobile workforces. In 2008 we got into telecoms as the industry needed telematics for static platforms such as shelters and fuel tanks.

2008 was an exciting time in Indian telecoms, and there are many parallels to Africa today. A lot of new licenses were being issued and a many international new market entrants were coming in. Towers were being hived off as separate independent towerco entities.

With the big operators and towercos commanding portfolios of 60-100,000 towers, as a startup Invendis decided to focus on new, smaller towercos with less than 5,000 towers. We did demonstrations to three towercos, one with 1,800 towers, another with 200, and a third with 2,200. Our first order came in for systems for all 1,800 towers six months after the demonstrations. We secured a second order from the 200 tower company before they were acquired by a large American towerco, then we were shortlisted to get a PO for the 2,200 tower business before they were acquired by the same towerco! So this large North American towerco came to us as a legacy supplier.

TowerXchange: What is Invendis installed base in telecom towers?

Satish Kulkarni, CEO, Invendis: Between 2008 and

Read this article to learn:< How to optimise selection of energy source to reduce energy opex

< The criticality of remote management of air conditioning in tropical climates

< Insights into how towercos trial and buy solutions

< A comparison of RMS installation costs in India and Africa

< Why equipment with integrated sensors is an opportunity not a threat for RMS companies

Keywords: Who’s Who, Monitoring & Management, Opex Reduction, Batteries, Installation, Air Conditioning, Unreliable Grid, Hybrid Solution, Fuel, Site Visits, RMS, Infrastructure sharing, Africa, India, South Africa, Invendis

Invendis (INVENt and DIScover) is a telematics technology developer from Bangalore, the Silicon Valley of India. They have developed an RMS solution that adapts perfectly to the tropical climates in India and Africa, and which is in use today monitoring over 24,000 towers, most with multiple tenants. Invendis are one of the few RMS suppliers to have successfully passed through a North American towerco’s rigorous partner selection process – naturally, TowerXchange wanted to learn more…


now we have installed end-to-end RMS in 6,000 towers in India, and we’ve also added energy management, alarm extension and inventory management for another 15,000 towers. So our domestic installed base is around 21,000.

About three years ago, after our domestic rollout, we decided to see what we could do in other markets. The North American towerco had just acquired about 2,000 towers in South Africa, so we brought our reference credentials from India, we responded to their RFP and were invited to participate in a trial, then agreed commercial terms and secured the order. Deployment started a year ago on the first 250 towers, with the total order being for 600. Deployment will be complete by the

end of July. So our installed base in Africa will be 600.

We are currently participating in other African trials and have been shortlisted in Uganda, and have active prospects in Kenya, Nigeria and Tanzania.

In Oman we have a major rollout of approximately 400 telecom exchange buildings, and 250 systems about to be installed in Kuwait.

TowerXchange: Please tell us how tower operators can achieve RoI in remote monitoring and control systems such as yours?

Satish Kulkarni, CEO, Invendis: Our approach is to move the customer operations from a reactive mode to a proactive mode by monitoring various parameters including alarms to detect and eliminate a potential site outage and also to optimise the equipment usage and operational expenses.

We are not just a remote monitoring company, we consider ourselves an energy optimisation company. We optimise the selection of energy source to reduce energy opex.

Our systems are most commonly installed at multiple tenant sites and we implement hybrid system based on power source and temperature. Cell sites have three major power sources: an often unreliable grid, 99% of towers have a diesel generator, and many have a huge battery bank (in some cases there is also solar or wind power, but in most cases it’s still grid, diesel generators and

batteries). Our systems help decide which power source to use to optimise operational expense and also increase the battery lifetime.

As long as you have grid power, the site runs on the grid. The moment grid goes down, what used to happen was the DG was switched on because the tower operator didn’t know how much charge was in the battery. With RMS, you can run batteries more often and run them for deeper cycles to optimise battery lifetime.

Many parts of India and Africa share a tropical climate, which means air conditioning is needed to keep the temperature in the shelter down to 25-30°C and operate the telecoms equipment within specified operating temperature ranges. When the cell site is running from the battery bank, air conditioning is often switched off. However, if RMS is installed we can monitor the temperature and run the air conditioning off the DG if the temperature exceeds a threshold of 35°C.

However, the biggest difference between Africa and India is that in India the infra company owns the shelter and the DC power is shared between the operators where as in Africa the shelter is often owned by the operator and the infra company provides AC power to the operator and hence we install RMS devices inside the shelter in India and in Africa we install outside the shelter using weatherproof enclosures. TowerXchange: What is the typical capital outlay per site to install your system?

“ “

Our approach is to move the customer operations from a reactive mode to a proactive mode by monitoring various parameters including alarms to detect and eliminate a potential site outage and also to optimise the equipment usage and operational expenses


Satish Kulkarni, CEO, Invendis: In India, the cost is around US $2,000 per site for the equipment and installation, with 6-7 months to RoI based on monthly savings of US $300-350.

In Africa because of import duties, local regulatory mechanisms, and very high installation costs (technical manpower can be six to seven times the cost in India), typical installed costs might be around US $4-5,000 per site. The costs are also higher in Africa because of the geographical distribution of cell sites, poor transport infrastructure, and more complex specifications to manage multiple tenants at sites on an unreliable grid. So RoI in Africa can be around 10-12 months.

The cost also varies based on geography, sensors, accessories and services required by the customer.

TowerXchange: How do the requirements of remote monitoring and control change when managing multi-tenant sites?

Satish Kulkarni, CEO, Invendis: Different tenants often use different active equipment with different specifications and different power consumption. So in multiple tenant scenarios, towercos need visibility of how much power each tenant has consumed so that each operator can be billed separately.

