The second Annual TowerXchange Meetup MENA brought together some of the most senior and influential players from Middle Eastern MNOs and towercos in Dubai for discussions on the future of 5G in the region. Heavy hitters commented on 5G throughout the two days. We share some of their views on 5G trials, live networks and the future vision of 5G rollout. Comments below are drawn from contributions from Abdulrahman AlMoaiqel, Chief Commercial Officer, TAWAL, Steve Howden, Senior VP and Deputy CFO, IHS Towers, Majid Al-Kharoosi, CEO, Oman Tower Company, Kash Pandya, CEO, Helios Towers, Salah Medawar, Chief Commercial Officer, ieng Group, Wiktor Barcicki, Group Senior Director Technology Economics, Etisalat and Gayan Koralage, Director Group Strategy, edotco.
The story so far
With some governments advocating their digital transformation and smart city ambitions and operators competing for deployment leadership, 5G has fast become a reality in the MENA region. As of Q4 2019 according to GSMA, as many as ten operators had launched commercial 5G services in six states in the Gulf. It is expected that 5G activities will become more widespread across the region with more trials taking place and the increase of commercial launches. The GSMA predict that by 2025, there will be 45 million 5G connections across the region, accounting for 6% of total mobile connections.
Across MENA, MNOs are focussing on demand hotspots for 5G, where the technology can help eliminate data bottlenecks and also create the most opportunities for boosting ARPUs. Progress in 5G is not only being driven by commercial pressures, but by regulators that have set conditions on operators to rollout. There are however many other markets which are 1-3 years behind in developing a 5G rollout.
5G business cases for towercos
5G brings with it new business opportunities for towercos in the form of small cells, fibre and edge data centres, but ascertaining the scale of these opportunities remains difficult at present. The degree to which traditional towerco business models, i.e. monetising traditional macro sites, will be eclipsed by new sources of revenue remains unclear, although Helios Tower have discussed non-traditional revenues reaching 10% of total revenues in ten years’ time.
Steve Howden from IHS Towers expressed that macro sites are going to become one of a suite of options that towercos will provide in future. Kuwait aside, IHS Towers are not upgrading macro sites for 5G in their existing markets, but they are ready to offer additional space for 5G antennas and equipment when needed. IHS Towers already has a DAS offering as part of their service offering and are expecting to see increased demand for DAS and small cell installations as the need for indoor connectivity grows.
Macro sites will of course help with densification of 5G and existing macro sites will continue to be leveraged to provide densification. There could be an opportunity for tower/fibre bundling in the future with microwave backhaul replacement and fibre backhaul increased. IHS Towers are currently assessing markets where they can offer fiberisation to help manage increasing volumes of data. But it is a major decision and change in strategy to invest in horizontal as well as vertical infrastructure.
Abdulrahman ALMoaiqel of TAWAL, stated that in Saudi Arabia they did not expect build-to-suit 5G requirements to be large. Instead they expect to be providing in-fill and filling the coverage gaps by turning single tenant sites into multi-operator sites. The co-location and upgrading of every possible site is the number one priority for the newly established towerco, allowing all operators to depend on their reliable infrastructure.
Saudi operators are testing the waters, focusing on 5G hot spots and where the demand is likely to be, including smart cities and new industrial cities and determining which areas need investment. Thus far the country has the largest deployment of operational 5G. Three of its operators are launching 5G networks on existing spectrum and new ready-allocated spectrum with more than 2,000-3,000 5G sites already active. This figure is expected to accelerate in 2020.
Heatmap of 5G activity in MENA
In Oman, Oman Tower Company has already begun constructing fiberised towers, ready for 5G. Wholly government-owned Oman Broadband Company will begin in 2020 to rollout fibre for the country’s MNOs, with OTC already having a signed agreement in place to build new sites, as shared by Majid Al-Kharoosi, CEO of Oman Tower Company. Due to the geography of Oman, with desert, mountains, and widely spread oilfields which would otherwise not be populated, it is difficult to fiberise all towers. However because fiberised towers enable an uplift in ARPUs there is robust demand to fiberise.
