Breaking new ground: HighTel Towers move East

Despite tracking 44 towercos across Europe and the CIS, TowerXchange are still often caught out by new entities we didn’t know existed. However, it’s very rare that we’re introduced to a towerco like HighTel, who boast both a long history in an established market and whose growth plans and success in gaining traction in new markets have gained our attention right away. As well as updating our European analyses, we managed to grab a few words with Nicola Parmeggiani, CEO of this disruptive Italian tower owner.

TowerXchange: Please introduce HighTel, your history and your current status as a company.

The company has actually been operational for 15 years as it was founded in 2001, making it the oldest towerco in Italy. For the first decade it only developed around 250 assets in that time, all of which were in Italy. In 2014 the main shareholder decided to sell all the towers which had been developed until that point to EI Towers.

After this we built on past experience to scale up the company and to expand abroad. HighTel Towers is a tower company that is fully integrated along the value chain and the only tower company in Italy providing turnkey towers to all MNOs in the country. I joined the company in 2014 as CEO and President, I’m also a shareholder in the company and very focused on our vision for the future. My background is in telecoms, having worked for Vodafone for five years, and McKinsey prior to that.

Once I came on board, we focussed on four pillars of the core business: building towers as a turnkey offering for MNOs; the M&A of towers; the acquisition of the land under the towers of other tower owners and cross border tower M&A activity. We recently raised €15mn from private equity in order to support these goals.

The Italian market is a very different market to other parts of Europe. We don’t have towercos who build in Italy, and thus far have mainly seen just the sale and leasebacks of existing towers. We are the only towerco in Italy who builds their own towers; indeed, we design, permit, build, own and manage our own towers. This is our niche, and we’re doing very well from it.

TowerXchange: Can you tell us how many towers you own and where they are?

We currently own 300 towers in Italy and 300 in Albania.

Of our Italian portfolio, around 50% were acquired from small ‘mom and pop’ portfolios and the other 50% were built to suit. Our current tenancy ratio is 1.75 but we are targeting a tenancy ratio of 2.8, which we believe our business model supports. Our tenants include Wind, 3, TIM and Vodafone, as well as non-mobile tenants such as Linkem; our strategy is only to build a tower once we have interest from at least two tenants. In order to deploy rapidly, we begin the permitting phase once the first contract is signed, so our towers may only have one tenant in the first few months they are operational, but this should increase to <2 very quickly. Since other towercos derive from a carve-out of MNOs’ networks and they expand through M&A, they don’t tend to have towers suitable for more than one tenant. HighTel, on the contrary, has a business model that allows the tenancy ratio to start from 2 when the tower is built and reach almost 3 in the next 12 months.

Outside of Italy, we’ve just signed a contract to acquire 287 towers in Albania, and hope to acquire towers in Macedonia, Kosovo and Slovenia in the next 18 months as well. Our aim is to roll up a significant number of towers in the Balkans and to gain first mover advantage in these markets. As we see it, there’s currently a huge amount of parallel infrastructure in these countries which lends itself to making significant efficiencies through colocation. In addition, the digitisation of broadcast television in just rolling out in the Balkans, and we can see our tenancy ratios jumping from one to two very quickly by getting buy-in from the incumbent broadcasters as well.

TowerXchange: How have you structured the company? With everything from design and build to international acquisition going on, how much do you keep in house?

HighTel is very small, with fewer than 20 employees. Our aim is to manage only core activities internally, so things like permitting and acquisition. Everything else, such as engineering and construction et cetera is outsourced. We use one construction company for each Italian region.

TowerXchange: Can you tell us about your plans for growth and your exit strategy?

We have a three year plan. The intention is to build approximately another 100 towers per year and to acquire another 100 per annum in Italy, excluding land. In terms of acquiring land, our plans are much more ambitious, it’s a €2.5bn market and we plan to play a significant role in that.

We also plan to attack all those markets in the Balkans which do not yet have an existing towerco and where synergies can increase the tenancy ratio rapidly – for example in broadcasting or consolidation. We are currently looking at Kosovo and Macedonia as our next target markets.

Our feeling is that the market is associating too much risk with the Balkans, where GDP growth has been stable for many years, inflation is stable, currency is stable (and additionally, our master lease agreements are in euros) and politically the situation has been stable for several years. The legal systems in some Balkan countries are a hangover from the Mussolini era and are very close to what we’re familiar with in Italy, which helps. Of course, there is more risk in the region, but we feel the risk the markets associate with these countries is disproportionate.

Other towercos have tried to tap into this market but don’t seem to have had much traction over the last few years, we have managed to close a deal already and have several more in the pipeline.

It’s a new market but our plan is to close down several Balkan markets within our three year timeline and then assess the most suitable option for our portfolio at that time.