Unlocking the co-location potential of police network infrastructure

Public safety networks are often untapped sources of potential value for the telecom tower industry, while the commercialisation of these networks can be an untapped source of revenue for government agencies. Public safety networks are necessarily extremely secure and reliable, and can offer coverage in prime metropolitan areas. In Nigeria, BCTEK have a unique business model which involves leasing up 700 towers built by the police as a surveillance network. Acting CEO Peter Audu, a veteran of the Nigerian tower industry, explained to TowerXchange how BCTEK has partnered with government, and where they’ve found the strongest demand for co-locations on this unique network.

TowerXchange: Please introduce our readers to BCTEK.

BCTEK is the newest towerco in Nigeria. Although we were incorporated in 2008, our operations started fully in May 2013. BCTEK manages, and markets for co-location, about 700 towers built by the Federal Government for police and other security agencies. We have a 20 year contract to manage and commercialise these towers, on sites in all 36 Nigerian States. Most of our sites are in Nigeria’s major cities, and 80-85% are within a Nigerian police station compound.

The RF planning motivation when designing this CDMA police network was to place towers primarily in densely populated areas so the authorities could attain intelligence information to fight crime. While not all the towers are in densely populated areas, most of the network’s footprint agrees with the RF planning needs of Nigeria’s MNOs. Having invested substantial capex into the network, the government saw an opportunity to commercialise the towers. However, until BCTEK took over the towers, there was no allowance for third party equipment.

TowerXchange: How is BCTEK funded?

BCTEK is funded by a combination of private equity funding topped up by local bank debt.

TowerXchange: Why was BCTEK chosen as the partner to manage and market these towers?

BCTEK is driven by a formidable management team that has excellent knowledge and experience of the tower industry in Nigeria. Being veterans in the infrastructure sharing and management space, the team’s combine expertise cuts across various senior roles in procurement, administration, technical, government relations, supply chain management, project management et cetera. This was crucial and, perhaps, helped in making BCTEK the right choice to manage and commercialise the assets.

TowerXchange: What progress have BCTEK made since you started marketing the sites in May 2013?

We’ve made good progress in leasing up the sites. There are currently about 700 towers in the network, out of which we have populated 67 sites with about 115 tenants – mostly in Nigeria’s three largest cities. We continue to receive ITPs from the MNOs and I would say we are as optimistic as ever about now and the future.

TowerXchange: What is difference in demand for tenancies between the major metropolitan areas compared to smaller towns and villages? Do you charge the same lease rates regardless of the location of the site?

80-85% of demand for co-location on our towers has been for our sites in Lagos, Abuja and Port Harcourt, rather than for towers in remote towns and villages in Nigeria.

Right now, our pricing is uniform in the main although we are also flexible enough to discount prices based on volume. However, in doing their RF planning, operators are mostly concerned with the commercial viability of a site, therefore what matters to them is the potential minutes of usage, not the lease rate. Even if BCTEK offered differential prices it won’t attract MNOs to provide service in a market where there’s no commercial incentive.

TowerXchange: Is there much overlap between your 700 sites and those of Helios Towers Nigeria, IHS and those recently acquired by American Tower from Airtel Nigeria?

We’ve looked at the portfolios of our competitors, and there’s an overlap of only around 20-25%. You have to remember that these networks were built for different reasons; our competitors in Nigeria started by doing build to suit projects for their clients primarily – they were commissioned to build in areas where there was demand. Nevertheless, due to constraint of capital they were never able to provide full coverage and had to address the challenge with yearly roll-out plans.

Our network was built driven by the intelligence gathering and surveillance requirements of the national security agencies including the police. However, much of the coverage is commercially viable.

TowerXchange: Are there any plans to extend your network?

Yes. As a tower company BCTEK is involved in site build and expanding the network is definitely part of our overall growth strategy. This will give BCTEK even more sites in locations appealing to MNOs.

TowerXchange: What Service Level Agreement (SLA) do BCTEK offer, and is power included in your service?

BC Tek offers a full service inclusive of power, with a 99.99% uptime guarantee. Like the other towercos, when we fall below SLAs penalties are incurred, but we have been able to maintain that service level in the main.

We don’t have the same security problems that affect many other towercos as most of our towers are secure inside police stations and compounds. Unfortunately, in many other parts of Nigeria it is necessary to pay “Area Boy charges” – community fees for the opportunity to deliver diesel without being impeded.

Nigeria’s National grid is so unreliable that at the moment BCTEK uses dual diesel generators at all our sites, with a rectifier and capacity for 14 batteries to provide at least eight hours of autonomy. We are finalising plans for the use of more efficient alternative power sources.

TowerXchange: What will be the impact on niche towercos like BCTEK of the recent sale of 11,287 towers from MTN and Etisalat to IHS, and the sale of 4,800 towers from Airtel to American Tower in Nigeria, given that ~80% of Nigeria’s towers are now owned and operated by independent towercos?

The sale of over 16,000 Nigerian towers to IHS and American Tower might look like bad news for niche towercos like BCTEK, but I think it is good news. Competition will be keener now, but since the inception of commercial mobile telephony in Nigeria, many have been making the case to persuade all the MNOs to buy into the idea of colocation – the principle of conserving resources, minimising capex, and improving competition – and now it seems like everyone is going the way of colocation.

Though we can refer to the competitors as early birds in the market with an established presence and long standing relationships with many operators, still the Nigerian MNO market is ultimately dominated by just four GSM operators, and BCTEK already has excellent mutually beneficial relationships with all of them. What is key for us is to maintain our niche market.

BCTEK does not have aspirations to acquire and run a network of over 10,000 towers in Nigeria. We have a vision to run a virile, lean and nimble business providing excellent service to our customers.

TowerXchange: What is BCTEK’s vision for the future?

The future for the Nigerian tower industry is very bright. One of the challenges for MNOs rolling out has been the paucity of funds – it’s difficult to raise the capital necessary to build towers. That burden has now been taken away, freeing up more resources to devote to rollout, with demand driven by both voice and data. Internet penetration remains low in Nigeria, there is a huge gap to be filled, and there are new WiMAX companies being launched who all need towers.

Nigeria’s towercos are ideally positioned to benefit from one of the fastest growing, most profitable telecom markets in the world