TIA Telecom: How to audit your asset register to improve the accuracy of valuations

TIA Telecom have audited over 15,000 cell sites in Africa, the US and UK, and have recently been engaged by the leading cellular operator in Africa to conduct a group wide site, switch and facilities audit. TowerXchange spoke to TIA’S CEO Lance Dickerson for a rare insight into the quality control and verification processes behind these audits, and where the most common, and value destructive, deviations are found between the asset register and physical reality.

TowerXchange: Please introduce yourself and TIA Telecom – where do you fit in the telecoms infrastructure ecosystem?

TIA originated, and we still play a big role in, the RF optimisation business – this is where the core skills of our shareholders come from, and we all have substantial experience with the major operators and vendors. Personally, I have over 17 years of experience at MTN, ten in South Africa, five in Nigeria and two years in Ghana. Whilst I was in Ghana I was instrumental in the tower deal between MTN Ghana and American Tower, where I started to see the importance of robust asset auditing to support tower transactions.

How TIA Telecom got into the business of auditing passive infrastructure was through our background in RF optimisation. Until recently, we seemed to be the only company that believed it was impossible to optimise a network without knowing what the configuration of the infrastructure was. Accuracy is critical in RF optimisation, which has given rise to processes which ensure our data is correct, and which can be easily expanded to audit the rest of the equipment at a site using the same quality control process, ensuring that what you see in the asset register and what you see in the field are exactly the same.

TIA Telecom still offer RF optimisation services, but now also offer asset audits all the way up to the depth required for pre- and post tower transaction site audits. Most operators have no verification or quality control process, and the auditor is often a semi-skilled worker, yet their word is taken as gospel, and significant errors can creep into the database. TIA Telecom are willing to guarantee accuracy of our audit data, to the extent that in the highly unlikely event of there being errors, we’ll revisit the site at our expense. That reflects our confidence in our processes to support the audit, and our operator and towerco clients are welcome to verify our data via third parties – it doesn’t take them long to realise that they can trust our data to be correct.

By eliminating the gap between the financial representation of the network, the asset register, and the physical reality of what is actually on sites, TIA Telecom can enable new efficiencies, effect change and drive accuracy in financial and operational processes, providing sound information on which to base customer service improvements.

TowerXchange: What are your credentials in auditing asset registers – can you tell us about some example projects?

My team and I have been auditing RF infrastructure, updating planning databases and asset registers for 20 years, as TIA Telecom for the past five years. To date, TIA have audited more than 15,000 sites across Africa, and have also audited RF assets in the US and UK. We recently secured a contract for a group wide audit for the largest cellular operator in Africa. This project will involve visiting over 20,000 BTS sites and over 50 switching centres to audit the entire asset base. We are updating fixed asset registers, planning databases and O&M databases. We’re just about to complete the first of 19 countries.

We understand the history and reputation of data in this industry is not good in terms of credibility and reliability, so we are happy to conduct a 20-40 site proof of concept to show the speed, accuracy and relevance of the data we gather, which we can give to the client to check and build their confidence in what we do.

TIA Telecom has established procedures to guarantee the accuracy of our information, including the digitisation and geolocation of information at the source, updating data from site on a real time basis.

TowerXchange: How do you audit a network to improve the accuracy of fixed asset registers?

There are three components of our auditing services, active assets, passive assets and RF information.

When we’re auditing active equipment, we’re looking at all equipment attached to network; BTS, BTS cards, RNCs, BSCs et cetera. Once we’ve determined which licenses and hardware are activated in each site, that data can go back to the operator and reveal insights such as “you’ve paid for 10,000 EDGE licenses but are only using a little over 5,000,” which can obviously yield considerable savings.

Our passive infrastructure audits provide a 100% walk down of all the assets of most interest to towercos, and our tablet app geolocates every asset in the field. We use a three pillar approach to ensure data quality: All data captured is subject to a rigorous verification process wherein we capture the barcode/ serial number by scanning, take a picture, and add user captured data, which is all fed into our verification process in Johannesburg where the data fields are confirmed using the three different sources of data.

Photographs are a key component of allowing the client to visualise the site layout, surrounding areas and potential coverage area of the site, particularly in areas where up to date information on population density and spread are difficult to come by.

