Founded in November 2010, Skysites started out as an aggregator, accumulating a portfolio of 27,000 prospective cell sites by securing exclusive agreements with large property owners including retail chains, churches, hotels, universities and sports arenas. As Brazilian carriers moved from building their own towers to outsourcing to towercos, Skysites has moved into the build to suit business, as well as exploring small cells and Wi-Fi.
TowerXchange: What’s your background and the experience of Skysites’ co-founder?
Luiz G. Silva, CEO – South America, Skysites Americas:
I have a background in strategy, product development, network design and building GSM, CDMA and UMTS mobile networks for companies such as Bellsouth International, Claro, Hutchison 3 UK and Brasil Telecom (now Oi).
Skysites’ co-founder, our Chairman Ryan Jarvis, founded UK telecom real estate firm Macropolitan, which he sold to Arqiva for £9.5mn, and a pan-European public Wi-Fi operator, which he sold to Swisscom. Ryan has also held senior roles at BT.
Skysites’ core competence is network design; we have a deep understanding of how urbanisation, new products and new technologies affect network design, and we’re able to anticipate demand from operators and innovate to meet their needs.
TowerXchange: Please introduce Skysites to our readers – where do you fit in the telecom tower industry ecosystem?
Luiz G. Silva, CEO – South America, Skysites Americas:
Skysites has evolved through three phases. In phase one, we started out as an aggregator of sites with direct MNO relationships. Then in phase two we evolved as we recognised that the carriers were increasingly outsourcing build to suit, and we’ve slowly started to build towers. Phase three, the next phase of our proposition is to develop small cells and Wi-Fi.
To go back to the start of our story, the initial idea of Skysites was a site acquisition model. Instead of going site to site one at a time, we acquired rights from big property owners: real estate investors, churches, drug stores, supermarkets and hotel chains. We were successful in putting together a portfolio of 27,000 properties with exclusive agreements 5-16 years in duration. In 2010 through early 2012 we didn’t have as many towercos in Brazil, just a smaller scale American Tower operation and a few local players. So the operators still invested in a lot of their own sites and had own their own acquisition and construction teams – and Skysites were positioned to help MNOs with access to thousands of sites on which they would be able to install various wireless technologies.
2012 marked a change of strategy, with operators starting to sell their towers to towercos and ask the towercos provide build to suit services. As we already had framework agreements with Brazil’s leading MNOs, we felt Skysites was well positioned to provide build to suit services ourselves. We started building a few towers, less than 50 so far, but in our next phase we’re aiming to build 2,000 premium sites within five to six years.
As well as seeking to address the build to suit opportunity in Brazil, we’re also developing, educating and interacting with MNO’s deployment of small cells and Wi-Fi hotspots – lots of our sites are ready to have Wi-Fi hotspots deployed.
As we already had framework agreements with Brazil’s leading MNOs, we felt Skysites was well positioned to provide build to suit services ourselves. We started building a few towers, less than 50 so far, but in our next phase we’re aiming to build 2,000 premium sites within five to six years
TowerXchange: What are the secrets of identifying a location that could be attractive to Mobile Network Operators?
Luiz G. Silva, CEO – South America, Skysites Americas:
Network design is in Skysites’ DNA. We understand where the MNOs are today, and we know where their weaknesses are. And we know where people and traffic are. We’re able to match gaps in operators’ existing network with areas of increasing population density, put those in our model and identify potential hotspots in short, medium and long term demand.
Operators tend to plan networks within short term horizons – they find a problem today, solve it tomorrow. We get ahead helping them to anticipate demand hotspots.
TowerXchange: How do you decide whether and where to build? Do you use your network planning knowledge to pre-emptively identify attractive locations? Or do you wait for one or preferably two tenants to request a site near a similar grid reference before breaking ground?
