In 2014, two new operators entered the Myanmar market. The model for both Norway-based Telenor and Qatar-based Ooredoo was to outsource tower building to independent towercos. In phase one and two of the rollout Telenor required their towercos to acquire and operate power systems whilst Ooredoo retained ownership of their energy assets and did not include power in their SLAs. By phase three of the rollout both operators’ appointed towercos took on the tower+power model. At TowerXchange’s Meetup Asia in December 2016, towercos and industry stakeholders candidly shared their views on the current and potential future of power provisioning to Myanmar’s towers.
Ground level realities
Currently in the Myanmar tower market, some legacy assets are still run under a pure steel and grass model, with energy assets operated by a third-party like IPT PowerTech (edoto and PAMEL), while other towercos operate as a full-service provider (such as MIG, IGT, and Apollo).
The dimensioning of a typical Telenor and a typical Ooredoo site remain fundamentally different however, primarily due to the large, power-hungry (but ultimately efficient) equipment Ooredoo is deploying.
For the full-service provider towerco, there is typically a DG and batteries at most sites, with connection to the grid where possible. However, it is reported that a good proportion of sites in Myanmar are off-grid, and effectively all on-grid sites are unreliable with less than 16 hours of usable energy per day.
Solar panels have been described as being less efficient given the country experiences little sun for four months of the year.
Operational challenges are described as being mostly around logistics, rather than some of the other issues seen in other markets such as substantial theft. Batteries are not being stolen on a wholesale basis and diesel theft is still under control. Towercos are building in protection around the energy assets based on learnings from other markets.
What’s important to note also is power is done on a pass-through on true consumption, as such towercos do not have a strong incentive to invest in energy efficiency, as any such capex investment would not necessarily translate to savings for a towerco’s balance sheet at the end of the day. This particular set up means towercos optimise their operations differently.
In the past few months towercos have had to double up on their batteries as some of the neighbourhoods and villages took issue with the noise of generators, which was not expected nor previously experienced in other markets. As such, there are some restrictions on running the generator from 8pm to 6am which means additional batteries need to be installed to keep the sites running over a significant period of time while the generators are off.
For those towercos who built during phase one of the roll out, the sites generally have grid connection, but again, the quality and stability are not there to sustain a high level of service and uptime without backup power systems.
Power solutions and ESCOs
The reality is the towercos may not necessarily want to get involved with power, but had no choice given the requirements by the operators. They are open to finding and working with a right partner that can provide power with a reasonable SLA. But the ESCO model is not without its challenges.
Towercos need an end-to-end solution that is credit worthy, which narrows the field on the number of vendors they can work with; OEMs are also not necessarily power experts.
On the other hand, towercos already have to invest in capex on power with it as an above the line depreciation item. The ESCO model brings more complications if the equipment is to be bought and a monthly fee charged, creating different implications depending whether the towerco is to be valued on multiples of EBITDA or TCF (tower cash flow).
In addition, adopting the ESCO model requires the blessing of the operators as it’s a pass-through model and they pay for the invoice. And it’s been a challenging sale as some of solutions cost 5x EPC (engineering, procurement, and construction) today, and that’s been set as the benchmark that operators are willing to pay.
Energy consumption with some towercos are skyrocketing as the mobile market has been very successful with high data usage and telecom equipment said to be at 100% capacity. This means that operators are increasingly looking to offload their network through additional sites and more co-locations. Power consumption is climbing but operators do not want to pay for power overusage, even as towercos are having to increase batteries to sustain uptime.
From the operators’ perspective, they want to ensure the right power equipment is installed, that service commitments are met, and not having to engage in time consuming bill inquiries.
Fundamentally power is less efficient to share than a tower, and right now there are different power solutions depending on the site, towerco, and operator. A towerco can configure its sites to share power, manage it through batteries, with certain limits on modularity. However, the set up could be less efficient when there’s only one tenant, but more so when there’s two. In theory a towerco could build a site for four tenants to share power from day one, but the economics of deploying so much capex up front will be challenging if there is no clear pathway to two, three, and four tenants.
Towercos seek to increase revenue and growth through co-location sales and that’s the mentality recommended to power providers – to have a mini-grid in one area connected to multiple towers. This is potentially how an ESCO model could work, similar to India where micro-grid companies are coming up fast, as well as solar. The other option is to look at the scalability of technology, whereby a towerco starts with one tenancy, and increase the size of the battery bank or generation solution on a modular basis as necessary. There are different models that could be possible for the marketplace, subject to adaptability and cooperation to structure the model such that it works for all stakeholders involved.
Investment decision-making
Towercos face a tough decision when it comes to making an investment on power solutions for their sites. High profile international vendors may be able to show real data behind the performance of their generators or batteries in the field, however, the price points are not attractive. On the other hand, vendors with attractive price points do not have real data from the field. The real lifecycle of a product is dependent on how operations and maintenance are undertaken. The best piece of battery and technology could have a significantly less useful life if the O&M outsourced company uses non-original replaced parts, if filters are cleaned versus replaced with new ones, et cetera. The reality is in Myanmar there is nothing older than two years in the field and much still to be proven on what would make the most sense for a towerco.
The question remains: would the expensive generators, rectifiers, and batteries last as long as expected? And how would a towerco govern O&M in such a way that it optimises asset lifecycles?