We also conduct a visual analysis of the tower and foundation, illustrated with photos. We also provide information on the condition of assets, critical for both financial reasons (depreciation and amoritisation) and for operational reasons, for example we will record runtime on generator, and provide a condition assessment on each asset. Our observations can also provide useful intel on the security situation, for example it’s not unusual to show up at a remote cell site to find a line of buckets outside the perimeter fence, where diesel thieves have used an A-frame ladder to climb over the fence, passed buckets over, and sold stolen diesel right outside the compound!

The RF part of the survey is of interest to both MNOs and towercos, who want to know where equipment is on the tower, the load on the tower, and the space available. We’ll record all of the RF configuration information, using antenna alignment tools to measure azimuth and tilt, recording the antenna types and models, and height above ground. To give an example of the importance of the verification process, if the tower climber has taken a tilt reading with the meter upside down, the verifier can see from the photo of that reading, and the accompanying antenna photographs, that the meter is upside down and correct -3° to +3°. Because all the information is geolocated, digitised and uploaded for each asset in real time (providing there is coverage), disaster can be averted if the tablet is dropped from the top of the tower!

Information is uploaded to our centralised verification team and verified on the fly. If the contract allows us time, we’ll ask the auditing team to wait half an hour whilst we verify in case any data needs to be re-inputed, thus avoiding another costly visit to the same site.

TowerXchange: What level of deviation have you encountered between the asset register and what was actually on sites?

Within our RF audits the lowest level of discrepancy we found was 80% (in South Africa), and the highest was 100% on another network in Africa where the data on every one of 256 sites was incorrect!

From an asset count point of view, errors over 80% are not uncommon, but the average is lower, if for no other reason than that in many cases there would be records of an asset leaving a warehouse and, as long as the serial number matches and the asset was dispatched to a site number, the asset register is often more complete.

I should emphasise that an average 80% deviation between asset register and reality doesn’t mean an 80% difference in valuation. The difference between the asset register and the audited value is often 30-40%, but when you get down to the level of the serial number on the equipment, the deviation can be up to 80% or more.

One of the most important differences between asset register and physical reality, from a valuation point of view, is location. I’ve seen too many sites not in the same location as recorded in the database, sometimes 1-1.5km from where they thought they were! This obviously creates a big issue from the point of view of the attractability of additional tenants, which is critical to towerco valuations.

We encounter a lot of old equipment, which should’ve been written off, but which might have several years left on the books, still left on the site. We’ve found disused, heavy microwave dishes and complete SDH transmission racks left onsite to avoid writing them off, taking up valuable space. We have even found whole dissembled towers, and multiple disused generators on site! This is critical for a tower transaction as towercos could be buying something that soon could be creating an impairment on their books, or that will cost them significant amounts of money to “clean” the site up and make it suitable for additional tenants.

The differences between the asset register and physical reality are massive, and nobody should be fooled into thinking that third world networks are any different from first world networks. The level of deviation we found in the US and UK was very similar to Africa.

TowerXchange: Given that TIA Telecom believes the asset register can and should be 100% accurate, yet most tower transactions take a sample of only 10% of sites, what is the cost and time required to bridge the gap?

The time taken to complete an audit is a function of the size of the project. For example, in West Africa we have 30 teams auditing BTS sites, five more auditing switches, and we’re currently auditing upwards of 50 sites per day, verifying at the same speed.

The size of a tower transaction audit should only be limited by financial considerations, not by time. TIA Telecom charge per site, so the quicker we can do it the better for us.

In my opinion, extrapolating from a survey of 10% of sites is an estimate and is not accurate, given the huge number of variables that exist from telecoms site to telecoms site, and any subsequent deviation can have a significant impact on the valuation and business case. I know of one example where, following the initial pre-sale audit and the first closing, the differential found was so substantial that US$20mn of potential revenue was lost. Once this was picked up, the purchase price was adjusted, but it made everything clumsy; it adversely affected the revenue generated by the MNO, the revenue generation potential for the towerco, and it cost considerable time and trust.

Eventually you’re going to need to audit everything, so I think there’s a case for MNO’s to do it all up front so investors can be more comfortable about what they’re getting for their money. While many of the audits TIA Telecom are undertaking for MNOs are for their own planning and optimisation purposes, many are thinking about potential future towerco deals, so it can be invaluable to get a good feel for the potential future sale price of assets.

