Last July, TowerXchange hosted its first virtual Meetup Americas, gathering 491 global telecom infrastructure experts for two days of discussions and knowledge sharing. Senior representatives from Alt’n Redes, Telesites, Mexico Tower Partners and Torrecom led an interactive, virtual roundtable discussion that analysed the main trends, future opportunities and hurdles that the towercos are facing in Mexico. This editorial explores the key discussion points and explores what lies ahead for the telecom industry in one of the biggest and most dynamic markets in CALA.’
Red Compartida’s expansion
Back in 2016, Mexico’s telecom regulator and investment institution PROMTEL launched Red Compartida, a pioneer wholesale network that aimed to provide connectivity to 92.2% of the country’s population by January 2024. At the beginning of August, Alt’n Redes’who is responsible for designing, deploying, operating and commercialising Red Compartida’s network’is covering over 56% of the country using over 5,400 sites. The enterprise, which has already initiated its next rollout phase, provides internet and mobile services to over 30 clients including MNOs, MVNOs and other enterprises though the use of 90Mhz of the 700MHz spectrum band. From the beginning, Alt’n Redes’ blueprint embraced the importance and benefits of sharing access to both the infrastructure and the spectrum, and the company has already collaborated with more than 20 towercos, from market leader Telesites to other mid-size and smaller entities among the country’s fragmented tower ecosystem.’
PROMTEL set up very ambitious coverage obligations and firm deadlines, which Alt’n has met rigorously by prioritising its network deployment across the most populated cities for the first couple of years of its rollout. Now, with more than half of the country covered, the project has to bring connectivity to rural and unconnected areas, creating an unprecedented BTS opportunity for the tower industry in Mexico. For the next three years, Alt’n aims to deploy over 6,000 sites to expand to unconnected areas and serve the project’s social purpose. Although the company has prioritised co-locations when possible, most of the upcoming deployment will require building new sites as many of those targeted areas do not have any infrastructure available.
Mexico-Estimated tower count 35,635
Organic growth, upcoming challenges and new streams
Among many other infrastructure providers, Am’rica M’vil’s spin off Telesites have been able to maximise the opportunity that Red Compartida brought to the telecom industry, with Alt’n being the main driver for its expansion. In fact, Telesites’ growth has exclusively meant building greenfield sites for Red Compartida while also working with the MNOs as the company hasn’t acquired any sites since its inception back in 2015. For the last five years, Telesites has built at least 1,000 sites per year, with this exceeding 1,600 sites in 2019. Now, COVID-19 is reducing the company’s development plans temporarily, but its management expects that new BTS orders will pick up again when the storm passes.’ Telesites is not keen on acquiring assets from small, speculative towercos as sometimes the quality of their structures don’t match its standards. The company emphasizes its great relationship with other big competitors though and it even has some agreements in place to avoid building sites next to its rivals.
Overall, Mexico has been a very successful venture for Telesites, and Alt’n’s defined action plan will continue providing steady growth for the tower industry, while both AT&T and Telef’nica’s strategies remain less clear.’ As mentioned earlier in the discussion, Alt’n’s geographical expansion will be very fruitful in terms of new sites, but also very challenging. Entering certain rural communities is tough, as both towercos and MNOs will face strong social opposition, while absurd conspiracy theories around 5G and COVID-19 will make it even harder in some towns over the next few months. The logistics will also be complicated and costly. Further, remote rollouts will push towercos to enter the energy game in Mexico as many of the new macro sites won’t have access to a reliable source of power. Despite the difficulties, many towercos seem quite excited about this new opportunity that can bring a profitable stream to creative players, ESCOs and renewable energy providers.
Torrecom, a very experienced player with towers in seven countries across CALA, anticipates a period of relatively low demand for new sites in the immediate term, but that will shift over the next year as the telco market consolidates. Towercos will lose a client after AT&T and Telef’nica’s last mile agreement is completed, but the former will have to implement considerable upgrades and expansions on its network in order to host all the new clients migrating from its competitor. In the meantime, Alt’n will keep driving organic growth for them and the rest of the towercos. Torrecom is bullish about the new phase of Red Compartida’s rollout but also conscious of the higher maintenance costs, difficulties around access and overall bigger risks of building sites in remote locations.
The tower industry still needs to figure out what is going to happen with all the existing infrastructure that Telef’nica is leaving and the company is rumoured to have around 4,000 sites for sale although it hasn’t been very opened about it. The market will go from three to two pure MNOs and the rest of the new demand will come from virtual operators. That consolidation will bring new demand and more traffic to the networks in the long-term, but how can the industry optimise the use of Telef’nica’s abandoned network once the migration is completed?
Torrecom also highlighted how the market is getting more and more competitive with the appearance of lots of small towercos that are pushing prices down. However, this challenge also brings a prospect for consolidators such as Mexico Tower Partners. In fact, the company, backed by Digital Colony, pointed out the three opportunities that towercos traditionally capitalise: more rollouts, more infrastructure sharing and densification. COVID-19 brings plenty of financial and operational challenges to the industry but also emphasizes the need of better coverage, hence MNOs will have to invest in network expansions and densification. Now, their investment plans could be negatively impacted, but in the mid-term MTP expects a considerable upturn with Mexican telcos deploying more capital to improve connectivity and competitiveness.
