The new look of the Colombian tower industry

For the last couple of years, Colombia had been waiting for the 700MHz spectrum auction that promised to improve both 4G coverage and capacity across the country. Last December, after many delays, the Ministry of Information Technologies and Communications (MinTIC) finally conducted a process that brought a new player, very ambitious coverage obligations and a breath of fresh air for the country’s tower industry. The much-awaited 700MHz auction will massively expand connectivity by pushing MNOs to expand their networks in rural and remote locations, where they will need to rollout a considerable number of macro sites over the next five years. This editorial explores MNOs rollout plans, Colombia’s regulatory regime and the emerging opportunities that the auction is opening for the telecom infrastructure industry.

Since current President Iván Duque took office back in 2018, Colombia has massively improved its 4G connectivity, going from 13 to 21mn of people connected to the internet through that technology. According to MinTIC, there are 6,96mn people with fixed internet access and 30,9mn mobile users, of which 69% use 4G. However, the government estimates that more than 20mn people still don’t have access to internet at all, stressing a crucial connectivity gap across the country. 

The 700MHz auction was only the first step and now MNOs and their infrastructure partners must get to work. Thousands of new towers are needed in the country and the Covid-19 outbreak has proven that Colombia cannot achieve progress without massively investing in digital infrastructure. The response from the operators have been very positive so far, and the pandemic has pushed both the operators and the government to accelerate deployment plans in order to satisfy the increasing data demand that the virus is driving globally. 

The country’s first auction in low bands over the last two decades was quite an historic milestone and the three winners made considerable financial efforts, as the process generated a total of US$1.5bn. The highly desired 700MHz spectrum licenses include obligations to bring 4G connectivity to 3,658 rural locations across 32 departments, with all networks having to be operational within five years. Therefore, MNOs will finally be able to expand their 4G coverage while also preparing for the arrival of 5G. Further, the arrival of Novator Partners will drive competitiveness and hopefully contribute to bridging the digital divide, while offering new opportunities to the tower industry to build macro-sites in rural and remote locations. But not only.

In fact, Tigo has already made good use of its 700MHz band in Bogota, Medellin, Barranquilla and Cartagena by installing over 100 new urban antennas during the last few days of April. Tigo’s CEO Marcelo Cataldo confirmed that despite Covid-19, the company has a firm rollout plan and is likely to have deployed around 400 point of access across 40 municipalities by the end of May. The company is set to cover 1,636 new locations and invest around US$750mn in a rollout process that targets 95% national coverage over the next five years. Millicom bet heavily on Colombia and acquired 40MHz in the last auction, becoming the MNO with the biggest portion of the 700MHz band. For the first time, the MNO will be operating low bands so its network requires important upgrades. Plenty of overlays are expected, while the telco will also be decommissioning and building new sites, generating a good pipeline of both macro and alternative urban solutions for its infrastructure partners.

The other MNOs are set to follow and even though plenty of new macro sites will be needed for those remote areas, low bands will drive demand of shorter typologies, small cells and DAS for urban areas across the country.

América Móvil’s subsidiary Claro Colombia has also been very busy during the pandemic and the company has already finalised the deployment of its infrastructure on the 2.5GHz band. Following December’s auction, regulator MinTIC has quickly handed the permits to operate that band to the telcos. Thus, Claro decided not to waste any time and started using the 30MHz acquired to increase capacity and satisfy the exponential increase in data demand. Over the last few weeks, the company has been making upgrades and changes to its +7,500 towers while also expanding its network across main cities and around 800 municipalities, investing over U$21mn on the initial spectrum payments and network improvements. The MNO has completed 70MHz of 4G and 4.5G technology while increasing speed and user capacity between 20 and 35%. Now, Claro will start its rollout on the 700MHz band to bring connectivity to 280 towns of the total 1,348 remote towns that the company needs to cover before 2025.

Unlike incumbents Claro and Tigo, Telefónica left December’s auction with empty hands, fuelling the rumours of a potential sale. However, in an interesting twist, the Spanish giant’s subsidiary has now started its 5G trials in the country, while also strengthening its network to satisfy demand during the pandemic. The MNO is now collaborating with Huawei and the Bogota’s Ministry of Health and installing 5G nodes in both the city’s Health Secretariat and the Public Health Laboratory. Those nodes have been connected to thermal cameras to control in real-time the body temperature of more than 400 employees – a great example of the benefits of cooperation between the public and private sectors to provide critical services with the help of 5G technology. MinTIC has permitted Telefónica to utilise 3.5GHz spectrum to test 5G and develop the initiative. Moreover, Telefónica’s CEO in Colombia Fabián Hernández, stated that the MNO will now double its 2019 investment, focusing on FTTH, cloud services, IoT and artificial intelligence.