In the absence of RMS, the towerco would divide the power consumption bill between tenants, but tenants are increasingly unhappy with such arrangements, especially if they’ve invested in new low energy equipment that can use a quarter of the power.

Secondly, RMS resolves disputes as to whether the active equipment or power solution was responsible for any outage. BTSs take a long time to power up after any outage, and SLAs often mean penalty clauses are triggered if the towerco lets the power go down.

The third way RMS adds value for multi-tenant sites is by reducing expensive technical manpower costs. Previously maintenance teams may have visited every day to check the site, but with RMS now they only need visit when an alarm is triggered and a site visit is necessary, and you know what expertise is needed and what spare parts are required to stabilise or resolve the incident.

RMS plays a major role in ensuring the health of the tower site passive equipment and helping to prevent or minimise site power outages by acting proactively before an incident occurs which leads to

outage, SLA penalties and compromised quality of service. Finally, RMS plays a very important role in giving towerco management an overall picture of tower performance.

TowerXchange: What were your impressions of selling to that North American towerco – what can you tell us about their procurement process?

Satish Kulkarni, CEO, Invendis: When they acquired four towercos in India, including the two towercos with whom Invendis had contracts, they held up equipment rollout and said they’d consolidate and normalise RMS requirements across the entire organisation. So they sent us their specifications and ultimately trialled two different RMS companies. After a full technical evaluation, including the last 3-4 months on multiple sites, they refined their requirements, wrote a new specification, and issued a new order for RMS at approximately 1,000 towers.

So this towerco took a four step approach after acquiring new towers; first they held up deployments scheduled by the acquired business, second they issued new specifications, third they trialled alternate suppliers, and fourth they issued refined specifications based on the trial.

Working with the North American towerco has been a great experience. They have worked closely with us to define their requirements and refine our


solution to meet those requirements, and we now have almost 3,000 of their towers running on our software.

We don’t see any major differences between the way that Africa’s big four towercos trial and buy RMS.

Towercos tend to standardise the equipment and operation of their towers. However they understand that every tower has different equipment (especially older towers with multiple tenants using different equipment vendors), so a degree of customisation is required for every site.

TowerXchange: Is there a danger that the monitoring devices embedded in new hybrid equipment will reduce investment in dedicated RMS?

Satish Kulkarni, CEO, Invendis: Who owns the sensor hardware is becoming less important – remote monitoring is a data-driven market. Successful remote monitoring requires a software platform to capture and normalise data and render it in a uniform way to support decision making.

We have supplied software in India, the Middle East and in Africa that integrates data from our own sensors and data from Emerson, GE Power Management Systems and other intelligent equipment with embedded wireless communication.

The equipment inside the cell site comes from

a wide variety of companies that are experts in a certain field, whether it’s power management systems, batteries et cetera. Even if remote monitoring is built into the genset, I’m not sure how much these systems talk to the different equipment at the cell site. Hence the need for dedicated, equipment agnostic and sensor agnostic RMS systems to integrate data from hardware manufactured by different vendors into a single platform.

I don’t think RMS vendors feel that integrated sensors are a threat to our business. These other companies specialise in power management - how many R&D dollars are invested into remote monitoring? We’re investing fully in remote monitoring and energy efficiency.

TowerXchange: Finally, please sum up how you differentiate Invendis from your competitors.

Satish Kulkarni, CEO, Invendis: Invendis is an end-to-end company – from software to remote monitoring equipment, temperature/fuel monitoring and alarms, we have expertise in all three disciplines.

We have a software platform running 24,000 towers across 6 countries.

Ours is the newest hardware on the market – our latest equipment is from a design three months old. Competitors’ industrial equipment was often designed five to six years ago, and doesn’t have the same customisation capabilities.

Africa needs solutions designed for emerging markets, not systems designed in Europe or America where they are used to clean, uninterrupted power and don’t have the same need for robust outdoor equipment as Africa.

Another differentiator is our speed of rollout. Having done 21,000 towers in the last four years, I don’t think our competitors have done even 5,000. To install in 21,000 towers you need robust installation processes. Invendis has only been in Africa for a couple of years, yet we’ve already deployed in two countries.

Finally, Invendis is a technology-driven company, not a box manufacturer. Our expertise is systems development and software development, so our systems are very robust, with no need for manual interventions


Introducing tower designers and manufacturers MetalogalvaMetalogalva has manufactured over 200 towers for Unitel and Vodacom Mozambique in the last year

Bruno Mota, Metalogalva

TowerXchange: Where does Metalogalva fit in the telecom tower ecosystem? Bruno Mota, Business Unit Manager - Telecom, Railways & Special Projects, Metalogalva: We design, manufacture and galvanise towers, for telecoms, transmission line poles, substations, lighting poles, road structures, catenaries and solar structures. For the telecom industry, we manufacture monopoles, lattice and tubular towers from existing designs - Metalogalva’s standard - or we develop a new design in order to meet customers’ specific requirements. We have our own factories, which we adjust according to the requirements of the work, with capacity to galvanise up to 140,000 tonnes per year. We have specialist equipment including welding robots, plasma and laser cutting machines and CNC machines for cutting, drilling and punching profiles and L shaped section. We also have in-house an automatic powder coating line (with capacity of 1400m²/day) and we have as well a liquid painting unit, so we are able to do the DUPLEX system with good quality at fair prices. Right now we are doing some interesting projects with camouflaged towers (Pine|Palm towers) for a partner with lots of experience in this niche market. To get an idea of our capacity in telecoms, we recently produced 114 towers in under one month for Vodacom Mozambique. TowerXchnage: What is Metalogalva’s experience in Africa?

