How Cellnex are embracing small cells and DAS

Cellnex currently manages a portfolio of 15,140 macro sites across Italy and Spain and with a large appetite for new acquisitions (following its 2015 IPO and acquisition of 7,377 sites from WIND in Italy). Their focus has expanded to also looking at opportunities in Europe’s small cells and DAS market. In this interview we speak with Cellnex’s International Business Development Manager, David Bernal to get a snapshot of Cellnex’s activity in the small cells and DAS market to date and where they forecast the business to be heading.

TowerXchange: Please can you provide an introduction to Cellnex’s experience in the small cells and DAS market?

When it comes to small cells and DAS, we have different kinds of projects underway. In Italy, we have deployed DAS networks inside tunnels, along motorways and on provincial state and regional roads. This is through our subsidiary, TowerCo and we have over 300 sites installed providing coverage for multiple mobile operators alongside the motorway network as well. In Spain, we have an agreement with the City of Barcelona which gives us the rights to use the city’s public infrastructure to install small cells for MNOs and we are currently doing a project with an MNO to deploy small cells in different areas of the city. Furthermore we have ongoing projects with MNOs to install small cells in specific areas like football stadiums, malls and other high traffic places.

TowerXchange: What are the different business models and what is the appetite of MNOs of each?

There are two distinct business cases; in the first (such as our project in Barcelona) we are acting as a real estate provider. We have the rights to the city’s infrastructure - the different mobile operators then install their own small cells and pay a lease rate. In the alternative business case, we install and own the active equipment which is then used by the different MNOs

As to which option the MNOs go for, it really depends on their strategy in the coming years and the location that we are speaking about. Our general impression is that they prefer to own their own active equipment, but it can vary and this will probably evolve since it is difficult to imagine that as many small cells networks as operators will be deployed in the urban areas.

Due the growing data traffic, the MNOs need to differentiate with coverage and extra capacity in hotspot locations - this presents an opportunity in the small cells ecosystem and Cellnex is betting on this business.

TowerXchange: Where do you see the biggest opportunities in small cells and what size market do you forecast?

We see the opportunities for small cells and DAS as country-wide. Whilst this kind of deployment is well suited to densely populated, high traffic indoor and outdoor areas like city centres, tourist zones, shopping malls and stadiums, there are also key applications in rural locations where the economics of developing macro structures are not favourable.

We see tower companies becoming a natural partner for telecom companies in the small cell markets as the MNOs continually seek to reduce their capex and opex. Finding the best locations for small cells is a time-consuming business and something that the MNOs may consider to not fall in their core activities – towercos are much better positioned to provide this service. In this instance, planning and deployment become tasks outside the MNO’s core business, having to plan an efficient network that takes into account the macro cells’ locations to avoid interference, topology, subscriber distribution and higher backhaul costs, amongst other factors.

When it comes to sizing the market, it is very difficult. Different market sources estimate that are currently three million small cells (both indoor and outdoor) deployed and that for the next few years this number will grow significantly as MNOs rollout their strategies. Europe is lagging behind North America and Asia significantly, but we estimate that the European market should grow to 350,000 small cells deployed in the next four years (2020).

In terms of where the opportunities sit to get to this number, just considering a country like Spain we are speaking about a landscape with more than 8,000 municipalities and city halls. In addition to the public sector, there are a lot of private players like stadiums, malls, small highways and supermarkets - our work is to find these potential location portfolios.

TowerXchange: What are the biggest challenges in the small cells market?

In order to deploy small cells there is a need for a high number of permits with the government and also the private sector which are not always easy to get.  We can call upon our experience in the macro site sector in this, with most towers being on third party owned land and sometimes in close proximity to public places we are well versed in dealing with such parties. Creating a correctly structured, long term contract is the way forward.

A further challenge is presented by the diverse nature of the potential opportunities, from cities to shops to venues - a lot of work goes into identifying and opening dialogue with such parties - something again that clearly fits with the profile of a neutral telco infrastructure operator rather than an MNO.

Further challenges include the high cost of deployment (especially associated with outdoor networks) and also connectivity issues when MNOs are looking for fiber backhaul.

TowerXchange: How do you plan to manage the O&M of small cell sites?

We are very open and flexible in our model. We can manage either the passive or both the passive and active infrastructure depending on the requirements of the operators.

TowerXchange: Do you see any hesitance in the deployment of small cells from the MNOs as they wait for example, for 5G technology to become available?

Technology in this space is always evolving. MNOs need to start deploying small cells now to cover the growing requirements created by high traffic consumer applications. We don’t see MNOs waiting for 5G or further generations of technologies as these could take years to arrive.

TowerXchange: What is next on the horizon for Cellnex in the small cells market?

We plan to work together with the different players (mainly mobile operators and suppliers) to find the best way to facilitate the widespread deployment of small cells in order to develop a broadband market which meets requirements for coverage and data traffic.