AJ Ingenieros: Towercos: an increasingly relevant client for LatAm integrated solution providers

AJ Ingenieros was set up in Chile before mobiles even penetrated the market. Initially active in setting up data transmission networks, the company quickly entered the mobile industry in the nineties and has since then offered its services to the growing Latin American telecom industry.

In this exclusive interview, Francisco Briceño, Vice President, Operations for the company, shares his views on the evolution of the regional telecom industry, how regulatory changes have impacted the telecom tower sector and how towercos are becoming an increasingly relevant player in the region.

TowerXchange: Tell us about your company, its operation and offerings

AJ Ingenieros was founded in Santiago de Chile in 1986, by Gabriel Olavarrí­a and Félix Olavarrí­a, both engineers. Since then, the company has always been active as a provider of solutions for the infrastructure sector and started by focusing on television data transmission networks.

To date, we are a fully integrated solution provider, offering services to the mobile sector such as tower design and installation, engineering, construction and due diligence, among others.

Originally based in Chile, AJ Ingenieros is now active in the Dominican Republic, Guatemala, Mexico, Peru, Colombia, Panama and Costa Rica among others. We count more than 1,200 employees regionally with 500 of them based in our Headquarters in Chile.

TowerXchange: Who are your key clients in the region? In which countries do you operate?

The majority of our business comes from carriers such as Movistar, Claro and Entel which represent 60% of our operations.

Our second group of clients and almost 30% of our business is represented by OEMs such as Ericsson, Huawei and others due to existing contracts they have with carriers whereby some of our services are required.

We are now actively working with tower companies which represent the additional 10% of our business. With the exception of Mexico - where we have been working with towercos for quite some time - I’d say that this client is a relatively new category for us. We have been working with tower companies for the past three to four years. However, this area is growing fast and the demand for our services by towercos is expanding.

Whereas it is a completely accepted model in North America and Europe, towercos are still establishing their presence in Latin America. Therefore, I can foresee their role becoming increasingly important over the next few years as carriers divest their tower portfolios and towercos become the direct owner of passive infrastructure. However, we need to keep in mind that for some carriers towers are still an extremely strategic asset.

The region still lacks maturity to fully accept towercos but I can see the perception shifting - it’s a matter of time.

TowerXchange: Tower transactions tend to unlock pent up maintenance work and tower strengthening projects - have you seen much demand for these kind of projects? If so, please share an example or two.

We have definitely experienced a growth in demand for strengthening projects since towercos came into play.

First of all, since we have been active for thirty years, a lot of the existing towers we are asked to work on have been built and installed by us. This industry tends to favour continuity when it comes to business relationships and we have been working on several strengthening projects on infrastructure we built several years ago.

To date, the majority of these projects focus on strengthening and upgrading existing towers to host multiple tenants. We haven’t done a lot of maintenance projects yet as some of the facilities we work on are relatively new.

Moreover, tower companies are increasingly contracting us to develop due diligence projects prior to portfolio acquisition. We analyse and evaluate portfolios tower by tower, asset by asset, and we deliver a full report. Our engineering department has been very active with engagements such as this lately, much more than in the past.

TowerXchange: Regulators often need to protect the environment when permitting building new towers. How are your products helping to preserve the environment? Is there a growing demand for camouflaged towers?

In 2012, the Chilean Senate approved a new law establishing clear rules regarding telecom tower installation. Specifically, the law sets parameters with regards to towers spacing in sensitive areas near schools, hospitals, gardens etc. The law favours tower sharing and the installation of camouflaged towers in order to preserve the landscape and reduce the visual impact of greenfield projects.

We have had a camouflaged tower offering for the past six years with a portfolio of products including tree-like towers, totems, advertisement boards and rooftops. We have various solutions which depend on the area chosen for the new project but all of them respond to the need to reduce the visual impact of telecom towers.

Clients tend to opt for these solutions in order to comply with law but also to maintain a positive relationship with the community. Although the price is somewhat higher than for standard towers, as it must take into consideration ornamental factor as well as technical ones, some clients have no choice but selecting these solutions as it allows them to establish service in areas otherwise unreachable to due legal restrictions.

TowerXchange: How do you ensure your services are delivered on time and within budget?

First of all, we allocate one project manager for each specific client in order to create an open relationship between the two with clear communication and understanding of deadlines, key milestones and requirements. Therefore, our clients have one point of contact within AJ Ingenieros throughout the duration of the project. This is a highly efficient system which has allowed us to create long standing, successful relationships with our clients.

Moreover, there is only one company - AJ Ingenieros - responsible for the entire project, from design to completion. This model has been adopted in Chile and is the preferred model throughout the region as it has so far ensured optimal communication between parties as well as success in meeting deadlines and working within budget.

By establishing offices in each country where we operate, our project managers and teams have direct, on the ground relationships with each client. The only centralised aspect is production which is entirely undertaken by our Chilean factory.

TowerXchange: What are the critical success factors tower operators should consider when selecting a design and manufacturing partner?

I’d say that the key factor is experience. We have been active for more almost thirty years and have installed over 7,000 towers across the region. It’s safe to say we know our business inside out and experience is the main reason for our success.

Manpower, quality and standards of design and services as well as local presence are other critical aspects I’d recommend each company takes into consideration when selecting a business partner.

We don’t offer standardised solutions. Our products are fully customised and we work with clients to find the perfect solution depending on their requirements. This is the most efficient solution to ensure we deliver products within budget.

TowerXchange: Are contracts in Latin America typically just for the manufacture and supply of towers, or are they end-to-end “turnkey” projects from manufacture to installation and maintenance? 

We do work with some subcontractors which we have been partnering with for several years. We use them for certain services such as site acquisition, installation and drive tests.

However, it’s important to note that we resort to outsourced partners when and if needed as we are able to offer all these services in-house. When the demand for services peaks, we employ our team first and then contract trusted external companies for projects we cannot fully cover with our own employees.

The telecom market is cyclic and has its own peaks which usually correspond with the launch of new technology. During those hectic times, we are able to cover a high volume of projects thanks to our internal resources and to a network of highly experienced subcontractors.

TowerXchange: Out of the countries where you are currently active, which are the ones with the biggest potential in terms of the growth of their telecom tower sector?

This is quite a positive time for the Chilean telecom market and we have several projects in the pipeline. Since two frequency auctions were successfully completed, we are now very busy with the installation phase.

The same can be said about Peru with the arrival of a new player - Entel - that has recently acquired Nextel and a subsequent growth in projects.

Both markets went from the legal phase of auctions and bids to the executional phase which for us correspond with a very active and promising time. That said, the volume of business we are able to generate very much depends on how the market responds to new offerings. 4G LTE is a new technology and the demand for it will set the pace for our workload.

Beside Chile and Peru, we see very good opportunities in Colombia due to its size and demand growth.