TowerXchange don’t want to critique a Myanmar tower rollout that is already transforming the lives of the citizens, but the reality is that operational challenges continue to delay “the last great greenfield telecoms rollout”. We should emphasise at the outset that subscribers are signing up in their millions, inflated tariffs have plummeted, and towers are being lit on a daily basis – commendable progress is being made. But significant challenges remain in importing equipment, permitting sites, licensing towercos and in the incompatibility of Telenor and Ooredoo’s approaches to cell site energy, which in the near-term is stifling tower sharing and slowing progress.
But perhaps the single biggest concern was how the different business models for cell site energy adopted by Telenor and Ooredoo were adversely affecting the potential for co-location.
By Q1 2015, 5,000 new towers were supposed to have been installed in Myanmar. TowerXchange sources suggest that, by the end of 2014, approximately 2,600 of those towers have been ‘lit’ with a further 2,400 in various stages of ‘work in progress’. Most of the initial rollout is in areas relatively well connected by transport and electricity infrastructure, so if phases one and two are being affected by delays, the rollout is only going to get more challenging as it pushes deeper into rural Myanmar.
What is causing the delays to the Myanmar tower rollout?
25 key stakeholders in the Myanmar rollout squeezed onto a very popular round table at the recent TowerXchange Meetup Asia. This is what they felt was causing the delays:
- Import delays and the high cost of import duties
- Continuing delays in the licensing of towercos
- A disconnection between Central Government policy and State-level implementation, particularly affecting permitting
- A fundamental lack of bureaucratic capacity to keep up with the volume of activity generated by the rollout
- The continuing impact of sanctions on the flow of international funding, especially from the US
But perhaps the single biggest concern was how the different business models for cell site energy adopted by Telenor and Ooredoo were adversely affecting the potential for co-location.
How co-ordinated is this rollout?
While each towerco reports good co-operation with their partner MNO – they are “tied with an umbilical chord” according to Arun Kapur, Executive Chairman of IGT – the potential to create a genuinely shared network is not currently being fulfilled.
Telenor has ‘muscle memory’ of co-ordinating shared networks, at least at a corporate level. For example they invested virtually no capex and took 19,000 tenancies on shared towers to rollout in India. However, Ooredoo has had less exposure to partnering with towercos in the provision of cell site power. For example the towercos in Indonesia provide a ‘steel and grass’ business model; power costs are “passed through” to tenants such as Indosat, in which Ooredoo has a substantial stake, and thus Indosat retains responsibility for investing in and maintaining power. Similarly, there is minimal towerco activity across the Middle East, Ooredoo’s heartland, so the company has not been exposed to towercos with a track record of energy service provision.
Incompatible tower power strategies of Telenor and Ooredoo
The fact of the matter is that whilst Telenor’s towercos own and operate the power systems, and Ooredoo currently prefers a model where they retain power equipment, their opportunity to co-locate is limited. Tenancy ratios were always going to be much closer to one than two in the early years, but Telenor’s towercos have found it easier to secure co-locations with Ooredoo than Ooredoo’s towercos have found with Telenor. Telenor want third parties to supply the power. At Ooredoo’s sites the operator must install and maintain their own power systems, or share Ooredoo’s own power systems. This ‘Mexican standoff’ on tower power in Myanmar cannot continue.
While phases one and two of the rollout has concentrated on Myanmar’s larger cities, and thus is largely on-grid, the power strategy incompatibility problem will be exacerbated as the rollout pushes deeper into rural areas – by 2017 GSMA’s Green Power for Mobile research suggests 56% of Myanmar’s cell sites will be off-grid, another 20% on unreliable grids.
whilst Telenor’s towercos own and operate the power systems, and Ooredoo currently prefers a model where they retain power equipment, their opportunity to co-locate is limited
To add extra complexity, Ooredoo is installing innovative equipment on their sites, equipment that needs a lot of power. Ooredoo is using 4 way Rx diversity with a dual antenna configuration, an innovative approach that requires 30% less sites to generate the same coverage. This is a great approach from an holistic network planning perspective, but each site consumes ~20% more power than traditional solutions, so they are complex sites to dimension. Where possible, Ooredoo is using grid power, while at off grid sites the most common approach will to be to install a DG+CDC battery hybrid solution, but they are looking at solar where possible. The problem is that the finite amount of GLA (Gross Leasable Area) at a site means that if power is not shared, each tenant must find space for their own dual DGs, or DG and battery bank. A hybrid solar array already needs ~35sqm to supply a single tenant, add a second tenant and the space savings are minimal – you still need ~66sqm, 97sqm for a third. You can see why it’s difficult for Telenor to meet their requirements if they co-located on Ooredoo’s unique sites.
In the long term, all four of Myanmar’s operators, MPT and YPT included, want to share towers AND power. Resolving the Mexican standoff on tower power is essential to the efficiency and sustainability of Myanmar’s new communications infrastructure.
Facilitating ESCO business models in Myanmar
One potential approach to ensuring the compatibility of cell site energy would be for the Energy Service Company (ESCO) business model to become prevalent in Myanmar. If Ooredoo has an interest in moving toward an ESCO business model, as their recent RFP and contract award to Leap Power Solutions suggests, then they will have to work out how to delink their unique legacy power assets. However, with most of Myanmar’s off-grid rollout still greenfield, delinking legacy assets is less of a challenge in Myanmar than it has been in India, for example.
