Tarantula: Using information management to measure and maximise Tower Cash Flow

Udhay Mathialagan tripped into the international tower industry almost 15 years ago, and for good reason he stayed! Having initially worked at Telstra and KPN, Udhay was a founding member of Crown Castle’s Australian business in 2000, playing an instrumental role in the acquisition of Singtel Optus’s US$225m tower portfolio, before serving as Director Strategic Development and Commercial in Crown Castle’s management team. Udhay founded Insight Infrastructure in 2006, a green field regional towerco in India, and served as CEO until its sale to American Tower in late 2009. Prior to joining Tarantula as Chairman a month ago, Udhay was a Senior Communications Industry Advisor to Macquarie Capital.

TowerXchange: Please introduce yourself to our readers.

Having been involved in a variety of different roles in developed and developing tower markets (Australia, India and Russia) involved in multiple towerco formats, from full blown asset purchases and carve outs to green field builds, and most recently being a financial sponsor, I was ready for a new role.

I became interested in niche companies offering differential value to the tower industry, and got connected with Ravi Kuppan, Founder of Tarantula. I saw Tarantula becoming more and more relevant as towercos seek to establish themselves in new developing markets, they have found the Tarantula platform useful to help them expand quickly and efficiently. So I recently joined Tarantula as Chairman to partner with Ravi to build out a global platform and go deeper into complex site management tasks.

TowerXchange: What does the Tarantula platform provide for tower operators?

We provide a platform for telecom operators and towercos to manage information assets relating to towers across the end to end workflow - from establishing, operating and monetising assets through to the tracking and management of an inventory of assets. The platform is purpose-built for the tower industry and for the unique challenges of managing of communications and power across thousands of distributed sites.

TowerXchange: How has the tower industry historically managed workflows and asset management?

When I started out in the business almost 15 years ago, the tower market was confined to big players in the US, UK and Australia. These larger players typically managed their businesses using customised traditional ERP systems at great expense - the customisation effort even in a smaller country could cost US$5-10m to adapt the towerco’s business process, and in many cases it still didn’t respond very well.

As the tower industry evolved into a larger number of countries, including emerging markets, a new class of smaller and medium sized towercos began to emerge, including subsidiaries of large towercos entering new smaller countries. With the move from developed to developing markets, the business model also became more complex. We moved from a straight-forward real estate management model to a tower plus power model, with new operational challenges, new costs and new penalties associated with managing unreliable power.

The large ERP systems didn’t respond well, they were too expensive for the scale of some of these new towercos, so Tarantula filled a natural gap in the market.  We had codified tower industry specific workflow processes, were able to automate key business processes, offering a cost effective, fast deployment solution.

TowerXchange: Tell us the story of Tarantula’s origins - how did you “codify tower industry specific workflow processes”?

Tarantula started in the late 1990’s in the UK, initially as a web-based platform site-share.com, supporting the industry with information about what was happening in the sites market. Site-share.com provided an open platform, and everyone put their data on it.

Tarantula developed an understanding of what people were doing with assets. As the emerging market tower industry took off, Tarantula entered the Indian market, and eventually had almost half the towers in India running on the Tarantula platform.

TowerXchange: What is Tarantula’s footprint worldwide?

We have a substantial footprint in Europe, particularly in the UK and Scandinavia, and in India. We’ve done a few implementations in Africa, with a more in the pipeline. Our market-tested solutions are highly relevant to the rapidly growing markets in Africa.

With our global headquarters being consolidated in Singapore, we’re going to get increasingly active in Asia, especially South East Asia, where there are some exciting market developments in the tower market. We’re also working towards a partnership approach in the Americas.

TowerXchange: How did the information management requirements of your customers evolve as your focus expanded from the developed UK and Scandinavian markets into emerging markets?

In developed markets, our platform was mainly used for lease management - managing ground leases and leases to clients - and inventory management. The biggest difference moving into emerging markets was the addition of energy management - understanding the energy mix particularly at sites connected to the grid but not necessarily available all day; balancing the use of grid, battery and diesel generators (later adding renewables). So it evolved from a pure real estate to a real estate plus energy logistics game.

