What’s the biggest challenge to closing infrastructure sharing deals? “The main challenge is that tower sharing is an asset deal where the assets are not always transparent. The risks are around the preparedness of sites – is the structure in place? Are all the permits and clearances secured? Is there a risk of ground lease disagreements?” Said Gilles Tre-Hardy, Vice President at Lazard. Lazard served as advisers of France Telecom-Orange in their recent deal with Eaton Towers in Uganda, so Gilles has some familiarity with gathering the data needed to sell towers.
The quality and comprehensiveness of data of on the network included in an operator’s RFP and data room can directly affect the valuation of the towers. “We inspect at least 10% of the sites and if the data’s not right, the valuation is reduced,” asserts Chuck Green, CEO of Helios Towers Africa.
When TowerXchange spoke to one active bidder on African telecom towers, they complained “data on the physical network is terrible! Bid documents are not great, and we like to check everything.” Another towerco recalled an instance where the operator’s co-ordinates of their cell sites suggested six towers were at sea! That particular transaction wasn’t in Africa, but the anecdote illustrates that tower location information isn’t always accurate.
“It’s a very bureaucratic process to build cell sites in Africa,” said a senior executive at an operator. “Government agencies are slow – if you waited for everything, you’d never achieve the rollout deadlines set by the government when they issue the license. So when you come to sell your towers, you discover there were things you needed and didn’t get – missing documentation, lost documentation due to staff turnover or a change of contractor. It’s a complex process to trace all that evidence, and in many cases you have to start from zero.”
TowerXchange has heard reports that in some African countries the issue of environmental permits is backlogged by five years. Under such circumstances, inevitably some operators have taken a pragmatic approach to rollout, and their documentation may never be complete.
Clifford Chance’s John Graham is familiar with the data problem: “The biggest frustration when dealing with tower transactions in Africa can be the slow deal cycle and difficulty in assembling the necessary information to commercialise a carrier’s sites.”
“Timing is slowed by the challenges carriers face collating information about their towers, getting that information to a state of preparedness where towercos are ready to buy them,” continues Graham. “Ultimately, we’re talking about selling assets that weren’t designed to be separated and sold, and in many cases the state of a carrier’s records are poor. Matters can be complicated by the fact that carriers frequently outsource site acquisition and passive infrastructure construction and may never have had occasion to ‘lift the lid’ on the record keeping of their contractors – it’s not always all there in terms of paperwork and permits.”
One of the reasons why these deals are so long and complicated is because there are so many stakeholders involved in the tower sites for each of the operators. From Group-level strategists to local shareholders, the CTO and existing network management team, and that’s before you get into layers of contractors and sub-contractors past and present. If everyone hasn’t ‘bought in’ to the concept of infrastructure sharing, getting people to retrieve essential documentation can be a lengthy process.
“Preparing even a modest data room can take months - some of our transactions took over a year to close for this reason,” adds Clifford Chance’s Graham, who goes on to conclude “despite the slow timelines, the track record of transactions in Sub-Saharan Africa is very good – most towers that come to market close – that’s not always the case in the Middle East.”
Different markets may require different data
Data requirements will differ from market to market, and you should use this checklist as a starting point only. This is also a “wish list”, and we wouldn’t want to discourage operators from exploring infrastructure sharing if their data sets are incomplete, although spending a couple of months compiling data before sending an RFP to towercos can be a worthwhile investment of time.
“Need to have” and “nice to have” data
Data in the “permits and paperwork” section is typically “must have”, much of the rest of the wish list may only be “nice to have” data at the outset. Detailed engineering and commercial analyses might follow after negotiations with towercos have started, and indeed they may be initiated by the towerco, but operators equipped with some or all of this information are better positioned to maximise valuations and accelerate deal closing. For example, conducting a full load valuation on several sites can be expensive, but it can yield significant returns by revealing hidden capacity in over-engineered towers, which has a positive impact on valuation.
Data Room Wish List, Version 1.0
Permits and paperwork
Reliable list of sites with accurate co-ordinates
Building, environment and civil aviation permits
Local authority approvals
Proof of payment of taxes
Ground leases, ideally extended where required
Copies of rights to land collated and ready to assign
Engineering analyses
Tower designs, drawings and calculations
Any available reverse engineered data on towers for which designs and drawings are missing
Load valuation: up to date database of equipment on towers, ideally with location
Foundation evaluation including dimensions and the quality and reinforcement of concrete
Up to date health & safety compliance
Uptime data, including a differentiation between DC and AC power
Generator model, age, installation and anticipated decommission date
Grid connection and diesel generator run time information
Shelter space, air conditioning system and load
Accurate maintenance record
Transmission bandwidth
Commercial analyses
Subscribers per Point of Service and associated ARPU
Current traffic and forecasts for future demand
Demand for any different technologies at the site (2G, 3G, LTE if applicable)
Partnering status
Comments and suggestions on our data room wish list?
This list is based on several research conversations with experienced practitioners, but does not derive from any specific individual or organization.
If you have suggestions for additional data required, or please share your recommendations with the TowerXchange LinkedIn group or contact Kieron Osmotherly at kosmotherly@towerxchange.com
