4G rollout and broadcast synergies in the French tower market

TDF, the French broadcast company own and operate a portfolio 6,500 ground based towers in France with commercial agreements in place covering an additional 3,000 rooftops. As France’s largest telecoms infrastructure provider, TDF hosts 8,500 PoPs putting its market share at 14%. Refinanced in March 2015, its shareholders now comprise Brookfield Infrastructure Group, Public Sector Pension Investment Board, APG Asset Management, Arcus Infrastructure Partners and Credit Agricole Assurances. In this interview TDF CEO, Olivier Huart discusses his thoughts on where growth opportunities lie in the French market.

TowerXchange: Please introduce TDF for readers less familiar with the European telecom and broadcast tower landscape.

We are the largest independent provider of telecoms infrastructure solutions, television and radio broadcast networks and media platforms in France. We provide mission-critical services for MNOs telecom equipment site hosting and for digital and analogue TV and digital radio.

We serve all four French MNOs - Orange, SFR-Numericable, Bouygues Telecom and Free - and French leading media - TF1, M6 Group, France Televisions, Canal+, NextRadioTV et cetera - backed by a unique chain of high-quality connected sites, with highly attractive locations and outstanding territorial coverage: our DTT network covers over 97% of the French population. As at September 2015, we owned and operated over 6,500 active sites in mainland France, approximately 300 sites in French overseas territories and have signed commercial agreements covering up to 3,000 additional rooftops in France. We own around 90% of our active towers and we either own or lease the land for our sites under long-term contracts.

In addition, we own 5,000 km of optical fibre, a high capacity national backbone which interconnects sites, our four data centers and our online video platforms. This network is used by all our businesses.

On March 31, 2015, an investor consortium - Brookfield Infrastructure Group, Public Sector Pension Investment Board, APG Asset Management N.V., Arcus Infrastructure Partners, and Credit Agricole Assurances through its subsidiary Predica - bought TDF. These new shareholders are backed by large, well-established infrastructure platforms which employ conservative, investment-grade capital structures, and have a very long-term investment horizon.

TowerXchange: What have been the drivers behind TDF restructuring to focus on your domestic business in France?

Before TDF was taken over in April 2015, its debt was very high. As a result, in order to cut debt, we decided to sell off our businesses abroad including those in the Netherlands, Finland, Spain, Hungary and Germany.

TowerXchange: Can you give us an idea of how the French tower market breaks down? How many towers are there in France and what role does TDF’s portfolio play in the market?

As of December 2015 the four French MNOs are estimated to have 60,000 PoPs (Points of presence), located on approximately 40,000 different sites including towers, rooftops and other structures (e.g. water towers, churches et cetera), as well as sites that MNOs own.

These PoPs break down as follows [prior to the recent Bouygues tower sale announced after the interview was conducted]: 14,200 towers provided by MNOs, 27,300 outsourced towers and 18,600 rooftops and other structures.

With more than 8,500 PoPs hosted on TDF’s towers and rooftops, our market share exceeds 14%.

We also provide site hosting services to governmental and public operators, such as the French Ministry of Interior (police forces, firemen), the French Ministry of Defence, blue-chip companies and machine-to-machine operators.

TowerXchange: What trends determine the potential growth of the French tower industry? Is there a lot of demand for new towers and high points as a result of 4G?

We believe that the telecom site hosting market’s growth will be driven by urban PoPs (rooftops, indoor sites), new roll-outs (IoT, 5G) and additional coverage (non-urban areas, black spots, motorways, railways).

In France, 4G coverage obligations (laid down under the licence awarded by the French Regulatory Authority ARCEP) are more stringent than 2G/3G coverage obligations and require further infrastructure in addition to the current network. The 800MHz licence requires the MNO to cover 99.6% of the population and 90% of non-urban regions in each French “département”  (French county) which exceeds the MNOs current 2G/3G coverage. The recently awarded 700MHz licence even tightens these obligations: 95% in each “département”, 97.7% in each “priority rollout” area, 90% along national railways and 80% along regional lines.

Competition also drives growth. Free, the fourth MNO, is racing to catch up to the coverage of the others. SFR will probably seek to compete on service quality with Orange, especially in non-urban areas where recent studies showed Orange still has a lead. Furthermore, focus is increasingly turning to indoor coverage, which requires both concentrated sites and new solutions, like small cells, DAS and other IBS.

Development of 4G and later 5G (very high speed mobile) will require networks to be re-architected around many more antennae with systematic fibre-optic threads connecting all radio stations. Very high speed mobile networks will converge with very high speed fixed networks. Our telecom operator customers will have to invest, and we will be focussed on delivering not only “optical fibre connected towers” but also FTTH rollout solutions to help them meet their coverage commitments.

TowerXchange: How would you describe synergies between the management of broadcast and telecom towers?

At present, telecoms accounts for some 40% of our revenues. Among our 6,500 active sites in France (an “active site“ means a site with at least one tenant or hosted activity), 28% of sites are shared between at least two of TDF’s three businesses (TV, Radio, Telecom). If we consider the occupancy ratio on our towers (i.e. no. of PoPs over number of active towers), this ratio is equal to 2.9 in the telecom market, and exceeds five if we include TV, radio and telecom markets.

Using our sites for all three of our businesses results in cost synergies (e.g. power, maintenance, design, radio planning et cetera), that ultimately benefit customers.

Over the last 40 years TDF has partnered with TV and radio operators under very demanding service requirements where continuity of service is an essential criterion.  TDF as an NOC operator is very well placed to provide hosting and transmission services to satisfy requirements for the telecoms industry and operate both mobile and fixed very high speed networks.

TowerXchange: What is TDF’s strategy in terms of HetNet solutions and Internet of Things? 

TDF has been involved from the very outset in the rollout of M2M networks. Several players in France have developed turnkey solutions meeting the needs of companies and local authorities. We have no preferred technology and our customers can access all our sites. We help them deploy their nationwide network rapidly. Those “M2M” customers include Orange, Bouygues Telecom, Sigfox, M2OCity and Qowisio.

TowerXchange: How do you view TDF and the French tower industry in the future?

We forecast that the French tower market will continue to grow on the back of increased demand for urban sites (in particular rooftops), indoor coverage and outdoor coverage needs (in particular transport corridors, touristic zones, and black spots). And at a later stage 5G might also require more sites. TDF is improving its sites portfolio to address those needs on a daily basis. We are also ready to play an active role in any market consolidation and do look at opportunities beyond France.