Uganda made telecoms infrastructure headlines at the end of last year when American Tower set up a 1,000 site joint venture towerco with MTN. Uganda was back in the news in June when Eaton acquired 700 towers from Warid and Orange. TowerXchange talks to Orange, UCC and Eaton to learn why infrastructure sharing is taking hold in Uganda.
By way of an introduction to the market, let’s take a look at Uganda’s operators and towers. MTN’s network has the most cell sites in Uganda, with growing data demands prompting them to recently install 78 new base stations and plans to deploy a further 300 3G+ sites, bringing their total cell sites in Uganda to 1,100 by the end of 2012. MTN command a market share of just under 50%.
Airtel, formerly Celtel / Zain, were the first GSM network in Uganda and have around a 20% market share and approximately 700 sites. UTL is the oldest network with some 500 sites.
Then there’s Warid and Orange Uganda, the latter of which reported an 8% market share in Q4 2011, having increased 57.3% in the second half of the year. ’Orange Uganda were the last market entrants in 2009, and we own 70% of the data market, largely on the basis of tariffs and speed,’ said Godfrey Kisekka, CTO, Orange Uganda.
As in many African markets, the entry of Airtel has prompted tariff wars. With low and still falling ARPU, there is pressure on operators’ cost structures. This provides motivation to work with independent tower companies and other outsourcing partners to stabilise and minimise operational expenditure, with reductions of 30% reported already.
We asked Orange Uganda’s CTO Godfrey Kisekka to explain the evolution of tower sharing in Uganda. ’I was at UTL (Uganda Telecom) previously. UTL was the sole telecom company in Uganda until Airtel (then Celtel) entered the market in 1995. MTN entered the market in 1998, and in the late ’90s UTL and Airtel started some modest tower sharing. Warid tried to share sites when they entered the market in 2007, but found it difficult and ended up building most of their own infrastructure. When Orange came to Uganda, we were under time to market pressure. Warid found it beneficial to share with us. While Orange did build some new sites, we also shared 180 of Warid’s sites, while they shared 80 of ours. By this point Airtel were also sharing many sites. And of course earlier this year Orange Uganda completed a sale and leaseback transaction with Eaton Towers.’
TowerXchange asked Kisekka, as CTO of Orange’s Ugandan operation, what was your role in the tower sale and leaseback transaction? ’As CTO I ensure integration between Group and affiliate activity on operational and strategic issues. Operational and capital costs were already under discussion, and we investigated the towerco model as well as various alternate models.’
’I had to gather lots of data to prepare the documentation for the RFP,’ continues Kisekka. ’We had a special local team supplemented by Group experts and the expertise of Sofrecom.’
What were Orange Uganda’s objectives in adopting the towerco business model? ’We freed up capital for build-to-suite projects. We were sharing infrastructure anyway, but our core competency is as a telco service provider. Eaton Towers specialize in those site infrastructure practicalities such as security and fuel, releasing opex savings greater than when we simply share sites with another operator.’
Orange sold 300 sites to Eaton Towers, who announced the deal in March 2012 together with the acquisition of 400 towers from Warid. Both deals were structured as sale and leaseback transactions. Warid had invested in building towers in prime locations with capacity for upgrades and additional tenants, and already had Orange on many of their towers, as well as tenancies from Airtel and a WiMAX operator. So tenancy ratios were up around two even before Eaton started selling further co-locations.
MTN Uganda and American Tower created a joint venture towerco in late 2011. American Tower paid $89m for a 51% stake in ATC Uganda, and approximately 1,000 towers were transferred to the new business.
Infrastructure sharing is off to a good start in Uganda, with both ATC Uganda and Eaton Towers Uganda having access to portfolios with excellent coverage. You can read more about Uganda from the perspective of Eaton Towers CEO Alan Harper in the interview here.