Another challenge is that ESCOs want to build distributed, micro-generation with telecom towers as anchor tenants. But ESCOs need permission to sell excess power to local communities and businesses, and to sell excess power back to the grid. That permission has not, to date, been forthcoming from Myanmar’s regulators.
ESCOs need permission to sell excess power to local communities and businesses, and to sell excess power back to the grid
The big question is whether ESCOs can provide energy at a kWh rate that Myanmar’s MNOs and towercos find digestible? In virgin territory like Myanmar, pricing is going to be a challenge – for example, nobody knows the delivered cost of a litre of fuel in the Northern States beyond the reach of the better roads, and in an environment where unrest persists.
For an aspiring ESCO the risk is not just in the selection and installation of capitally intensive hybrid power systems, it’s also in the Service Level Agreements that MNOs and towercos use to assess quality and consistency, and in the application of penalties when performance targets are not met. ESCOs’ capital requirement and risk exposure is multiplied when one considers the scale required to make an ESCO a credible business partner in Myanmar – is 100 sites enough? 500? 1,000? Indeed, do any ESCOs have the balance sheet to finance power at the 5,000 or so sites each MNO might have in Myanmar by 2018?
ESCOs need time to refine their business models, raise capital and execute, but Myanmar’s MNOs won’t wait. They, or their towercos, will rollout their own power solutions and create a legacy of owned power assets which they may have to restructure in due course.
Conclusion
The first signs are already evident of the resolution of the Mexican Standoff on tower power strategy in Myanmar. The ‘cleanest’ medium term solution would be if Ooredoo’s ESCO project yields successful results, they could de-couple existing power assets and divest them to one or more ESCOs that also build the energy solutions at greenfield sites. Power being provided by third parties at all Telenor and Ooredoo sites would unlock the potential for co-location, and drive tenancy ratio growth.
In the longer term, the market will inevitably be restructured. Myanmar does not need five or six towercos and an additional layer of ESCOs serving three MNOs (or four, if YPT – with Viettel? – gets their act together). A sensible scenario might see Ooredoo’s tower assets consolidated under a single partner, a partner who would be unlikely to want to include energy in their service proposition. Thus Ooredoo or Ooredoo’s towerco would themselves partner with an über ESCO owning and operating all the power systems.
Telenor’s ecosystem is less urgently in need of consolidation and reorganisation, but the more we study Myanmar, the more it looks like several of the country’s towercos could build to a given scale and make very successful exits. We think there will be two, at the most three towercos in Myanmar in the long term. We think MNOs will not retain power assets in Myanmar in the long term. And when that happens, we think we’ll see healthy tenancy ratio growth at or above 0.2 per year.
Stop press: joint rollout RFP issued by Telenor and Ooredoo for 1,100 tower in next phase
TowerXchange has verified through multiple sources that Telenor and Ooredoo have gotten together to issue an RFP for the joint rollout of a little over 1,100 towers in Myanmar, with the winning towerco to provide the power solution, subject of course to the usual review and approval of their MNO partners.
We understand that Telenor is running the RFP, with Ooredoo intending to co-locate on the same towers rather than build parallel infrastructure. Shortlisted counterparts were being informed in the first week of February, 2015.
Myanmar Tower and Infrastructure Provider Association proposed
Umang Das was the first to propose the idea of creating an industry association to enable the key stakeholders in the Myanmar rollout to speak with a unified voice, lobbying Myanmar’s MIC to change the shape of the regulatory regime and processes affecting towercos. Such an association could also identify and disseminate legal and technical standards and best practices; and consolidate tower locations to co-ordinate FTTT.
TowerXchange has pledged our support in the creation of the provisionally named “Myanmar Tower and Infrastructure Provider Association”. All five towercos with contracts to build sites in Myanmar have verbally expressed an interest in joining the association, and we’ll be hosting an invitation-only dinner for them at the Mobile World Congress in Barcelona this March.
At time of writing, our initial focus remains on engaging Myanmar’s towercos, but we’ll be soliciting the support and participation of MNOs, suppliers and of course the MIC in due course. If you’d like to be kept informed of developments with the Myanmar Tower and Infrastructure Provider Association, please email me, Kieron Osmotherly, at kosmotherly@towerxchange.com.
Meet Myanmar’s towercos at the TowerXchange Meetup Asia 2015, November 24 and 25, Marina Bay Sands, Singapore
Five towercos have contracts to build macro towers in Myanmar, and all of them were represented at senior level at the 2014 TowerXchange Meetup Asia; Apollo Towers and Irrawaddy Green Towers (Telenor’s towerco partners); Digicel Myanmar Tower Company and Pan Asia Tower (Ooredoo), plus Young Investment Group’s recently founded Eco-Friendly Towers, which has a contract to build 1,000 towers, including in the Northern States where there is still significant unrest. A sixth towerco, Myanmar Infrastructure Group, which has several DAS in Myanmar and ambition to build 1,000 macro towers, is also an active participant in the TowerXchange community.
For an in-depth guide to the structure of the Myanmar tower industry, checkout TowerXchange’s Myanmar tower rollout FAQs. And to connect with Myanmar’s towercos F2F, add a date to your diary now; the TowerXchange Meetup Asia 2015 will take place on November 24 and 25 in Singapore. Exhibit space is almost sold out – contact Annabelle at amayhew@towerxchange.com to reserve a booth.
