The formation and ambitions of Ireland’s newest towerco

Cignal, a newly formed Irish towerco, came into life last year when it purchased 113 towers and 400 plots of land (on which its towers and those of third parties are situated) from Coillte, the state owned forestry company. In an Irish market where 29% of towers sit in the hands of eight independent towercos with portfolios ranging from 40 to 400 towers, the acquisition gives Cignal a strong foothold in a market ripe for consolidation. In this interview, Cignal’s CEO and chairman explain the Coillte transaction and how Cignal came into existence. We also discuss the newly announced National Broadband Plan and ask them to share Cignal’s ambitions for expansion in Ireland and overseas.

TowerXchange: Please can you tell us a bit about yourselves and your background in the telecoms sector prior to Cignal?

I have been working in the telecommunications sector for over 20 years after starting my career in Esat Digifone (now O2). I was a Founder and former CEO of Vilicom providing technical consultancy and property management services to the telecoms industry and have a wealth of experience managing Telecom Infrastructure portfolios including Coillte and the Office of Public Works (OPW) in the provision of Towers, Distributed Antenna Systems and Fibre solutions with a focus on customer engagement.

I have over ten years experience in the highly successful Digicel group of telecoms companies in the Caribbean and Central America including roles as Chief Operating Officer and Chief Executive Officer. I was previously involved with the Irish mobile telecommunications company Esat Digifone as a member of the team responsible for the rollout of the network throughout Ireland. Over the last five years I have been involved in developing and investing in businesses spanning technology, property, financial services, media, hospitality and utilities both in Ireland and internationally.

TowerXchange: Please can you provide an introduction to Cignal and its structure?

Cignal is a newly formed towerco in Ireland having purchased the communications assets of the state forestry company, Coillte, in 2015. The portfolio consists of 113 owned towers and approximately 400 plots of freehold land, on which both Cignal owned towers and those of third parties (principally owned by Ireland’s MNOs) sit. The portfolio is strategically located right across Ireland.

Cignal is backed by Paris based Infravia Capital Partners through their infrastructure Fund II.

The board of directors of Cignal is comprised of myself (as Chairman), Colin as CEO and three representatives from InfraVia Capital Partners. Cignal’s management team is Colin and a team of six people, all based in Ireland and each with extensive experience in all aspects of telecommunications infrastructure asset management.

The management team formed by Cignal has experience of managing multiple and prominent portfolios of assets both domestically and internationally. The company is newly formed and the corporate structure, brand, balance sheet, accounts systems, IT, banking facilities  have all been set up within the first three months following the acquisition.  Cignal has also successfully completed a financing arrangement with Bank of Ireland and Investec in December 2015.

TowerXchange: Was Coillte’s asset register in good order and most of the acquired assets in good condition when Cignal took them on?

All of the paperwork for the sites including the various agreements with MNOs were in very good shape which has enabled a seamless transition of the assets and agreements into the company.

The portfolio was pretty unique in that it was only one landlord selling property on which 400 towers sat - unusual for a transaction of that size. This made it very straight-forward and clear from a title point of view.

When it comes to the 113 Cignal owned towers, they were all built as part of the National Broadband Scheme in 2008 and 2009 and so they’re all less than ten years old and in superb condition and capable of multi-tenant occupancy.

TowerXchange: What was the rationale behind Coillte selling the assets?

The sale of the assets was part of a state strategy to free up investment for other state projects such as the €59mn investment by Coillte in its SmartPly facility and investment in Coillte’s extensive wind power development projects – essentially the deal put fresh capital on Coillte’s balance sheet.

TowerXchange: What details can you tell us about the tender process and how smoothly it went?

Coillte announced the sale at the start of last year, announcing in January and closing in June. From a process point of view, six months from start to finish is very good. The process went extremely smoothly and kept in line with the timelines laid out from the start.

TowerXchange: What kind of competition was there in the bidding?

The information on who bid was never made public, however we understand there to have been a good number of expressions of interest.

TowerXchange: What can you tell us about the deal value?

Some numbers have been put out there but they are just speculated numbers and nothing that has come directly from us. We made the decision to not to disclose details of the transaction, we have an appetite for further acquisitions down the line and so it makes business sense to keep this confidential.

TowerXchange: Why did InfraVia look at the Coillte portfolio?

The interest from InfraVia was on a number of fronts. Firstly it’s a sector they invest in and know well and they had already been looking at other opportunities in the infrastructure sector in Ireland. The asset base was also highly attractive - it’s very rare that state owned telecom assets come to market. One of the principal motives was that it was a great way to get a foothold in what is a pretty fragmented towerco market. The ownership of Ireland’s towers sit in many hands, some private, some state, some MNOs - there is good consolidation potential here.

