With a population of 4.78mn and 4.9mn mobile connections, 60% of Ireland’s 4,000 telecom towers sit in the hands of the country’s three MNOs leaving the remaining 40% in the hands of independent tower companies, broadcast operators and public sector players. With no one dominant tower company, the market is ripe for consolidation as ambitious towercos look to get a foothold in the region. December’s announcement of the National Broadband Plan, coupled with the consolidation from four to three MNOs following 3’s acquisition of O2, creates new opportunities and challenges for towercos in the market.
How many towers are there in Ireland?
There are currently 4,000 towers in the Irish market, of which 60% sit in the hands of the three incumbent MNOs - Vodafone, Meteor (owned by Eir, previously known as Eircom) and 3 (Hutchison) who have just recently acquired O2 (Telefónica). The remaining 40% of towers are owned and operated by a number of towercos, broadcasters and state enterprises.
Who are Ireland’s MNOs and what scale are their networks?
The history of MNOs in Ireland is complicated by a number of mergers and acquisitions and network sharing agreements. Eircell, 100% owned by Eircom was the first MNO in the Irish market. In 2001 Eircell was bought by Vodafone, demerging from Eircom. Vodafone currently has the largest market share in Ireland sitting at 38% with 99% network coverage.
The second MNO to launch in the Irish market was Digifone, owned by Irish billionaire Denis O’Brien. Digifone was rebranded O2 in 2001 following a take over and then demerger from BT, and was then owned by Telefónica following their takeover of O2 Ireland’s parent company in 2006 (until their recent acquisition by 3).
Meteor Mobile, at the time owned by US company Western Wireless, launched in Ireland in 2001 as the third MNO in the market and then was subsequently acquired by Eircom in 2005, still operating under the brand Meteor. Meteor currently have 21% of the market share in Ireland with 75% network coverage and is the only Irish owned MNO in the market.
3 (Hutchison) was the latest MNO to launch in the Irish market in 2005 and up until 2014, held only 9% of the market. Following an acquisition of number two operator, O2 from Telefónica in 2014 for €780mn, the newly formed entity currently controls 33% of the market with over 95% network coverage.
The consolidation from four to three MNOs (following 3’s acquisition of O2) has been further complicated by network sharing ventures set up by each of the operators. Vodafone and 3 formed a network sharing venture called Netshare which has since been restructured - Netshare is now wholly owned by Vodafone. Prior to O2’s acquisition by 3, O2 created a network sharing agreement with Meteor - the EU has ruled however that following O2’s acquisition the network sharing agreement must remain - thus tying together the O2, 3 and Meteor networks.
Figure One: Irish operator mobile market share
Who are Ireland’s independent tower companies?
40% of towers in the Irish market are outside the hands of MNOs, higher than the 27% average in Europe. The biggest towerco players are Towercom and ESB Telecoms each with around 400 towers, joined by six further tower companies which TowerXchange are tracking, with portfolios ranging from 40 to 113 towers (see table two). In addition, state owned broadcaster 2RN (RTE) owns 150 towers, the Office of Public Works 180 and CIE, the Irish national railway company, 100. See sidebar one for information on each company.
Figure Two: Irish MNO installation and tower counts
How has MNO consolidation impacted towercos in the market?
Towercos have been affected to varying degrees by the acquisition of O2 by 3. Towercom, whose towers had a predominance of Vodafone tenancies have felt the impact less than others. Those that had a high concentration of O2, 3 and Meteor have most acutely felt the impact of consolidation as, due to the network sharing agreement between O2 and Meteor, the three networks are now effectively one.
In order to mitigate the loss of tenancies, some towercos are looking at the added value they can bring to their towers to position them as core assets for the MNOs - one of the primary mechanisms being the deployment of fibre to sites.
Figure Three: Who owns Ireland’s 4,000 towers?
What tower transactions of scale have occurred in the Irish market?
In August of 2015, Coillte, the state forestry agency, sold a total of 113 masts and 400 plots of land (on which Coillte masts and those of third parties - predominantly MNOs sat) to French investment fund InfraVia Capital Partners. Following the deal a new entity, Cignal, was created to manage the sites on InfraVia’s behalf. Whist details of the deal value have not been released by any of the involved parties, rumours indicate this was in the order of €70mn. Prior to that Towercom bought 340 masts from Eircom for €155mn in 2007.
Could we see Ireland’s three MNOs divesting towers?
Despite the sale of 340 masts from a cash-strapped Eircom to Towercom back in 2007, MNOs have not to date expressed an interest in the sale of their towers. Whilst tower companies have approached the incumbent MNOs with sale and lease-back proposals, the well capitalised operators have not yet been motivated to sell.
Prior to the takeover of O2 by 3, observers were watching O2 closely with the belief that their financial pressures may necessitate the sale of towers to raise capital. The recent carve out of 11,500 Telefónica towers in Spain and speculation surrounding divestment of further assets has brought credibility to this theory, however since the acquisition by 3 we are unlikely to see a sale in the near future. Similarly, Vodafone, who have yet to monetise many of their towers globally, do not look set to be bucking this trend in Ireland. So no divestiture is currently expected from their Irish operations.
There have been no rumours of any further tower divestments by Meteor, although Eir is now selling its exchange portfolio (including some very valuable urban locations). Potentially once they’ve run out of unused properties some commentators believe they could look to sell their 525 towers.
Could we see M&A amongst Ireland’s towercos?
As a highly fragmented market, there exists strong potential for consolidation between Irish towercos. Whilst 2015 saw one transaction of note, no further transactions are currently expected in 2016, although the more acquisitive towercos are keen to engage in dialogue on the subject.
