Introduction to the Southern and South East Asian telecom tower industry

By Arianna Neri, Head of Asia and Americas, TowerXchange: As TowerXchange start delving deeper into the reality of the multi-faceted Asian telecom tower industry, we are glad to offer our readers an initial overview of our findings.

The scope of our research is mainly focused on the Southern and South East Asian markets where the tower industry is in some countries established and mature, while in other countries still taking root and yet to reach its full potential. From India to Indonesia, encompassing Myanmar, Vietnam, Cambodia, Thailand, Sri Lanka, Malaysia and Bangladesh, we will provide our readers with initial data and insights into the evolution of these very diverse tower markets.

There isn’t a unified Southern and South East Asian tower industry. With an array of single-country towercos and only one, recently established multi-country organisation - edotco - the trend towards large, international towercos is at its very beginning.

While Korea and Japan are mature markets, whose early adoption of 3G contributed to their current high penetration and data consumption rates, emerging markets are now at the heart of the unprecedented mobile growth Asia is experiencing.  In fact, mobile subscribers worldwide are expected to reach an astounding 7 billion by 2015 and 65% of it will be from Asia which will become the largest (mega) mobile market in the world.

That said, the entire region has been experiencing a wave of technological advancements, impressive rates of GDP growth, rapid movements towards smartphone adoption and, following a worldwide trend, declining ARPU. With ARPU around US$5 back in 2008, countries like India and Vietnam are now closer to US$4 and likely to reach US$3 by next year.

With declining margins and higher capex requirements as 4G LTE becomes a reality, the time is right for a shift towards passive infrastructure outsourcing and countries like Indonesia and Malaysia are embracing the independent towerco business model, albeit at a different pace.

Thanks to its scattered geographical landscape made of more than 17,000 islands, the Indonesian market is host to dozens of independent towercos with portfolios ranging from 10 to 10,000 assets.

Indonesia has recently surpassed Brazil and Russia to place itself as the 4th largest mobile market in the world after China, India and the U.S. With 278 million subscribers, or 165 million unique users, owning an average of 1.7 active SIM cards, and one of the world’s top 3G markets, Indonesia’s mobile industry is expected to reach 130% penetration rate and 330 million subscribers by 2015.

According to GSMA, Indonesian mobile subscribers are connected via approximately 90,000 towers which could become as many as 130,000 over the course of the next year. In fact, with a very fragmented tower industry, and a ‘long tail’ of regional players expanding way beyond the “Big Five”, it comes as no surprise that greenfield projects are developing at a swift pace throughout the national territory to reach out to uncovered rural areas and remote islands.

With Protelindo, Tower Bersama, Mitratel and STP leading the way and owning approximately one third of the total national tower count, the country is served by an array of middle market towercos including Komet Infra Nusantara, IBS Tower and Retower Asia.

There are still as many as 60,000 towers in the hands of mobile operators and with three of them - Telkomsel, XL Axiata and Indosat - fiercely competing and expanding their geographical coverage, BTS projects are becoming available throughout the archipelago.

With 30 million people of which 70% live in urban areas, and mobile penetration above 140%, the Malaysian market is among the best performing in the region, ahead of Indonesia and Thailand.

Tough competition among three main operators, Digi, Maxis and Celcom, is driving tariffs and devices prices down, compromising the sector’s growth potential and, with as many as eight mobile operators, the industry is likely to witness some consolidation over the next few years.

Infrastructure sharing in Malaysia has been a common practice for some time now, as initiated by Digi and Celcom in an effort to drive their capex down. With shrinking margins and higher capex as the market moves towards 4G LTE, telecom operators are likely to start outsourcing parts of their operations. Divesting their tower portfolios seems like the next obvious move.

To date, few opportunities remain for urban site acquisition and telcos are increasingly focused on in-building and small cells in order to optimise urban coverage in public spaces and high-traffic areas. Co-locating multiple tenants on scarce urban sites and supporting rollout of IBS is yet another area where towercos could offer technical expertise and allow operators to focus strictly on their core business.

An array of towercos is available to serve the needs of the Malaysian telecom industry. Along with the newly-formed edotco, a tower company spun out of the Axiata group, which owns 3,400 sites across Malaysia, TowerXchange are tracking a series of regional towercos with portfolios ranging between 100 and 700 towers such as Common Towers, Instacom, KJS and Sacofa, all of which are involved in BTS projects along with the antenna space leasing business.

Although with varying scenarios, other countries in the region are slowly getting closer to the independent towerco model. Sri Lanka, Cambodia and Bangladesh are now served by edotco, which has recently started operations in five markets with an overall portfolio of 12,000 towers.

