Torres Andinas: creating a successful build to suit business in Colombia and Peru

After an extensive career in the North American wireless sector, Eric Ensor decided to focus on the expansion of the Latin American tower industry so now he dedicates his expertise to the development of build to suit (BTS) projects in Colombia and Peru while exploring opportunities in neighbouring markets.

In this exclusive interview, he shares his views on the potential and characteristics of the BTS market and on the regulatory framework and carriers’ strategic situation in  Colombia.

TowerXchange: Eric, as a veteran of the telecom tower industry, please introduce yourself and your background.

I have been involved in the wireless industry since 1982, when the cellular business was launched in the United States. For the first twenty years of my career, I worked on the carrier side and spent several years with BellSouth as their Wireless Strategy Director for their worldwide operations.

When the FCC released additional spectrum back in 1995, I got involved in the PCS (Personal Communications Service) rollout in the southeast of the country and got exposed to the tower construction business for the very first time. On that occasion, we built 1,000 sites over the course of two years, some for Bellsouth’s exclusive use and some others for co-location purposes.

In 1998, I left Bellsouth and worked in several ventures related to fibre which at the time was at its early stages. Then in 2002, I started my own consulting company, Quiet Water Associates, and helped several telecom players with their operational and strategic planning.

In 2008, my business partner John Hamm and I created a joint venture with SBA Communications and launched SBA Torres, a towerco in Central America with operations in El Salvador, Panama, Nicaragua, Costa Rica and Guatemala. When SBA Communications bought our interests in the company back in 2011, we ended our Central American venture and decided to work with a Panamanian financial investor, MHC Holdings, to create Torres Andinas.

TowerXchange: Please tell us about Torres Andinas footprint and operations in the CALA region.

To date, we are active in Colombia and delivering our initial towers to carriers in Peru. In the meantime, we are also exploring opportunities in Ecuador and Chile.

Torres Andinas is mainly focused on build to suit activities, as a result of our own expertise in greenfield projects, rather than sale and leaseback deals. BTS is a growing trend in the countries where we operate in light of the need to expand coverage and increase capacity. Data usage in Colombia, Chile and Peru is increasing by the day and these markets are in need of reliable a BTS provider able to develop new, high quality projects.

As a BTS provider, Torres Andinas covers the whole spectrum of activities from site surveying to land acquisition and permitting. Once the specific location is defined, we design and build multi-tenant ready sites capable of serving multiple carriers.

TowerXchange: Can you tell us about your operations in Colombia and the changing competitive landscape among carriers, with the imminent launch of LTE and entry of DirecTV?

Colombia is a fairly active market with three established carriers all offering 4G LTE; Claro, Telefonica and Tigo, as well as a few smaller players such as Avantel, ETB and UNE. UNE, which is now planning its merger with Tigo, was the first company to launch 4G LTE services back in 2012 while ETB and Avantel are both expected to start their 4G LTE services over the next few months.

A few years ago, Tigo sold a approximately 2,100 towers to American Tower and started working aggressively on its network expansion. The company launched 4G services this past December and gained several points of market share as a result of its investments.

In the meantime, DirecTV is planning to add mobile services to its fixed broadband offering in Colombia.

In this landscape, each player is looking at either rolling out greenfield projects or expanding their coverage by using existing towers. this is a prosperous scenario for both BTS companies like ours and major towercos also involved in sale and leaseback deals like American Tower.

TowerXchange: With the volume of recent transactions in Brazil, and to a lesser extent Mexico, TowerXchange has tended to cover sale and leasebacks in these markets more than in Torres Andinas’ other markets of Colombia, Peru, Chile and Ecuador. Are there substantial sale and leaseback opportunities in the pipeline in these markets? How do valuations and investor appetites compare?

Colombia, Peru, Chile and Ecuador definitely won’t experience the same wave of large transactions that are taking place in Brazil and Mexico simply because there aren’t as many towers there. However, companies like Torres Unidas and American Tower have closed deals with Telefonica and Tigo in the past.

That said, with both Claro and Entel unlikely to sell their towers in the near future, I’d say there are limited opportunities for acquisitions right now. Telefonica still retains some sites in Chile and Peru as well as their Colombian portfolio so I’d expect those assets to be the next target of towercos.

Investors understand the potential of these markets as the numbers show constant growth in data usage and coverage demand, factors closely linked to the expansion of telecom infrastructure and, as a consequence, of the independent towerco model.

However, towercos need to be disciplined in order to ensure their business model is successful, especially when rolling out projects in rural areas which is something with which we are increasingly involved. In fact, whereas carriers would prefer to contract towercos to develop BTS projects on the basis of a “one price fits all” model, regardless of the location and characteristics of each site. Capex is higher when access and energy expenditure become a factor, and towercos need to ensure they are properly compensated.

TowerXchange: Are there still BTS opportunities for other towercos in markets with a large towerco with a preferred supplier agreement with their anchor tenant?

Tigo is the most active player in Colombia and in the past has developed several projects with American Tower in light of a so-called “preferred supplier agreement." However, to date, Tigo is working with several towercos such as Centennial and ourselves so I’d say that yes, there are opportunities for qualified BTS suppliers to operate in an environment technically dominated by a larger towerco.

DirecTV is starting to get active but their rollout is proving quite slow, possibly also in light of the potential merger with AT&T. Avantel has recently been recapitalised and is now seeking opportunities on existing towers  as well as rolling out new projects.

TowerXchange: You recently mentioned that 4,000 subscribers per site is the average in the region, so how many towers are needed in the countries where you operate and how likely is it for existing towercos to fulfil the demand for new sites? How does that compare with the Colombian telecom market?

It is unlikely that South America will reach the densification levels of the U.S. anytime soon as the capital required would be overwhelming. However, we feel that the situation will improve significantly over time as carriers are heavily involved in the expansion of their networks and bridging the infrastructure gap is a priority for governments.

I’d say Peru, Chile and Colombia all need a minimum of a couple of thousand sites to meet their demands in the near future and that refers to a combination of new and re-strengthened towers as well as rooftops. In fact the Peruvian government just announced that they believe that carriers will need 14,000 new location over the next 3 years. While the capex available may not allow carriers to reach these levels, it certainly shows the level of potential demand.

To date, there are American Tower, Torres Andinas, Centennial and Continental Towers all serving the Colombian market and Torres Unidas is rumoured to be entering it too. Therefore, I think existing companies can cope with the demand for new sites under the right financing and project conditions.

TowerXchange: How is the telecom regulatory framework in Colombia? And how does that compare with the other countries where you are active?

In Colombia, the national law regarding towers is technically favourable toward the development of new projects. However, the law is applied selectively by municipalities especially when an announced greenfield development causes civil unrest among the population. In these cases, we need to be very careful and work closely with the local authorities and the community itself to fully explain the nature of our business and gain their support.

That said, I have always believed that the tower industry is fundamentally a local business and we have local teams in each country where we operate to facilitate the dialogue with local entities - from municipalities to contractors - and ensure the respect of the local cultural environment.

As a result of the fragmented adoption of the national regulation, some projects might not see the light but we take it as part of the game. Some towercos might be more aggressive in their relationship with authorities but we try and solve the problem by becoming part of the local community.

TowerXchange: What is your vision for the future of Torres Andinas?

We have set ourselves the goal to build an average of 20-25 new sites per month in the next couple of years by working with several carriers. That figure represents a very positive target for us and we expect to increase our business considerably over the course of the next few months as we have both the capability and the financing in place to meet the growing demand for new sites in our markets.