Luiz G. Silva, CEO – South America, Skysites Americas:
It’s a mixture of both. Where demand at a particular location is huge, one operator with capex available for the location may be sufficient. We don’t need to have two tenants from the outset, particularly if our analysis suggests the site will be required by a second and third tenant in the medium term.
TowerXchange: Will Skysites build structures yourself or will you subcontract?
Luiz G. Silva, CEO – South America, Skysites Americas:
We’ll be subcontracting the construction work – we don’t need to have this in-house. There is no national construction company with a cost effective proposition in Brazil, so we’ve found it better to use regional companies with a strong internal programme management team.
TowerXchange: Talk us through the economics of building and leasing out towers in Brazil.
Luiz G. Silva, CEO – South America, Skysites Americas:
A traditional macro site costs US$100-200,00, depending on the location. Rooftop sites can cost a lot less, around US$50,000. Innovative small cells or Wi-Fi hotspots depend on the cost and quality of location and the type of infrastructure used, but the range is US$5-20,000 up front capex. For example, we have an agreement with major drug store chains with over 4,000 locations across Brazil. We can use their outdoor space to place small cells, with a small unit inside, with a capital cost typically around US$20,000 for a solution with capacity for two carriers.
Rental rates vary a lot according to the geographical context. At some locations tenants pay less than US$400 per month, other special locations can attract lease rates of up to US$2-3,000 per month.
TowerXchange: How do you foresee the evolution of Brazil’s telecom networks?
Luiz G. Silva, CEO – South America, Skysites Americas:
Brazil is so huge that the design of network varies greatly. You have a dense, urban environments such as São Paulo, Rio or Belo Horizonte where the networks are at capacity and you need a lot of infill sites, small cells and Wi-Fi offload, similar to the UK or US. Then you have rural areas as challenging as sub-Saharan Africa. You have everything in Brazil, so it’s like having to have a business plan for multiple countries.
We need to double the ~70,000 sites in Brazil. A good proportion of those sites will still be big macro sites providing suburban coverage, but half of them will be in urban high density areas, and networks will evolve to include a lot of street furniture, Wi-Fi hotspots, small cells, indoor and outdoor DAS.
Brazil has already shifted from a voice-centric to a data-centric network in terms of what users want to do. People are talking less. They’re accessing data, videos, Facebook and WhatsApp. In terms of resource allocation per user, Brazil’s mobile networks were designed for voice, so this data explosion demands a lot from the RAN and core network resources. So operators are in the midst of a challenge to adapt Brazil’s network from voice-centric to data-centric.
We need to double the ~70,000 sites in Brazil. A good proportion of those sites will still be big macro sites providing suburban coverage, but half of them will be in urban high density areas, and networks will evolve to include a lot of street furniture, Wi-Fi hotspots, small cells, indoor and outdoor DAS
The marketing guys face a similar challenge. Price plans, billing systems… everything was designed for voice, but the economics of data changes everything. Brazil has one of the lowest costs of data in the world. You can still access mobile data after using the full volume of data in your plan, but operators will decrease data speed. However users don’t care about data speed for 90% of the applications they’re using because they’re primarily using low bandwidth apps.
So I foresee an evolution in how the network is designed, and a parallel evolution of products on offer to the market. This is creating pressure on operators’ balance sheets, under pressure to deliver the best returns for shareholders, which leads to the sale of towers and the outsourcing of build to suit. Skysites are trying to help by providing sites quickly and at low cost, and adding value by providing innovative solutions.
TowerXchange: How will the new Antenna Law affect the acquisition and building of new cell sites in Brazil?
Luiz G. Silva, CEO – South America, Skysites Americas:
There are three factors we need to address to unlock the volume of implementation of new sites. The time consuming licensing process is the first, and the National Antenna Law will help a lot – it will speed up the implementation of new sites. The second factor is an internal challenge within operators to reconcile the new economics and new network design required for a data-driven market – they need to reinvent how they design the network. And thirdly, we need to address licensing costs, for small cells for example, and taxation in general.