Another big difference between developed and developing market tower portfolios is that in developed markets portfolios are most often assembled through asset purchase, whereas there is more green field activity in emerging markets. To support these complex construction projects, we developed a deployment module. So the Tarantula platform covers the end to end workflow; from a front end construction module, through a central module for managing financial and legal processes, to a back end O&M management module. We’ve codified tower management business processes in a box, enabling towercos and MNOs to get to market very quickly by configuring unique elements of their business process onto the platform. For companies moving into new markets it makes a lot of sense.

TowerXchange: Tell us a bit more about the configuration that is required to adapt to different towerco’s unique business processes.

We’ve been through many combinations of different market dynamics and different customer needs, so we’ve market tested our codified tower industry workflow processes. There is always something unique to bring in from a new customer’s business plan, but we’re not starting from raw code; we have a platform that works. Towercos have a trade-off of cost and time to adapt, so time to market is critical.

Configuration requirements vary by customer, but the core processes of tower operators are not that different - managing build-to-suits, leasing to tenants, managing maintenance processes and fuel supply. Tower operators need to be able to adjust dynamically to emerging new opportunities as they acquire more towers, win build-to-suit contracts, or as the regulations change. Tarantula has a dynamic platform built specifically for towercos, supported by people with knowledge of the towerco business, which means we can configure the system very quickly and efficiently, which is a compelling alternative for towercos who would otherwise spend US$millions adapting a much larger ERP system.

TowerXchange: What are the KPIs through which tower operators should measure and manage performance?

When you’ve worked in the tower industry as long as I have, you know it’s all about Tower Cash Flow (TCF) - how much cash is being generated at a unit level. TCF is the first metric investors look at it when evaluating tower portfolios. TCF is a product of the revenue or cash flow per tower, which itself is a function of the tenancy ratio and lease rate. TCF also incorporates how much revenue is being dispersed to landlords through the underlying ground lease costs, and how much is spent on maintenance.

The tenure on the underlying ground lease is critical, and Tarantula helps towercos track this. Investors always want to know the long-term lease costs and whether they are at risk. Towercos in developed markets spend $millions extending and stabilising their ground leases, but ground leases are even more complicated in developing markets where you’re dealing with multiple federal, municipal and environmental regulatory authorities, not to mention a range of different real estate legal frameworks. The Tarantula platform enables you to add compliance processes to follow and to create a view of your lease model. This enables tower operators to create an early warning system when lease renewals are coming up, and to create a proactive strategy to secure leases at a good cost level.

The tower industry may be young in Africa, but it’s important to have high quality data on ground leases that you can slice and dice.

TowerXchange: What are the other critical data points when managing and maximising TCF?

From a costs perspective, there are key data points around property. In developed markets you can almost have an attitude of ‘set and forget’, at least you can have that attitude to costs other than those relating to long-term ground lease costs. In developing markets property, power and regulations are always changing. The asset may be “passive”, but nothing about the information is! Tenants may add new equipment, the underlying lease may change - there are literally hundreds of data points per tower.

A lot of first generation towercos didn’t need this level of information detail, but in developing markets you need better control and monitoring systems to optimise energy opex, maintenance processes and ultimately to achieve your business plans.

Revenue is reported through normal financial systems, with revenue assurance and asset tracking.

What is physically on a tower and what’s reflected in contract are not always the same things! Having a real time asset register gives you a better quality framework for revenue assurance, and a sound basis for a mature conversation with the client. So good information management is critical to bridge the gap between what’s in the contract and what’s actually on the tower.

Being able to get accurate and consolidated data across sites enables you to make commercial decisions on the front line of the marketing of towers and the sale of tenancies, and to meet specific client requirements. Having the ability to get accurate and timely information on these distributed tower assets will enable towercos to come up with smarter commercial and promotional deals, and ultimately to optimise revenue. Tarantula has the ability to create reports that have been proven across multiple markets and situations to give more levers for an emerging market towerco to run their revenue engine.

