How Irrawaddy Green Towers plans to rollout 1,500 towers for Telenor Myanmar

John Stevens is a tower industry veteran with over 25 years’ experience, having served in senior management positions and rolled out thousands of towers with US Unwired, Tarpon Towers and Sprint PCS. However, John is probably best known as the former CTO of SBA Communications, where his responsibilities included sales and incubating SBA Power Services. John currently owns Infinigy Engineering and his own towerco back in the US, but his passion remains emerging market towers, which is what brings him to Myanmar…

TowerXchange: Please introduce Irrawaddy Green Towers.

Irrawaddy Green Towers is one of four new tower companies operating in Myanmar.

We started out as Golden Towers, a newly formed towerco with a small portfolio in Vietnam, and an interest in Myanmar. Golden Towers found ourselves on a shortlist of two towercos, together with VIOM QUIPPO, bidding for the award of a contract for 1,500 towers for anchor tenant Telenor Myanmar. Telenor liked our speciality in power, and liked the proven track record of VIOM QUIPPO, so we joined forces in a 50-50 partnership to create a stronger combined towerco.

TowerXchange: What is your experience of attracting capital to finance emerging market towercos, and how is Irrawaddy Green Towers financed?

Whereas four years ago I was exploring an opportunity to launch a towerco in Cambodia, which ultimately didn’t come to fruition largely due to a lack of investor appetite, now it seems like there is too much capital chasing too few emerging market tower deals.

Golden Towers is backed by Alcazar Capital, a private equity firm out of Dubai, while our partners VIOM QUIPPO’s financing comes from their original investors, SREI Group. We were oversubscribed in our first round of financing of US$150mn, now fully raised, and our original partners are funding us further to our total of US$300mn.

We’re also counting on a fair amount of vendor financing, similar to everyone else’s strategy.

TowerXchange: Please introduce us to your leadership team and their respective roles.

TowerXchange has already spoken to Karim Dakki, our CFO. Karim is a finance guy from the Alcazar Capital team.  My COO from the United Kingdom, Simon Payne, brings with him extensive deployment experience in towers, power and fiberoptics.  We found him lounging in Liverpool after recent stints in Zimbabwe and Burundi, having previously held a group level implementation role at Celtel.

Further my Board Chairman, Arun Kapur has very strong experience on the proven concept of Community Centres, which they’ve deployed at thousands of sites in India. Community Centres provide ancillary services at cell sites located in small communities, many of which hitherto had little in the way of digital communications with the outside world. The Community Centres typically consist of a small building with a computer and a dedicated Internet connection, enabling local citizens to access banking, e-commerce, health services et cetera. We setup these Community Centres very simply initially then, as the community gets comfortable using basic services, more services get layered on such as an ATM or vaccine refrigerators. We’ve received a lot of support for such initiatives from the Myanmar government and from Telenor, who share the same philosophy of community development.

TowerXchange: How would you describe the challenges and opportunities of rolling out towers in Myanmar?

Everything in Myanmar flows through Yangon. There’s a decent port with warehousing capacity, and roads from India, China and Thailand. However beyond Yangon, there’s not much infrastructure.

The single biggest challenge in Myanmar is the lack of transport infrastructure – there are good roads to Naypyidaw and Mandalay, but beyond that, the roads and bridges often can’t handle heavy goods vehicles, so we have to limit the physical weight of loads, and we expect to use oxen and mules to get construction products to remote sites. In Northern sites where we have site hunters out, it can take a two to four day round trip to get information back to Mandalay!

Another long-term challenge in Myanmar is the under-developed banking and insurance business. For example, Telenor requires its partners to have robust insurance, and want that flowed down to their subcontractors, but many of the contractors in Myanmar don’t have insurance because of the deficiencies of the local financial services industry.

TowerXchange: Can you give us a sense of the geographical focus of those initial 1,500 sites for Telenor, the timelines and the progress of your rollout to date?

