ADNA: African towerco investor may be required as tower sharing moves to phase two in Egypt

ADNA has come through a downturn in green field site investment, civil unrest and the restructuring of Alan Dick & Company Ltd. in the United Kingdom to remain a trusted tower installation and service partner of all three operators in Egypt. TowerXchange spoke to the head commercial business of Alan Dick and Company (North Africa) region Magdy Zaky to get his views on the evolving Egyptian tower market.

TowerXchange: Please introduce us to ADNA - where do you fit in the telecoms infrastructure ecosystem?

Alan Dick & Company was founded in Egypt in 1999 as AL.AN - a joint venture owned 70% by Alan Dick & Company Limited (ADC) and 30% by Alkan. ADC has a long relationship with Vodafone worldwide and particularly so in Egypt. AL.AN started services with Vodafone Egypt (when it was known as Click GSM) in 1999 where it acquired and built sites for its network.

In 2003 ADC decided to establish Alan Dick & Co. (North Africa) “ADNA” as a 100% owned entity to provide services for other telecom operators in Egypt and to design, manufacture and supply ADC’s structures in Egypt and the North African region. ADNA was one of five contractors acquiring sites for Telecom Egypt (TE) in 2003 when TE won their second (1800 MHz) spectrum (the spectrum was subsequently resold to other existing operators). Currently ADNA builds sites for MobiNil (directly) and Etisalat (indirectly, through OEMs). ADNA’s Headquarters is in 6th October city, just outside Cairo where both AL.AN and ADNA are based.

So today, AL.AN provides managed services to Vodafone Egypt, and ADNA designs, manufactures and supplies ADC structures (towers, masts and camouflage solutions) and provides managed services to other operators in the region, as well as to broadcasters, military and petroleum clients in the region. The two businesses entities share offices and are run under one leadership team. We have 270 staff and each project has got its own fully dedicated resources, in addition to other resources that are allocated as projects require. I run the commercial side of the business, Ashraf Mounir runs the operations of the business and Rimon Youssef runs the finance and administration.  The ADNA chairman is Dr. Rob Fisher based in UK.

ADNA manufactures its structures under licence from ADC and is the only Alan Dick subsidiary in the region that has the capabilities and the authority to design, manufacture and supply Alan Dick structural products.

TowerXchange: What can you tell me about the current status of the Alan Dick & Company group?

Alan Dick & Company was founded in 1971 by Mr. Alan Dick. After the global credit crunch of 2008 telecommunications operators around the world curtailed their spending on infrastructure. This rapid deceleration and the large drop in activities and revenues put huge pressure on costs and overheads. As a result, ADC decided to prune its portfolio and sold or closed down many of their subsidiaries. ADC’s subsidiaries in the UK are now all sold off or liquidated, and the only entities still trading and owned by ADC are ADNA and Alan Dick Middle East and Alan Dick China - both of which are in the late stages of being sold and are expected to be completed very soon.

TowerXchange: What’s your view of the tower industry in Egypt - do you think a substantial tower deal may be imminent?

The operators have become very conservative about investing capex in Egypt, with a considerable reduction in greenfield site rollout, and a preference to deploy rooftops, which can cost a third of the cost of a new greenfield site. This has coincided with rapid changes in technology, for example operators around the world are acquiring 4G licenses (LTE) to provide higher bandwidth and enable them to provide new services.

However, higher bandwidths and higher spectrum frequencies both tend to drive additional cell sites, which is expensive. This has driven passive infrastructure sharing, which the operators have chosen to do on a bi-lateral, one-for-one basis, rather than build their own dedicated and standalone sites. Today, maybe 20-25% of the new green field sites are shared and coverage of new constructed roads is shared also, which saves at least 50% of passive infrastructure costs in Egypt.

A towerco should be implemented in Egypt in two stages. The first stage is the lease of new sites required for the network and a license has been offered by the NTRA in Egypt since couple of years ago. The second stage is the lease of the existing passive infrastructure network, which requires the involvement of the big African towerco investors who have got the know-how and previous experiences in all aspects. The Egyptian operators tend to be quite conservative and very precious about their existing infrastructure, and I do not think that it is likely that they will make a deal - for their existing network - with a local contractor to be their exclusive towerco.

TowerXchange: What do you forsee ADNA’s role being in the future?

