How edotco is operationalising their vision to ‘enable connectivity’

edotco is a unique towerco with a vision around ‘enabling connectivity’, that extends beyond towers to energy management, fibre and In-Building Solutions (IBS). With the launch of edotco in Malaysia, Bangladesh, Cambodia, Sri Lanka and Pakistan to B2B customers earlier this year, TowerXchange spoke exclusively to CEO James Maclaurin and CTO Sairam Prasad.

TowerXchange: Thanks for speaking to us James. What’s the current progress of the launch of edotco?

Right now our focus is on spinning out assets, operationalisation, synergisation, and rationalisation.

We’ve launched to our B2B customers, but the asset transfer process is still ongoing. Co-location sales are under way in a few countries, and we’re already driving volumes onto our infrastructure.

We are in the process of spinning out towers into separate legal entities. We’ve got individual co-location teams in place and synergy teams at the centre of the business whose services are shared by all the opcos.

The next step will be to engineer merger deals between tower portfolios in-country for those operators who show willing. We have a collaborative mindset and we are open for business!

TowerXchange: What’s your view of the current state of the independent tower industry in Southeast and Southern Asia?

Our markets are kicking off with the independent towerco initiative a bit late and, as a result, a lot of networks are quite mature with significant parallel capacity. For example, Bangladesh is already 60% penetrated. With around 25% of the population below the poverty line, subscriber growth is already leveling off – but Bangladesh is nevertheless our highest growth country, but starting to level off.

In Malaysia there are 14 state-backed towercos, and 20 small independent towercos. The lease rate is reasonably healthy, and there has been no destructive price war, but it remains a crowded market.

In many countries in Asia, too often we see four towers within 75m of each other. One of our objectives is to rationalise networks by engineering deals to merge portfolios and take out that parallel capacity. If we can sweat assets more effectively, we can provide better yields for tenants as opex is saved, through investment in energy efficiency. We’ll also accelerate fiberisation and the replacement of microwave links. Without exception all of our customers in Malaysia are requesting information on our roadmap to fiberisation of at least urban and in some case semi-urban sites.

TowerXchange: We haven’t seen much decommissioning of towers as networks are rationalised in Africa – do you foresee the market taking a different shape in Asia?

Independent towers have been more additive in Africa. For example, I recall from my time at Helios Towers Africa that their pioneering deal with Millicom included a rationalisation provision to take out spare capacity.

In contrast, we have made progress with a Malaysian operator, for whom we’ve taken out 100 sites already. For us the name of the game is building robust networks, maximising volumes and sweating the assets; putting as many tenants as possible on the towers and driving as much traffic as possible through the fibre – delivering value by helping our clients get more bang for their buck.

TowerXchange: I appreciate there is a long way still to go, but two years into Axiata’s project to spin out your own towerco, what’s the main lesson you’ve learned that might be transferrable to other MNOs trying to pursue a similar strategy?

The key is to ensure alignment with the vision amongst senior management. As CFO of Axiata I sponsored the project to spin out the towers and fibre, and was fortunate to receive unequivocal support from the CEOs of our local OpCo, the Group CEO and the Axiata Board.

I have previous experience where there wasn’t alignment among senior management, where some retained the attitude that the network was proprietorial and a source of competitive advantage. I feel that perspective is unjustified in most markets. There are exceptions of course, like Papua New Guinea where Digicel has 80% market share or Kenya where Safaricom is similarly strong. However, when I was on the board of Safaricom, Michael Joseph and I were of the same view that in every market towers will eventually be shared – there’s a fine line between guarding your network and getting to market first, and deriving a bit more value from the assets. As soon as there’s another player chasing co-locations, it diminishes the value of your own towers – there are a finite number of tenants you can go after. So it is all about timing.

TowerXchange: What is the growth strategy for edotco? Is there a phase of leveraging Axiata assets initially, or can edotco be used as an acquisition platform to acquire new assets and enter new geographical markets?

edotco is a regional player with an aspiration to build a globally significant towerco. In terms of tower count we’re already quite far up the list – we have 13,000 already.

We are committed to a long term investment lifecycle and mindset – independent towercos are private equity funded with five year exit timelines, although that timeline may be pushed out a bit in some cases because deals came to market slower than originally anticipated. The important point is that private equity funded towercos need exit provisions. edotco doesn’t have exit provisions, we’re not of a mindset to exit; we’re not up for sale and never will be. Our Malaysian government linked investors have a supportive and long term mindset.

The Asian tower industry is an exciting space to be in – there are a lot of deals and potential deals in the pipeline. The only frustration is that it takes a long time to close tower deals in Asia – we’ve already pushed the timeline out on a number of deals.

There remains an educational curve to go through with customers and would-be M&A and sales and leaseback partners. Would-be partners’ progress along that learning curve can often be defined by the state of their balance sheets, and the extent to which they really buy-in to the infrastructure sharing concept – those that buy-in are keen to monetise their assets before the value of their towers drop. If one deal opportunity collapses and we buy somebody else’s towers in the same country, the value of the original party’s towers drops.