Insiders believe that a sale from a state or semi-state entity could be more likely. An ESB Telecoms tower sale had been considered a few years ago as a means to help reduce state debt, however with ESB now being in a much better financial position and with strong management in place, a tower sale in the near future seems unlikely. There has been talk that OPW could look to sell some of their towers and some observers believe there is a potential for a sale at 2RN with its assets having been carved out from parent company, RTE, however, to date there have been no qualified rumours of such a transaction occurring.
What level of new build is happening in Ireland?
Following the amount of MNO consolidation that has occurred in the market, MNOs are currently very closed regarding future rollout plans and most believe appetite to be limited in the market with operators instead using existing assets and rights on rooftops. The last major batch of towers to be developed was as part of the National Broadband Scheme, led by 3 (which Cignal’s towers played a major role in).
Whilst rumours surrounding rollout are limited, we have heard talk that Vodafone are approaching towercos in the market regarding a build to suit programme but discussions are very much in the early stages.
What is the level of decommissioning?
Following the acquisition of O2 by 3, a requirement for decommissioning of existing sites has been created. The lengthy regulatory process surrounding the acquisition had stalled decommissioning but a program over the next two to three years has commenced and represents a key focus for some towercos. There are mixed opinions when it comes to the volume of decommissioning in the market however there is a growing sentiment that the level of decommissioning required will be lower than people originally thought and that potentially there may be a risk of “over-decommissioning” as MNOs look to focus on short term stock market performance over longer term network planning.
What role have ground lease aggregators played in the market to date and how exposed are each of the towercos?
The exposure of Ireland’s towercos to the actions of ground lease aggregators varies company to company. State or semi-state towercos are relatively safe - 2RN owns the land under most of its portfolio, ESB Telecoms own all of their own sites and OPW are in the same position. Other companies not at risk from the interference of ground lease aggregators are Cignal (who are end owners of the land) and Towercom (who have full rights to all of their sites). Cellcom have long leases but are exposed somewhat, whilst the majority of Hibernian, Highpoint and WIG’s sites are leased.
Ground lease aggregators who have been looking at the market include AP Wireless, but to date they have reportedly not been getting a huge amount of traction. The problem in the market is not finding the product, rather it’s finding a party to offload it to. Towercos are not mature enough and the financial institutions won’t pay a large enough multiple.
Is there a focus from the MNOs on improving rural coverage?
Whilst there are a few not-spots in rural areas, the issues are very much localised. After a deep recession some of the MNOs took their foot off the pedal in addressing these not-spots but they are now working on infill for some very specific locations. Due to the fragmented and very localised nature of this infill, it does not constitute a major opportunity for towercos.
What is the National Broadband Plan and what implication does this have on Irish towercos?
In December, a new National Broadband Plan was announced for Ireland to build upon the work of the National Broadband Scheme initiated in 2006. The original scheme, awarded to 3 Ireland, was to provide a minimum of 1.2MB of download speed to rural areas; the aim of the new National Broadband Plan is to bring this up to a minimum of 30MB. The state have done a lot of mapping and there are approximately 750,000 premises in the catchment area to be covered by the plan.
Companies were invited to enter the pre-qualification process just before Christmas and responses need to be in before the end of February, after which a formal tender process will be opened. Details need to be extrapolated within the plan, however thinking is that the delivery will follow both a fibre and a wireless strategy, potentially creating requirements for new tower build (as was the case with Coillte’s towers in the original scheme) and also the bringing of fibre to towers (which is something that is currently being planned by some towercos in the country).
Snapshots of Ireland’s tower operators
Towercom Formed in 2007 following the acquisition of 400 masts from Eircom, Towercom was one of the first independent tower companies in Ireland. In 2013 the company was acquired by the Irish Infrastructure Fund (managed by AMP Capital).
ESB Telecoms ESB Telecoms is a fully owned subsidiary of the state owned power company – the Electricity Supply Board of Ireland. Formed in the 1970s to meet ESB’s own telecommunication requirements, ESB Telecoms entered commercial operation in the 1990s, leasing space to operators on their towers. They currently own 377 towers and have also launched a fibre business.
Office of Public Works The Office of Public Works is a public service organisation tasked with managing the country’s estate portfolio. They currently own and operate 180 towers.
2RN (RTE) RTE is the national communication and radio company currently owning 150 broadcast masts. They haven’t proactively sold space to MNOs but there has been a high uptake by operators for tenancies on their masts.
Cignal Cignal, is Ireland’s newest towerco, which was established in 2015 following InfraVia Capital Partners’ acquisition of 113 towers and 400 plots of land (on which towers are situated) from Coillte, the state owned forestry company.
CIE CIE is the Irish railway company and currently owns 100 masts on which around 35 have MNOs as tenants. There is however a drive to get away from these sites as licensing arrangements are very complicated.
Wireless Infrastructure Group Wireless Infrastructure Group, launched over eight years ago and have 2,000 towers across three European markets (UK, Netherlands and Ireland) and a fast growing DAS and small cells business. They currently own around 100 towers in the Irish market having acquired FIM’s portfolio of 42 towers.
Hibernian Towers Hibernian towers formed ten years ago and have since acquired the majority of their portfolio from MNOs and smaller towercos (with some degree of new build). In addition to their 70 towers in Ireland they also have a similarly sized portfolio in the UK under the name Britannia.
Highpoint Highpoint, owned by Obelisk group, currently manages a portfolio of 150 sites, of which 50 are Highpoint owned. The majority of their towers are based around the borders and the West Coast, having stayed away from the East Coast.
Cellcom Cellcom, with a portfolio of 40 towers, based mainly around the West Coast are privately owned. Their towers have a high tenancy ratio, thought to be upwards of two.
