TowerXchange wanted to understand the impact of tower transactions on the Managed Services (MS) business in Africa, so we spoke to market leaders Huawei. In this exclusive interview, we examine the operation of Huawei’s MS business in Africa; how they partner with MNOs, what capabilities they consider core and keep in-house, and what is outsourced, and we ask the value proposition they present to towercos.
TowerXchange: Please introduce yourself, your role and Huawei’s managed services business in East and Southern Africa.
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
I’m responsible for Huawei AMS business unit in the ESA (Eastern and Southern Africa) Region. ESA means we are not only covering the South Africa region, but also the booming business in all countries in East and Southern Africa such as Tanzania, Congo K and Uganda, in total we cover 26 countries in ESA. Defining Assurance and Managed Services, or AMS, in Huawei we combine the Managed Services business with Customer Support business to further address the customer concerns about network quality assurance, that’s the reason why we call it the AMS Business Unit.
Managed Services is an important business and plays a very important role in Huawei Global Technical Services. In ESA, it’s even more important considering the typical challenges within this region. In the ESA region, most operators are facing the same pain point of how to improve the network quality while keeping the same, or even lower, opex. While you could say this is a general pain point for any operation, but actually it’s much more crucial to operators in ESA region. I can give you three reasons why:
One, most markets in the ESA region present a very low ARPU, that means the operator’s TCO should be very competitive to adapt to the market.
Second, the talent resources are very limited in our region. Keeping high competency resources is very costly if the operator doesn’t seek advantage from cost efficient solutions.
Third, the most important: network quality. The telecom business is booming from Uganda to South Africa, from Congo to Mozambique. The operator needs to provide very good network quality to attract data users, and also maximise profitability by providing stable data connections to high ARPU data subscribers.
To combine all these three operational pain points, outsourcing to Managed Services (MS) definitely will be the only choice to improve operators’ business with an aligned and efficient network operation.
TowerXchange: What is the operational footprint of Huawei’s managed services business in East and Southern Africa? For example, how many staff do you employ in your field maintenance workforce? Which capabilities are subcontracted to selected partners?
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
Huawei setup our MS business unit in ESA back in 2008, when our first MS contract was awarded in 2009 with the number one operator in Zambia. That was also the first MS deal in for that telecom group. After three years, the model proved to be a great success and it became the best operation model within that Group, making them decide to launch a massive network operation outsourcing plan including Nigeria and South Africa.
Now, in ESA, we have more than 80 staff working covering 11 projects now in five countries, in which more than 50% are staff transferred from the operator. At same time we are forecasting to have another 50% in volume increased before the end of 2014, more amazing is that the MS at that time will not only cover CT (Telecoms), but also the ITO area.
Huawei defines some competence areas as key areas which we deliver ourselves, still there are areas which we decide to outsource to our partners, such as site maintenance, drive testing, site build, refuelling, site security and civil works
While Huawei defines some competence areas as key areas which we deliver ourselves, still there are areas which we decide to outsource to our partners, such as site maintenance, drive testing, site build, refuelling, site security and civil works. On the ITO space, an example would be be desktop management.
TowerXchange: How are projects and workflows co-ordinated across the fragmented ecosystem of Huawei’s own local field operations and subcontracted refueling and O&M partners?
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
As a global company, Huawei always seek any chance to localise a business, finding strategic partners to run field operations. In 2013, the outsourcing volume for MS has already been the second biggest in Huawei, and its forecast to increase a further 30% by the end of 2015.
Our ‘fragmented ecosystem’ of partners typically covers a broad geographical area, unlocking many potential synergies. For example in Nigeria, Huawei has many MS contracts. Once we have one MS relationship in a market, there are potential synergies between the management of active and passive infrastructure, but also potential synergies between different partners which might, for example, allow one partner to focus on more sites in a smaller geographical area, enabling them to invest in warehousing at therefore to improve response and lead times.
TowerXchange: What will be the impact on the managed services business of independent towerco’s acquisition of an increasing proportion of Africa’s towers? (According to TowerXchange’s statistics, towercos have increased their market share from 4.7% in 2010 to 25% today).
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
I don’t think towercos are a threat, I see the increasing importance of new business models such as independent towercos as an opportunity.
Whether MS or another business model, like the sale and leaseback of towers, network optimisation is still all about meeting customer need, whether it’s replacing a rectifier or even the oldest drive tests. In either case, as long as the service provides the value that customers need, I think the MS business will always be there. Considering the operational excellence or the global competence advantage, our business analyses suggest the MS market will keep growing in the coming five years.
TowerXchange: With the separation of active and passive infrastructure into different companies, are there still opportunities to create synergies through the integration of managed services for both active and passive infrastructure?
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
In the area of field maintenance, it’s Huawei’s strategy to use local partners for service delivery, which means Huawei will need companies like towercos to provide services in certain areas.
When we talk about synergy, it’s not only the synergy between active and passive infrastructure management, but also the synergy between the operators. In the future, when more operators adopt MS and outsource their towers, we think synergies will be transformed, shifting from active+passive to multi-operator active + multi-operator passive.
Huawei’s professional network design capability will help tower companies to plan networks in very precise way in terms of where to build a new tower, how to design the site, which antennas to put where, how to design the shelter, and from a network design point of view, how to sell towers to operator
TowerXchange: How can Huawei help towercos optimise their build-to-suit programmes?
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
I would like to mention another advantage that Huawei can bring to the tower companies. That’s network design. Huawei’s professional network design capability will help tower companies to plan networks in very precise way in terms of where to build a new tower, how to design the site, which antennas to put where, how to design the shelter, and from a network design point of view, how to sell towers to operator.
We can help optimise capex deployed for build-to-suit and organic build programmes, reducing costs and explaining how to make the plan more efficient and professional.
TowerXchange: What can Huawei do that other managed services and partners cannot do?
Lu Yuming, Director, Assurance & Manage Services, Eastern and Southern Africa, Huawei:
In Huawei, we have two Global Network Operation Centers (GNOCs) and three Global Technical Centers (GTECs) which provide customers with follow-the-sun services and globalisation leverage on competence and cost.
Huawei are hosting a round table on “How to manage a broad diversity of managed services, O&M and EPC partners” at the TowerXchange Meetup Africa, coming up on October 20 and 21 2014 in Johannesburg. For further details, visit click here.