The company has sold most of its sites in the country over the last decade and has been focusing on overlays and upgrades on existing sites rather than growing organically. In Colombia, it has also done some co-locations while closing sharing agreements with competitors Claro and Tigo, a strategy that Telefónica has also implemented in other Latin American countries. However, not having access to the 700Mhz band will push the company to build new sites and densify its network to face the surge of data demand that is expected over the next few months if the company plans to continue competing in the country. The MNO has consolidated its Latin American businesses under an independent unit and while its plans for each country are unclear, it looks like Movistar will continue investing on its Colombian network and optimising the use of the 350MHz band while exploring an exit if the right offer comes.

After getting a lot of attention with its big take on December’s auction, the new kid on the block Novator Partners did not get off to a good start. The company returned a 10MHz block on its 2,500MHz band and regulator MinTIC has imposed a fine of U$12mn. However, the London-based investment firm – that also manages Chilean MNO WOM – plans to initiate its necessary rollout before the year ends. Partners has committed to reaching 674 rural municipalities and is already in talks with leading towercos. The company’s goal is to launch commercial operations by Q221 and in order to do so, it needs to start ordering a considerable volume of BTS and co-locations. Further, the investor has been reportedly considering a takeover of both Movistar and Avantel – which now has a small market share – in line with the strategy they followed in Chile when the company acquired Nextel five years ago.

After a few quiet years, the arrival of a new and rather aggressive player and the ambitious coverage targets set at the latest auction guarantee plenty of action in Colombia. MNOs will continue expanding their networks across the country’s main cities, while also dealing with the numerous challenges of building new sites in remote and rural areas across its vast and diverse geography.

As almost every single country in Latin America, the decision-making power on land use and infrastructure rollout permitting falls under hundreds of different municipalities and local authorities with varied standards. Back in 2015, the country introduced the 1753 law that allows telcos and towercos to start building a site if they have not received a legitimate response from the authority after two months of applying for the permit. On April 13, the government issued the 540 order as a response to the Covid-19 emergency. The order reduces the response time to ten days, after which enterprises can start their rollout if they haven’t received feedback from local authorities – a great response from the regulator to guarantee connectivity and support the industry.

The Comisión de Regulación de Comunicaciones (CRC) – part of the Ministry of Information Technologies and Communications – has been leading different initiatives to help the industry in overcoming the bureaucratic barriers that stop infrastructure development. The 1753 law had allowed the institution to analyse the different local laws and procedures of each municipality, passing recommendations to the local authorities based on their studies. However, those recommendations have not had the desired impact and the government has now added a much more efficient incentive: the municipalities that CRC accredits as “barrier free” will be included in a list to receive direct support from the Ministry in developing telecom and connectivity projects. The CRC has received over 60 consultations in the last month, more than during the whole last year. The Commission will continue working with towercos, MNOs and local authorities to connect 20mn Colombians over the next few years.

In addition, MinTIC was the first Latin American regulator to establish a 5G plan, which among many other things, aims to facilitate the necessary infrastructure development by continue creating a favourable regime. The regulator wants to audit the selected 3,500MHz band for 5G development on Q321 hence there is a lot of work ahead for the industry.

For years, the lack of growth and demand from MNOs and the fierce – and sometimes irresponsible – competition made Colombia a rather unpleasant tower playground. Now, the arrival of Partners, the prospects for greenfield sites in rural areas and the need for network upgrades are putting Colombia back into the spotlight as one of the most investible towers markets in Latin America. Further, the government could be hosting another auction before the next year ends and new capital is expected to land in the country imminently. Actually, some has recently landed.

Although its entrant went a little unnoticed, African-based force IHS Towers entered the country’s tower industry right before Christmas with the acquisition of Cell Site Solutions. IHS Colombia has a portfolio of only ten sites, but we can assume that the company will leverage its expertise and financial capabilities to disrupt the tower landscape in the near-term.

For now, American Tower dominates the market, followed by Phoenix Tower International (PTI) and Digital Colony’s ATP, who might be following the group’s international strategy and exploring new verticals to complement its steel and grass offering. 

Consolidators will need to scout around the small, mid-size tower market for inorganic growth as Telefónica already closed what could be one of the latest relevant MNO-to-towerco sales in the market when the operator transferred 621 sites to PTI a few months back. The Spanish telco only retains a portfolio of around 300 very strategic sites that won’t be up for sale, unless an investor decides to take over Movistar’s whole operation in the country. Millicom has sold towers in the past too and it is unclear if any of its 1,000 remaining sites are transferable. Much clearer is Claro’s position, who is now more open to the idea of working with infrastructure providers but has decided to keep all its towers – maybe in preparation for a spinoff. With more than 600 sites in the hands of smaller towercos and independent developers, some acquisitions could take place once Covid-19 is over or under control.

On top of all these organic and inorganic growth opportunities, some infrastructure providers are exploring fibre development and some of them are even considering an entrance into the energy game, which could become a new interesting operational stream as demand shifts to remote areas with poor grid conditions. 

In summary, Colombia salutes a disruptive new MNO and sets up very ambitious deployment obligations for its reliable incumbent operators, which seem eager to explore collaboration and innovation opportunities in preparation for 5G. What’s not to like?