TowerXchange: What areas of growth do you see for Cignal?

We see three areas of growth. The first is to maximise the portfolio we bought from Coillte, increasing revenues and tenancies down the road, especially as new technology gets rolled out. Secondly it’s to invest further money in either new site build out (if the industry requires it) or by bringing fibre up to our sites. As part of the acquisition of this portfolio, we also have the fibre wayleave rights to all of these sites which is a huge benefit to the MNOs and those who may participate in the National Broadband Plan (which is being unveiled by the government currently). The final area of growth is in terms of strategic acquisitions of towers.

TowerXchange: Do you foresee any challenges presented by MNO consolidation in the market?

Although we are in a consolidating market, the MNOs are all in the process of adding new technology layers and rolling out more equipment so ultimately a strategic set of sites like ours will always be a key part of the operators networks.

TowerXchange: Is Cignal considering developing their own fibre capabilities to play in the National Broadband Plan?

We will probably enter the fibre business through a partnership approach, acting as a facilitator. A lot of Cignal’s sites are multi-operator sites and so the plan is to try to facilitate a fibre strategy that allows everybody open access to fibre at these locations in the most cost effective way possible. The site locations are within forests and surrounded by land owned by Coillte, so the wayleave rights we have are very significant - having the framework agreement with Coillte makes the process a lot easier. In addition, the operators are aware of the strategy to bring fibre to the sites as Coillte started to promote this before they entered the sale process - in fact, two of the sites today are already fibre enabled.

TowerXchange: What can you tell us about the National Broadband Plan and its rollout?

The government issued a PQQ before Christmas which outlined the process. The responses have to be back in by the end of February and after the pre-qualification process they’ll enter into a formal tender process with the pre-qualified candidates. Criteria for the National Broadband Plan are very well set out in the document but there seems to be a lot of flexibility in there about what will happen in relation to availability of future spectrum and there has been a lot of discussion about whether or not the strategy will be a fibre to the home strategy. We certainly believe that part of the delivery will form a wireless strategy but details are still up in the air. The positive thing is that the process has commenced and all the key players have started to engage.

TowerXchange: Is the primary goal of the plan to expand coverage to rural areas?

There was a National Broadband Scheme initiated in 2006 - 2007 in which 3 Ireland was the preferred bidder. The criteria at the time was to provide a minimum of 1.2MB of download speed but the Broadband Plan is to bring this up to a minimum of 30MB - creating a real step change in broadband provision to rural areas. The state have done a lot of mapping and there are approximately 750,000 premises in the catchment area to be covered by the plan.

A key thing to note is that the 113 towers that Cignal owns were built primarily for the original National Broadband Scheme and as such, they will be strategically relevant in the National Broadband Plan. The physical structures are already built, they’ll just need the new technology capability added to provide the necessary coverage and broadband speeds.

TowerXchange: Moving away from the growth potential offered by fibre and focussing on potential acquisitions in the Irish market for Cignal, where do you see opportunities? 

Whist there have been no rumours or talk from tower owners in Ireland, either state or privately owned, we will hold discussions with all interested parties to discuss potential opportunities. It is too premature to speculate at this early stage of Cignal’s development but we see excellent potential.

TowerXchange: What volume of decommissioning is happening and are there any opportunities for Cignal in this field?

Across our portfolio we don’t envisage a huge amount of decommissioning because of the strategic geographic spread of the site locations.

We’re in the very early stages of upgrading networks and the plans of the operator are still evolving and so it is too premature to guess which sites or whose sites will be decommissioned. We think that the amount of sites that will be decommissioned will be smaller than what everybody thinks, whilst the amount of new equipment added to the existing sites will be higher that what people commonly think.

TowerXchange: Is the plan for Cignal to focus solely on Ireland or is international expansion likely?

At the end of the day the InfraVia Fund is a European fund. Cignal is the fund’s first investment in a tower company and certainly there would be an aspiration there to expand beyond the Irish market. We don’t have any plans or any specific markets in focus at the moment but we would be very keen to bring Cignal beyond the shores of Ireland.

TowerXchange: How would you sum up the first four months of trading as Cignal?

We have had an exceptional first four months setting up the business, putting a first class and highly experienced management team in place, successfully raising finance and have had excellent engagement with our 30 customers. We are very excited about taking the business forward and developing our relationships as a true infrastructure partner for our customers.