October 13-14 saw the eighth edition of TowerXchange Meetup Africa, the first time the event had run 100% digitally. While we plan to incorporate digital elements into future shows, we hope that next year we will all be meeting again in Johannesburg.
Over 400 people attended in total, with over 200 attendees from towercos. All Big Three African towercos sent substantial delegations, with attendees tuning in from Nigeria, Uganda, Kenya, South Africa, Tanzania, Congo and elsewhere. Our networking platform enabled nearly 3,000 messages, and a number of lengthy video meetings. 63 speakers presented keynotes, spoke on panels and moderated roundtables, plus dozens of sponsors and delegates got involved in our interactive roundtables.
There were 20+ hours of content during the two day event, with most of it still available to view on demand (our interactive roundtables were held under the Chatham House Rule, and therefore were not recorded). If you work for a towerco or MNO please get in contact, we can send you the links so that you can watch one of the many keynotes and panels which took place, or if you want to review the videos submitted to our innovation showcase.
A land of opportunity
Our event kicked off with three presentations each emphasising, in different ways, the strong macro fundamentals which drive investment in Africa. Marek Busfy, COO for American Tower in Africa began by underlining the tremendous runway for growth by comparing Africa today to Europe. Across Europe 900 people are serviced by each base station; in Nigeria the number is closer to 4,500 people per base station.
Nigeria is a long way behind Europe in terms of development and would require 84,000 new towers to match Europe. Today there are just 30,000 towers in Nigeria. In Uganda, the same thought process would require another 21,000 towers. Even in South Africa, Africa’s most developed market, the country needs another 2,000 towers to reach the current level prevalent in Europe (and Europe continues to add 1,000s of towers each year). Even if Africa continues to lag Europe, as it surely will in the short to medium term, the latent demand for new sites will remain large and growing.
Population growth is also a major factor driving the bullish case for Africa. Tower demand in Africa is chasing a moving target. On current trends, the population of Africa will double by 2050. Every two years, Africa adds another France of population. That growth rate means that Africa needs another 9,000 towers just to stay still, which is roughly what Africa has been doing over the last three years. Much of this growth is already baked in; over 90 million Nigerians are under 14, almost all currently without mobile phones.
The story was similar for Helios Towers. Manjit Dhillon, interim CFO, pointed to the strong fundamentals driving growth in Helios Towers’ existing markets, and drawing them to deploy capital to move to 8+ markets and 12,000+ towers over the next few years. Helios Towers already serves 4 of 10 fastest growing cities. Helios Towers’ markets will have 37mn new people over the next five years, with 27mn more people moving to cities over the same period. 66% of their population is below 30, which represents a huge market of future mobile customers.
2020 has been a year of missed opportunity thanks to the COVID-19 crisis. New build has been healthy ’ when possible ’ in Nigeria and East Africa, but MTN have cancelled all but emergency capex in South Africa and much of the continent has either been under lockdown, or affected by supply chain disruption. The last few years as a whole have failed to see Africa do anything but keep pace with SIM growth, with SIMs per tower barely shifting overall. Eaton’s acquisition by American Tower, Helios Towers IPO and IHS Towers planned IPO have all acted to depress capex in one way or another.
Looking at Figure 1, we can see that Africa lags well behind the worldwide average for SIMs per tower. If IHS Towers successfully IPOs, Africa will have three large public towercos with healthy balance sheets, plus a raft of hungry smaller towercos looking to deploy capital. In the face of this growth potential the question facing towercos and suppliers should turn from ’how do I get my slice of cake,’ which made sense in the last few lean years, to ’how do we maximise the growth of this cake.’ That was the key message from American Tower’s Marek Busfy.
ESCOs take centre stage
Our most watched session at the event was the ESCO session which closed the event, further evidence that ESCOs have gone mainstream. Globally the IFC estimated US$4bn will be invested by ESCOs by 2030. Currently ESCOs only manage power at 1% of global sites but are responsible for almost half of total renewable energy powered sites. That US$4bn will push the number up sites under management up significantly.
The IFC are soon to launch a hotly anticipated report on the global market for ESCOs. The IFC has been investing in ESCOs since 2010 and hope that their report will help to size the market as well as identify the key stakeholders. In doing so they hope their analysis of the commercial models supporting the business will reduce risks and improve bankability. These are aims TowerXchange has shared since we published our own report in 2018.