TowerXchange: Looking beyond the tower operator, how does site-share.com help to align and manage subcontractors and suppliers within the tower supply chain?

This is an area we’re particularly good in!

Without a platform like ours, you can find a managed service provider converting Service Level Agreement commitments into their own complex spreadsheet, then a field engineer converts it into a Word document - instructions and metrics are corrupted by their transfer.

Our platform allows field engineers visiting a site to work against exactly the same task list as seen at the NOC, and to upload data back to the NOC. In this way, the tower operator can confidently tick off milestones - and suppliers don’t get paid until they have provided data, in the right format, proving a task has been completed in a timely manner, and the completion of that task has been accepted.

Managing small suppliers in remote operations requires a “single source of truth” set of data. Managing subcontractors becomes a data-based interaction with remote supply chain participants. Significant managerial skills are required, but we’ve standardised data and embedded workflow processes in a way that results in a more professional approach to managing the supply chain. We also generate an audit trail of what’s happened - that’s the power of data - there’s a lot of information that can’t be retrieved from spreadsheets and word documents spread across locations.

TowerXchange: How does Tarantula’s mobility platform support the management of remote suppliers?

We’ve put our software on a smart phone to enable the tower operator to push detailed jobs out to staff and contractors.

The mobility platform enables accurate information transfer to field staff: which site to go to, which tasks to undertake, which data to capture. The app generates a geo-coded, time stamped audit trail. The mobility platform can help reduce site visits or make them more efficient - if someone is visiting to replace battery they can take a picture of the assets on the tower at the same time.

Labour may have a cheaper unit cost in developing markets, but developing market towers require a lot more site visits, and the economic cost of inefficiency is quite high. Tarantula are bringing technology to bear to make site visits more productive.

TowerXchange: Finally, as a tower-industry leader with experience of tower transactions, tell us how using Infrastructure Lifecycle Management platforms like Tarantula’s can improve the valuation of tower assets?

Good question! There are two parts to my answer: one, having better systems and controls helps tower operators drive TCF in a smarter way. Through the lifecycle of owning an asset, you want do everything possible to optimise TCF using all the information and control tools we put at your disposal. Then two, once you’ve negotiated the headline valuation with an acquirer, the major international towercos have very thorough due diligence processes, and you need to be able to withstand those due diligence processes to close the transactions. I have first-hand experience of selling my company to American Tower, and I’ve worked with Crown Castle so I know how they evaluate assets.

High quality information gives confidence to the buyer. If you’re scratching around for information, you’re opening yourself up to downward renegotiation of the multiple. Information quality is the first impression even before a potential acquirer takes a sample of your physical assets - you can’t reverse engineer high quality information four years after the assets were built or initially acquired  - you’ve got to ensure high quality information from day one.

TowerXchange: Actually, one more question - in your experience how does the information quality compare between towercos and MNOs?

A few MNOs in markets that are exposed to the towerco business model are starting to develop a concept of what their assets could be worth. They’re starting to appreciate the need to manage towers as a distinct asset element and therefore realise improving the quality of their information can improve value.

Our engagement with MNOs has increased sharply this year. We have an end to end workflow and asset management system for managing distributed tower networks, and we’re noticing that MNOs rolling out 4G / LTE use tower assets and rooftops in different ways from what how they used them with 2G and 3G. They’re using property rights in different ways, blending technologies at a combination of owned, shared and leased towers. The nature of tower sharing has shifted from one-to-one relationships, to the complexities of network joint ventures and multi-band technologies in the same slots; there are more variables. Towers are a multi-dimensional matrix that needs to be managed. MNOs’ traditional network management tools would need to be heavily customised to manage such complexity; Tarantula’s pedigree in wireless site management is embedded in our product and in our people - MNOs entering into complex sharing agreements for LTE or deploying purpose-built emergency networks need to manage information around these new modes of sharing at complex, distributed sites.