You can’t apply conventional M&A methodologies to tower transactions. Sale and leasebacks can only be completed with a considerable degree of latitude to enable compromises to be found. These are often 15-year deals, and there are a tight set of economic variables and drivers that enable deals to be done.

In my opinion, it doesn’t make sense for markets to have more than one or two towercos of scale – it’s a long term, stable cash flow business, regulated to an extent – it doesn’t lend itself to excessive competition.

TowerXchange: Thanks for speaking to TowerXchange Sairam. Please introduce yourself – what’s your background and what brings you to edotco? 

Wireless communications came to India in the mid 1990’s. Fortunately I was one of the first few who joined the bandwagon. I have seen wireless networks and technology growing from plain voice services back then to where they are today.

In this wonderful journey, I was fortunate to work with some of the best telecom groups like TATA Bell Canada International, Birla Tata AT&T, Idea Cellular, Bharti and now Axiata.

I started my telecom career as Wireless Network Engineer and have extended my experience vertically and horizontally over the years by doing various roles involving managing complex networks like planning, projects, operations, IT and supply chain.

My experiences in managing tower networks started in early 2008 when I joined WTTIL, now known as Viom Networks, as Head of Operations and Chief Project Head. We started the journey with 5,000+ towers and grew big to launch two nationwide GSM networks for Telenor and Tata DoCoMo.

From there I moved to Bharti Infratel as CTO and Head of Operations.  Bharti Infratel is a deeply penetrated network that operates in some of the toughest terrains in India. Hence this provided me with an opportunity to break through some of the complex issues being faced like energy costs and network uptime.

TowerXchange: What attracted you to join the edotco team?

After spending six years in SLT roles with two big towercos, I came across the news of Axiata forming an independent regional towerco.  I liked the Group and the edotco vision. edotco has a different model, we’re not just a towerco, and our mission is to become one of the most admired Asian infrastructure service providers. We’re not just spinning out, operating and managing assets, we’re also looking at in-country consolidations and other initiatives. The edotco vision is enabling connectivity with an environmental conscience. So I am here to operationalise those values, and to do my bit of value add to our multinational footprint aspirations.

TowerXchange: What lessons can be learned and transferred from the relatively mature Indian tower industry to the emerging tower industry in Southeast Asia?

The Indian tower industry over years has learnt and kept on fine tuning their business model. A few of the important achievements of the Indian towercos include:

1. Operator collaboration to form joint venture towercos

2. The evolution of energy cost models from power pass through

3. The removal of parallel capacity, shutting down low tenancy sites

4. Handling the regulatory norms around EMF radiation, green energy, and Health & Safety

TowerXchange: Axiata provides the equivalent of a 41MW power station – what solutions would you consider investing in in to improve the energy efficiency of cell sites?

Our various footprints have different energy challenges. For example, some of our geographies have pure 2G networks while others have matured to overlay 2G, 3G and 4G networks as well. Similarly electricity availability and quality in different markets also vary considerably.

Hence we have an energy plan that is most suitable and optimised to each footprint but primarily aimed at:

a) Reducing energy consumption per tenant

b) Reducing diesel consumption per tenant

c) Improving energy efficiencies in power systems

d) Using efficient cooling solutions

e) Adopting alternate and green energy solutions

As part of our vision, we have stated our ambitious goal to reduce our carbon footprint by up to 40% by 2018 using new and advanced energy technologies.

TowerXchange: What’s your personal view about the economics of alternate energy sources like solar, fuels cells and wind power?  

I have carried out good number of studies around various alternate energy solutions over years starting way back in 2008. Back then we had two main challenges:

a) Making the business case work as the cost per unit of production using these sources tends to be higher than conventional sources

b) Technology adoption related issues like customising products to suit telecom needs, a lack of scaled deployments et cetera

However over last six years, things have improved. Cost of energy using conventional sources has increased exponentially, while the cost of producing using alternate energy is continuously going down. Most of the vendors also have customised products developed and tested for telecom use. Examples of scaled deployments are in effect in a few markets, it’s already crossed over or on the verge of cross over soon.

Once the above issues are overcome, all other benefits like low carbon, low opex, reduced maintenance and long term sustainability are great to have.

TowerXchange: Finally, the CEOs of the leading tower manufacturers, RMS and power solutions read TowerXchange so on their behalf, I’d like to ask how does edotco buy equipment and services?

We have already sent out several RFPs, received responses from vendors, and have moved to the next level of evalutation. We are also working on several long term projects. Unlike a conventional towerco which provides just tower space, edotco will be providing integrated infrastructure services like tower space, O&M, energy management, last mile fiber, IBS et cetera. So there will be more RFPs to follow.

Our priorities today are to put in place various advanced systems like RTOC, an end to end IT system, optimised tower structures, and energy efficient technologies and services. We like to benchmark our costs to the best of the industry globally and leverage our scale so that we provide most cost optimised solutions to our customers.

James Maclaurin, CEO of edotco, has kindly agreed to join the TowerXchange ‘Inner Circle’ Informal Advisory Board.