On 2 October 2015 edotco announced that it had reached agreement to acquire a 75% controlling stake in Digicel Myanmar Tower Company (MTC), subject to the approval of regulators and MTC’s minority shareholder YSH Finance. The transaction values MTC at an enterprise value of US$221mn. When closed, the deal will bring edotco’s tower count over 15,000 and extend their footprint to include Malaysia, Bangladesh, Cambodia, Sri Lanka, Pakistan and now Myanmar.
TowerXchange: Congratulations on the announcement of edotco’s maiden transaction beyond the Axiata group! What has attracted edotco to invest in Myanmar?
Suresh Sidhu, CEO, edotco:
Mobile penetration in Myanmar remains among the lowest in Southeast Asia; according to the Myanmar Ministry of Communication and Information Technology, mobile penetration stood at just over 50% in June 2015.
The outlook is positive as Myanmar’s three main telecommunications operators have already committed to cover circa 85% of the population by 2020. New Crossroads Asia (NCRA), the research branch of the Union of Myanmar, estimates that Myanmar will achieve 100% mobile penetration by 2021.
edotco expects to invest further into Myanmar as it plans to bring its full service offerings into the country. Through its proposed investment in Myanmar Tower Company (MTC), edotco will offer Myanmar its knowledge capital, especially in the realm of tower and infrastructure sharing, which we believe will greatly benefit its partners and customers.
TowerXchange: Can you share some insights into the characteristics of the portfolio you are acquiring from Digicel MTC?
Suresh Sidhu, CEO, edotco:
MTC currently owns and leases out 1,250 towers (largely a ground-based portfolio) which support multiple customers and are located primarily in highly sought after urban locations. MTC currently provides services to all three of Myanmar’s mobile operators: Ooredoo Myanmar, Telenor Myanmar and MPT.
TowerXchange: Will edotco provide just steel+grass, or tower+power in Myanmar at these newly acquired sites and/or at any new builds?
Suresh Sidhu, CEO, edotco:
In Myanmar, towercos have different operating models with some providing both tower and energy as part of their solution, and others just providing the tower (where mobile network operators take care of their own energy needs).
The market is trending towards including energy as part of a towerco offering, primarily due to limited grid availability and reliability. To help operators run more efficient networks, edotco has regional competence to bring its best-in-class energy solutions (linked with our state-of-the-art real time remote monitoring service, echo) to Myanmar.
Within our existing operating markets, edotco provides end-to-end solutions in the tower services sector including co-locations, build-to-suit, energy, transmission and fibre as well as operations and maintenance; edotco is therefore well positioned to extend such capabilities in Myanmar as well. However, a final decision will be made after the transaction has closed and we have formally acquired the company.
TowerXchange: We understand around 7,410 towers have been erected to date in Myanmar, with a further 3,390 contracted in phase three of the rollout - how soon do edotco hope to start building additional towers in Myanmar?
Suresh Sidhu, CEO, edotco:
edotco believes Myanmar has a strong growth potential in terms of new coverage and capacity, largely driven by increasing mobile penetration, operator license obligations, potential new entrants and new spectrum licensing. This will drive the need for new towers across all mobile operator networks; however, edotco expects infrastructure sharing will also become more prevalent. GSMA-IFC estimates there will be around 17,300 towers by 2017 in Myanmar, which is approximately 10,000 more towers than are currently in existence.
Developing the infrastructure Myanmar requires to meet demand will take investment by all key tower industry players, including edotco. We are well positioned with sufficient financial strength and firm backing from Axiata and we look forward to expanding our network and implementing our regional expertise in Myanmar for the benefit of all. Assuming the transaction closes as expected, we will hope to begin building new towers sometime in 2016.
Consolidation of Myanmar towercos starts – Kieron Osmotherly, CEO of TowerXchange asks “what next?”
edotco’s acquisition of a majority stake in MTC and their portfolio of 1,250 towers sets a benchmark price per tower of US$176,800 in Myanmar. While this is a considerably higher price than India, where towers changed hands for an average of US$114,301 between 2009 and 2015, lease rates in India are typically just US$600 whereas is Myanmar lease rates range from US$1,400 to US$1,700, driven by relatively high opex.
Another factor which justifies the price paid for MTC’s towers is that they were built in phase one of the rollout (which concentrated on Myanmar’s three biggest cities, Yangon, Mandalay and Naypyidaw), and built on highly desirable sites secured by Digicel in advance of their own ultimately unsuccessful bid for an operator license in Myanmar.
Myanmar remains host to six towercos; IGT having built around 1,500 of 2,900 contracted towers, Apollo having built 1,100 of 1,827, PAMEL and MTC each with 1,250, plus EFT with a contract for 700 towers, and MIG which has started building the first of 503 contracted towers for Ooredoo.
TowerXchange forecast that we will see at least one more Myanmar towerco consolidation before the end of 2016. Ultimately we expect the Myanmar market to consolidate to just two large towercos, perhaps supported by one or more regional builders who will most likely flip assets to the larger players. Whether US$176,800 remains a sustainable benchmark price for a Myanmar tower remains to be seen. But the premium paid by edotco to secure some of Myanmar’s most attractive towers, and to establish their maiden transaction beyond the Axiata footprint, seems justifiable to us.
