Building a green towerco for Peru – a startup story

Partners Jermaine and Dana Pendley decided to leverage their mutual contacts and friendships to commence multiple international ventures, including investing in mining and telecommunications in Peru. They’ve started with four teams maintaining towers and upgrading for 3G, but aspire to start building their own green towers for the thriving Peruvian tower industry.

TowerXchange: Please introduce us to Consiliumo Group - where do you fit in the telecoms infrastructure ecosystems, what is your geographic footprint and how is the business financed?

Consiliumo Group is a Canadian corporation with international ventures in diverse growing markets. Leveraging various partnerships and joint ventures, we have interests in several for-profit ecologically-friendly emerging market ventures including in telecoms and mining in Peru, and real estate in Ghana and Nigeria, as well as commercial property in Canada.

Our partnership with local communities and professionals in Peru gives us a good platform to create local businesses in mining and telecom; specifically building green towers for remote, difficult to access areas of Peru.

We are financed through various government programmes, banks, high net worth and angel investors. We hope to attract further joint venture partners and larger capital in the near future.

TowerXchange: Let’s focus on the tower company you are building in Peru. What’s the current scale of the business and what scale are you seeking to achieve in Peru? Is there a particular niche you are seeking to fulfill?

We currently have four teams of four people, plus management and administration, undertaking maintenance of existing towers; general troubleshooting and upgrading to 3G and 4G. Depending on investment, we’d like to scale up operations and start constructing and purchasing our own towers as soon as possible.

We would like to explore opportunities to deploy green towers in unserved and underserved areas of Peru – extending network coverage while protecting Peru’s beautiful landscape by keeping it in its most original state as much as possible.

TowerXchange: Let’s put that into context - what’s your view of the current size of the tower market in Peru? Our sources tell us there are ~9,000 towers, with a little over 12% of Peru’s owned by active towercos; American Tower, Torres Unidas, Torres Andinas, NMS Towers and Torresec, a subsidiary of Innovattel. Are we about right in our estimates?

Our research also suggests there are around 9,000 towers in Peru, with perhaps nearer to 15% of them owned by towercos.

A further 3,000 are needed to drive geographical coverage to 80%. The Peruvian government is interested in covering the whole population even in less dense, remote areas, because of the positive impact of ICT on the economy and on society. The political agenda around communications is motivated by increasing literacy and reducing poverty in rural areas. For example, the government has negotiated with Movistar allowing them to access more remote areas if they provide free internet access to the schools in those areas.

The fact that Peru’s mobile penetration is approximately 100% is not representative of the country as a whole – in the capital city Lima for example, many people have two or more mobile devices. So there is still the potential to connect millions of people without phones – and in turn possibly increase the agriculture, mining and tourism activity in rural areas. Take Cusco for example, a tiny town with 3,000 inhabitants that generates substantial tourism revenue and mobile minutes as the jumping off point for visitors to heading to Machu Picchu – there are other similar sites further into the Amazonia that might be worth developing from a tourism and communications point of view.

The telecommunications industry already contributes 3-4% to Peruvian GDP. In a country of 30mn inhabitants, the impact of full coverage is obvious.

TowerXchange: How has the entry of Entel in 2013 and more recently Bitel (Viettel) into the market affected demand for new sites in Peru both from Entel and Viettel and from incumbents Telefonica and Claro?

Virgin Mobile are entering the market during 2015 too. Entel, a Chilean company, came in with a lot of capital, and invested heavily in the formerly urban-centric network of Nextel to achieve a similar level of coverage to Claro and Movistar. Viettel won a government contract under slightly different terms, but there is no doubt that competition is increasing among Peru’s operators. And competition means more pressure to lease one site rather than build parallel infrastructure. With the operators investing to increase coverage and capacity, the chances of attracting multiple tenants to a tower are increasing.

TowerXchange: What’s the penetration of 3G and is the 3G overlay complete? What is the current state of 4G in Peru?

3G coverage is around 80%, 4G 35%. All the operators are already working on 5G – full 4G might not be achieved before 5G rolls out. However, there are a lot of feature phones still in Peru with 2G to 3G substitutions still ongoing.

We have a healthy pipeline of work upgrading 2G to 3G and 4G, and it’s less capitally intensive and less risky than constructing from scratch. We’re patient enough to wait to find the right locations and the right investors to start building our own sites.

TowerXchange: Do local municipalities’ reluctance to permit new sites contradict the Ministry’s enthusiasm for nationwide broadband coverage? How would you characterise the regulatory environment around infrastructure sharing in Peru?

Permitting regulations are pretty strict, and it seems the government is torn between covering the entirely country and not wanting towers to destroy the landscape. And it’s difficult to make a business case for coverage in many areas of Amazonia and the mountains.

As ever, the ease of permitting varies from region to region and project to project. Proposing green towers helps, but it’s often a matter of knowing the right people to get things done.

TowerXchange: What does “green tower” mean to you?

Especially for the off-grid base stations in unserved and underserved areas throughout Peru, but also to change the existing tower image, Consiliumo Group will – depending on the location and its individual research – be moving closer to renewable energy based solutions. Either fully autonomous or still grid-connected to avoid downtime. Developments over the past years in both renewable energy like wind, solar power, biomass or fuel cells and also the more efficient and cost effective energy storage systems have made big steps and can today be considered economically viable alternatives.

TowerXchange: Please sum up your vision for the future of the telecom tower industry in Peru.

Peru still lags Chile and Argentina with regards to technological development. The Peruvian economy will grow steadily over the next three years creating tremendous opportunities for local businesses and committed international investors.

There are also tremendous opportunities for rural economies to profit from extension of wireless services.

Large demand for new sites, as well as upgrading existing sites to 3G, 4G and eventually 5G should fuel excellent growth in the Peruvian tower market for at least five to ten years.