2014 was a tough year for managed service providers in the Ghanaian market as the devaluation of the Ghanaian Cedi threw the market into uncertainty and a fuel supply crisis hit companies’ ability to deliver. In this interview Jean Farhat, Managing Director of leading end-to-end service provider Netis, explains how they have worked hard to tighten up on controls in order to maintain profits and deliver optimum performance for their clients.
TowerXchange: How do you see Ghanaian towercos dealing with power issues? How will changes to power provision affect your offering to clients?
Jean Farhat, Managing Director, Netis:
There is currently power crisis in Ghana, grid is very poor in quality and availability. In 2014 we had a big crisis not just for the grid but also a huge delivery crisis where the importers claimed they were not paid by the government so fuel wasn’t available at all at certain times. It has changed the whole situation. Now fuel has to be paid for upfront and even then you’re not guaranteed to receive it. This results in more outages and has impacted towercos’ opex given they offer a fixed price for clients to rent the space and provide power and maintenance. So when this crisis hit and the need increases drastically, the towerco is left quite exposed by the commitments in their Service Level Agreements. I don’t think they have any agreements in place with their clients to compensate for or mitigate a situation like this, but it won’t change the way towercos work. For companies like us, we have to change the way we work. In terms of how we supply fuel, we have to make sure we are sourcing more effectively. Before the crisis you could go to any supplier and fuel was available. More and more now we have to control the distribution and that means not using too many subcontractors, so we have to buy our own trucks and do our own distribution in order to have better control over logistics.
Another trend which is more and more common with towercos is that instead of paying fuel on delivery it is now paid on consumption which is another difficulty for us, so we have to better manage the delivery, staff control, losses during transportation and losses on site. We have to use more efficient tools like employing RMS all the way from depot to site, and finding tools which allow us to monitor really carefully.
TowerXchange: Do fuel problems like this make Ghana a less interesting market for you?
Jean Farhat, Managing Director, Netis:
We’re used to these kind of challenges and this is just an additional layer of complexity. Maintenance is not a massive profit maker, you earn your profit by saving costs, not on the margin. It pushes us to be more accurate, professional and careful. The trend of being paid on consumption pushes us to be more careful with how we control the whole supply chain, from taking orders or approvals from the towerco up to being paid and invoicing. At each stage we have to be very accurate, but this trend is all across Africa, it’s the same in Uganda or Burkina Faso, it’s a trend which is growing across the continent.
TowerXchange: Will the recent 4G license auctions impact demand for new sites? Will the restriction of licenses to new market entrants affect the market?
Jean Farhat, Managing Director, Netis:
These auctions mean new opportunity for the towercos, but they have to be very smart in terms of being more commercially attractive. I don’t see specific impact in terms of O&M except that newcomers might need to build infrastructure but there’s no massive investment in terms of structures and civil works to come. It doesn’t heavily impact us.
TowerXchange: What role will DAS and ‘special structures’ such as camouflaged sites and lamp posts play in urban infill and Ghanaian needs moving forward?
Jean Farhat, Managing Director, Netis:
We are involved in lamp posts. We can see there’s more and more need for camouflage but it’s not massive for now. It remains very expensive for towercos and operators. We see the demand growing and we see the same trend in other countries, but given the cost implications we try to avoid the need for camouflage as much as we can for our clients. In part it’s driven by regulation but mainly by the reception of the consumers; over the last few years we have seen that more and more people are reluctant to have structures close to their homes and now in many markets some operators need to densify their network by putting more structures into urban areas and residents are reluctant to have towers close to their houses.
TowerXchange: How did the devaluation of the cedi affect your operations and is there anything you can do to mitigate the risk of currency devaluation?
Jean Farhat, Managing Director, Netis:
It’s impossible to control it happening again and of course there’s an immediate impact on your costs. It hits transportation costs and it impacts opex - most of the consumables and materials we use are imported so even if you buy on the local market prices can change six or seven times in a year which means you just can’t control your costs. Most of the time your process can’t change in the same way, it’s just that your profit margin that is eaten up. In terms of sourcing you have to be more careful, watch your financial costs, keeps costs as low as you can. Most of the time towercos prices are fixed and you can’t negotiate adjustments.
TowerXchange: How does the fact there are currently three towercos in the market affect the requirements they have for you? Do you find the presence of three players affects how you work with your clients?
Jean Farhat, Managing Director, Netis:
Yes we feel it is better to have this situation than to have a monopoly with only one towerco in the country. You have a choice and more possibilities to negotiate and if one client is not doing well you can catch up with another one. In some countries with only one towerco and you can definitely see the difference as they can dictate their terms and if you cannot manage with it, you may close down.
TowerXchange: Has there been any decommissioning in Ghana and what are the implications for Managed Service Providers?
Jean Farhat, Managing Director, Netis:
Decommissioning is happening in some cases like for example where a towerco is taking over a network and there will be some decommissioning there definitely. Usually it won’t be big numbers. Some towers will have to be decommissioned because they’re duplicated. We will lose some sites but if they’re still happy with us we’ll gain some others in new areas. In the end it depends on the towerco’s policy. When they take over a new network they may introduce new contractors with which we’ll have to share the new network, so for us it generally means no major changes, in the end the numbers will remain more or less the same. If they don’t bring in a new contractor it’ll be different but I believe they tend to bring in a new one then reduce the numbers after some time. Or they’ll keep things as they are for six to eight months and determine whether to keep the contractor or change to their usual contractors.
