Continuing TowerXchange’s ‘edotco 360’ series, we spoke to CFO Thivanka Rangala about organic growth: new towers and tenants, inorganic growth including the acquisition of Digicel Myanmar Tower Company, and how their standardised solutions are improving service levels across edotco’s footprint.
TowerXchange: Can you give us an update on the progress of edotco over the past year from your perspective?
Thivanka Rangala, CFO, edotco:
Last year we had just shy of 13,000 towers and now we have more than 15,000; this isn’t M&A activity either, it’s just pure growth, which has been amazing. Our tenancy ratios have also improved this year: the number of tenancies in the portfolio has increased from 17,000 to 21,000 in the year to date (this interview was conducted in Q4 2015).
August was a great month for us and we made some major advances, and all of this while improving the co-location ratio. We’re looking at our portfolios and moving a lot of operations into shared service structures and developing a standardised execution across our footprint which helps us to execute more seamlessly. We want to ensure that if a member of the team from Bangladesh comes to Malaysia there are no major differences in operations other than minor tweaks in the local environment; this includes IT systems and platforms supporting operations. Some systems require a bit more development in terms of security, and there is always room for improvement in streamlining deployment and getting new operations up and running. There has been a lot of activity focussed on this and it’s really helping to leverage the scale of the edotco group. We’ve also standardised procurement; our genset towers are now managed in a coordinated manner with common vendors and preferred suppliers. We have one RMS vendor that is growing along with us and this continues to support our scale across our portfolio of 15,000+ towers and we get a good price point. The standard MNO footprint would normally be around 8,000 towers, so our scale really brings amazing benefits.
Having common infrastructure across the footprint acts as a foundation for our operations, and it’s easier to work with our customers to deal with environmental solutions. Some of our footprints face difficult conditions that can lead to disruptions including power outages and landslides during monsoon season. We have achieved some tremendous improvements to uptime by pre-planning for incidents such as floods. These include having boats and portable generators ready to deploy and keeping equipment above the highest water mark. We’ve made impressive improvements in Bangladesh, one of our markets with the most challenging conditions, and we’ve focussed on key areas to deliver increased uptime. The lessons we’ve learned in Bangladesh can be used in Cambodia and Malaysia. We have a sequence of actions, tools to be had on standby, and partners that can supply generators, and this model can be deployed across our footprint.
TowerXchange: Can you share any details on the new acquisition in Myanmar and the recent sukuk that was announced?
Thivanka Rangala, CFO, edotco:
Myanmar is an interesting addition to edotco; when the mobile licenses were first on offer it seems half the MNOs across the globe tried to come into this underserved market. We believe that there will still be significant growth for the next few years, and that the operational efficiencies that we’ve developed elsewhere at edotco can be brought into play and bring a lot of value.
As in other footprints, engineering solutions, RMS and logistical efficiencies are already being implemented and progress is very positive and on target to be a great addition to the portfolio.
The US$500mn sukuk was taken on by the Axiata Group, and some of the proceeds have been passed on to edotco; US$125mn has been earmarked for edotco in total to support new operations in Myanmar. We’re excited to have a new footprint to add to the edotco group.
We believe that there will still be significant growth in Myanmar for the next few years, and that the operational efficiencies that we’ve developed elsewhere at edotco can be brought into play and bring a lot of value
TowerXchange: Are there any other acquisitions planned in the near-term or are you more focussed on consolidating in Myanmar?
Thivanka Rangala, CFO, edotco:
We will explore any opportunity, but at this stage we don’t have anything confirmed to mention. Our focus will be on identifying opportunities in the countries where we already have a presence, and then identifying other complementary markets across the region that will merge well with our portfolio.
We’re actively exploring to see the value of available assets, and definitely look more for quality rather than quantity. We have a few benchmarks that we use to choose markets and opportunities: these include location, financial feasibility, the standard of the towers, who the anchors would be, the quality of the MLA, and market maturity. The consolidation phase can be tricky; we have to bear in mind the macroeconomics of the footprint and be quite disciplined about identifying the real growth opportunity. It’s complicated; it’s not limited to the quality of the towers, there are a lot of drivers including regulations and licensing that need to factored in to ensure that we can operate without issues.
TowerXchange: Can you share some more details on the lessons learned by edotco about managing assets and manpower thus far?
Thivanka Rangala, CFO, edotco:
When restructuring infrastructure from the operators in the Axiata Group, building new teams and operations is not an easy process; there is a tremendous amount of work involved, and it also requires a culture shift from a human perspective.
Operators focus on their network, and on their customer facing operations trying to keep large numbers of subscribers happy. This is a very different mindset from towercos and passive infrastructure management. There is quite a difference in the level of granularity that MNOs and towercos use when looking at a portfolio. It’s also challenging when someone transfers over to a towerco and their former colleagues and friends at the MNO become clients and the relationships need to change. A lot comes into play in keeping assets separate; this requires a cultural shift that has to be managed as it requires a completely different mindset. Some people don’t grasp this idea completely at the start and it takes some time and a lot of work to get used to. Approaches to lifecycle management and other processes are significantly different from those in an MNO.
edotco is a subsidiary of the Axiata Group, but we operate in an extremely independent manner; we have a full board of independent directors and the relationship with the Axiata Group is well formulated. The management of the leases that edotco signs is more important than anything else, and we hold true to the contract that we hold with clients; these are kept completely separate from the Axiata Group operators. We walk the walk and it has earned us recognition in the markets that we operate in. We’re starting to see this in increase in actual orders coming in from operators, and a key element in this is the degree to which we have refined our operations.
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