Read this article to learn:< The importance of sourcing high quality steel from a reputable company< How the lifetime, and guarantee, of a tower is extended< Designing towers to be easily upgraded for multiple tenants< Metalogalva’s experience supplying towers for Unitel in Angola and Vodacom Mozambique

TowerXchange asked Bruno Mota, Manager of Metalogalva’s Telecoms Business Unit, to explain the quality differentiators and economics of telecom tower design and manufacture, and to describe and how they adapt to meet the changing needs of customers as their structural requirements change from capacity for single to multiple tenants.

Keywords: Who’s Who, Steelwork, Tower Design, Tower Manufacture, Installation, Capacity Enhancements, Loading, Retrofitting, Procurement, Masts & Towers, Asset Lifecycle, Infrastructure Sharing, Europe, Africa, Vodacom Mozambique, Unitel, Metalogalva


Bruno Mota, Business Unit Manager - Telecom, Railways & Special Projects, Metalogalva: In the last year we have manufactured over 200 telecom towers which are now installed in Unitel’s network in Angola and in the network of Vodacom Mozambique. We’re looking to expand to send our towers to countries like Nigeria, Uganda and Tanzania. In these cases we didn’t sell directly to the operators, but were introduced by our partners locally. We’ve also sold towers into Algeria, Morocco, Cape Verde and São Tomé and Prí ncipe markets indirectly. We’re interested in building relationships with other tower installation companies in Africa, in order to spread our product to other emergent markets. Metalogalva also have several important clients in Europe, for example we supply towers to E-Plus and

Vodafone in Germany, and two years ago we won a big project for TGV in France called GSMR Synerail to supply GSM towers. TowerXchange: How should buyers distinguish between the quality of products offered by different tower manufacturers? Bruno Mota, Business Unit Manager - Telecom, Railways & Special Projects, Metalogalva: We source our steel mainly from ArcelorMittal, the world’s leading steel producer - we don’t use second rate

steel. It’s important to confirm that your tower manufacturer uses raw material from a reputable company, and we use 3.1 certified raw material whether we’re shipping to Germany or Angola. All the procedures we use are certified like for example welding (DIN 18800) or galvanisation (DASt22). We are as well certified by ISO9001, ISO14001, OHSAS18001, CE mark and EN1090 (EXC3). There are different standards and specifications in different markets. Our solutions meet the customers requirements and they are adapted to the location

“ “We source our steel mainly from ArcelorMittal, the world’s leading steel producer - we don’t use second rate steel. It’s important to confirm that your tower manufacturer uses raw material from a reputable company


multidisciplinary team of engineers who can quickly verify if it is possible to apply more load. If there is no additional capacity, the customer may need to reinforce or replace the tower. We can also offer towers designed to be easily upgraded after installation. For example, we recently applied for a tender in France for two variants of 30m tower designs, evolutive and non-evolutive. The evolutive designs have 4sqm of capacity at the top, but it is possible to add an extra section to add a further 3sqm of capacity to enable sharing the tower with more operators, so we design the structure for 7sqm capacity. TowerXchange: Finally, please sum up how you would differentiate Metalogalva from other tower manufacturers. Bruno Mota, Business Unit Manager - Telecom, Railways & Special Projects, Metalogalva: In 2013 we invested €6.6m in new equipment, enabling us to produce towers more efficiently.

Moreover, we have been serving the market for 42 years, which means we have a lot of ‘know how’ in what we do. We think it’s very important to achieve our lead time commitments, whilst maintaining quality. And we think it’s important to give constant support to our customers, to act quickly to meet their needs, which means Metalogalva has many happy customers!

There are fixed costs that are the same whether we’re producing one tower, 50 or 200. We’re very competitive at a larger quantity as we can use serial production techniques. TowerXchange: Tell us about the implications for the design and reinforcement of towers as clients add additional tenants. Bruno Mota, Business Unit Manager - Telecom, Railways & Special Projects, Metalogalva: There are now a number of companies offering solutions to reinforce towers to achieve more capacity. If one of our customers wants a tower with 6sqm on top, we may evaluate their requirements and find they can be met by a standard tower, or we may need to design a new structure. Then if the customer wants to add additional antennae, requiring additional capacity, then we have a

where they will be placed. We have a technical department with eight Structural Engineers able to design structures according to any norm required: Eurocode or TIA for example. The lifetime of a tower has a lot to do with the thickness of the paint and the zinc galvanisation, so we can offer towers with a 10, 15 or even 25+ year guarantee depending on the client’s requirements and its own respective budget. We use the 1461 Euronorm standard for galvanisation.Our competitiveness comes from optimised and custom solutions, introducing technology on the production process such us robots, lasers, powder coating, and also Kaizen concepts. TowerXchange: What is the tradeoff between tailor made solutions to meet the specific requirements of each cell site versus installing standard, and therefore lower cost, towers? Bruno Mota, Business Unit Manager - Telecom, Railways & Special Projects, Metalogalva: If we have an order for 200 different towers then that requires lots of unique designs to be verified, lots of different drawings to be prepared - a lot of work is needed before manufacture. In addition the performance of our production line will be reduced, making our solution less competitive. So instead the optimum solution might be to create four variants on a standard tower, enabling us to produce four batches of fifty towers for example, so we can offer a more competitive manufacturing price, and facilitate easier mounting/logistics of the structures on the field.

“ “We have a multidisciplinary team of engineers who can quickly verify if it is possible to apply more load


Nexsysone: How ONE software interface

simplifies the management of network deployments,

co-locations and maintenance activitiesSince 2001, the Nexsysone platform has been used for 250 projects in over 40 countries

TowerXchange: Tell us about the history of Nexsysone in Americas.

