Plata Tower Company, a new towerco entering the Argentinian market

Alex Sepehri-Nik is a serial entrepreneur and one of the masterminds behind companies such as Brazil Tower Company and Arqueiro Telecom. And now he is the Founder and President of Plata Tower Company (PTC), the latest entrant in the Argentinian tower market (just behind our friends at Innovattel and Tower 3). With the Argentinian government recently passing a new pro-infrastructure-sharing telecom law, and carriers announcing a combined four-year investment plan of up to US$20bn, it comes as no surprise that towercos are making their moves in the country. And TowerXchange couldn’t be more excited about it.

TowerXchange: Alex, please introduce yourself and your career path.

Around five years ago, my partners and I started Brazil Tower Company which is now the third largest independent towerco in Brazil. When we entered the country, the sharing concept was not popular in the market, and we faced the resistance of the carriers and at first really struggled to convince them to work with us.

The first breakthrough for us happened with Telefónica which is now on most of our sites in Brazil. Once that happened, things started ramping up quite quickly and we then got the buy-in of the others.

I knew that the sharing concept could be extended way beyond towers and, as you know, I got involved in the creation of Arqueiro Telecom last year offering shared backhaul solutions across Brazil as well.

TowerXchange: From Brazil to a new market… Tell us the story behind it.

The recent story of Brazil is known to everyone. We went from close to US$1mn worth of deployments each week down to almost zero as a result of the combined political and forex crisis. These crisis led to a spending freezing by the carriers and this has been going on until not long ago. Fortunately, our business was built to be profitable on an operating basis and we were able to weather this storm.

In the last few months we’ve seen some movements in the Brazilian market in terms of search rings but we really need to bear in mind that the country was on the brink of a revolution. The impeachment and removal of Dilma Rousseff has for now contributed to calming things down but there’s still a way to go to really stabilise the national political situation.

When the volume of business in Brazil started declining, I looked for new business opportunities everywhere, from Mexico south. I applied the usual criteria of examining the carriers landscape, acceptance of the sharing model and planned/forecast level of spending by the carriers. And this led me to Argentina. And to the creation of Plata Tower Company (PTC).

TowerXchange: So why Argentina? And how does Argentina compare to the beginning of your Brazilian venture?

Carriers in Argentina have a considerable level of approved spending for 2017 and likely 2018 and this to be honest was the key factor that convinced me to go ahead. And we aren’t the only towerco that is entering Argentina… There are several of the usual suspects sniffing around but I think we are quite advanced in our launch plans. In fact, PTC has our registered business entity in Buenos Aires and we are already negotiating our master services contracts with the carriers who give every appearance to be willing and open to work with towercos.

On the other hand, every market presents its own challenges and permitting is extremely complicated in Argentina, even more than in Brazil!

Until a couple of years ago we were all extremely excited about Brazil and its growth pattern but then it all fell apart. Brazil is not an easy market to do business in, and it never was. We’ve faced so many challenges with regards to permitting, carriers’ acceptance and even suppliers driving prices to the sky… In a way, we are seeing some of these dynamics repeating in Argentina but on the other hand, there’s a greater openness with regards to the sharing model, which is very encouraging.

In Argentina, things are very different from where they were at the beginning of the BTC venture in Brazil. The government is extremely committed to pushing the infrastructure sharing model and is now working on some new and important telecom laws. And while permitting remains the biggest hurdle in terms of new deployments, I can see that changing as well with the new law. In fact, the new rules will require municipalities to simplify the process and remove certain onerous requirements. That will help us a lot just like the Lei das Antenas in Brazil.

Additionally, the government has been creating several tax breaks for investments in new infrastructure and working to allow the repatriation of funds, which is a crucial point for foreign investors. All in all, I’d say that officials have been extremely responsive and they’ve even consulted me for some advice based upon our experience with similar evolutions in the United States and Brazil.

In Brazil for instance, we didn’t get that much interest from the government which sometimes appeared as even hindering our business. You see, our contracts in Brazil prohibit RANsharing and the government went as far as supporting carriers who decided to share. We don’t ask the government to be on our side, we can easily enforce our contracts and do whatever is needed to ensure that everyone plays fairly, but it is more appropriate for the government to stay out of it and simply avoid supporting some of these initiatives. And this is one of my pieces of advice to regulators of new tower markets such as the Argentinian one.