To move to the next level however, our panel of investors thought that ESCOs required more standardisation. Each individual ESCO project remains risky, especially if residual ownership of any assets remains with the MNO client. But as an asset class and as portfolios of projects ESCOs are very attractive. Contract structure will need to change to improve bankability. Attention is now turning to these matters because many of the questions or operations and delivery have now been answered.
Etisalat, Safaricom and IPT PowerTech all sent representatives to discuss how to move the ESCO model forward. Etisalat reviewed both Egypt and Afghanistan as potential ESCO markets, abandoning Afghanistan because the security situation is so fraught, but Etisalat will issue an RFP in Egypt. Safaricom are looking to issue an RFP in Kenya too. For both, ESCOs offer a powerful way to accelerate adoption of renewable energy, while also pushing down opex.
Urban and rural
Africa is due for much investment. In the past, telecom investment has tended to favour urban markets. In Africa’s next phase, both urban and rural areas will receive considerable attention.
The firm making the biggest impact on rural areas is Africa Mobile Networks. Rural specialists who have been active since 2013, they have this year reached 1,500 rural sites. Africa Mobile Networks rely on OpenRAN technology to keep the capex and opex of their base stations as low as possible. Their breakthrough has come through adopting a revenue share model with mobile network operators, offering sites in areas that AMN’s own models predict to be profitable. Other towercos plan to follow suit, but AMN have a first mover advantage.
4G deployment will get a boost next year, with plans proliferating to rollout the technology. Many barriers remain, chief among them, transmission capacity. Without improved fibre backhaul, 4G will be restricted to urban centres. As well as underdevelopment, Africa’s inequality is also holding back investment because towers must carry 2G, 3G and now 4G equipment, limits are being reached on loading and power.
MNOs want to be able to roll-out at zero additional opex, but existing towers and contracts are making that hard. Jeff Schumacher, Commercial Director at Helios Towers indicated that he was open to finding a win-win solution, but it remains to be seen how terms for amendments will change. The MNO/towerco commercial relationship, which has stood since 2010 when towercos began their incursion into Africa, must change to accommodate new urban and rural models.
Operational excellence
Greening the network has leapt up the priority list for towercos and MNOs recently. At TowerXchange Meetup Africa the topic helped shape discussions across the agenda. American Tower announced its intentions to help influence the energy system which is developing across Africa. Africa is well placed to develop distributed and green generation, and the telecoms sector can help advance that. Similarly, with difficult supply chains and onerous opex, the low maintenance potential of renewable and hybrid solutions remains appealing.
To this end, American Tower have emphasised its interest in working with suppliers who are manufacturing within Africa. American Tower’s growth strategy relies on riding the growth driven by Africa’s strong economic fundamentals, but those fundamentals will only translate into economic growth if African industry develops. It also has the benefit of improving supply chain resilience. If you are a supplier producing in Africa please make sure you contact American Tower directly to discuss how they can support you.
For the time being though, many energy and operational innovations rely on components and innovations from outside Africa. One innovation highlighted at the show was the use of AI for predictive maintenance. Most towerco-owned sites are now collecting data on performance, the next step is deciding how to use that data to get results. American Tower’s Hisham Sabry has been looking at how sophisticated algorithms and machine learning techniques can predict future results based on historical data. Using data-driven insights is enabling American Tower to anticipate failures based on patterns, and proactively fix problems. Our Data Collection and Utilisation Working Group will continue to investigate innovations like this.
Conclusions
Since its early days a decade ago the telecom tower industry in Africa has matured into a thriving business that sits at the heart of the African telecom sector. ESCOs have also now reached a level of maturity that means they are here to stay as critical partners to the sector. However, unlike some other mature industries the runway for growth in Africa is substantial.
Sub-Saharan Africa must add around 9,000 towers per year just to keep the SIMs per tower ratio stable. As rural sites are added and 4G rollouts continue, 10,000s of new sites must be added each year. Although COVID-19 has seen big delays to planned capex, TowerXchange can understand why American Tower remain so bullish about its medium-term prospects.
The next milestone for the industry appears to be an IPO for IHS Towers. Capex by IHS Towers has been muted over the last 12+ months, and a successful IPO would put all three of Africa’s major towercos on strong financial footing to invest in new sites. Smaller towercos are also finding capital available to invest, Pan African Towers have a strong platform for growth with their 1,000+ sites in Nigeria, and Africa Mobile Networks look set to dominate rural coverage for the next few years. Newer towercos are also being formed, with ex-Eaton Towers and American Tower management ready to invest as independent towerco entrepreneurs.
Further write-ups and videos will be shared over the coming weeks, so please stay tuned.
