Outsourcing of telecoms towers management a win-win situation - analysts

By Tom Jackson, South Africa

The sale of tower assets by African telecoms operators to independent management firms is a win-win situation, according to analysts, with operators benefitting from reduced costs and the buyers obtaining potentially valuable long-term assets.

BizTechAfrica reported last week telecoms tower firm Eaton Towers had acquired over 3,500 telecoms towers from Bharti Airtel. The purchase continues an ongoing trend across Africa. In July Airtel sold another 3,100 towers in four African countries to Helios Towers for US$2 billion, while Etisalat Nigeria is amongst operators to have also sold towers to the likes of IHS Holding Limited and MTN Nigeria has launched a tender for a similar process.

Analysts told BizTechAfrica this was a trend that had previously been witnessed in Europe and was continuing in Africa due to the mutual benefits of such arrangements.

“The process aims at reducing operating costs while at the same time operators can focus telecoms services, customer services, and marketing, rather than managing infrastructure,” said Ovum telecoms analyst Thecla Mbongue. “Since 2013, we’ve seen such deals happening In Africa but also in Asia-Pacific, in the Americas and in Europe, as reducing costs is a concern globally. Managing infrastructure like towers is often difficult and costly in Africa, so there’s a further incentive to outsource this. And there are several credible outsource partners to work with.”

Siphiwe Nelwamondo, technical marketing manager for Aviat Networks in South Africa, said selling off towers meant infrastructure cost saving for operators of between 16 per cent and 20 per cent.

“The Nigerian market for example needs another estimated 50,000 to 60,000 towers, or masts, for optimum mobile network coverage across that country,” Nelwamondo said. “Multiply that by the US$200,000 price to build a new tower in Nigeria, including the cost of obtaining all necessary permits, acquiring land and providing a private supply power - usually from a diesel generator - and the costs become very high.”

In spite of this, Nelwamondo said it was still a worthwhile investment for companies such as Eaton Towers to buy up tower assets.

“There are certainly profits as the contracts are usually long term - for example, Vodafone Ghana agreed to outsource the operation and management of its 750 cell towers to Eaton for 10 years,” he said. “The business model is usually based on having more than one tenant per tower as one tenant is usually a liability.”

Nelwamondo said the trend was evident across most of Africa, but South African operators had so far not been selling off any assets.

“In South Africa, we have not seen the uptake of tower leasing by Telkom, Vodacom and MTN,” he said. “These operators already have strong large portfolios that overlap, so for competition reasons they might be reluctant to sell off their assets. The tower companies would also not want to buy sites or assets in areas they already have presence.”

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