Since the creation of Telesites back in 2014, TowerXchange have been looking closely at the evolution of América Móvil’s tower venture, from the carve-out of the carrier’s 10,000+ towers to the towerco’s recent registration on the Mexican Stock Exchange. In this article, we take a closer look at the implications of Telesites business in Mexico and beyond and whether the towerco is proving to be a fair competitor to the likes of American Tower and Mexico Tower Partners.
“Agente Económico Preponderante” means dominant player. An expression we’ve all heard several times over the past few months linked to América Móvil and its position in the Mexican telecom industry as declared by the Federal Telecommunications Institute (IFT) back in 2014. The carrier responded by spinning off its tower business and creating Telesites which now owns 12,555 towers across the country.
At the beginning of December, the Comisión Nacional Bancaria y de Valores (CNBV) - the Mexican banking and securities regulator - approved the registration of Telesites which will start trading on the Mexican Stock Exchange (BMV) on December 21.
In spite of this move, Gabriel Contreras, President of IFT, stated that not only América Móvil but also Telesites is considered a dominant player and as such, needs to comply with the existing regulation on the matter.
In Contreras’ words, the 2014 decision to declare the operator a dominant player “extended to all companies in the group and it was established that in the event of spinoffs, mergers or other corporate moves, the affiliates and subsidiaries would have the same obligations as the dominant company.”
Practically speaking, there hasn’t been any practical consequence for Telesites whose business has been recently approved and whose negotiations with the likes of AT&T and Telefónica had started even before the CNBV’s go-ahead.
When created, Telesites acquired 10,800 towers from América Móvil and its count is already up by over 1,700 towers to 12,555 (as of Q3 2015), representing 48% of Mexico’s 26,010 towers. Telesites is targeting a count of 16,600 Mexican towers by 2020.
MNOs market share breakdown as of July 2015
Exclusively used by América Móvil in the past, Telesites’ portfolio is now available to all Mexican carriers, with MLAs already agreed with Telefónica and AT&T. For the time being, TowerXchange has reached out to the towerco for comments and looks forward to new developments on the always exciting Mexican industry.
Estimated breakdown of tower ownership in Mexico
An exhaustive analysis of the Mexican telecom tower industry will be a crucial component of the 2016 edition of the TowerXchange Meetup Americas. Now in its third edition, TowerXchange will gather key executives from the Mexican, Central and South American tower industry in Boca Raton, 16-17 June 2016, at the exclusive Boca Raton Resort & Club. Contact Arianna Neri at aneri@towerxchange.com for more information.
A view on Telesites from TowerXchange Founder and CEO Kieron Osmotherly
The approval and inauguration of Telesites marks a new chapter in CALA towers - an operator-captive towerco with a potential pan-regional footprint and a scale that by the end of this decade could surpass even American Tower’s LatAm operation.
To date Telesites’ operations have only commenced in Mexico and Costa Rica, but many other Claro opcos are saying that new sites will be built through Telesites - it remains to be seen whether all Claro’s legacy towers, which would total in excess of 30,000, could all be transferred to the new entity
KPI objectives
Telesites has already agreed MLAs with Telcel (of course), AT&T and Telefónica, charging a lease rate comparable to Mexico’s other towercos of around US$1,150.
With a tenancy ratio very close to one currently, bullish estimates suggest Telesites is targeting a tenancy ratio of 1.6 by 2020, driven by pent up demand from Telefónica and AT&T which could see 2,000 co-locations added very quickly in 2016. However, 1.6 remains an ambitious target given the 900+ new towers (most with a single tenant) which Telesites intends to build per annum in Mexico.
Through subsidiary Opsimex, Telesites has already raised substantial debt, initially as high as 9x EBITDA, which they plan to deliver over the coming years.
In conclusion, TowerXchange see Telesites as the primary change agent in what has otherwise been a quiet year for the CALA tower industry. The creation of Telesites may have implications even beyond CALA, creating a playbook for the carve out and management of operator-captive towercos which could be replicated by the likes of Telefónica (primarily in Europe), and drawing comparisons with Axiata and its six-country edotco venture.
