What are the synergies between broadcast and telecom towers?

With broadcast towercos representing Spain, Italy, the UK, France, Poland, Norway and Finland in attendance at the TowerXchange Meetup Europe, we hosted a panel session and roundtable to explore the synergies between the two sectors. Here’s what we learned.

Of the 78,000 towers owned by independent infrastructure providers in Europe, almost 48,000 are owned by companies which also generate significant revenue from the broadcast and radio sectors. Each European country has at least one broadcast towerco and some markets (such as Spain and Italy) have two, often heavily regulated, many with significant State ownership. The attitudes of broadcast towercos to the telecoms sector varies with some companies actively pursuing opportunities in the sector (France’s TDF reports that 40% of their revenues come from the telecom industry; Italy’s EI Towers is one of the two front runners to acquire a stake in Telecom Italia’s INWIT), whilst others have adopted much more of a passive approach.

The principal difference between a broadcast tower and a telecom tower is their height. Requiring a direct line of site for transmission, and with a broader signal propagation, broadcast towers are advantageously positioned on high land. This very feature makes them ideal for providing microwave backhaul services the telecoms market (which also requires a direct line of site). MNOs have looked into alternatives to broadcast towers for backhaul but currently the usage of such towers remains a central part of their network. What’s more, with requirements for 100% uptime, these sites usually possess significant power backup and as such represent ideal sites to serve as network hubs for telcos.

With the broadcast sector coming under threat from internet TV and reduced advertising, many stakeholders believe a big question mark hangs over the long term revenues stream for broadcast towercos. This creates a serious concern for the telcos that are using the sites as the core backbone of their backhaul network.

Speaking to one broadcast towerco, however, they remain confident that these tall towers will remain, a position backed by various statistics; in Italy still 95% of the population watch TV for more than four hours a day; the over 50s still rely on TV (in place of the Internet) as their primary source of news and that population will still be around for over 20 years; a large proportion of cars can only receive FM radio and so a switch off of radio broadcast is unlikely any time soon; increased data usage can be correlated with significant television events such as football matches and talent shows… all indicating that growth and demand for broadcast and telecom data and infrastructure remains synergistic.

Nonetheless, it would seem prudent that broadcast towercos look to diversify into the telecoms market as a means protecting themselves against any decreases in demand and revenue from their broadcast tenants, sweating the assets, and effectively de-risking their business model.

Telecom antennae can typically be hung at lower heights, minimising the direct competition for space between the broadcast and telecom equipment. In addition to mobile network operators as tenants there are further niche markets for which broadcast infrastructure can provide backbone capacity - the football league in Italy being one. The Internet of Things also presents significant opportunities. Sigfox are using many broadcast towers and, with their network being the inverse of a broadcast network (several smaller points converging on one receiving point to be transmitted to the cloud versus one central point transmitting to multiple), the two markets are very complimentary.

Having an established presence in the broadcast infrastructure sector also serves as a strong base in which to grow through acquisitions, including into parallel markets like telecom. EI Towers is perhaps the most notable example of this. EI Towers are one of two shortlisted bidders for the INWIT portfolio, while they have also created a business rolling up the infrastructure assets of smaller telecom towercos in the market. Whilst they see strong synergies in the acquisition of telecom assets, their competitors in in Italy, Rai Way have chosen to stay out of the telecom market beyond promoting their sites for co-location. WIth telecom towercos trading at higher multiples than broadcast towercos it puts telecom towercos in a stronger position to bid for assets more aggressively. At the same time, the synergies between two telecom tower portfolios are higher than that between a telecom and broadcast portfolio and as such, the telecom towercos have a stronger motivation to bid more aggressively. With these two factors in mind, most broadcast towercos have chosen not to play in telecom infrastructure transactions.

Sticking with the example of EI Towers and INWIT, it is also interesting to note that INWIT CEO, Oscar Cicchetti, has been quoted as believing that greater synergies exist between the company and Cellnex, than do between the company and EI Towers. It must however be noted that there is a Chinese wall between INWIT’s management and that of parent company Telecom Italia and so Cicchetti’s comments cannot be taken as indicative of thinking within the Italian MNO.

With broadcast towercos typically keeping their engineering capabilities in house, often managing the active as well as passive equipment for the clients, it was commented that broadcast companies are ideally positioned to play a role in small cells and DAS, possessing the technical expertise that may currently be lacking amongst many of Europe’s ‘steel and grass only’ telecom towercos. A critical strategy of towercos brought up at this year’s TowerXchange Meetup Europe was their desire to diversify their business model and one could argue that in this instance, broadcast companies may be ahead of the curve in their experience managing active infrastructure components.

In regards to the upgrade and maintenance of active equipment that is hung on sites however, it was commented that the broadcast market was generally a lot more stable - with antennae typically only needing to be changed once in a decade. Within the telecoms sector, there are a huge number of equipment swaps that need to be completed which makes it less attractive to lease space on a fixed capacity.

Further differences between the telecoms and broadcast sector appear when we talk about regulation. The two businesses are managed by separate authorities and codes of conduct, with the broadcast sector generally being more highly regulated. One example being that when it comes to infrastructure sharing, many broadcasters are mandated to allow their competitors access to their towers. In the telecoms sector, there still exists a degree of choice in refusing access to some strategic sites. Such differences in regulation and technology has led some broadcast towercos to manage the broadcast and telecom parts of their business separately, viewing them as different entities.

Whilst indisputably broadcast towers are critical to the backhaul network for telecom tenants, whether much growth in tenancy from MNOs would be seen on such sites created differences in opinion. Some saw stronger growth in the telecoms than broadcast sector, whilst others didn’t expect any significant increases in telecom tenants on their towers - citing the fact that most broadcast towers were located in rural locations and the current focus for Europe’s operators was on densification in urban areas. However, with most broadcast towers attracting telecom tenants, whether or not the company is actively pursuing such business, the natural synergies that do exist between the two sectors cannot be overlooked.

---

MNO consolidation, 4G rollout and broadcast synergies in the French tower market

Consolidation of Italy’s telecom and broadcast towers

The appetite of an Italian broadcast towerco for telecom towers and tenancies