Towercos Are Revolutionizing Connectivity in APAC and MEA: What It Means for the Future.

Even today, millions of people in regions like sub-Saharan Africa, parts of India, Indonesia, and the Pacific Islands lack access to mobile broadband, with many areas remaining significantly behind in telecommunications infrastructure. This issue is especially pronounced in rural regions, where limited grid availability and various operational challenges deter mobile network operators (MNOs) from constructing base stations, as these investments are costly and often yield low returns.

Tower companies (towercos) are emerging as pivotal players in bridging this digital divide and reshaping the telecom landscape across APAC and MEA. By promoting infrastructure sharing, the towerco model enables MNOs to extend services to areas with unreliable power sources and make their investments more economically feasible. This shift is having a transformative impact, allowing millions in previously underserved communities to access the internet and unlock new economic opportunities, improving livelihoods and fostering development throughout the region.

Not surprisingly, the telecom towers market size is projected to reach USD 32.75 billion by 2029, growing at a CAGR of 2.84%. This growth is essential in supporting the region’s digital growth.

The Rise of Towercos

Historically, in the telecom industry, MNOs deployed their own tower infrastructure. However, the challenges of frequent network upgrades, increasing competitive tariffs, and the rollout of 5G networks are squeezing margins and causing mobile operators to opt for shared infrastructure models.

In this business model, MNOs offload their passive assets to towercos while they retain control over active assets like spectrum and mobile equipment. This strategy has resulted in telcos reporting a 35-40% reduction in TCO. Indeed, sharing mobile towers significantly lowers the entry cost into mobile markets and creates a level playing field for small MNOs and new entrants. Also, the cost savings are passed on to the end-users, who get to access services at reduced prices.

Ultimately, this arrangement benefits both parties involved: by removing tower assets from their balance sheets, operators can stem profit margin drops and bring out customer-centric policies for increased ARPU. Meanwhile, towercos benefit by aggregating assets from multiple MNOs and improving their operational efficiency.

Key Developments in MEA and APAC

The telecom landscape in APAC and MEA is quite fascinating, with cutting-edge, futuristic markets jostling with remote locations where connectivity remains a challenge. Let’s look at some recent developments in the towerco landscape in these regions.

MENA

Bolstered by the successful merger of Ooredoo-Zain with TASC Towers, towerco penetration in the MENA region has risen to nearly 30%. While the strong financial performance of IHS Towers and Helios Towers is motivating MNOs in the area, it will be interesting to see how operator-owned tower companies manage to implement effective colocation strategies, particularly given the low tenancy rates in the region.

The Kingdom of Saudi Arabia is emerging as a major telecom hub in the region. A prime example is STC’s Mena HUB, which is a $1 billion investment aimed at transforming the country into a leading industrial power.

Further, Saudi is creating a new telecommunications infrastructure company through the merger of TAWAL the country’s largest telecom company, and the Golden Lattice Investment Company (GLIC), owned by the Public Investment Fund (PIF). The merger will combine 8,069 sites of GLIC with TAWAL ’s 16,000 towers and 4,800 sites it bought earlier from United Group to create a towerco featuring 30,000 sites valued at US$6.7 billion and estimated annual revenues of $1.3 billion.

Africa

In Africa, over 50% of telecoms towers are owned by towercos, with the largest being IHS Towers and American Tower . Development finance institutions are pumping money into the African market with Proparco, British International Investment (BII), and IFC providing millions of dollars in financing to towercos for new infrastructure investments.

Recently, TowerCo of Africa (TOA) which operates in Uganda, Madagascar, DRC, and Tanzania, secured a US$30 million financing agreement with BII to build 200 new tower sites in rural Tanzania, aligning with the company’s goal of responsible infrastructure development.

NaaS (Network as a Service) is also seeing substantial growth in the region, with Africa Mobile Networks (AMN) leading the pack, having deployed over 4,000 NaaS sites across 14 African markets. Other players like Vanu, NuRAN, and iSAT Africa are also supporting rural sites, in total around 15,000 new towers are currently under contract between these firms, or around 5% of Africa’s entire tower stock. In fact, MTN in partnership with NuRAN has expanded its rural sites adding 200 2G, 3G, and 4G sites in Benin.

