Perspectives from Germany’s leading towerco on Europe’s largest telecom market

Deutsche Funkturm (DFMG), a subsidiary of Deutsche Telekom, is Germany’s largest towerco, operating 27,000 sites across the country. They recently acquired 7,700 towers from Telefonica in July 2015 which are now managed under a newly created entity, Omega Towers. They are currently constructing a significant number of new macro-locations across the country and are also starting to explore micro-sites to address Germany’s growing bandwidth requirements.

TowerXchange: Please introduce yourself, how did you get into the tower business?

I have worked in the telco environment for the past 25 years. In 2009 I joined DFMG as the Head of Technology and moved to heading Sales and Marketing in 2012.

TowerXchange: Please tell us a little about Deutsche Funkturm and Omega Towers.

Deutsche Funkturm (DFMG) was founded in 2002 as a subsidiary of Deutsche Telekom with the specified aim of renting out antennae space in the German market. The company currently operates 27,000 sites.

Since the deal with Telefonica in July 2015 we have also taken over another 7,700 sites which are managed under a new entity (100% owned by DFMG) called Omega Towers, of which Thore Doernemann and myself are the General Managers.

TowerXchange: What was the rationale behind creating Omega Towers to manage the sites acquired from Telefonica?

Legal requirements made it necessary to found Omega Towers in order to transfer the sites in question from E+/O2 to our group.

TowerXchange: Who are DFMG’s main tenants?

One of DFMG’s main customers is Deutsche Telekom. Other tenancies are primarily from Germany’s other MNOs but we do also lease space for usage by TV, radio, public security and other users.

For Deutsche Telekom we do the entire infrastructure build out; we manage the process from site acquisition all the way through the building process. Other customers manage the infrastructure that they built themselves or solicit our services to do so.

TowerXchange: So is there a requirement for new macro infrastructure building in Germany? What opportunities are there for towercos in small cells?

We are currently constructing a significant number of new macro locations per year and this could well augment for the next couple of years. A large portion of this is due to the need to re-locate sites following the termination of leases by landlords.

When it comes to micro-sites this is something that we just started to get involved in. If new infrastructure is required, for example antennae on houses, then MNOs may approach us to support them in this.

TowerXchange: Are permitting processes and landlord agreements becoming increasingly challenging in Germany?

Let me put it this way: we are dealing with well informed and highly sophisticated landlords, therefore our competence in the acquisition process must meet these challenges.

TowerXchange: As well as building new sites, is DFMG heavily involved in decommissioning existing sites?

Since the merger of O2 and E+ we are in the process of decommissioning sites as part of a project for them. Decommissioning for us tends to be project based rather than a major strategy with Deutsche Telekom having no requirements to decommission.

TowerXchange: Speaking of the merger between O2 and E+, what impact has this had on DFMG and the market?

Whoever rented out space to the two companies – including DFMG - loses revenue from the merger between the two companies.

TowerXchange: What capabilities does the company keep in house versus subcontract out to third parties?

DFMG subcontracts the entire construction work, some acquisition, and some business support activities. Our company philosophy though is that we control and project manage every single investment and technical project ourselves. This is why we have a substantial workforce of architects and engineers managing our technical business.

TowerXchange: Who owns the energy assets at the sites? Is there an appetite for shared back-up solutions?

DFMG or its sister company PASM (Power and Air Condition Solution Management) generally own energy assets at DFMG locations. Definitely power and backup solutions provide opportunities for win-win solutions for MNOs and ourselves.

TowerXchange: In terms of the remaining towers and masts in Germany, who has control and do you forsee other tower companies entering the market?

American Tower is the only other pureplay towerco in the German market at present. We have observed a lot of changes in the management of American Tower in the country and that casts some doubt about their appetite to stay in Germany, so we are watching closely.

The remaining sites are owned by MNOs, broadcast companies, the military, public security and other users who all try to lease out space for commercial benefit. We don’t see any other small tower companies in the market.

When it comes to new market entrants, there have been various press releases and rumors about European operators looking at the German market.

TowerXchange: Do you anticipate any further divestment of infrastructure assets by MNOs in Germany?

There have been rumors that a big MNO might try to sell more assets but this has not yet been confirmed.

TowerXchange: What do you see as the priorities for German MNOs at present and what impact does this have on towercos?

LTE rollout is definitely a priority for the next 3-4 years and then the assumption is that 5G technologies will kick in around 2020, creating a further 3-5 years of infrastructure expansion to support this.

With increasing bandwidth demands from consumers and existing cable being unable to meet the data requirements of the population, MNOs are focused on adding additional capacity as a service to offer to their customers. These increasing bandwidth requirements will force the need for an increase in macro- and micro sites and so present a great opportunity to towers.