Ghanaian telcos outsource towers

Zoyiku_MobilesPhot by: Megavas

The three major GSM operators in Ghana’s telecommunications sector have embarked on a new strategy to focus on their core business of providing telephony services and outsource passive infrastructure.

The three operators – Tigo, MTN and Vodafone – have sold their transmission towers to other specialized business entities. First to do so was pioneer mobile telephony service provider, Milicom Ghana operating the Tigo brand, which in January 2010 sold its towers to Helios Africa to be followed in October by Vodafone Ghana which outsourced to Eaton Towers and in early December, MTN Ghana also followed by selling to Boston based antenna operator, American Tower Corporation.

MTN is however setting up a joint venture with TowerCo Ghana, American Towers’s new Ghana subsidiary to manage her 1,876 towers located in the West African nation. TowerCo Ghana is expected to pay $428.3mn to MTN Ghana for the towers, while American Tower will pay $218.5mn for 51 per cent of the new company. MTN Ghana will own the rest with the transaction expected to be completed early 2011. American Tower, a leading owner and operator of communications sites for the wireless and broadcast industries has over 32,000 towers, 2,000 managed rooftops, in-building and outdoor DAS (Distributed Antenna System) networks, and a suite of services that speed network deployment. MTN Ghana will therefore be the anchor tenant, on commercial terms, on each of the towers being purchased. American Tower also expects that TowerCo Ghana will build at least an additional 400 sites for both MTN Ghana and other wireless operators over the next five years.

In signing the deal, Jim Taiclet, CEO, American Tower Corporation said "Creating an independent tower company in Ghana reflects the execution of our strategy to invest in selected African markets with strong wireless growth potential and a positive investment climate. As a partner, MTN's stature, vision and operational experience in Africa are highly complementary and combined with our tower leasing expertise; we believe TowerCo Ghana is exceptionally well placed to maximize the market opportunity in Ghana."

Group President and CEO of MTN Group, Phuthuma Nhleko, added that "Infrastructure sharing makes absolute sense for MTN and was a key aspect of the updated strategy outlined to MTN shareholders in July 2010. We have in the recent past looked at various permutations to reduce our infrastructure roll-out costs as well as the on-going costs of operating our passive infrastructure in our key markets. Because market conditions in each of the markets are unique, we have resolved to evaluate infrastructure sharing opportunities on a market by market basis. The Ghanaian market has presented us with an opportunity to partner with a leading independent global tower operator who have demonstrated their extensive experience in operating towers in both the developed world and in emerging markets," concluded Nhleko.

Launched in 1994, the MTN Group is a multinational telecommunications group, operating in 21 countries in Africa, Asia and the Middle East and listed on the Johannesburg Stock Exchange and has as at September 2010, 134.4 mn subscribers.

Tigo on the other hand sold approximately 750 towers to Helios Towers Ghana (HTG), a direct subsidiary of Helios Towers Africa. In announcing the acquisition, Helios Towers Africa, Ltd. (“HTA”) said its direct subsidiary, Helios Towers Ghana Limited (“HTG”), has agreed to acquire approximately 750 towers from Millicom Ghana Company Limited ("Tigo Ghana"), a subsidiary of Millicom International Cellular S.A. (“Millicom”).

Additionally, the two have entered into a long term leasing agreement where HTG will provide Tigo with wireless communications towers, including a build-to-suit agreement to support Tigo’s wireless networks.

HTG also said this arrangement will create savings in both capital and operating expenditure for Tigo and will also seek similar agreements with other operators. The transaction represents the first major sale/leaseback transaction between an independent tower company and a major operator in Africa and provides a stable platform for HTG to offer a broad tower sharing option to other operators interested in enhancing network coverage and capacity, with significantly improved time to market and improve on operational efficiency.

Charles Green, CEO of HTA, said “HTG will enable Ghanaian wireless operators to outsource non-core tower-related activities and focus their capital and managerial resources on providing higher quality services more cost-effectively. We are very excited and pleased to enter into such an innovative arrangement with Millicom, which ensures that HTG has, as an anchor tenant on each of its towers, a high quality operator with a demonstrated long-term commitment to the development of wireless services in Ghana."

Tope Lawani, Managing Partner of Helios Investment Partners LLP (“HIP”), HTA's lead investor, said “HIP pioneered the independent tower model in Africa when it formed Helios Towers Nigeria (“HTN”), and remains the leading independent tower company in Nigeria which owns, operates and offers tower sharing services of approximately 600 multi-tenant towers to eleven operators in that country and our goal is to provide telecom operators outside of Nigeria with similar opportunities to outsource passive network infrastructure in response to the challenges of meeting rapid demand growth and increasing competition.”

President and CEO of Millicom, Mikael Grahne, explained that the “… agreement marks Millicom’s first substantial commitment to outsourcing passive infrastructure. The new venture will allow us focus on areas of genuine differentiation: sales, marketing, distribution, service innovation and customer care.”

Helios Towers Africa, Ltd. was founded by Helios Investment Partners LLP, SSP Offshore LLC, an affiliate of Soros Fund Management LLC, RIT Capital Partners plc, and Albright Capital Management to meet the infrastructure needs of wireless service providers by developing, owning and leasing communication towers in sub-Saharan Africa.

In October 2010 Vodafone Ghana outsourced its own towers to London-based Eaton Towers under a 10-year deal which allows the British company to take-over the 750 telecommunications towers belonging to Vodafone. Eaton is also expected to invest up to US$80mn on upgrading and improving the existing towers, develop the existing infrastructure and build new towers which will ultimately improve Vodafone's coverage. The agreement also allows Eaton to sell co-location and shared-infrastructure facilities to other mobile operators, generating future revenues from separate long-term contracts.

By outsourcing the management of its towers, Vodafone Ghana will immediately benefit from cost savings and significantly reduce capital expenditure while Eaton assumes responsibility for all operational aspects of the passive infrastructure, including health and safety, security and power provision. Upgrades to the existing sites will include new power generation equipment and advanced management systems aimed at reducing diesel consumption and other costs.

Alan Harper, Chief Executive of Eaton described the agreement as good, saying “Our co-location offering ensures that Vodafone's infrastructure will continually improve, whilst maintaining the lowest possible operating costs.

"Furthermore, our tower-sharing agreements will enable Ghana's mobile operators to reduce costs, reach more subscribers and avoid the environmental impact of duplicating towers but most importantly, through our investments, and sharing of towers, Ghana's mobile subscribers will benefit from better coverage and operators having a lower cost base - and that is good for economic growth and sustainability. We plan to bring the benefits of tower sharing to operators and subscribers across Africa."

Tower sharing is a more cost-effective and efficient way for mobile operators to reduce capital expenditure and operating costs by co-locating antennas on the same tower and for African operators, allows them to reach subscribers, with building and operating costs typically shared across multiple tenants. It also benefits the environment by reducing unnecessary duplication of masts and their associated infrastructure. According to a study by the TMT advisory firm Delta Partners, there are 200,000 towers in the Middle East and Africa.

 

Kafui Gale-Zoyiku

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