Jim Prosser, CEO, LEC Consultancy DMCC: Nexsysone has been around since 2001. Our success story began in Sweden in 2001 where Nexsysone (then named LNT) was used to deploy the first ever shared UMTS network in the world for 3GIS (a joint venture between Vodafone, Orange and Hutchinson). In 2003 Nexsysone was deployed in the U.S. for the T-Mobile National UMTS deployment. Subsequently our solution was used to consolidate a number of local operation centers into a National central remote integration center in Dallas.

Our solution provided users with a single point of contact for nationwide integration tracking, rollout management reporting, alarm and fault management with OSS API integration, competence development and workforce management processing. Using best practice innovation gained from our telecom experiences since 1996, we customised our modules to deliver a true telecom focused end-to-end project deployment tracking and reporting platform. All aspects of the typical challenges faced when deploying or maintaining high volume complex networks were addressed by Nexsysone.

Customer acceptance lead-times using intelligent forms and work force task processing were reduced from three months to one day (i.e. sometimes before the technician had left site after a successful integration).

The word soon spread that Nexsysone was changing

Read this article to learn:< The history of Nexsysone in the Americas

< How Nexsysone addresses the key network deployment and maintenance work streams

< Synchronising work tasks to manage peak volumes and improve resource utilisation across multiple

network operation centers

< How some of the largest greenfield deployments are using Nexsysone to co-ordinate the site sharing

process between operators with tower companies

The Nexsysone software platform has been refined and proven in more than 250 large scale, complex network rollout, integration and maintenance projects worldwide. Originally developed as an internal competitive differentiator for Lemcon Networks, Nexsysone is now available to external customers such as towercos, MNOs and system integrators by LEC Consultancy DMCC out of Dubai, who also provide parallel service offerings. In this interview, Jim Prosser, CEO of LEC Consultancy, shared with TowerXchange in-depth details about Nexsysone’s evolution and capabilities.

Keywords: Americas, Brazil, South America, Asia, Africa, Zimbabwe, Change Management, Job Ticketing, KPIs, LEC Consultancy, Monitoring & Management, Network Rollout, Nexsysone, NOC, O&M, Opex Reduction, RMS, Myanmar, Philippines, Indonesia, Site Management Systems, Who’s Who

Jim Prosser, CEO, LEC Consultancy DMCC


the way networks were typically deployed and maintained. Within a year after starting operations in the U.S., Nexsysone was deployed in Rio de Janeiro to support twelve countries across Latin America for six operators. Between Dallas and the Brazil-based regional operation center, we managed over 3,000 sites per month with UMTS upgrades, new site builds, core deployments, Edge activations, re-homes, fault management and site co-locations.

TowerXchange: How does Nexsysone assist the tower industry these days?

Jim Prosser, CEO, LEC Consultancy DMCC: As the independent towerco model matures, operations become more complex. Nexsysone addresses these complexities.

We’ve listened to the requirements over the years and tailored our solutions to meet them. Previously our solutions exclusively focused on operators and system integrators but with the shift towards site sharing over the years we’ve adapted to meet these changes. A perfect example is in Myanmar where Nexsysone is solely used to deploy and site share infrastructure for two of the three operator networks. Myanmar currently has one of the largest greenfield deployments in Asia and Nexsysone is the exclusive supplier to both operators Ooredoo and MPT.

We tackle the site sharing process from the operator’s perspective and from the towerco’s perspective. Both have their own requirements but Nexsysone empowers both parties to reach that common agreement. We have an integrated

RMS system, a tenant request portal (with a site information pack download feature), access management solution, cost control, field tech workforce management system, asset and site project management solution and an analytics reporting engine that assists with data analytics to ultimately improve work process efficiencies whilst reducing deployment and operational costs through visibility of factual data.

TowerXchange: Tell us about Nexsysone’s current offering and footprint.

Jim Prosser, CEO, LEC Consultancy DMCC: Nexsysone is a system that has been moulded through twenty years of experience of designing, building and operating mobile networks. We have secured two thirds of the Myanmar market because of the completeness and suitability of our offering.

Consistently, in all the deployments I have been involved with over the last twenty years, we’ve found that operators, and now towercos, require a scalable management system managed through a single interface. They need to consolidate documentation, control progresses, manage leases, rental billing and cost control; maintain the network, provide quality assurance, manage their workforce, cost control, provide end-to-end asset management, consolidate RMS data and develop the competence of their resources and subcontractors.

Our offering has five software modules which address all these issues. For us it’s all about synchronising the data and aligning processes between departments and companies into a single interface to manage communication within the projects. Currently our busiest regions are the U.S., Myanmar, the Philippines, UAE and some countries across Africa.


In Myanmar two of the three MNOs (Ooredoo and MPT) use Nexsysone to manage their rollouts. This means it is being used by all the active towercos, system integrators and OEMs in Myanmar. The Myanmar network rollout is a greenfield network rollout with a strong focus on site sharing. In the U.S., Mycom International use our software to manage their extensive Sprint, Verizon and AT&T turnkey rollouts. We’re also in Zimbabwe, the Philippines, and Indonesia.

TowerXchange: What drivers are making your clients make the switch to Nexsysone’s solutions? Is the decision simply financial?

Jim Prosser, CEO, LEC Consultancy DMCC: We are telecommunications professionals with software skills. Not the other way around.

We firmly believe that it is the telecom specific knowledge that exudes from Nexsysone that appeals to our customers. It is a robust and dependable solution, with an unrivalled history of industry experience that comes built in. So no, it is not just a financial decision. It is all about understanding our customer needs and adapting the system accordingly. No project is ever the same. We’ve worked on enough to know that!

