Interest in the Chinese tower market is of great interest thanks to the recent creation of the world’s largest towerco, China Tower Company. There is also a lesser known independent tower market in China spread across the country. We caught up with George Zhu, Vice General Manager of Miteno, one of China’s largest independent towercos, to learn about his company and gain some more insight into the Chinese tower market.
TowerXchange: Please give us a brief introduction to your company.
George Zhu, Vice General Manager, Miteno:
Miteno was founded in 2004; we own approximately 1,000 towers in China by the end of 2015 and we have two factories there as well. Miteno also provides other services including mobile internet and mobile payments, online marketing which are part of a separate division. We have more than 1,000 staff almost two thirds of whom are dealing with the tower business. We started off just producing and building towers, then moved on to running as a towerco, and now finally we provide value added services such as RMS.
3G and 4G are having an impact on demand for power, and CTC needs to provide uptime sustainability. Miteno will provide a turnkey solution to support this, including the ability to switch to different parts of the grid and access to backup generators. In general the grid in China provides very comprehensive coverage and is very reliable. China may be looking into some renewable energy solutions for the more remote towers in the north west of the country, but most of the towers in the other regions have grid access.
TowerXchange: Can you tell us about Miteno’s strategy for future growth?
George Zhu, Vice General Manager, Miteno:
Miteno plans to own around 10,000 towers to maintain balance in our portfolio. Our strategy is to keep the towers in the region where we have the best relationships and suitable partners. We will also seek support from the government to expand in different regions within China, and we are looking into expanding abroad. We are already investigating opportunities in the US, Laos, Myanmar, Vietnam and some countries in the Middle East. The US market is very high end but the number of opportunities there has decreased, but Miteno is looking for potential purchases. The Asian and European tower markets also have strong growth potential so we are interested in potential opportunities there, and we will seek support from the Chinese government to help with our international investments according to the One Belt, One Road strategy.
We also offer an asset management system that can monitor a whole portfolio of towers. We have also provided this as a SaaS product to the railway, including to monitor the deployment of towers beside the rail line.
The only potential telecoms clients really are the three incumbents as there are almost no other alternative operators or MVNOs. We have a research team with 50 people working on product innovation. We’re also looking into getting involved in fibre networks
TowerXchange: How many independent tower companies are there in China?
George Zhu, Vice General Manager, Miteno:
There are a large number of independent tower companies across China in every major city, perhaps thousands of them, and many of them own fewer than 100 towers. Some even have as few as 30 - 40 towers. Miteno has acquired some of these smaller companies in the past. Including these towers, we estimate that there are approximately two million towers in China in total.
It is impossible to buy land in China as all land belongs to the country, and it generally requires local relationships and support from the government. All operators are listed companies and their assets cannot be easily transferred to non-listed companies; this greatly restricts any tower transactions involving the top three operators.
There are a large number of independent tower companies across China in every major city, perhaps thousands of them, and many of them own fewer than 100 towers. Some even have as few as 30 - 40 towers. Miteno has acquired some of these smaller companies in the past. Including these towers, we estimate that there are approximately two million towers in China in total
TowerXchange: What can you tell us about the impact of the creation of China Tower Company (CTC)?
George Zhu, Vice General Manager, Miteno:
China is a dynamic market and innovation is needed from zone to zone; it can be a challenge to keep up with the changes. We couldn’t imagine that CTC would be created so quickly but now it’s already here and we have to accept the change and adopt the new policies. Manufacturing has become less straightforward and it’s harder to add value.
The creation of China Tower Company should lead to a lot of new opportunities, but it is state-owned and there are a lot of restrictions for foreign companies in dealing in the Chinese telecom infrastructure market. The transfer of over one million towers will be followed by a further transfer of nearly 500,000 towers in 2016. Miteno is running as a complementary telecom service towerco to CTC in some ways, and we’re also a vendor and will be supplying them as well. We’re also providing them with supporting infrastructure including street poles designed to hold street lights, cameras and provide Wi-Fi access. China is promoting the development of the Internet of Things and Miteno is involved in supporting this. We’re also planning on taking this model of street posts to Europe and the Middle East, and we’re actively looking for partners.
TowerXchange: Do you think there will be new opportunities for foreign companies in the Chinese market?
George Zhu, Vice General Manager, Miteno:
There may be some opportunities for international companies to provide consultations as CTC consolidates its new assets and develops a strategy for upgrades to support future service development. There are some assets that have been transferred to CTC that have no documentation and were deployed ten years ago that may need to be decommissioned and rebuilt. In some cases the database of tower assets is a huge mess but this represents a potential business opportunity to introduce a model for analysis. At this point the average tenancy on CTC’s towers is 2.2. Miteno’s goal is to have at least three platforms on each of our towers which could make as many as six to nine tenants possible, and in the future we will aim for a tenancy ratio of 1.7 to 1.8.
It will be difficult for foreign companies to do business with CTC; they seldom attend events and since they are state-owned they can’t say much without the approval of the government. They have to be much more careful than other companies. Miteno may be able to partner with international companies and propose projects with the CTC, as well as providing financing for new projects too. Ultimately most assets are controlled by the state and any foreign company wishing to enter the market will require a local partner. That being said CTC will need support to complete the consolidation of its assets and there may well be opportunities to be found.
