TowerXchange: We’ve spoken to MER Group about your presence and capabilities in Africa - in which countries are you active in the Americas? What capabilities do you have locally?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
MER Group’s Telecom division has operated in Latin America for 13 years and is currently active in Argentina, Chile, Peru, Bolivia, Colombia, Panama and Mexico. We are also active in Ghana, Tanzania, DRC, Mozambique, Cote d’Ivoire and Kazakhstan and have legal entities in several other countries where we carried out projects, and therefore are ready to re-enter those local markets should client engagements require.
MER’s Telecom Division capabilities in Latin America are very similar to those in Africa; we undertake turnkey infrastructure implementation projects and as well as design, manufacture and supply our own Tower structures, i.e. provide ‘A-Z’ site construction and maintenance services, as well as supply camouflaged and quick deployment towers, TI services and installations, and in building solutions.
MER Telecom Division is part of the broader MER Group and leverages its proven global track record, comprehensive knowledge and accumulated expertise to seamlessly deliver technologically innovative and best-of-breed solutions including M2M enablement and vertical market applications, Mobile Financial Services, cloud billing, MVNO enablement, as well as on/off board and remote/contactless payment solutions for public transport operators.
TowerXchange: Looking back on your time as CEO of MER Telecom Chile, tell us about the tower industry in Chile.
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
Chile is a very developed market, led by two big operators with 6-7 million subscribers each; Telefónica (Movistar), which of course operates tens of thousands of towers across South and Central America, and Entel, a substantial local private operator which recently made an acquisition in Peru. Claro (part of América Móvil) also has over 3 million subscribers, Nextel entered Chile a few years ago, but is not as big yet, and VTR which is licensed but seemed to be focusing more on cable.
American Tower is becoming strong in Chile - they bought 836 towers from Telefónica in three transactions, and are doing a lot of build-to-suit work with all the operators. (TowerXchange: American Tower’s Q3 2013 announcement states that they then owned 1,153 towers in Chile).
As in any other market, when a towerco acquires assets, they undertake carry-overs and upgrades to build capacity for additional tenants. Construction of new sites seems to be never ending in Chile!
There is a strong regulator in Chile, including a Telecom law which for example often means towers can be a maximum of just 12m high in urban areas, which makes it difficult to provide capacity for more than two tenants, as well as usually requiring that no other tower be located within 80m. Regulations also enforce infrastructure sharing in rural areas.
MER Telecom Division is proud of its ability to forecast and adapt to market requirements not only in Chile but all over Latin America, Africa and other regions where it is operating. For example, the growing population in Chile caused capacity problems, so we developed a new quick deployment tower which took just one to two days to get on the air. After the regulations changed and required the camouflage of towers in many areas, we developed a series of new camouflaged products to comply with the new law - we developed our own creative camouflage solutions including Palm trees, Chimney poles, billboards and advertisement towers, which look like the sail of a ship.
TowerXchange: How do local import duties and other tax regimes affect international suppliers selling into Latin America?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
Of course all suppliers are affected by taxation costs, and each country has own rates, which we take into our consideration. Since we manufacture our own towers and our engineering is very cost effective, we are able to compete even with local manufacturers.
Being an international company, MER Group manufactures most of its structures at its two large plants in Israel. We ship to our local branches and ensure we have half a year of inventory available to respond quickly to time-sensitive orders. We also use local factories to manufacture accessories and smaller fixed infrastructure assets in Chile and Mexico, where we manufacture monopoles locally.
TowerXchange: In which countries do you anticipate the greatest demand for new cell sites in Latin America?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
Mexico is a huge country and implementation of network extensions is on a scale far beyond the rest of Latin America (except for Brazil, although we’re not operating there at the moment). MER Telecom is installing 400-500 towers per year in Mexico, so it’s critical that we have stock available on demand. We maintain stock of a variety of towers so we can select the right design for the local wind conditions and loading, which is critical for us in order to maintain a good market share in Mexico.
Peru is also an important market for us. Chilean carrier Entel acquired Nextel Peru in Q2 2013, and is working on permitting, ready for a big expansion planned for this year.
Argentina is a relatively problematic market for us - unstable because of the economy, with harsh restrictions on quotations. We are importing some towers but it’s a challenging market, so we are trying to open local manufacturing facilities.
So in summary, we see Mexico, Chile and Peru as particularly strong markets for us - there’s also a vast implementation movement in Bolivia.
TowerXchange: Do the majority of the towers you are building in Latin America have capacity for multiple tenants? Are you getting a lot of work upgrading the structures of existing towers for multiple tenants?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
It depends on the client! Generally the Latin American carriers will deploy single tenant towers, maybe with capacity for a subsequent generation of technology, unless regulators mandate infrastructure sharing. Regulations can change the market completely, for example in Chile carriers have to build large towers for multiple tenants because of mandated infrastructure sharing.
Of course towercos think more about building capacity for multiple tenants, but at the end of the day everyone wants to minimise capex.
Wherever there is a towerco there is work to upgrade structures, for example in Chile we have a big site survey and reinforcement project for the local towerco.
TowerXchange: How do the requirements of carriers and towercos differ between Africa and Latin America?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
The biggest difference between Africa and Latin America is that of the power grid in South America. A much greater proportion of each country is electrified in South America - there are very few sites running diesel generators as their primary power source. Where there is no grid in Latin America, carriers and towercos think twice about whether to construct a site, whereas in Africa there is often no choice!
TowerXchange: How does the market for In Building Solutions (IBS) in Latin America compare to Africa?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
The growing need for indoor capacity is not something that can be ignored, however the market for In Building Solutions is more developed in South America than in Africa.
We’re seeing an increasing volume of DAS deployments in big cities in South America. MER Telecom recently acquired DAS manufacturer Optiway to strengthen its capacity and capability in DAS, so we are now able to offer end to end DAS services from design and engineering to installation and optimisation, including passive equipment and active DAS with optical signal transmission.
TowerXchange: Are DAS deployments of similar value to macro sites? And are towercos starting to get into this market?
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
DAS deployments can cost US$50-200,000, so it’s a similar value engagement for us to a macro site.
The towercos are starting to get into the DAS market - nobody wants two or three different antennas in a building, so again this is an opportunity to acquire IBS sites, install DAS equipment and offer that infrastructure to multiple operators. Our DAS technology supports multiple operators with multiple technologies from a single set of antennas, with one set of feeders supporting multiple BTS.
We think IBS will be a big trend in the near future in Africa, driven by urban capacity and the need to reduce network congestion in densely populated buildings. As a matter of fact we’ve recently started some deployments for Helios Towers Tanzania.
TowerXchange: Finally, please sum up how you differentiate Mer Group’s Telecom Division from competitive turnkey infrastructure providers in Latin America.
Uri Bar Yosef, GM, Infrastructure unit, MER Group, Telecom Division:
As an international company, Mer Telecom’s capabilities are much stronger than the smaller, regional companies we compete with in Latin America. Mer Telecom has superior logistic, manufacturing, financial, engineering, and quality assurance capacities and experience.
However, it’s also critical that we have a local presence in Argentina, Chile, Peru, Bolivia, Colombia, Panama and Mexico to keep up with changing market dynamics in these countries. There’s nothing like direct contact with the client to tailor our services to best meet their needs and provide quick, cost effective solutions.
