EEC Group positioning itself to partner towercos in Egypt

EEC Group (Engineering Enterprises for Civil & Steel Constructions SAE) is a family business established in 1977 as a construction company. EEC moved into the manufacture of steel structures and towers in 1983, and they have been a passive infrastructure turnkey subcontractor since 1996 with Vodafone Egypt and Algeria’s Djezzy among their first clients. EEC Group is now an integrated manufacturer, turnkey construction and O&M service provider with 1,500 employees and projects in eight countries.

TowerXchange: Thanks for speaking to use today Samih. What are the drivers for infrastructure sharing in Egypt?

There are two main drivers for infrastructure sharing in Egypt. The first is the usual balance sheet reason – mobile network operators want to get their assets off their hands to stabilise opex and capex, and to outsource the challenge of operating and fuelling sites.

The second reason is due to the changes in Egyptian society, which means we need to deal with more stakeholders and local pressure groups. So what started as a purely financially motivated issue now has technical and operational drivers too.

TowerXchange: How do you see the current state of infrastructure sharing in Egypt?

Egypt’s three main operators have been working together for three to four years, having regular meetings to share their sites. But the percentage towers shared still hasn’t reached what it could be. The potential for co-location and tower sharing in Egypt is huge, especially for greenfield sites – there’s a lot of work to be done in rural areas.

Egypt’s three operators have held discussions about forming a joint venture towerco between them, run by a towerco. There has been some interest in that model, but I can’t see it happening at the moment.

TowerXchange: Are any of the four companies licensed for infrastructure leasing in Egypt (EEC Group, Alkan, Mobiserve and HOI-MEA) actively building independently owned towers and selling tenancies?

Two of the four licensees are actively building towers, one of which is EEC Group.

We have started a pilot project, having been assigned one of Egypt’s 25 regions. We’ve just finished our surveys and are now in the construction phase, building 10-12 initial cell sites, and should have them “on air” next month.

We have also signed build-to-suite contracts with two of Egypt’s operators, and hope to sign the third this week.

TowerXchange: What’s your 18-24 month vision for EEC Group’s role as infrastructure sharing accelerates in Egypt?

If we are successful in this pilot project, I believe the operators will commission and co-locate in more and more sites through independent infrastructure leasing companies– they’ll stop doing their own rollouts.

We think there could be 1,200-1,500 new sites per year in Egypt, and we believe that as first movers, EEC Group has the potential to build 30-50% of those new towers.

The second part of our vision concerns strategically important opportunities that could arise if one of Egypt’s operators were to sell 1,500 towers. EEC Group would like to bring our local and political knowledge to a joint venture with one of Africa’s established major towercos bidding for those assets. We’re aggressively pursuing conversations with two major towercos, who would bring their experience with deal structuring and setting up the NOC. We feel the towercos need a local partner with regional exposure, so there’s considerable synergy in us working together.

TowerXchange: Egypt is a mature market in terms of penetration, but I understand 3G is only used by a small proportion of subscribers – as 3G becomes more widespread, will there be a need for significant cell site densification?

As I understand from Egypt’s operators, 3G only generates 5-7% of total revenue. While 3G is still very new, wireless broadband has significant potential in remote areas, where the landline infrastructure isn’t extensive.

In my opinion 3G will require a lot more sites. The most efficient option is to co-locate, but as demand for data grows, we are going to run out of sites and capacity, so we will have to build more towers and densify networks to support 3G.

TowerXchange: What was the impact of the recent unrest on the management of tower networks in Egypt, and what has changed?

The unrest post revolution is certainly impacting the telecom business. Operationally, the situation is much more complex and challenging - from the lack of security affecting transportation and materials, economic instability causing an increase in virtually all operational costs, and fiscal policies potentially bringing in higher taxes and removal of subsidies.

This hasn’t stopped the operators or the companies like ours. The telecom business will definitely bounce back when the situation stabilises.

TowerXchange: Thanks Samih. With all this talk about Egypt, I wouldn’t want readers to think EEC Group is focused solely on Egypt. Tell us about your experience, footprint and business development objectives outside Egypt.

We’re exporting to more than 25 countries.

EEC Group has been in Algeria since 2002 providing full turnkey infrastructure services, now also O&M for one of Algeria’s mobile network operators – we have more than 30% of O&M market share.

We’ve been in Senegal and Mali for the last five years, offering full turnkey services from towers and equipment supply, construction, telecom installation to commissioning.

EEC has been in Sudan since 2003, working with three operators in Sudan and one in South Sudan – again offering full turnkey services and some O&M.

We also have 10 years experience in Libya, but had to withdraw from the market during the recent conflict. We’re just about to return to Libya by winning a portion of 3,000 full turnkey sites up for contract. We expect to win at least 1,000 sites.

So EEC Group is focused on Egypt, Algeria and Libya in North Africa, and we also specialise in Sub-Saharan African countries where it’s difficult to rollout.

TowerXchange: Tell us about the people and the project cycle when setting up a new operation in a country “where it’s difficult to rollout”.

EEC Group has a specialised team with lots of experience setting up operations in countries where it’s difficult to rollout towers.

We feel it is critical to build relationships with local stakeholders and to build local knowledge as fast as possible. We tend to start with a core Egyptian team who are used to moving into new countries, but as we acquire local expertise the project becomes more streamlined, and the team consists of an increasing proportion of local people.

For example, EEC Group has been in Algeria since 2002, where the local team consists of five Egyptians and 250 Algerians – you can see how the operation matures. In contrast, in Mali where we’ve only been for five years, I think EEC Group’s team is about 45% Egyptian and 55% local.

EEC Group is becoming used to the protocols and processes of working in areas of political unrest – it’s becoming part of the job!

Our project cycle for opening up a new operation is fairly straightforward. First, our client provides engineering approval on our designs for towers, shelters, and rapid deployment sites, and we start manufacturing. At same time we dispatch our team on the ground to mobilise, prepare for implementation and support logistics. We have a strong logistics partner, which can be particularly critical in landlocked countries like Ethiopia.

TowerXchange: How do EEC Group differentiate yourself from other turnkey infrastructure partners in MENA and SSA?

As an integrated manufacturer, EEC Group controls the supply chain, giving us a cost advantage in turnkey jobs that is a win-win for us and for the client. More importantly for client, EEC Group’s integrated design, manufacturing, commissioning, construction and O&M services means we have the flexibility to deploy rollouts a lot faster than our competition – for us, everything is in-house. This is especially important in countries “where it’s difficult to rollout” as we were discussing earlier. And EEC Group’s integrated package drives our competitiveness when it comes to offering towercos solutions for co-location.

But that’s only half of the story. EEC Group thinks of itself as an engineering / innovation company. We try to present as many innovations as we can, such as new designs for integration, rapid deployment sites, or partnerships with specialist hybrid energy equipment manufacturers that can achieve 50-60% savings in diesel fuel consumption.