TowerXchange Meetup MENA 2020 post-event summary

250 senior executives from the MENA telecoms industry gathered on the 28 - 29 January in Dubai for the second annual TowerXchange Meetup MENA. Key discussions ranged from the role of towercos and MNOS in the evolution of 5G to the viability and attractiveness of the towerco model in the North African region, with industry experts sharing their know-how and insight on key challenges facing this evolving region. Including representatives from the regions first carve-out towerco TAWAL as well as key significant players, IHS Towers, Oman Tower Company, Helios Towers, American Tower, Etisalat, Turkcell and many more, we share a summary of the main topics, themes and market developments from this exclusive meetup.

If TowerXchange Meetup MENA 2019 helped lay the groundwork for the tower industry to take root in the Middle East and North Africa, then the 2020 edition of the event saw seedlings breaking the surface as the professionalisation of infrastructure sharing had begun.

It is almost axiomatic to note that MENA is a diverse region, home to MNOs that are among the most financially robust in the world, pioneering the rollout of 5G to a relatively wealthy subscriber base, but also including some emerging markets with sub US$3 ARPUs, where 3G rollout is not yet complete.

Historically it has proved difficult to close tower transactions in MENA, with several processes abandoned for financial or regulatory reasons. A year ago, towercos owned and operated less than 1% of MENA’s 275,000+ towers. While that figure remains modest at 6% today, several towercos are poised to play a critical role in the consolidation and expansion of MENA communications infrastructure.

The separation of TAWAL from stc continues apace. While wave one of the project will focus ingesting assets, capturing pent up demand for co-location, and build-to-suit, TAWAL is already acutely attentive to opportunities to provide connectivity in Mega Projects, and hinting at an appetite for opportunities outside the Kingdom of Saudi Arabia (KSA). The impression this commentator was left of TAWAL is that their impressive management team is keen to listen and learn from both their peers at other tower companies, and particularly keen to earn the trust of the MNOs in the region as a truly independent, non-discriminate business partner.

One of the world’s fastest growing and most respected towercos, IHS retains appetite and enthusiasm for opportunities in the Middle East and North Africa and, as one of the founding members of the International Digital Infrastructure Alliance, is focusing on dialogues to navigate the challenging regulatory landscape. There was a buzz in the corridors anticipating that IHS’s first buy and leaseback transaction in MENA would be confirmed shortly after the event. And to that effect, on 12 February 2020, further to receiving regulatory approval from the Communication and Information Technology Regulatory Authority (CITRA) and support from Kuwait Direct Investment Promotion Authority (KDIPA), global leading international towerco IHS Towers completed the sale and lease back deal of 1,620 telecommunication towers from mobile network operator Zain in Kuwait.

The transaction marks the first large scale sale and leaseback (SLB) tower transaction in the Middle East by a mobile network operator to a pureplay independent towerco.

Oman Tower Company impressed participants with a combination of humility – it remains early days for the joint venture towerco – but also their potential, with MSAs secured with both Oman’s existing MNOs and with soon-to-launch Vodafone Oman in Q2 of this year. OTC are expecting to be heavily involved in the deployment of ~4,400 5G base stations, some on existing sites, many on new sites. OTC is currently in talks to take further sites from Omantel and Ooredoo. It was evidently clear that the new towerco has big ambitions for organic growth and we can expect OTC to acquire more portfolios in the next three to six years. 

Much of the discussion focused on 5G as a driver for the professionalisation of infrastructure sharing. From 5G forcing the upgrade of tower structures and power systems, providing a natural window for the emergence of towercos, to the role of towercos in smart cities and Mega Projects, the next generation mobile network is giving the MENA tower industry an injection of momentum. Towercos’ focus on macro sites will diminish, with large macro sites becoming one part of a broader suite of products, including street furniture and an increased emphasis on small cells and DAS/DIS, and which may expand so far as to see towercos exploring opportunities in fibre – particularly last mile fibre to the tower. Helios Towers revealed that they already had edge data centres up and running.