To understand Nexsysone it is important to understand its history and pedigree. Nexsysone is not new to the telecoms industry. Nexsysone was part of Lemcon Networks until four years ago. Lemcon was a Finnish system integrator operating in forty countries across five continents, which grew with Nokia in the ‘90s and 2000s. When Lemcon’s

parent company sold its telecoms business unit, LEC consultancy Dubai under the previous management of Lemcon took full ownership of Nexsysone.

Nexsysone has been at the heart of planning, building, integrating, upgrading and modernising well over 250,000 cell sites since 2001. It was a system my team and I designed and built for our company. We were constantly adapting it to meet the challenges of the dynamic telecoms industry. It is all about understanding our customer needs and adapting the system to meet them. It is a product that helped us manage some of the world’s toughest rollouts and implement game changing rollout management software solutions, which are now common practices in most countries. Having used our solution, towercos come to us with their own requests for additional stand-alone features, or to integrate their existing systems with Nexsysone when purchased by an operator.

Nexsysone allows them to confidentially manage their own projects or unrelated projects. They also have other projects on going and other things happening that doesn’t necessarily need to be shared – meaning they need their own central asset database for example for passive infrastructure or task workforce management solutions.

TowerXchange: How does the relationship between Nexsysone, operator and towerco work?

Jim Prosser, CEO, LEC Consultancy DMCC: It works by understanding that Nexsysone precisely is the relationship between the operator and the towerco.We work together with our customers and their

supplier ecosystem so that Nexsysone defines those relationships. Nexsysone binds the objectives and operations of the stakeholders together, and has become a primary single source of real time project information for official project communication and progress measurement.

An experienced rollout manager will tell you that the biggest challenge in every large rollout is aligning all the stakeholders on the same page. In its simplest form, it boils down to inter- and intra-company communication. We understand the conflicts that arise between stakeholders in a rollout. In a towerco scenario we focus on making the agreements between operators and towercos as transparent as possible. Transparency reduces unnecessary communication and improves time to market. Time to market is critical during a new rollout. Harmonising the complex needs of managers, planners, designers, OEMs and contractors, with different priorities in different companies is essential. Providing a single interface to attain efficient interaction is the key. And that is where Nexsysone comes in.

TowerXchange: Tell us more about how you help operators and towercos work together more effectively? How does that stack up against the other options on the market?

Jim Prosser, CEO, LEC Consultancy DMCC: We are not scared of customisation. We actually embrace it but since our platform captures the typical requirements, customisation is never a big deal. We listen and if needed customise Nexsysone to meet our customer’s exact requirements. Whilst the


major objective is always the same: build the best network for the lowest cost in the quickest time; the processes to get there are sometimes different. Different countries require different permits and different acquisition procedures for example. Efficient construction methods differ from country to country, so lead times differ for example. Contract and regulatory requirements mandate a different focus and priority. All these issues must be captured within the site management system if the project is to run successfully. We empower the user the ability also to make such changes themselves with a powerful admin application called Admin-one.

Choosing a system to manage your project or network is all about saving money, improving efficiency and obtaining visibility. Once you have made the decision to purchase such a system, it must deliver for you. We believe Nexsysone offers the best value in the market in this regard.

TowerXchange: Which of your applications is most popular? Why do you think that is?

Jim Prosser, CEO, LEC Consultancy DMCC: Project-one and Tower-one. However, as more projects move into the operational phase Task-one is gaining rapid momentum.

These are the most popular, because they are the applications needed at the start of the rollout. As time progresses our customers may expand their used modules. Asset-one, Task-one and Staff-one may come into play as their pain point shifts. With our project experience we are able to address these future pain points before they happen by

implementing the correct platform and processes from day one. Our project management platform is popular because it focusses on the actual site build programme and cost control. It therefore has a lot more features. Tower-one captures the processes of sharing sites. All the modules are extremely scalable and designed to work together. Light versions have been used by system integrators for simple milestone tracking, documentation control and quality assurance.

The Task-one platform manages the workforce’s daily activities and is becoming very popular.

Its attraction is that it helps manage operational teams, and more significantly it measures their performance. It comes with an advanced geo locator to track the location of resources or teams with an associated easy to use ticketing system. Site builds and maintenance tasks are made easy with Task-one. The advanced notification system build across all modules empowers customers to action tasks with ease whilst having visibility into organisational bottlenecks. The mobile apps which are integrated are very popular. They provide field resources, project managers and executives quick access to critical data


NorthStar: more than justa battery companyMarket leaders in premium lead acid batteries committed to understanding and resolving their customers’ energy storage problems

Thierry Tardivent, Head of MEA and APAC, NorthStar Battery

TowerXchange: Please introduce NorthStar to our readers - what role do you play in the telecoms infrastructure ecosystem? Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: Since 2000 NorthStar’s telecom batteries and site solutions have been delivered in more than 150 countries. NorthStar helps its customers globally to extend battery life and save energy by providing High Performance AGM Batteries specially designed for different grids and telecom applications – I believe today NorthStar Batteries makes the best AGM batteries in the industry. But NorthStar Battery is more than just a battery company. We also have a unique expertise in power systems for emerging markets which is key to optimise battery life and energy saving. TowerXchange: We usually ask how many cell sites in Africa, LatAm and Asia the interviewee’s solutions are installed - I guess that may be difficult to specify given the scale of NorthStar’s business! However, can you give us a sense of the size of your telecoms business in those three regions. Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: Tens of thousands sites in MEA are equipped with NorthStar products. In Pakistan alone, Northstar has equipped over 5,000 sites with a pure fuel saving application delivering outstanding results. Many thousands of hybrid sites in Africa have been equipped with NorthStar

Read this article to learn:< Why premium lead-acid batteries remain the best compromise between capex and opex

< How to choose the right battery for the grid profile and application

< How to overcome common problems in the installation and setting of batteries

< How to cool batteries with just 40W, even at 30-40°C ambient

< How to protect batteries from theft and vandalism

NorthStar is more than just a battery company. They’ve made a commitment to really supporting their customers. A commitment to help customers select the right batteries. A commitment to identify and resolve power system problems, even if they aren’t caused by batteries. And a commitment to manufacture, and dispose of, lead-acid batteries in an environmentally aware manner. Of course, NorthStar also manufactures premium lead acid batteries which they say represent the best compromise between capex and opex, which is why they are one of the market leaders in energy storage for emerging market cell sites.