The cost of an audit for a tower transaction is calculated in a similar way to an RF optimisation project. A significant amount of the cost is in getting to the site. We can populate 100 fields of client-defined information in around 30 minutes. There is a small premium to be paid for the accuracy of the information we provide, but we justify that cost in reduced time and risk. The speed of our process allows us to audit quickly and efficiently – typically 1.8-2 sites per day per team, climbing and auditing every site. We’re up to 2.5 sites per day in West Africa. Our process is quicker and more efficient than our competitors, which makes the valuation process run of the mill – it doesn’t take months of pushing and pulling, and it frees MNOs and towercos to get on with the operational transition, and creating shareholder value, instead of trying to bed down infrastructure valuation.

TowerXchange: Talk to us about the handover from your audit to the financial due diligence undertaken by companies such as your partners EY.

In tower transactions, TIA are best suited to being an independent third party between the MNO and the towerco, not necessarily representing either. As such it helps to have people like EY who are often called in to be the valuator.

TIA Telecom are quite unique in that we drip-feed our audit of the asset register on a daily basis, in to the new FAR, whereas usually the financial auditors have to wait for the audit of several thousand sites to arrive at once, before they start building the new FAR. This allows for earlier activation of resources for the financial firm – less resources working for longer on a constant stream of data instead of a big block. This also reduces the time from the first audit to finalisation significantly. And at any time there is credibility of having so-many hundred sites audited and valued.

Data fields and types are agreed up front with MNO, towerco and the financial firm, so our app is customised to gather exactly what they expect, in the format they want, from the field. Data is delivered digitally day to day with no import issues, formatted and hooked up to fit Oracle or whichever database the client uses, enabling analysts to build their valuation on a daily basis. And it’s easy to make corrections and adjustments on the fly, rather than waiting for the whole survey to be complete before realising that you needed to add or adjust a field.

From the outset we’ll also compare with the existing fixed asset register so, for example, if the operator’s asset register has very accurate information on active equipment, that enables us to reduce attention to those areas, making efficient delivery of numbers quicker.

TowerXchange: How does TIA Telecom offer these specialised services on an international basis – what capabilities sit ‘on the payroll’ and what is outsourced to partners?

The verification work is done by TIA. We use our specialist resources to audit switches and warehouses, where equipment identification is critical, and we’ll do the field work for proofs of concept, but in general we outsource field work at BTS sites.

We partner with local rigging and construction companies who carry out the field work under the management supervision of our project management resources. When inducting a new partner, we accompany them until we’re comfortable that the data they are providing is up to our standards. The three partners we use now, who allow us to cover SSA, are able to carry out a range of work for us from asset audits and RF optimisation to changing configurations onsite. These are not the average auditors; they work on networks all day every day, for example one of our partners does all the network O&M for an MNO in Ghana.

We’re pushing to get into the maintenance of fixed asset registers; offering an opportunity for MNOs to maintain their fixed asset registers through sample auditing, active asset audits which we can run daily to monthly, and the tracking of assets through RFID. RFID becomes quite expensive, so you have to be selective about what you track.

TowerXchange: Finally, what differentiates TIA Telecom from other potential partners in asset auditing?

I believe we have seven points of differentiation:

1. The accuracy, and ability to guarantee the accuracy, of our data

2. The digitisation and geolocation stamping of all data, photos and comments collected on site

3. Our centralised verification, data storage and processes: we have a dedicated team with the ability to verify 150 sites per day, from any operator or country

4. Speed is on our side – we can achieve accuracy at a speed of 2-2.5 sites per day in West Africa. In South Africa we audited 880 sites in 4 weeks

5. The completeness of our information; because we structure our app up front, we can capture all relevant information for the MNO, towerco and auditor

6. The data we collect improves the budgeting ability of the MNO or towerco, whether it be network design or optimisation, and empowers decision makers to optimise purchasing, funding and distribution of equipment across Africa

7. Verification for tax and regulatory purposes; often during rollout, too much focus is placed on speed, and zero ratings on import duties may not have been taken advantage of. While it’s not easy to get value back in tax reconciliation processes, we give our clients the data to start!