After more than 10 years of supplying and building towers, which has a good ratio of revenue to overhead, the absence of greenfield site builds means we are refocusing the ADNA business on managed services. ADNA’s vision is not to establish ourselves as a towerco, but to form a joint venture with an existing towerco where we provide sites maintenance, fuel and supply towers (if needed).

In addition, as the whole business model for a towerco is to share towers, they need to undertake detailed analyses on the structures (which were all originally designed to support only one operator) so they can understand what loading the towers can take and how they might be strengthened to cope with loads above their original design.  Given that a large proportion of the structures in Egypt are ADC structures, this analysis is a much simpler job for us than other design companies in Egypt. This will allow us to utilise the resources and extensive experiences we have got at all stages acquisition, construction, towers structural design and manufacturing.

ADNA started the process to secure an NTRA infrastructure provider license enabling us to build and rent sites.  However, this requires a large amount of funding, which is not easy to find at an economic rate in Egypt, so this process is on hold.

With the changes in the climate in Egypt, it has been difficult to gain site build permits and construct a site - particularly where excavation is required at green field sites. Our solution has been to use a rapid deployment technique for green field sites: using precast concrete foundations and a self-supporting antennas support structure, complete with site fence.  We licenced the designs for this from a company in the USA called Cell Blocks Inc and we called the design “Boomerang”, because in the event of any problems, the site can be easily re-located. The Cell Block’s unique precast foundation systems enable a rapid 48-hour deployment using nine 3x3 blocks for single tenant towers or sixteen 4x4 blocks for multi-tenant towers.  We installed our first “Boomerang” palm tree site - 35m high - in Sharm El Sheikh, at Sinai and have 45m and 50m options available that have the load capacity for all three operators.  The Sharm El Sheikh site was a longstanding problematic site that was stalled for many years until the Boomerang site was agreed.  48 hours later the site was erected.

We also have a vision to expand outside Egypt again where there is significant demand and where we can agree a sensible deal with the operators or an OEM. We’ve done a small market survey with Huawei in Ethiopia, and we’re interested in supplying towers into Sudan and Libya.

TowerXchange: Is there a lot of pent up demand for 3G and LTE upgrades in Egypt?

Demand for 3G and LTE upgrades is increasing rapidly after 25th of January, with the awareness of the importance of social network and widely expand of smart phones, with some of the contracts coming from OEMs such as Huawei and ZTE. 3G licenses have been issued for long enough so many of existing sites have already been upgraded to 3G. Telecom Egypt will have an MVNO license by second half of the year, but they won’t be adding many new sites - at least at the beginning - as they will be largely using the existing network of the other operators. Their plan is not clear yet

TowerXchange: Does ADNA have your own “TOC” (Tower Operation Centre / Network Operation Centre)?

No - we operate out of the 6th October office and have a number of small locations outside Cairo and provide site build and some maintenance from this infrastructure.  However, we have not had the need to build a central network management center.  If we were to become a towerco we would obviously need to develop one.

TowerXchange: Finally, how do you differentiate ADNA from your competitors?

For site rollout, the operators really want excellent project delivery with the best quality at an acceptable cost to get the site on air. At the same time for the site to remain live on the network, a final permit should be obtained so a permanent power meter installed and the site is secured. The final permit will require all site legal documents to be completed, which is a real challenge in some regions. ADNA directly employs and trains highly skilled local acquisition, construction and quality control teams and uses a central program management team. This to ensure that we can deliver the sites to quality in the shortest possible timeframe, and manage to get sites’ final permits accepted. This is what differentiates ADNA from others - acquiring valid options and getting the final permit.

For telecom antenna support structures, ADNA has long experience and an excellent design capability, supplemented by a small manufacturing facility for rooftop systems. We manufacture green field towers through partners. Our ability to customise structures and designs to client requirements is particularly known to telecom operators in Egypt. AlanDick is the prime supplier for telecom towers and camouflage solutions in Egypt - all are supplied to the best quality. AlanDick is also well known for its unique Palm Tree camouflaged monopole in Egypt, which designed up to 45m high. For eight years AlanDick was the sole towers supplier to one of the main operators in Egypt.

HSE is our main concern so we certify all our technicians for working in heights and the safety officer should attend at the site during construction. Regular medical checkups are performed on vehicle drivers and all staff must be under medical insurance. Vehicles are maintained on a regular basis, and shortly a fleet management system will be implemented to monitor the performance of the drivers.

ADNA is fully dedicated to telecoms infrastructure, and has got our own resources. As a result of this ADNA today is working with all three Egyptian operators directly and indirectly.