- While nothing was said with a microphone, don’t preclude the possibility of the Zain and Mobily towers coming to market either through another crack at a sale and leaseback, or in partnership with TAWAL.

- TAWAL have ambitions to increasing their scalability both organically and inorganically with regional aspirations outside of Saudi. 

- KSA is spearheading 5G rollout with the largest deployment of 5G operationally in the region. More than 2,000-3,000 5G sites are active and rollout is predicted to accelerate in 2020. 

- There is significant momentum in gaining alignment between municipalities and telcos, mostly driven by the regulator CITC. 

- stc’s acquisition of Vodafone Egypt may further alter a landscape that looks increasingly attractive to build-to-suit.

- In terms of inorganic growth opportunities, where once towercos perhaps had reservations about tackling the rooftop-rich site portfolio in the country (~40% rooftops compared to ~15% in the rest of Africa), now there is appetite for all site typologies.

- Resolution of the subsidy of diesel prices remains the number one challenge to closing ESCO agreements in Egypt, with RFQs coming out of Etisalat Misr and Orange Egypt

- Interest from IHS and other international towercos in this country, which is regarded as one of the most business friendly in the North African countries.

- No regulatory hurdles as such presented in the region, more so the need to break into the market with support from local partners. 

- Orange and Vodafone will be the key drivers of change in this market.

- Morocco has significantly more available capital than SSA markets, which will play a key factor in terms of potential pricing of SLBs, or BTS rollouts.

- The tower industry in Pakistan continues to flourish, with edotco and Enfrashare each building several hundred sites per year, joined by some impressive independent developers including Associated Technologies, AWAL and other independent developers.

- Stakeholders seem increasingly bullish that 10,000 Jazz towers will finally trade this year, while rumours persist that Ufone will bring their towers to market.

- Expect an announcement soon of Pakistan’s first substantial ESCO proof of concept.

- Oman Tower Company set to change the competitive landscape with ambitions growth plans. 

- Oman Satellite Company is launching in the next 2/3 years will provide new opportunities for existing and new players. 

- Plenty of tender opportunities for new and existing vendors to build relationships with OTC in areas of O&M, site security, tower strengthening and hybrid solutions. 

- OTC is involved in an ESCO tender with Omantel and Ooredoo for 200 sites.

- Country risk and sub US$3 ARPUs continue to hinder investment in communications infrastructure.

- Active sharing is mooted between the country’s MNOs

- Towerco Asia Consultancy Group are focusing efforts to become a national fibre provider. Their strategy is to provide internet to the country, delivering real 3G and real 4G. In connection with digital TV station and fibre to the home (FTTH), within next two years ACG is seeking to deploy a datacentre for cloud services. 

Conversations about Kuwait were largely confined to corridors in anticipation of a landmark deal closing imminently, which as expected has come to fruition. We eagerly await the transformation IHS Kuwait will bring to this region.

Much interest and discussion sided on the topic of carve-outs and whether TAWAL is a blueprint for other MNO carve-outs? This begs the question; are we going to see more carve-outs in the region? Will MNOs geo-clone their European carve-out strategy into other regions in which they operate? This remains yet to be seen. The signs are notable that MNOs are eager to find value creation strategies and are moving on from being a service-oriented technology-based business to one of creating value.

With discussions still centred on the challenges still prevalent to doing business in MENA. These varied from macro topics on good governance, having clear and defined regulation to political stability, to micro topics on developing solid relationships with MENA’s MNOs and towercos and developing win-win partnerships with municipalities.

Transformation of the MENA tower market to date should be celebrated with modesty as a lot of work remains in order for the market to fully embrace the international towerco model. With ambitious BTS growth plans set out for both towercos and MNOs, as well as new entrant IHS in Kuwait, we expect to see promising developments in the coming twelve months in this new emerging market.