Keywords: Who’s Who, How to Guide, Meetup Preview, Energy, Installation, Opex Reduction, Batteries, Fuel Security, Air Conditioning, Off-Grid, Unreliable Grid, ROI, Hybrid Power, DG Runtime, Dimensioning, Procurement, Warehousing, Shelters, Rectifiers, Africa, Asia, Pakistan, NorthStar Battery


technology since 2000. TowerXchange: Why are lead acid batteries standing up to the challenge of alternate energy storage chemistries in a telecom context? Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: Frank Fleming, our renowned CTO, has a strong belief that lead acid can remain the technology of choice for telecom energy storage for the next 50 years, as long as we push the limits of the design. We also want to push back against the bad environmental image of lead acid batteries, which is why we invested massively in environmental controls when we built our new factory. Many of our key customers select NorthStar as their preferred / strategic supplier partly because of our strong environmental control. Corporate Social Responsibility policies make environmental control a key target for companies like Ericsson, with whom we’ve been a key strategic partner since 2002. We’re also strategic suppliers to NSN, Huawei and ZTE. TowerXchange: How much tailoring to the specific requirements of individual sites can really be achieved through the selection of batteries? Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: One battery cannot fit all applications. You need different chemistry depending on the grid profile and energy situation. There’s a huge difference between the battery you

should deploy on a stable grid in USA, compared with the unpredictability of the grid in Pakistan, and pure off grid applications in Myanmar for example. NorthStar differentiates ourselves by offering different chemistry depending on the application and grid profile. Whereas with other vendors the battery is a standard, commoditized component, forcing site designers to solve their problems through the modification of other power systems, NorthStar have been able to customise the design of our batteries for different grid availability and telecom applications. For example, one of the most unstable grids we have experienced was in Bangladesh. No matter what power system we used, there were so many repeated power outages that it seemed we were never able to fully recharge our batteries. That presents a problem for traditional lead acid energy storage technology, but we were able to modify our electro chemistry to be fully partial state of charge (PSOC) compatible. TowerXchange: Why is the replacement cycle so much shorter for batteries on developing market cell sites, and what can be done to deliver reliable, sustainable power? Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: We think there is too little understanding of why batteries are failing. While the right choice of battery is crucial, it’s as much about the electrochemistry as it is the choice

of supplier – so simply switching to a different supplier won’t fix the problem. Energy storage solutions need to be redesigned to provide reliable, sustainable power to cell sites in emerging markets, providing faster recharge, high cyclic, high temperature, high efficiency operation. You need to deploy the right power system, on the right settings and ensure it’s installed properly. This is why we are lauching the NorthStar Academy – to help to extend battery life by two to three times and save energy. While some battery vendors may prefer their batteries die sooner to accelerate replacement cycles and sales volumes, NorthStar want to make sure our batteries last a long time and deliver the opex savings targeted. Our success comes from our people in the field, people with a background from the power industry, who can address power system problems holistically and who can help our customers fix those problems. If it’s not a battery problem, we don’t just say “talk to the power system vendor”, we help the customer to change controller settings, cabling et cetera – training their people to avoid repeating mistakes. TowerXchange: I understand NorthStar initially, and to a certain extent still do, sell a significant proportion of batteries via OEMs – how does the entry of the independent towercos affect the criteria against which energy storage solutions are acquired?

Thierry Tardivent, Head of MEA and APAC,


NorthStar Battery: We have always had a strong strategic relationship with OEMs and we will always will. But we also realised we need to accelerate the battery technology and solutions awareness at the end customer level such as with towercos as they are more and more driving the battery selection process. Our technology has been approved already by two major emerging market towercos this year. We still see a few examples where energy storage solution selection is driven by short term capex savings, resulting in a temporary improvement in the P&L. However, making the wrong decisions in the selection of energy storage is does not yield

performance improvements that are sustainable in the medium and long term, particularly at unstable and off grid sites. There are only three or four factories worldwide that can manufacture premium AGM batteries. But the good thing about premium AGM is that they have a two year shelf life thus we can then easily maintain inventories in hubs all around the world and provide a short lead time to our customers; we adapt to the logistical challenges to ensure our products are available as close as possible to market.

TowerXchange: What is the performance, and

cost, difference when using premium lead acid batteries versus lower cost alternatives at cell sites in harsh conditions?

Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: A premium AGM (thin plate technology) would normally cost 30% more than a Standard AGM battery with three to four times greater storage life and up to five times longer operating life in real harsh conditions (typically 2.5 X the life). A lot of our customers are migrating from dual DG to DG plus battery hybrids to cut DG runtime by 50% or more. If you want to optimise energy efficiency programmes, you have to think about total efficiency; about DG efficiency, the efficiency of rectifiers, and the efficiency of batteries. A standard battery can suffer two to three times more loss than a premium battery, which can make a huge difference for some applications. A premium, fast charge battery can take a lot of energy to recharge the battery in short time, which enables the customer to run the DG faster and more efficiently, for a shorter time. For example, when we rolled out NorthStar Blue Technology in Pakistan, we found that most of the operators were buying low cost batteries because of their focus on capex. When they saw that at off grid sites we were cutting DG runtime by up to 85%, we helped them realise that it doesn’t even matter if you replace in your batteries every two to three years if you payback the investment in three to four months.

