Few outside the telecom industry knew of AMT until Cell C CEO Lars Reichelt announced a US$430m deal in which AMT would buy up to 1400 of Cell C’s tower sites . It also agreed to purchase up to 1800 of Cell C’s sites under construction or planned for the next two to three years.
AMT followed this up by concluding a $428,3m deal with MTN to run its network in Ghana. TowerCo Ghana, a joint venture between MTN and AMT, will now own MTN’s 1876 towers in that country.
There is a simple reason why mobile operators are willing to dispose of their tower networks. “Selling them off and leasing them back lowers cost,” says BMI-TechKnowledge MD Denis Smit.
Smit says as the sector becomes more competitive, more of these infrastructure sell-offs can be expected over the next few years.
The AMT deal, for instance, will be useful to Reichelt as it will help Cell C sort out its debt burden, which has hampered the company since its formation. It recently had to restructure its debt again by borrowing € 240m from China Development Bank.
Rival Vodacom has no plans to sell off its towers in SA but its CEO, Pieter Uys, has nothing against such a move in principle.
Operators are not the only ones benefiting from this outsourcing trend. Companies like AMT and its rival, UK-based Eaton Towers, earn revenue by making the tower available to other operators while retaining the original owner as an “anchor tenant”.
And they can expect a further boost when the Independent Communications Authority of SA auctions off valuable radio spectrum for high-speed 4G mobile services .
The newly formed operators who win this spectrum will be able to lease network space on an already established fibre network from companies such as AMT, without having to go through the costly process of building their own network.
Such outsource deals have also been lucrative for AMT. Its total revenue increased 15,6% to $513,3m and operating income jumped 19,2% to $213,4m for the three months to end-September.
A recent report by research group Delta Partners says the outlook for companies such as AMT is bright . Delta estimates there are more than 200000 mobile telecom towers in the Middle East and Africa and expects this number to rise by 50% in the next four to five years.
It estimates that $8bn in capital expenditure could be saved if operators were to share towers.
Local group Plessey — a subsidiary of Dimension Data — is also entering the market and is offering a managed infrastructure service. Its CEO, Howard Earley, says it has already secured an outsourcing contract, beating off a foreign rival.
These infrastructure management companies are well-placed to tap into the mobile operators that need to cut costs. But is there a danger they can become de facto operators themselves?
Not really. Though they use sophisticated monitoring platforms to manage the network, a lot of the work is just mundane maintenance. And, as Smit points out, they lack a crucial element when it comes to becoming a fully fledged mobile operator — a telecom licence.
(C) Financial Mail
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