The implications of the Nigerian tower deals for managed service providers

Ericsson is the leading provider of managed services in Nigeria, with over 1500 staff on the ground and managed services contracts with MTN, Airtel and Smile. What is the impact on their business of towercos acquiring 65% of Nigeria’s towers (forecast to rise to 85% when the Airtel Nigeria transaction closes)? What are the synergies between active and passive infrastructure management?

TowerXchange: Please introduce Ericsson’s Managed Services footprint and capabilities in Nigeria.

Ericsson’s first activities in Nigeria were in 1960 via a registered office. The company was formally established in 1978, and we now employ over 1500 people in the country. Nigeria is a very important market for Ericsson - we are the leading provider of managed services in the country.

Ericsson have  been building and operating mobile networks in Nigeria since the liberalisation of the telecoms industry in 2001 for all major operator’s with clients such as MTN, Zain, Airtel, Smile and so on. We managing active and passive infrastructure as well as providing capacity management, front office and back office functions through our service centers and expert hubs established to support regional operators. Ericsson provides turnkey capabilities for building communications infrastructure as well as services. Ericsson’s software and infrastructure are enabling the telecom industry and other sectors to improve customer satisfaction and improve business, increase efficiency and user experience, and capture new opportunities.

TowerXchange: TowerXchange forecast that 85% of Nigeria’s towers will be owned or operated by independent towercos by y/e 2014. How will the transfer of towers from operator-captive to independent towercos affect your business?

We have a strong position in Nigeria. Today Ericsson services around 50% of Nigeria’s towers, with the remaining 50% split between other OEMs and in-house management by MNOs. Due to the scale as well as logistical tools and processes of Ericsson in Nigeria, we provide the lowest possible cost base for passive infrastructure maintenance.

The transfer of passive infrastructure from MNOs to towercos is an opportunity to explore new business models and partnership opportunities. Of course different towercos have different strategies; some prefer to be landlords, while others want to do everything themselves. We are currently engaged in exploratory discussions with the towercos evaluating potential partnership models to improve end customer satisfaction.

Power is the biggest cost factor when running the network, and there are many savings that can be achieved if power is managed effectively. Ericsson is able to offer battery, solar and wind hybrids as well as offering combinations of these solutions, we also have the field workforce as well as state of the art logistical tools and processes to efficiently install and maintain our own and third party solutions.

There are potential synergies even in cases where Ericsson manage just the active infrastructure and the towerco manages the passive infrastructure. However, as we found in other countries such as India, where Ericsson managed the asset transfer and maintenance of over 100,000 cell sites for Indus Towers and Bharti Infratel, efficiency is optimised when we manage both the active and passive infrastructure. Africa is of course a different continent with a different culture, but the big picture on the front lines of managed services is not so different.

TowerXchange: Which O&M and refueling capabilities sit ‘on the payroll’ at Ericsson, and what is subcontracted?

We create the right mix of in house and carefully chosen subcontractors according to the complexity and volume of tasks. Some services are better delivered by firms with local knowledge; refueling, for example, isn’t particularly complicated so we subcontract it to local firms, but we add value by coordinating deliveries, which is particularly important in Nigeria given the vast number of different local refueling subcontractors.  This is all enabled by our integrated by work efficient work force management, dispatching and NOC tools.

TowerXchange: We understand as much as 30% of diesel is stolen in Nigeria – can this be stopped?

Security is a well-known challenge of doing business in Nigeria, it affects almost every business, as well as private residences.  As a company, Ericsson has proven processes and controls mechanisms in place to mitigate the risk, and ensure that we act in accordance with international standards and national laws.

TowerXchange: IHS now own 56% of Nigeria’s towers. What kind of opportunities for economies of scale could that open up, and how could Ericsson help?

With coverage in Nigeria at 90%, significant efficiencies can be achieved. Of course exactly what we can do depends on the strategies adopted by the MNO’s, towerco’s and ourselves. However, it is evident that there will be some kind of collaboration between towercos and infrastructure vendors, but it will become more apparent how consolidation will transform the Nigerian market in the coming 3-6 months.

TowerXchange: How can MNOs and towercos create the efficiencies they are seeking given the fragmentation of the O&M subcontractor ecosystem in Nigeria?

The passive infrastructure O&M team need to have field staff to maintain DGs, solar panels et cetera, meanwhile Ericsson also has field staff to handle active equipment – we need to visit sites anyway, and getting to the site is a substantial part of the cost. So there’s an obvious inefficiency we can address by unifying passive and active infrastructure management under one service provider.

The key to success is knowing how to steer these resources – tracking that the right person is on the right site at the right time by leveraging sophisticated monitoring software. There are a lot of managed service providers that can build and maintain towers, but it’s our workforce management techniques and technologies that give Ericsson competitive advantage and help us keep costs down. Ericsson as well has well developed training and assessing centers across Africa to train own and hired workforce for all kind of field activities.

TowerXchange: Finally, of all the African countries where towers have been transferred from MNOs to towercos, why is Nigeria particularly suited to deeper collaboration between towercos and managed service providers?

We feel that collaboration between towercos and managed service providers like Ericsson is beneficial in both small and large markets but for markets as large as Nigeria the savings are of course greater, due to sheer size.

The size and scale required in countries like Nigeria make it very challenging for towercos to manage installation and maintenance resources directly. Ericsson has proven logistical systems, and experienced staff familiar with the local subcontractors and the terrain. In addition, we have to visit the sites for active equipment maintenance in the course of our operations allowing for further optimization.

Exactly how we will utilise the synergies and scale advantages will become apparent next year, depending on both parties’ willingness and interest in collaboration.