Is this the secret to deploying rural mobile networks?

Is this the secret to deploying rural mobile networks?

Africa Rural

Africa Mobile Networks unique business has seen strong growth and helped connect Africa’s unconnected

Since its inception, Africa Mobile Networks (AMN) has sought to change how rural mobile networks are deployed in Africa.

Formed almost a decade ago in 2013, AMN’s unique model meant they managed both the active and passive components of a mobile site on a turnkey basis, while also taking a share of the risk on the revenue the site generates.

Handling operations, management, traffic management and even airtime distribution, the company’s infrastructure is able to deliver traffic directly to the operators switch, without the need for the MNO to deploy any capex at all.

This means they provide an access service to connect an operator to their own subscribers, enabling operators to increase their penetration deeper into rural communities.

The first site deployed was in Koabagou, Benin, in a settlement with 4,000 people, although the tower was able to cover three other communities with populations of 500-1,000. In total the site brought mobile service to 7000 people.

Traditionally high-capex and sustained operating costs, whether they be direct or in the form of a lease paid to a towerco, has driven mobile network operators to prioritise network expansion to dense urban or sub-urban locations.

Investing in these locations means the traffic generated by the connected urban population leads to revenues that can pay for the initial and upkeep costs.

Rural areas are more often covered out of spectrum licencing requirements imposed by regulators and governments, rather than for a business reason.

However, this comes at a cost. In 2013 when ANM was formed, 300 million people were not covered by mobile internet in sub-Saharan Africa, and while that number has shrunk by 100 million in the last 10 years, 50% of the global population with no access to mobile internet live in the region.

Furthermore, data from the GSMA published in January 2023 indicated that inhabitants of rural Africa were 54% less likely to use a mobile internet connection than their urban counterparts.

AMN’s model seeks to change that. Reducing the cost of the deployment for the operator means they are able to serve these communities.

Now, ten years later, AMN’s model is starting to prove it can work at scale.

“It took seven years to get to be EBITDA and cashflow positive, which we achieved in Q1 of 2020,” Mike Darcy, CEO of AMN says.

Over that time AMN have grown across the region, from its first site in Benin to 3,099 towers across 13 markets, which include Benin, Bissau, Cameroon, Congo Brazzaville, DRC, Ghana, Guinnea, Guinea Bissau, Liberia, Nigeria, Sudan, Zambia and the Ivory Coast. They have also expanded beyond Africa and are present in Panama.

According to their website, AMN also plan to launch services soon in Central African Republic, Kenya, Madagascar, Niger, South Africa and Uganda.

“For our first seven years we had to raise money just to keep the business going until we reached a certain scale: which was about 1,000 towers” Darcy explains.

“Each tower makes a certain margin and many are required to fund the fixed costs of a head office, technology, development and staff. The paradox is that once you are not reliant on external funding anymore then it is readily available. We now have multiple options for Tier One private equity investors and other funders who now chase us rather than the other way round!”

Many companies have tried to set up rural towercos in Africa, and few have survived. Key to AMN’s success has been leveraging technology to make the overall cost of deploying connectivity as cheap as possible.

For instance, they relied on partnerships with satellite backhaul providers, such as SES, and more recently Starlink, following a partnership deal struck in July 2023.

AMN have also had to rethink the structure of the sites they are deploying.

Darcy says that they had to move away from the model they used for their first site in Benin to make the business case suitably compelling for Africa’s Mobile Network Operators.

This reshuffle turned the traditional approach to building rural networks on its head.

“Critical to our success has been adapting to the harsh reality of rural economics and key to that was the development of our low-cost standard site of 12m, which is optimised to cover the African villages we target but cover no more.”

Darcy uses the example of one of AMN’s earlier sites, built in DRC. It was a traditional 30m tower, a kilometre from the closest building, but was engineered to cover many hundreds of square km of uninhabited bush. This naturally came with a much higher cost than the more nimble, targeted design AMN deploy today.

“We re-engineered our sites away from the large macro towers you’re used to seeing in rural areas to the shorter, tightly-specified low-cost solution we have today” Darcy says.

“We were ahead of most in the industry, especially in Africa, when we realised that small cells were optimal to cover the population with great signal and lowest capex. Lowering the “I” in our ROI calculations has made all the difference in making the business model work well.”

With a laser-focus on cost, AMN deploy sites that are highly standardised, which further helps keep the price of deployment low across their design and construction.

Darcy is aware of the uniqueness of the AMN model. “Most towercos or OEMs won’t touch a revenue share” he says. “We had to decide how to compete with the establishment and how to stand out. Being cheap just wasn’t enough.”

The solution AMN designed was to offer to find the sites, finance them, manage site acquisition, then construct, maintain and manage them. This meant that operators just had to focus on serving their new customers and were happy to sacrifice the revenue as they would not have been able to cost-effectively cover the population without AMN.

This level of control is unlike any other towerco and offers its advantages. “As we take on the operator risk, we also own the decision on which sites stay live. So in 2023 AMN plan to relocate 275 sites away from communities which aren’t using them towards locations we think will prove sustainable,” Darcy says.

“By doing this we ensure that our worst performing sites can move to become our best performing ones.”

With bold ambitions to grow their African and international business, AMN could be on track to completely redefine how rural networks are built and restructured. With the experience of the last ten years, and access to previously unthinkable levels of financing, it remains to be seen how the model will continue to evolve.

To learn more about Darcy and AMN, read the top 20 towerco CEO report, published by Capacity’s sister company, TowerXchange.

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