Analysis: Empires of steel the future of tower companies
In a world where businesses are constantly charged with finding ways to make everything smaller and more accessible, the lofty telecoms cell towers of steel that provide the bare infrastructure remain as prevalent as ever.
Is there a long-term future fo the cell tower?
Only last month, Indian operator Bharti airtel confirmed plans to create tower companies in all 16 African countries in which it operates, following the much publicised $9.7 billion purchase of Zain’s assets in June 2010. With a huge growth anticipated in African subscribers, it may have been a necessary move. As Gagandeep Kaur, India editor of Light Reading, comments: “There are very few independent tower firms in Africa. Bharti doesn’t have much option but to take the leadership position by forming separate tower companies.”
Despite recent innovations by European vendors at the recent Mobile World Congress in Barcelona, proposing new technologies to eventually replace the cell tower, business activity suggests that merging and acquiring cell tower companies remains a cost effective and efficient approach for operators.
India’s largest telecoms tower operator, GTL Infrastructure, has reportedly set a fund-raising budget of up to $400 million in private investment to increase its cell tower portfolio, after bidding to merge cell tower operations with Reliance Infratel. GTL Infrastructure has also made a bid of approximately $700 million to buy out Vodafone Essar’s 7,000 cell towers.
Whether or not this bid for outright acquisition will prove successful, Vodafone is not immune to the attractions of tower sharing. “There are considerable capital expenditure and environmental advantages in sharing passive infrastructure,” a Vodafone spokesperson commented. “By sharing the build, operators are able to roll out physical network infrastructure more quickly to a greater percentage of the population.” Meanwhile, in the Middle East market watchers predict Saudi Telecom and Etisalat-owned Mobily are likely to merge 14,500 towers; following such a merger, they would hold a 70% market share in the region.
“Tower companies have multiple advantages for the telecoms operator,” said Jawad Abbassi, founder and general manager at Arab Advisors. “They allow the operator to remove capital expenditure requirements by leasing out towers to other operators. It appears that Bharti, with its Zain assets, is attempting to leverage its experience in the Indian market and spreading growth across markets in Africa.”
Despite such activity in the market, however, developing technology could mean cell tower blocks are eventually replaced by small antennas that can work as long as there is electrical or fibre connectivity close by. French vendor Alcatel-Lucent is pioneering the development of ‘small cell’ technology with its lightRadio cube that can be hidden from view without impacting capacity for calls and data traffic. Splitting traffic between smaller cells could improve connectivity, as mobiles would no longer be forced to compete for traffic on a single cell tower in the area.
“While we don’t see cell towers going away anytime soon, we believe there is a need, specifically in urban areas, to reduce the number of antennas visually polluting the urban skyline,” says Tom Gruba, Alcatel-Lucent’s senior director of marketing, lightRadio. “Providing coverage to users will continue to involve a number of technologies. Towers prove useful in reaching users over distances while other technologies, including small cubes like lightRadio, can provide additional capacity to meet user demands in more urban settings.”
Advancements in lightRadio, femtocell technology and heterogeneous networks mixing big and small cells, as developed by US vendor Qualcomm, appear to be reserved for the maturing markets. Mumbai-based GTL Infrastructure now operates 32,463 towers, a very rapid growth from the 1,200 towers it owned in 2007. Viom Networks, a joint venture between Tata Teleservices and Quippo, is even larger, with over 38,000 towers; and is rumoured to be partnering with GTL for the proposed Vodafone Essar tower acquisition. Viom has already committed to roll out up to 25,000 additional towers in the next two years with an increase in operations and connectivity across rural areas of the region.
“Tower sharing came about from the need to cater to poorer segments so I think it will always be more relevant in a poor country context,” adds Abbassi. “This does not mean that tower sharing should not be applicable to richer markets, because it is in all companies’ interest to become more efficient operationally.”