Both Telenor and Ooredoo have roughly 2,500 sites to rollout in phase one, the timetable for which is ‘yesterday’ through the beginning of 2015.

Actually, the rollout breaks down into phase 1A and phase 1B, the former being concentrated on the bigger cities where the operator is going to get the best bang for their buck; Yangon, Mandalay, Naypyidaw, Taungoo, Bago and Tharrawaddy. Irrawaddy’s towers are in phase 1B, some in Yangon, but many in the next blush out.

TowerXchange: Tell us about the power situation in Myanmar.

The structure of Telenor’s contracts with Irrawaddy Green Towers and with Apollo Towers includes both the tower and the power. My understanding is that MTC’s and Pan-Asia’s contract with Ooredoo includes only the tower, with power being handled under separate vendor purchase contracts.

There is little grid power beyond big cities, and with no near-term opportunity to extend the grid. We estimate two thirds of Myanmar’s cell sites will be off-grid. Even in the big cities a significant portion of sites need backup generators because grid power is not reliable enough. Sometimes it’s a timing issue – even if grid power is available, how long will it take to connect?

Irrawaddy Green Towers is taking a hybrid approach. We’re considering solar in areas where the climate makes it a possibility – Telenor has a mandate to deploy green power where possible – but the engineering and economic circumstances at a lot of sites won’t support renewables, so we’ll roll out a lot of DG+battery hybrids.

TowerXchange: Can you give us an insight into Irrawaddy Green Towers’ procurement strategy?

Acquiring the steelwork is relatively easy, selecting power solutions is more challenging. There are no shortage of renewable, DG and energy storage solution providers, but sometimes the technical data in their marketing literature doesn’t reflect the results you get onsite.

Our procurement strategies are focused on Total Cost of Ownership (TCO), rather than focusing purely on initial capital outlay, which means we have some appetite for longer term payback solutions. Telenor has exacting requirements, and punitive terms in case their towercos fall short of their SLAs in terms of uptime, so we place more emphasis on technical capabilities than financial costs to ensure we install robust power solutions.

Ultimately, we look for better than 20% IRR, and from day one we’re probably slightly less than that on power. Let’s put it this way; Irrawaddy is spending 60% more on energy solutions than VIOM did in India – that certainly led to some healthy internal debate!

TowerXchange: How has Irrawaddy Towers addressed the challenge of finding skilled and experienced people to install and maintain cell sites in such a challenging context?

Our strategy is unique in Myanmar in that Irrawaddy has two local equity service partners that have construction expertise and some telecom experience. For tower construction and tower climbing, we’re bringing in experienced expat management to train local staff.

All the towercos are taking a similar approach to training inexperienced local labour to take over later on. In Irrawaddy’s case, around a third of our staff now are expats, who will train locals, exposing them to O&M experience ready to take over. We expect our staff to include 80% Myanmar citizens in two years.

TowerXchange: How supportive has the Myanmar government been in terms of licensing towercos whilst the new Telecommunications Law is still in draft form?

The Myanmar Ministry of Communications and Technology (MCIT) have been tremendously supportive and have adopted a very progressive strategy.

Whilst the new Telecommunications Law progresses from draft form to take effect, the MCIT has granted temporary licenses to all four Myanmar towercos, and can award more if necessary. Irrawaddy already had a license in place allowing for leasing land and building tower infrastructure through one of our local equity partners.

The Myanmar Government has been very helpful. This rollout project is so large, with so many moving parts, that the government has regularly convened meetings between stakeholders and the appropriate ministers, and has proactively helped to streamline and standardise processes. Rollout timetables are aggressive, and there are strong deadlines with penalties on Telenor and Ooredoo if those deadlines are not met, and the government doesn’t want be the cause of any hold ups.

TowerXchange: How have government policies taken effect on the front lines, for example, how easy has it been to acquire sites (particularly to handle leasing and permitting) in Myanmar?%