Delivering reliable and sustainable power to the world

Using Premium AGM in Offgrid will offer best Capex /Opex compromise

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Source: NorthStar Battery


NorthStar Blue Technology is ideal for unstable and off grid sites; it’s a fast charge, high efficiency battery with Partial State of Charge (PSOC) compatibility. If used in a hybrid genset combination, it offers the best capex and opex compromise. Other technology such as sodium and lithium batteries are two to three times the price and are not so easy to implement in large scale projects.

TowerXchange: Why are telecom batteries failing so early? And what are the key steps towercos and MNOs can take to extend battery life? Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: We need to increase customer awareness of the root cause of batteries problems. What NorthStar have done, and what all the battery manufacturers should have done, is make an assessment on over 60 countries where our batteries had been installed, to find out what were the key challenges were with using batteries, and to and try to find a solution for each: 1 Make sure to select the right battery based on grid and application including sizing/dimensioning; in too many cases there is not enough power to recharge the batteries. Our recommendation is that customers need to use different chemistries for different locations.

2 Solve installation and setting issues: everything from cabling the battery properly to controller settings (charging voltage, boost timing et cetera); low voltage disconnect; temperature sensor

configuration and cooling systems. Too many site installers don’t even know how many rectifiers they need to recharge the batteries – spending an extra US$200 on a rectifier can save a US$5,000 battery bank. 3 Temperature: a 10°C change in temperature can reduce battery performance by as much as 30-50%. But air conditioning just to cool energy storage elements costs a lot of money. A few years ago we partnered with one of the most famous fridge manufacturers to leverage proven consumer product technology into the telecom fields. We took the high efficiency, high reliability DC compressor cooling technology, added a unique cabinet structure and made the world’s most efficient telecom battery cooler called SiteStar. We can

now cool batteries with just 40W even at 30-40°C ambient. Over 30,000 sites have been equipped with our SiteStar technology to date with very positive feedback from the field. 4 Protect batteries from theft and vandalism: One approach we’re trying is to protect batteries in a safe-like structure. We’ve co-operated with a safe manufacturer to come up with a cabinet which used to be a safe box; made of robust, very thick metal. Another area we’re starting to explore is advanced locking systems.In some countries theft is related to the parallel market; at one point batteries were even being resold to the operators from which they were stolen! This was resolved with a relatively easy to fix – an engraving that cannot be removed. In other

Source: NorthStar Battery

Why are telecom batteries failing so early?

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cases the parallel market is home usage, but I feel that’s minimal. No single approach to combating theft can be successful everywhere as there are different causes of theft, from theft by large organisation’s to pilferage within the fuel supply chain. Ultimately combating theft requires working with the operators and towercos to develop an understanding of the nature of their theft problem and what budget they can afford to resolve it. Theft is a problem, and we want to address it. NorthStar can help MNOs and towercos overcome all four of these challenges. I’m particularly concerned when people talk about minimising the competence required of people in the field. While the solution needs to be as simple as possible to be installed and operated, the competence of the average field engineer is not necessarily the same in Southern Asia and Africa as it might be in Europe. We see a lot of mistakes in installation, and we’re happy to the deliver first training at the NorthStar Academy on the basic principles – we can put all the installers in one room, identify common problems and misconceptions, and make corrective actions. TowerXchange: How do NorthStar ensure you remain sensitive to environmental considerations from manufacture to disposal? Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: NorthStar has invested heavily in building the most environmentally advanced battery plant in the world. But our environmental

policies actually start from the design of the product; making sure the battery is designed to last longer and also not to deteriorate beyond the end of its life. We are also developing an advanced solution to operate batteries with the minimum energy consumption – our SiteStar battery cooler designed in Sweden is still the most energy efficient Battery cooler in the industry. TowerXchange: Finally, please sum up how you would differentiate NorthStar’s batteries from other energy storage solutions for remote cell sites. Thierry Tardivent, Head of MEA and APAC, NorthStar Battery: Most battery companies are focusing only on selling their own components. But NorthStar are more than just a battery company. We take a different approach – we really want to help our customers (as well as help ourselves). How we support our customers is a tangible, core value for NorthStar Batteries. In the past few years we’ve assessed the typical problems faced by our customers, and come up with solutions for what can we do to extend battery life and save energy. We seek to understand our customers’ problems. We’ll audit your site for you and we won’t leave without giving you an analysis of the problem and corrective actions. You won’t get an “it’s not a battery problem – talk to power system vendor” attitude with NorthStar – we have a strong competence on the whole power solution, not just the batteries.We’ve changed the focus of our business to help

our customers understand how to select the right batteries. One best electro-chemistry and battery technology isn’t right for all grid profiles and applications. For example, low technology batteries could be good enough for some developed market applications. But battery performance is more problematic in developing markets, so we’ve developed energy storage solutions for unreliable and off grid applications which we think represent the best compromise between capex and opex. Lastly we are developing solutions which have a very quick payback. Payback after five to ten years won’t work in telecom industry – everything needs to pay for itself in less than two years. NorthStar are focused on developing the best opex solutions, with affordable capex and quick payback – making our energy storage solutions a ‘no brainer’!