Kash Pandya of Helios Towers said 5G and last mile connectivity presents an opportunity for towercos to partner with MNOs and fibrecos, helping to create extra revenues and enhance end-user experience. It is the hope that regulators will facilitate the rollout of 5G by allocating spectrum, at affordable prices making it amenable to invest and rollout. Macro sites will facilitate the initial launch of 5G but street furniture will come quickly, providing an opportunity for towercos to invest in this area.
In Malaysia the Government has shown a link between broadband penetration and economic growth, indicating that a 10% increase in broadband leads to 1.8% increase in GDP. Despite the wider benefits, according to Gayan Koralage, Director Group Strategy at edotco it is the operators that are slowing 5G investment as they are not able to yet monetise those benefits themselves. 5G has been ready for a few years however the pushback is coming from the MNOs who have been slow in the rollout of 5G indicating that the business case is not quite ready.
Gayan expressed that we need a mass market 5G product in order for towercos to be ensured of new sites. With a third of the global population categorised as “Gen Z” born after 1994, these are the biggest consumers of data. Therefore offering high speed data through 5G efficiency to this percentage of the world’s population is essential for telecoms businesses to succeed.
Economics of 5G
The economics of 5G are very difficult – there’s no single business case to map returns. As expressed by Wiktor Barcicki from Etisalat, 5G business cases also cannot be isolated. It is impossible to treat 5G as another value-added-service (VAS) and expect to make a decent return. With 5G being interlinked with existing technologies on both cost and revenue, it is impossible to show a pure return on 5G investment. Whist MNOs can identify costs such as network and spectrum how do MNOs allocate costs to 5G rollout when it uses existing infrastructure, such as existing dark fibre? These present challenging questions for the 5G business case coupled with the challenge of defining and allocating revenues when you have continuous migration from 4G to 5G.
Steve Howden from IHS Towers commented that towercos need to stick resolutely to what is in place from a contractual point of view. Given that this is the basis of how infrastructure companies operate – the contracts matter and play a significant part of the business model. Of course new solutions such as DAS or small cells, or shorter/lighter towers will inevitably evolve the business model in future years and IHS Towers anticipate a consolidation of infra-service provision to mobile network operators.
As discussed by Abdulrahman from TAWAL there will be an evolving product line for towercos. Alongside street furniture evolving requirements will depend on a reliable fibre backhaul. Bundling will take place more with 5G, which will help create some value-added services from an infrastructure company perspective. Bundling with fibre could help with additional revenues and protect margins.
With towercos having their own structure and rate card for existing customers, it is expected that the returns on investment will remain unchanged.
Seeking partners for 5G
There are regulatory challenges aligned to the rollout of 5G and these vary from country to country. It is clear that both municipalities and regulators can help with 5G rollout and allowing companies’ access to street furniture and facilitating investment in 5G spectrum.
A good example is Oman, where towerco Oman Tower Company and operators Omantel and Ooredoo are collaborating with government entities and the support of the regulator to rollout 5G. In Saudi Arabia there is huge momentum for the alignment between municipalities and telcos driven largely by the regulator with initiatives towards fibre sharing in the country.
In order for the telecom towers industry to progress with 5G and smart city projects, collaboration between governments, regulators, MNOs, towercos, fibrecos and other service providers is key to successful rollout. Government support for access street furniture and assistance with permits are mandatory to speeding up the implementation of these new technologies.
With the proliferation of 5G, the telecoms value chain as we know it will change and towercos, infracos or new players taking ownership of different elements of the chain. As we think about DAS, small cells, shorter and lighter towers, the business model will inevitably change taking into account new offerings, together with evolving economics and funding structures thus making the 5G world an exciting one – for telecoms, towercos and investors alike.
