For the last few months, the emergence of 5G have kept many towerco executives awake at night. The new technology will have an unprecedented impact on mobile networks and infrastructure players are wondering how to accommodate the evolving requirements of their clients, from new energy setups to the need for lighter, shorter poles and indoor densification. We invited several telecom infrastructure executives and experts to analyse how towercos should transform their offer and business model in preparation for 5G. Here are some exclusive insights from the 6th TowerXchange Meetup Asia.
Although nobody in the industry is 100% sure about how 5G networks will look like — and indeed, 5G networks will vary from country to country depending on the spectrum used — everybody knows that many more sites will be required. The implementation of different typologies has been one of the biggest discussion points for the last couple of years. In the meantime, the exponential increase of data consumption in Asia (and globally) is demanding densification and MNOs across the continent are in need to deploy more and more points of access in high-density urban areas, where the limited accessibility to real estate is posing severe challenges. Therefore, towercos and manufacturers need to offer new, light structures that fit in smaller spaces while also looking at friendlier solutions that reduce the visual impact of traditional macro-sites. Innovation also means using new materials and leaders such as Indus Towers and edotco are exploring more environmentally friendly options such as bamboo and carbon-fibre towers.
From an operational standpoint, energy remains the biggest concern for the industry when looking at the 5G transition. Indus Towers’ COO, Tejinder Kalra, suggested that the MNO landscape is getting more competitive and aggressive, especially in India, and towercos need to find ways to help their clients in reducing both the use and the cost of power. The transition from diesel generators towards more efficient solutions such as solar panels and Lithium-Ion batteries is a first step, but that won’t be enough. The executive highlighted that Indus is exploring how to shift from a reactive maintenance approach to a more predictive, remotely controlled and intelligent maintenance model that can reduce cost and increase efficiencies.
New typologies and technologies such as edge data centres, poles or small cells will have very different energy requirements so towercos need to quickly figure out how they are going to adapt and operate them. In some markets this will offer an opportunity for towercos to get involved or increase their role in optimising energy management and consumption.
Thinking ahead
When talking about innovation in Asia, Protelindo quickly comes to mind. The Indonesian leader has been a pioneer in identifying new revenue streams and seizing the opportunity to go beyond the traditional steel and grass approach.
Back in 2015, the company acquired iForte and absorbed a portfolio of 450 microcells as well as 700km of fibre; now Protelindo owns over 30,000km of fibre across the whole country — mostly built on demand. Mobile phone penetration and data consumption have been growing exponentially in Indonesia and the towerco quickly realised that traditional macro-sites were not going to be enough to satisfy that boom, especially in urban areas. iForte’s acquisition facilitated Protelindo’s entrance into the small cell arena and since then, the company has been organically growing its non-tower portfolio by rolling out fibre and new site typologies while also acquiring companies that complement that strategy such us KIN in 2018, when the company absorbed 300km of fibre across six different islands.
Two years ago, non-tower profits represented 5% of Protelindo’s total income. In 2019, that percentage doubled. While macro-towers still account for most of the company’s business, Protelindo will continue connecting as many towers as possible in order to have a fiberised network just on time for the 5G arrival. Further, demand for micro cell poles (MCPs) in urban areas will increase as a way to avoid issues with permits that don’t allow to build more macro-sites.
In the eyes of investors, fibre is not as attractive as traditional towers since it does not generate the same returns and is more capex intensive. However, in the long run Protelindo expects its valuation to keep going up and to leverage a competitive edge against other players that don’t have the same capabilities on their portfolios. In the words of Protelindo, the returns of having one tenant on their fibre are acceptable and they are of course aiming to co-locate other clients on their current backbone. Protelindo is very cautious about its last mile and the company always provide at least the last 500m connection to their towers.
Currently, fibre does require considerable investment efforts with little returns. But can towercos survive without it in a 5G world?
A different approach
Alike Protelindo, Malaysian leading towerco edotco has also understood the increasing critical role of fibre in future networks. However, the company is betting on a different ownership model and has decided not to own the backbone but to partner with experienced providers for its rollout. In the words of its CEO Suresh Sidhu, “the future might not require that much ownership over new assets, but you will need the skills and the ability to build the right ecosystem of partners.”
In Malaysia, edotco is also going beyond traditional towers and leveraging urban infrastructure such as traffic lights and bus stops, which are assets often owned by municipalities hence requiring a completely different acquisition approach. edotco decided to take over the whole value chain and explore how to monetise all the available revenue opportunities. For a year, the company has been exploring how to develop a successful ownership and operational model on these assets and has been even involved in the design of a bus stop that can host the required equipment, and where the company can benefit from advertising profits.
