Assessment on the towering business in emerging markets

Tower companies are finally getting their due in the telecom space. After being behind-the-scene players for long, they are now the object of huge interest from strategic investors and private equity firms. Strong returns on investments and fast growth have made the business more interesting. The large number of towers needed in the emerging markets over the next few years, make it the most lucrative segment in the telecom sector.

On top, operators realised the value of sharing infrastructure and in the last few years, to maintain profitability. The telecom regulators initially started to allow passive infrastructure sharing among operators, which includes sharing of physical sites, buildings, shelters, towers, power supply and battery backup. Now, most of them also allow sharing of active infrastructure such as antenna, feeder cable, node B, radio access network and transmission systems.

With sharing, the cost burden on operators reduces significantly, improving the rate of mobile services rollout. Just an example in an emerging country: India. According to an E&Y report titled ‘Wireless Infrastructure Sharing in India’, “Capex (capital expenditure) savings across the industry are expected to range between $7-12 billion over the next four years, till 2012 while on going opex (operational expenditure) savings are estimated at $1 billion a year. During this period, the number of towers is expected to go up by 60% to well over 350,000 and the number of subscribers is expected to double to 640-650 million.”

We have been supporting different financial institutions and private equity firms in screening potential deals in “buying and leasing back business models” with telecom operators. As written previously, we fully understand the financial and economics behind this business and therefore we are in a position to identify, evaluate and measure the size of any opportunity in any region and country.

What I’m showing next is an assessment of whom in the African and Middle-Eastern regions could be interested in a towering business deal with a tower company or a private equity firm. It provides a valuation matrix where most of the operators publicly stating their interest in such a business have been allocated. The question here is, who of this will move first? Well, we’ll have to wait for a while but let me tell you that we’ll see movements in the short term. Until then, happy reading.

Best, CVA

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