TowerXchange: What can you tell us about the carriers’ plans in Argentina? And what is PTC’s plan for its launch?

In Argentina, as you know, there are three carriers with relatively even market share and aggressive rollout plans for the years to come. All of these three are actively deploying their 4G networks, and we are proud to help. The fourth carrier here is Nextel, and it appears that they have some ambitious plans as well.

Argentina is getting so exciting that I foresee lots of different towercos entering the market. We know that this is inevitable. But as usual, some might think doing business here is easy when at the end of the day, Argentina is a virgin market and will require extreme diligence from our side.

At PTC, we will only raise money for what we are able and are planning to deploy, which has been the case with BTC too. I think towercos need to be disciplined and look very closely at the demand, the supply chain and the permitting environment and, based on that, ask themselves how many towers they can realistically build.

We always talk about how many towers a given country needs. Brazil needs 250,000 sites in the next three years… This was the mantra we used to listen back in 2012. But if carriers in 2011 built approximately 7,000 sites, how could towercos believe they’d be ordering 80,000 the following year? And even so, who would supply those towers? And who would raise money to build them?

Our goal in Argentina is to stick to our working plan. It’s been announced that 35,000 sites are needed for both 3G and 4G rollouts and we believe that projections might be slightly on the low side. But we are starting out humbly, building quality products and working closely with suppliers and carriers.

TowerXchange: How has the relationship with Argentinian carriers been so far? And with suppliers?

In Argentina, carriers were anticipating and welcoming our arrival. They’ve embraced the infrastructure sharing concept moving forward and, although they won’t let us build all of their towers or really strategic sites for now, they are willing to give us a shot which is very refreshing and exciting!

Carriers are learning our model which, lets be honest, is far from complicated. They are open to share documentation, contracts, paperwork with us and this is helping us a lot. The level of cooperation is great.

On the supplier side, things are a bit different. They are a bit wary about our entrance in the market as they don’t know yet how we’ll affect their work. But let me tell you one thing: yes, we are adding a layer into the ecosystem and changing the dynamics of the supply chain. However, they will end up welcoming the change since we will standardise the model. Our approach to towers is highly specialised because this is our business and we’ll work with suppliers as much as we can!

At the end of the day, we are going to order the same three variants of towers - hopefully - several times during the year. Orders will ramp up in Argentina, no matter whether towercos enter or not, and we won’t reduce the number of towers needed, we’ll just rationalise it.

TowerXchange: Do you think that the taxation regime will improve to allow carriers to eventually sell their assets?

At the moment, it’s simply prohibitive for anyone to sell towers. However, I believe that the current status of things is likely to change in the future, especially since the government is so in favour of international investments. The big guys will definitely look at Argentina more closely if and when the divestment of assets is simplified if not incentivised.

TowerXchange: What types of investors look at towercos? And how did you get investors to work with you in Argentina?

In the tower business, we tend to encounter two types of investors. On one hand, there are those that already know the model and have made considerable returns with it. With these, the approach is very straightforward. They want to know how much money you want and how quickly that can be deployed.

Other investors see their competitors making considerable returns in our industry and want to know more about it. As previously mentioned, I think that the independent towerco model is so simple it’s almost embarrassing. So it’s just a matter of showing the business case and they’ll be able to make an informed decision.

I like to summarise it as follows: there’s an asset which is going to be built. If it’s built smartly, it will return cash from day one and it will do so for at least twenty years. The “smartly” bit is up to us, industry people, to figure out.

I think on the investment side Brazil was an easy call because at the time there was so many needed sites and objectively obvious room for towercos. We knew we were introducing the sharing model in the country but that was possibly the biggest challenge we’d encounter.

In Argentina, country risk has been the biggest pushback from potential investors. And I didn’t want to be the one to convince anyone to invest in the country. I needed informed people and firms committed to my project who already believed, like I do, that things are going to get much better in Argentina, and soon.

All I know is that carriers are going to spend money and that we need to be there for them, serving the industry and riding this positive wave. If tomorrow carriers go to the moon, you can bet there will be a Moon Tower Company there soon!

TowerXchange: Do you think Arqueiro Telecom could extend its footprint in Argentina anytime soon?

Yes, I do believe there is room for an active-infrastructure sharing type of company… Stay tuned!