During a one-to-one interview on stage with our founder Kieron Osmotherly, Indus Towers’ CEO Bimal Dayal also addressed the potential of “non-telecom revenues” and confirmed that the company has closed a very profitable partnership with an advertising company on a smart city project. Further, he also commented that another enterprise has approached them to install sensors on their sites to collect data on air quality and pollution. The arrival of electric vehicles also presents interesting opportunities, as their charging stations bring another great co-location alternative in urban areas in the new 5G context. “Indus looks at sites as pureplay locations and we want to monetise them in each possible way, hence we are looking at synergies beyond traditional telecom clients,” Dayal stated.
Smart players will have to think outside the tower in the quest for new revenue streams but a big question arises: how do you integrate all those verticals under the same umbrella? Indeed, this new world calls for a new set of skills and capabilities.
What is the potential for a standalone small cells business?
India-based, indoor solutions provider Space World gives us the answer. “With 5G, over 70% of the data demand will come from indoor scenarios hence we’ll need antennas that are closer to the end user. Sites will also need to be closer to each other and we believe that both DAS and IBS complemented with small cells will be the solution for those spaces,” Space World founder Ankit Goel commented. As many others, the company is currently trying to develop shareable small cell solutions that can bring down the access cost for MNOs while also exploring potential synergies with municipalities, airport and universities among others. In this context, both operators and towercos need a more proactive and collaborative approach with those outsiders — who can also massively benefit from the technology if they are willing to exploit those partnerships.
Now, small cells are considered an immature technology. Many vendors are involved in the process of putting their products and packages together but with several parties involved in the value chain, the cost is still fairly high. Finally, the scale element is missing so the equipment remains expensive when buying relatively small quantities.
Huawei is at the forefront of small cells development and is one of the most advanced vendors in the 5G technology space. The company is globally exploring different use cases and collaborating with MNOs, testing different 5G applications and executions. In China, gaming is the second driver for data demand after social media and that kind of consumption requires a lot of capacity, mainly indoor. The Chinese vendor and Indus Towers are trying to bring the data closer to the point of consumption to reduce latency and testing edge data centres integration in some sites.
Managing a widespread portfolio of millions of small cells will also require automation, as you need to set up a remotely controlled operation that can keep the cost structure and establish a viable business model from both operational and financial perspectives.
Are towercos ready for 5G?
Negative — as the new, unexplored use cases will require plenty of technology innovation. In the case of India and other Asian countries, regulation doesn’t allow towercos to own any electronic equipment and it is yet to be seen whether new laws will allow towercos to own small cells and rent access directly.
Both Indus Towers and edotco suggested building a collaborative ecosystem where towercos partner with specialised small cells companies and fibre providers that can supply equipment and last mile connectivity. High-speed data and low latency require lower structures and indoor systems abundance, so creating an end-to-end solutions with a minimal cost remain the key challenge for towercos.
The role of regulators
We have been hearing this for years, but a supportive approach from regulators will be even more critical in the transition towards 5G. In Indonesia, the government has sponsored a fibre connectivity initiative for remote locations but Protelindo demands the same level of support for urban areas, where infrastructure players need a clear regulation and the ease to deploy from both a permitting and a financial perspective.
As discussed, a lot of 5G infrastructure will be deployed in public spaces, including street furniture or government buildings, hence governments and municipalities need to facilitate access to those assets and really embrace the public service offered by digital infrastructure.
The Malaysian Communications and Multimedia Commission (MCMC) has even established a national 5G Task Force to study and develop a holistic strategy for 5G deployment in the country. The institution has set up a national fibreisation plan to financially support and accelerate enterprise B2B 5G deployment. So far, edotco has been one of the first towercos to work with Malaysian MNOs that are currently testing and deploying 5G initiatives. The parties have been granted a spectrum as well as financial support to test how you can develop a shareable 5G network for business.
Advocacy will be fundamental and as edotco’s CEO pointed out, “towercos’ mission often matches public interest, which gives the industry a unique position to work with regulators.” It is time to maximise that opportunity.
Panelist:
- Jon Atkin, Managing Director, RBC Capital Markets
- Ankit Goel, Founder and Managing Director, Space World
- Tejinder Kalra, Chief Operating Officer, Indus Towers
- Anil Chet Karamsingh, Head of Strategic Initiatives, edotco Group Sdn Bhd
- Jacopo Rigamonti, Head of Marketing, Sales & Leasing, Protelindo
- Zhibing Xu, Vice President, DIS Product Line, Huawei