Sri Lanka, with its population of 20 million and mobile penetration rate just above 99%, is an ideal marketplace for towercos. In fact, the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) has recently developed the National Policy on Antenna Structures in order to “safeguard the environment and public interests while not unduly restricting the development of telecommunication services.”

Area	Tower Count
Sri Lanka	2150 Towers
Cambodia	1500 Towers
Bangladesh	5300 Towers
Malaysia	3300 Towers
Pakistan	12000 Km of Fiber

Along with it, at the end of 2012, the Sri Lankan cabinet has approved new tower guidelines which will govern the actions of the telecom operators currently active in the country and operating its 2,900 telecom towers. These guidelines include incentive schemes to develop all new telecom towers with additional antenna space to potentially accommodate additional operators - the perfect scenario for towercos to get involved as mobile operators won’t lightly invest extra capex to develop multiple tenant towers. Additionally, the regulation stipulates the creation of Antenna Structure Farms: specific areas where towers will be grouped together with very detailed limitations in terms of zoning.

A very different scenario is found in the less penetrated Cambodian mobile market (69%), where a technology-hungry population of 15 million people can choose from five network operators after a rationalisation phase in 2011, when nine operators were active in the country. Two mergers and one market exit led to Smart Mobile (formed by the merger of Hello Axiata and Smart) and Viettel’s Metfone owning the majority of the market share.

Based on our research, edotco is the only independent towerco in the country where it operates 1,500 sites. Despite frequent rumours of towerco launches and sale and leaseback opportunities, Cambodia’s telecom towers are still mostly in the hands of operators. Cellcard, the third telco of the country, has recently denied any intention to sell its portfolio of 3,000 sites.

Strongly positioned thanks to its presence as a mobile network operator - Robi - Axiata group launched its first towerco operations with edotco in Bangladesh as well where it owns and operates 5,300 sites.

With six mobile operators - Telenor’s Grameenphone, Banglalink and Robi leading the market - and subscribers doubling since 2009 (from 45 million up to 114 million as of January 2014), the Bangladeshi mobile industry has boomed over the past few years.

According to GSMA, 25,858 telecom sites provide almost 90% coverage. However, a substantial rural population is concentrated in the uncovered 10% of the national territory.

To date Vietnam is the fastest growing mobile market in the region, leading the way in terms of mobile penetration (150%) and with forecasts that suggest it will reach 167% by 2018.

Military-run Viettel Group, the leading mobile operator, is a state-owned enterprise with over 40% market share. Its two main competitors, Vinaphone and MobiFone, are both owned by the national telecommunications company VNPT although MobiFone is reportedly being privatised by the end of this year in a move to increase competition in the telecom market as ordered by the Vietnamese government.

By creating a more liberal environment for the telecom industry to develop, we can predict more tower companies seizing opportunities in Vietnam but for the moment, Golden Towers is the only active towerco we have identified in Vietnam. Backed by Alcazar Capital, Golden Towers has been active in the country since 2012.

Thailand finally established an independent telecom regulator, the National Broadcasting and Telecommunications Commission (NBTC), in September 2011 after years of near-misses which contributed, along with the 2009 financial crisis, to a standstill of the telecom industry. Since then, several positive actions have been implemented with the 3G licence auction that took place in 2012 as a highlight.

To date, the mobile market has reached over 85 million subscribers with a penetration rate above 130%.

True Corporation, owner of the third operator in the country Truemove-H, has recently set up the first national towerco, the True Growth Infrastructure Fund (TRUEGIF) with the goal to transfer the operator’s assets into the newly formed towerco over the course of the next two years. The assets include 6,000 telecom towers (planned and existing) of which 1,800 are in Bangkok and 4,200 in the rest of the country.

As the first mobile network operator to offer 4G LTE in Thailand, divesting its passive infrastructure and lightening its opex was a necessary step for Truemove-H to continue being profitable while being a pioneer in Long Term Evolution.

Left out in this analysis, India and Myanmar represent polar opposite tower markets with Myanmar’s telecom industry and infrastructure just about to be rolled out, while the mature Indian market is emerging from a period of consolidation and restructuring.

TowerXchange continues our coverage of the role of towercos in the Myanmar rollout in part three of our ongoing "Myanmar tower dossier" later in this journal, while in the next pages we also present our first Indian tower count and market commentary.

Finally, if you’re interested in Asian towers, please join us at the TowerXchange Meetup Asia, December 9 and 10 in Singapore! Contat me for details: aneri@towerxchange.com.