APAC

In the APAC region, acquisitions are progressing at a fast pace. MIDC and Phil-Tower Consortium have merged to create a Philippine-wide digital infrastructure joint venture, which is going to be one of the first examples of towerco consolidation in the Philippines. This merger brings the combined portfolio to 3300 towers that will address the country’s growing demand for 4G and 5G services.

In Bangladesh, VEON-owned Banglalink sold over 2000 towers to Summit Towers, the largest integrated telecom company in the country, in a sale and leaseback deal worth $US100mn. Meanwhile, in Japan, the sole independent towerco JTOWER accepted an offer from digital infrastructure investor DigitalBridge to acquire the company.

In Australia, connecting rural communities remains a challenge. To address this, Indara has partnered with Ventia to provide mobile coverage to the First Nations community, Yarrabah, helping bridge the digital divide. Additionally, the government has earmarked A$17.4mn (US$11.5mn) in funding for its Telecommunications Disaster Resilience Innovation (TDRI) program. One of the recipients was Indara, who will deploy solar panels to eight sites across New South Wales, Victoria, and Western Australia to keep telecom infrastructure operating in the event of power outages.

Australian operator Waveconn is also set to acquire 100% of American Tower's assets in Australia. The assets include the wholly owned subsidiaries of American Tower Corporation, namely AT Australia Operations Pty Ltd and AT Australia Pty Ltd. The deal which is set to conclude in the 4th quarter of 2024, will add another 170 sites to Waveconn’s already existing 1,400 tower and rooftop sites.

Earlier this year, Axiata announced its exit from Myanmar with EDOTCO Group deciding to sell its entire 87.5 percent stake for $150m to a local investment group. This decision was prompted by the deteriorating business environment in the country. The capital from the proposed deal is going to improve Edotco’s balance sheets and reduce its debt.

Challenges for Towercos

Although the long-term view remains bright, short-term macro problems like rising energy prices, declining margins, and supply chain disruptions are creating challenges for towercos. In rural Africa, for instance, the cost of running grid networks often exceeds the revenue it generates with fuel alone, accounting for nearly 30-60% of the total OPEX costs of MNOs in the region. Additionally, despite the telecom industry’s transformative nature, the ICT sector is guilty of generating approximately 2.3% of carbon emissions, highlighting the need for adopting more sustainable practices.

In response to these challenges, companies are exploring green approaches as a viable alternative to power mobile telecom networks. For instance, EDOTCO Green Tower initiative is an attempt on the part of the company to become Carbon Neutral by 2030. The company is also conducting feasibility studies on the large-scale deployment of solar energy, which, if successful, could inspire other towercos to switch over to low-carbon technologies.

Similarly, Helios Towers has invested close to US$12 million in 2023 on solar and hybrid solutions besides trialing wind technology. Through its Project 100, the company is committed to investing US$100 million between 2022 and 2030 in carbon reduction initiatives, to reduce dependency on diesel generators and choose more earth-friendly solutions.

The Way Forward for Towercos

Given the significant anticipated population growth and low mobile penetration in many of these regions, there is going to be a sustained demand for tower infrastructure in the coming years. Naturally, the international tower business is experiencing explosive growth, with towercos actively expanding their market share and geographical reach via integrations and M&As.

However, while leasing space to MNOs will continue to be the major revenue earner for towercos, even the most conservative among them are looking to tap new revenue streams. To adapt to the ever-evolving telecom landscape, diversification and investment in new growth opportunities have become essential, and that is exactly what towercos are doing.

The successful towercos of tomorrow are increasingly opting to invest into a diversified asset portfolio that includes small cells, in-building solutions (IBS) sites, neutral host, edge infrastructure, NaaS, fiber, and mobile private networks among others. Ultimately, this approach will not only help them future-proof their dealings but also provide better service to their existing customers and increase the ROI of their builds.?