Altan’s new deployment phase brings a great co-location chance to the tower industry, not only because of the new numbers of new sites required. Red Compartida is enabling the entrance of lots of new virtual operators into the market, which will drive co-locations and improve tenancy ratios. In addition, more competition will continue pushing MNOs to improve their offering and therefore increase their capital expenditure for networks upgrades.
As stated earlier, MTP also expects AT&T to rise from the ashes once the deal with Telef’nica is completed. The company should step up its investment to be able to sustain the migration process and compete in this new landscape.
The future of Mexico’s telecom
Across the whole region, MNOs are shifting towards an asset light strategy, with the national examples of Telef’nica and Axtel. As their needs are also evolving and becoming more complex, MNOs want to reduce the number of companies they deal with hence towercos need to offer a whole package that goes beyond towers and provides a holistic solution. MTP is one of the many infrastructure providers in the country that is exploring different integration options to offer a ’connectivity package.’ Carlos Buitelaar the company’s VP of M&A and Corporate Development, highlighted a more collaborative approach between the country’s MNOs, which can also create new opportunities for the industry: ’Something very interesting that we have just started seeing in Mexico is more collaborative ecosystems in certain sites, with fixed mobile operators wanting to establish more points of presence. We have some locations with fixed and mobile operators as well as MVNOs where we see plenty of interaction, and we’d like to be the host of those interactions’, Buitelaar added.
There is a huge opportunity for towercos to provide not only towers but transmission, capacity, access to data storage and even energy in this market
With the arrival of 5G, the capacity of networks will be critical, as they will have to host much more data demand and supply. The pandemic is also increasing that need by creating an unprecedented rise in data consumption for towercos as well fibre and cable providers. In order to satisfy that huge demand’not only in the future 5G scenario but in the short-term’sharing infrastructure is the only way forward for the industry in Mexico.’ Alt’n pointed out that infrastructure players should offer not only access to real estate, but provide connectivity ’bundles’ with more capillarity and bandwidth. ’There is a huge opportunity for towercos to provide not only towers but transmission, capacity, access to data storage and even energy in this market,’ Juan Carlos Alfaro, Director of Implementation, Alt’n Redes stated.
Torrecom agrees on the above and the company is also keen on going beyond towers towards that connectivity offer. The company only builds on demand and when the sites have potential for co-location. In Mexico, we usually find too many towers close to each other, which reduces the overall competitiveness of the industry. Torrecom claims that Mexico still needs further improvements in the regulatory framework to drive a more organized growth of the industry.’ Doing this will introduce benefits in different aspects such as environmental by providing the means to reduce the indiscriminate proliferation of structures, social by improving the interaction between the industry and the communities, as well as others that will aid to fulfill the country’s objective of improving voice and data connectivity.’’ Miguel Ramirez de Arellano cited Panama and Chile as good regional examples.’ A more organized growth with a healthier competition will drive further participation from the towercos, which role as a facilitator to MNOs is closer to a partner than just a simple vendor by backing their expansion plans through tower deployment in exchange for a long term monthly rent.
Telesites also anticipates plenty of opportunities with the arrival of 5G. Its Director of Operations, Luis Diaz, expects densification to become a top priority for MNOs. Diaz agrees with the other speakers on the fact that towercos should become facilitators for the operators and provide a more complete offer and he mentioned two streams that can provide a competitive advantage for towercos in the future: transmission and energy. On the former and even though some regional players have started exploring fibre, Telesites prefers to stick to its traditional business model. However, there are plenty of synergies and partnerships that towercos can initiate to make MNOs’ lives easier on that front. In terms of energy, this is even more complex due the country’s complicated regulatory regime that makes it difficult selling power on the energy market. Again, Telesites sees towercos getting into the alternative energy game to help operators in reducing energy cost and their carbon footprint. Finally, he also highlighted security as a service that towercos can do better. He suggests that towercos should explore new tools to protect MNOs assets and work closely with their clients to secure the tower equipment.
All participants agree that 2021 will be critical to start understanding what is going to happen with AT&T and Telef’nica as the former will switch off the first regions under the agreement. The companies must have a plan in place but they haven’t shared it, adding a little bit more uncertainty to the process. AT&T should absorb some towers from Telef’nica, but most of the sites will not be reutilised and will be dismantled. Some co-locations that will be lost with Telef’nica could be added to Alt’n’s network. In addition, a towerco could acquire a selection of the Telef’nica legacy locations that work for Alt’n, although that wouldn’t be a huge portfolio. Finally, AT&T will need to build more sites and expand its presence, as some of its towers will be ’saturated’ when absorbing all the new traffic.
When talking about other particular challenges, a member of the audience asked what towercos should do when their MNO clients bring extra equipment to the sites without notifying it. In some cases, towers ended up looking like Christmas trees, they joked. Most of the participants agreed that in most cases, MNOs have urgent coverage needs and they quickly upgrade the sites, forgetting to notify their partners. The issue is that sometimes, the towerco offers a new location to another MNO and when they inspect the tower, it is packed with unexpected equipment. The experts reckon this will continue happening as networks are very dynamic and MNO expansion needs are often pressing. Again, Alt’n was brought up as the enterprise with best practises as they always notify and communicate with their towerco partners before uploading new equipment into the sites.
With plenty of organic growth ahead, a challenging but opportunistic consolidation process and many new streams to explore, Mexico becomes again one of the most promising and prolific markets for towercos in Latin America over the next couple of years. Stay tuned for more news and analyses as the upcoming months will be critical to redefine this evolving landscape.
