Sri Lanka is one of the smaller telecoms markets in Asia, but one where the tower sharing business model has been in play for several years already. We spoke with Mohan Villavarayan, Managing Director of edotco Services Sri Lanka Ltd. to hear about the steady ongoing development taking place there. Mohan has spent the last twenty years in senior positions within the telecommunications industry. Since 2010 he has led the passive infrastructure business for Dialog Axiata PLC and was responsible for establishing strong relationships with all operators and broadcasters within the country and for achieving a tenancy ratio of two plus. In February 2016 he assumed the position of Country Managing Director of edotco Services Lanka (Pvt) Ltd.
TowerXchange: This is our first interview with edotco focussed on your operations in Sri Lanka; can you give us an overview of this market and your recent projects?
Mohan Villavarayan, MD, edotco Sri Lanka:
The telecom market consists of seven operators; the two large constellations are Sri Lanka Telecom, which owns Mobitel, and Dialog. Both players are essentially into quad-play. In terms of market share Dialog is number one at the moment. Additionally, we have Etisalat, Airtel, Hutchison and Lanka Bell who have relatively lower market share in terms of subscribers and revenue. The tower sharing market largely consists of these seven operators, broadcasters and the armed forces.
Tower counts are generally estimated as we don’t have access to accurate information. In our estimation Dialog has the largest base at approximately 2,100 towers (excluding IBS) followed by Mobitel, Airtel, Etisalat, Hutch and Lanka Bell. Dialog started sharing towers six years ago, and have engaged in unrestricted sharing. Most of the smaller operators have now stopped building their own towers, it’s only the two market leaders that build out new sites, and if the smaller operators want to increase their coverage they share with one of them.
Sri Lanka still has no specific license for towercos and at present we have established edotco Services Lanka (Private) Limited which can provide all towerco specific services with the exclusion of owning a tower (for which a license is required). ESLL also manages Dialog Towers, which is the business unit within the Dialog Group that houses the tower portfolio. We report into the edotco headquarters in Kuala Lumpur, and have commercial independence to provide services within this market.
TowerXchange: We have an estimate that you have around 4,000+ tenants on approximately 2,000 towers. Is this the case? Are there plans to build or acquire more?
Mohan Villavarayan, MD, edotco Sri Lanka:
At present, we have 2,100 towers in Sri Lanka, and the tenancy ratio is approximately 2.13. M&A will be a major part of edotco’s strategy, but naturally we will be selective; it all depends on which towers become available in this market and what the terms are.
TowerXchange: Roughly how many towers are there in the country in total?
Mohan Villavarayan, MD, edotco Sri Lanka:
Our estimate is that there are total of approximately 7.500 – 8,000 towers in Sri Lanka. Most operators don’t share these numbers, but this estimate is based on our knowledge of the market and reports submitted to the regulator.
TowerXchange: What are conditions on the ground like in Sri Lanka compared to other markets that edotco operates in? What are the main challenges and risks?
Mohan Villavarayan, MD, edotco Sri Lanka:
Sri Lanka is an island with a relatively small land mass with 95% of the territory already covered. Compared to other markets in the edotco footprint, the geographical and environmental conditions are not a problem. The biggest challenge for Sri Lanka at present is that the country is reaching saturation where new tower requirements are concerned. All the operators have completed their 2G and 3G roll-outs and 4G spectrum is available only with Dialog and Mobitel; any of the operators that want to provide 4G services will need to engage in RAN sharing with them. There will be further requirement for new towers for in-fills et cetera, but this number is estimated at a further 1,500 – 2,000 towers or special structures.
TowerXchange: What are the grid conditions, and what proportion of sites are on/off grid?
Mohan Villavarayan, MD, edotco Sri Lanka:
The grid conditions in Sri Lanka are not as good as Malaysia, but better than those in Bangladesh by comparison, and they are improving every year. At present, we have fewer than 75 sites off grid. Overall grid is at acceptable levels and as improvements to grid uptime continue they will result in reduced use of DGs.
TowerXchange: There have been some recent regulatory developments in Sri Lanka; can you share your perspective? Is the government mandating infrastructure sharing or network development?
Mohan Villavarayan, MD, edotco Sri Lanka:
As of now the regulators interpretation does not recognise tower companies and licenses to build and manage towers are only issued to operators. Several lobbies have been made to the regulator and key decision makers to enable the issue of a tower specific license. Fundamental infrastructure is critical to nation building; and we have to participate and invest in this and become a true partner to the country, not just a foreign investor. In the past, tower model has been perceived as just a “good deal”, but now customer demand is shifting and governments are asking what we’re doing for the country.
Fundamental infrastructure is critical to nation building; and we have to participate and invest in this and become a true partner to the country, not just a foreign investor
TowerXchange: Will the regulator interfere in market pricing of lease rates?
Mohan Villavarayan, MD, edotco Sri Lanka:
When licenses are issued there will most probably be terms included where the regulator could make determinations on lease rates like they do in the case of operators. The regulator lets the market play out but reserves the right to step in and make determinations.
TowerXchange: Is there some form of protection against towers being built too close to each other?
Mohan Villavarayan, MD, edotco Sri Lanka:
At present there is a process in place but no strict mandate. However, the approval process to erect towers involves applying to the TRCSL (Telecommunications Regulatory Commission of Sri Lanka) and there are multiple layers of approval. The database of sites is checked, the requested position is compared to the location of other sites, and in some cases tower sharing may be mandated. However, if these particular towers are over loaded or if the operator concerned does not permit sharing, approval is granted for the construction of a new tower.
Ten to fifteen years ago it was common to see towers within a few metres; now there are far fewer. There aren’t strict regulations on tower locations, but in some cases the regulator will listen to objections. Some of the local concerns include radiation, proximity to population centres and the potential for lightning strikes.
TowerXchange: Is foreign direct investment in telecom infrastructure / real estate permitted or capped?
Mohan Villavarayan, MD, edotco Sri Lanka:
At present there are no regulations preventing FDI’s in telecom infrastructure. Non-national’s are not permitted to purchase of real estate but can lease to the required extent; in general foreign investment is permitted and encouraged.
TowerXchange: Are taxation regimes fair regarding tower transfers, lease sales and equipment import?
Mohan Villavarayan, MD, edotco Sri Lanka:
At present there are no taxes that are specific to the tower sector. At the point of transferring towers VAT would be payable on the purchase consideration. Most operators have duty free exemptions when importing tower and energy equipment. Within the telecommunications sector – the present regime exempts VAT when operators invoice each other for services including passive infrastructure sharing.
Don’t miss the upcoming TowerXchange Meetup Asia being held on 13-14 December at the Marina Bay Sands,Singapore. For more information visit https://meetup.towerxchange.com/event/779b884f-2156-4a99-81e0-747a2f905382