In some countries theft is related to the parallel market; at one point batteries were even being resold to the operators from which they were stolen! This was resolved with a relatively easy to fix – an engraving that cannot be removed. In other cases the parallel market is home usage


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The Sale & Purchase Agreements & Master Lease Agreements that underpin tower transactionsA closer look at two important parts of the contractual framework for infrastructure sharing

Jeff Eldredge and Rob Dixon, Partners at Vinson & Elkins

TowerXchange: What are the key components of a Sale and Purchase Agreement (SPA) in a tower transaction?

Rob Dixon: There are of course many components common to all SPAs, but let’s concentrate on those components which are unique to towers deals. A key example is the structure and content of the conditions to closing. First, we’ll typically have a set of transaction conditions precedents that need to be fulfilled before the deal can happen at all. These would include any over-arching regulatory requirements (for example an operating licence or a competition approval). Secondly, we’ll typically have a set of conditions precedent that need to be fulfilled (or waived) before a specific tower can be transferred. These would normally include good title, satisfactory ground lease arrangements (for example, the right to sub-lease the tower to third party co-locators and to assign leasing arrangements in security) and compliance with regulatory requirements (for example, building permits and environmental consents)…it’s potentially a long list!

The buyer will require a certain number of towers before the deal is economically viable. Typically, therefore, the deal will be structured so that closing does not happen unless and until a certain number of towers are ready to be transferred (i.e. the tower-specific conditions precedent are satisfied or waived).

Jeff Eldredge: One key point in the process is the

Read this article to learn:< How a minimum number of towers must be included for a deal to be viable

< The conditions precedent that need to be fulfilled before assets are transferred

< What happens to towers that aren’t transferred in the first close

< How the MLA defines the rights of the Anchor Tenant

< How critical towers are sometimes treated differently

The devil is in the detail – the detail of painstakingly constructed and hard negotiated Sale and Purchase Agreements (SPAs) and Master Lease Agreements (MLAs) that define the main terms in any tower transaction. Jeff Eldredge and Rob Dixon, Partners at Vinson & Elkins, have advised on over ten sale and leaseback transactions in the last couple of years in countries such as the DRC, Ghana, Nigeria, South Africa and Tanzania. Rob and Jeff kindly agreed to meet with TowerXchange and to provide us with an overview of tower sharing SPAs and MLAs.

Keywords: SLA, MLA, Transfer of Assets, Regulations, Novation of Leases, Due Diligence, Anchor Tenant Privileges, Service Level Agreements, Infrastructure Sharing, Vinson & Elkins


extension of ground lease terms. Towers deals can involve thousands of different parcels of land. Different ground leases will expire at different times, giving uncertainty on future costs. The buyer will therefore seek to have the ground leases extended for a reasonable period.

Rob Dixon: As a result of that and certain other conditions taking time to satisfy, there are typically a number of closings as the tower-specific conditions are gradually satisfied. In the interim, the buyer might take over the operation of the non-transferred towers on a managed services basis. Different deals are of course structured differently – some deals go further to synthesise the buyer’s ownership of non-transferring towers from first closing. TowerXchange: What happens to any towers for which the CPs cannot be satisfied?

Rob Dixon: The treatment of ‘stub sites’ depends on the deal. The operator is unlikely to have the ongoing capability (or desire) to maintain

and operate the sites so the towerco may agree to manage the sites (with the operator retaining ownership). The buyer is likely to conduct legal diligence on a sample of sites before signing the SPA so it will have a reasonable idea of the position before signing the deal. The SPA is, of course, only one part of a sale and leaseback deal. It’s relatively short-lived compared with the MLA which will often govern the parties’ relationship for many years.

TowerXchange: So tell us about the critical consideration when drafting Master Lease Agreements.

Jeff Eldredge: The MLA is where the real value is for the tower company and where most of the real complexity lies in a deal. It’s a long term contract (perhaps 10-20 years) and a large value contract. The operator needs sufficient flexibility to manage its needs to deploy and maintain equipment, while the towerco needs sufficient control to maximise the co-location opportunities – that’s how they build value. Thus, there’s a natural tension that needs to be resolved to everyone’s satisfaction.

The MLA is an umbrella agreement which defines the operator’s rights as anchor tenant in terms of leasing space and capacity (windload) on the transferring towers and the towerco’s obligations to the anchor tenant in terms of such space and capacity (including the service levels which apply). Different rights and obligations typically apply to different towers. For example, network planners can get very nervous about sharing particularly critical towers with other operators and therefore a small number of the towers might be identified as exclusive to the anchor tenant. The service levels for different classes of towers is also likely to vary and be closely negotiated. These will typically be set out in a service level agreement, which may form part of the MLA.

Rob Dixon: There are of course other agreements which are important in most towers deals – for example the Build to Suit Agreement – but perhaps that’s for another time!

“ “The MLA is where the real value is for the tower company and where most of the real complexity lies in a deal

It’s common practice to have at least two phases of closing a sale and leaseback transaction, giving extra time to finalise documentation for troublesome towers. As Alan Harper, CEO of Eaton Towers explained “With Warid, 90% of the towers were included in the first close, but we take over 100% of the towers whilst the last complicated paperwork is finalized.”

Operators err on the side of caution when it comes to reserving capacity on towers for future upgrades. But every square meter the operator reserves is a square meter less for the towerco to sell, and that goes directly to the value of the tower. When it comes to the Master Lease Agreement, “it’s important to help operators avoid reserving more capacity than they really need for upgrades”, to use the words of one senior towerco executive.

Phased close Capacity crunch


See you at our future events!


Meetup Africa2016

Meetup Asia 2016

Meetup Europe 2017



13-14 December, Singapore 4-5 April, London

16-17 June, Florida

spotlights on the cala tower industry...202 nexsysone 206 northstar 211 vinson & elkins rllp...

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