The majority of 5G launches in MENA are still a few years away, though 5G coverage will rise steadily in the period to 2025
Conclusion
Summarising the challenges and opportunities Salah Medawar Chief Commercial Officer, ieng Group said network architecture upgrades are needed to support 5G. Firstly towers need to be shareable and used by several operators. This process is now underway in earnest. Secondly towers need to be fiberised. In places that is a massive challenge, for example in Pakistan only 6% of towers are fiberised. And thirdly the unlocking of street furniture including advertising billboard, traffic lights, lampposts, et cetera is essential for MNOs and towercos to utilise these existing assets to deploy 5G equipment.
As MENA progresses with the rapid rollout of 5G services, we can expect the early adoption of 5G technology by the mass market to follow a familiar pattern. According to Huawei the adoption of 2G took ten years to reach 500mn subscribers, nine years for 3G, five years for 4G and three years are expected for 5G from 2019-2022, suggesting a rapid 500mn uptake.
Whilst some countries including Saudi Arabia and the UAE have spearheaded the rollout of 5G, we can expect to see 5G activities become more widespread across the region, with trials and commercial launches expected in non-GCC countries. GSMA stated that by 2025, there will be 45 million 5G connections across the region, accounting for 6% of total mobile connections. And it is envisaged that 5G will contribute US$52bn to the MENA economy over the next 15 years.
It is clear that the digital ecosystem in MENA is evolving rapidly, with the emergence of new digital services and increasing interconnectivity through digital infrastructure. Whilst 4G may be the dominant technology for the foreseeable future, the underpinning challenge for MNOs and towercos is deciding not if but when to invest in 5G, as we move into an era of smart cities and automation.
5G headlines from key markets in Middle East and North Africa
UAE
- 80% of the country’s populated areas and main cities are now covered by 5G networks
- Etisalat 1,000 5G sites and completed first 5G call in MENA
- du deployed more than 700 5G sites
Saudi Arabia
- 2018, Saudi government established the National 5G Task Force to support the development of 5G
- stc deployed 450 5G sites under first phase of rollout
- Zain KSA expanded coverage of its 5G network to 27 cities with a total of 2,600 sites. The operator launched 5G roaming between its networks in Saudi & Kuwait
Egypt
- Telecom Egypt and Nokia sign MoU to rollout 5G network
- Etisalat Misr completes 5G test trials with Ericsson
Bahrain
- Viva Bahrain (stc) 5G mobile and home broadband services are now available in more than 50% of the country
- Batelco signed deal with Ericsson and became the first MNO to launch a commercial 5G network in the country
- Zain Bahrain selected Ericsson to deploy 5G service
Qatar
- Ooredoo partnered with Ericsson to launch 5G services and deployed Ericsson’s spectrum sharing technology as a first in the Middle East. 100,000 mobile customers have signed up for Ooredoo’s 5G packages
- Vodafone selected Huawei to roll-out its 5G which covers 70% of the capital Doha. The operator also launched the Gulf region’s first 5G MiFi mobile hotspot device
Kuwait
- Ooredoo launched 5G services and devices in collaboration with Huawei
- Viva Kuwait (stc) has more than 1000 sites covered by the 5G services launches enterprise ‘5G Connectivity’ service. It has signed an MoU with Huawei Technologies to develop 5G IoT solutions
- Zain Group launched first MENA intra-region commercial 5G roaming between its networks in Kuwait and Saudi Arabia
- All three mobile network operators Viva, Zain and Ooredoo have launched 5G smartphone packages
Oman
- TRA revealed 5G roadmap as part of Oman Vision 2040 strategy
- Omantel deployed over 100 5G sites and plans to increase total to 2226 by 2024
- Ooredoo Group selects Huawei Technologies to enable 5G networks and has launched its 5G home internet
- 1,000 new BTS will be deployed in 2019-2020 between Omantel and Ooredoo illustrating the countries readiness for 5G mobile services.
