A high level glance at LatAm with American Tower

It’s been a while since TowerXchange last spoke with Olivier Puech, CEO - LatAm at American Tower. Since our last interview, American Tower has kept expanding its LatAm footprint thanks to acquisitions in Brazil (TIM’s 6,000+ sites) and Argentina (CyCSA), and impressive organic growth. In this interview, we take a look at the region country by country, from the dynamics of new markets such as Argentina to those of established markets such as Mexico and Brazil.

TowerXchange: Olivier, please tell us about the entrance of American Tower in Argentina.

Two critical factors pushed American Tower to enter Argentina. On one hand, there was the overall telecom landscape with its crucial need for connectivity and enhanced mobility. We are talking about a country which is lagging behind in terms of the deployment of 4G, the densification of infrastructure as well as fibre connectivity. With about 15,000 existing sites, we estimate that at least 10,000 new sites are needed over the next few years to bring the level of coverage and capacity up to par to regional standards.

On the other hand, the increasingly attractive macroeconomic environment made it possible for us to consider a move.

American Tower acquired CyCSA in December 2016. CyCSA owned 1,000 urban telecom sites as well as 2,500km of fibre optic cable and the exclusive Right-Of-Way to utility sites. With the deal, CyCSA’s staff has been transferred to American Tower which means we could enter the country with a degree of scale, local knowledge and technical know-how, which combined with our operational expertise will provide us with opportunities to participate in the continued growth of the telecommunications sector in Argentina in the future.

Our plan is now to scale up while focusing on two different and yet complementary business streams. On one hand, we’ll bring to Argentina our expertise in deploying greenfield assets, but we’ll also focus on the traditional business model of CyCSA, hence continuing to install telecom equipment on the existing portfolio of urban assets as well as on utility poles.

TowerXchange: Let’s take a look at Mexico and the opportunities that the Red Compartida could present for towercos.

Similar to the rest of the region, Mexico does present a deficit of infrastructure. In fact, it is estimated that roughly 85% of the population is reached by mobile coverage which means that there’s a staggering 15% not covered. In a country like Mexico, this means about 18mn people without coverage!

The current administration has been pushing to enhance competition in the telecom sector and accelerate the growth of the industry via a series of reforms and projects such as the 700MHz shared network. The Red Compartida requires significant investments estimated around US$8bn and sets very aggressive goals and targets for ALTÁN Redes, which has been awarded the project.

Specifically, the network is expected to cover 30% of the population by Q1 2018 - just one year from now - 85% by 2022 and 92.5% by 2026. We are talking about a very ambitious deployment plan for ALTÁN Redes and everyone involved in the project.

I believe that towercos can play a key role in this initiative and American Tower is crucially positioned with its network of almost 9,000 towers. Collocations are obviously going to be the preferred way forward and I would imagine that ALTÁN will take a very close look at the inventory of available towers before committing to any greenfield project.

American Tower can contribute with time to market and quality of assets which are particularly critical in this case due to the tight schedule.

ALTÁN isn’t the only organisation currently investing in Mexico. We’ve seen fresh capital being poured into the local telecom sector and AT&T is just another example! On the towerco side, we’ve seen new entities being created and all in all, we believe Mexico has still a long path of growth ahead and our objective is to consolidate our presence and keep upscaling our portfolio. Mexico is the first market we’ve entered after the U.S. back in 1999 and we have a long history and experience there as well as a large and qualified team able to serve our customers.

TowerXchange: Could you give us a quick overview of the status of the market in Brazil?

Brazil is undergoing a political transition and is in the early days of its transformation. In spite of the underlying volatility, 2017 is showing signs of a timid recovery with operators very carefully and consciously planning and all players taking a very considered approach to investments.

We’ve been the main driving force behind consolidation in Brazil, having sealed deals with both operators and towercos in the past. And we are building scale in Brazil every day just like we are doing in other key markets such as Mexico and Colombia. Our goal is to reach significant scale in all our markets to provide unique connectivity opportunities for our customers.

In Brazil and elsewhere we are committed to offering the benefits of collocating on our extensive network of sites so our main focus remains on organic growth. However, we are also keeping an eye on other opportunities to expand our portfolio.

TowerXchange: How competitive is the Colombian market and is there enough room for everyone in the country?

The Colombian market is more about the potential for future growth and long term vision rather than immediate returns. Colombia is the third largest market in Latin America for American Tower and a very stable one in terms of its macroeconomics and its telecom ecosystem. I’d say that the fundamentals are there for everyone to keep investing in Colombia but the big question is how quickly the market can accelerate growth.

At American Tower we took a stance six years ago and since then we’ve continued to believe in the country and its potential. And now, with the 700MHz auction taking place we are quite positive about the future especially since the top three operators - Claro, Tigo and Movistar - are large, international players with the potential to invest heavily in the deployment of 4G network acrossthe country.

Topology in Colombia is a challenge and one of the reasons why it lacks infrastructure. The presence of the Andean mountains makes it complicated to manage the logistics and, unlike places like Argentina, where most of the population is centralised in and around Buenos Aires, in Colombia there are tens of important and populated cities such as Bogotá, Medellín, Cartagena, Cali and Barranquilla, just to name a few.

For the telecom sector, this means more work, better planning and more investments for logistic reasons. And this issue will become even more crucial after the auction in light of the rural coverage obligations that follow.

TowerXchange: Continuing with the Andean region, could you give us a snapshot on Peru?

Peru presents all the right factors for towercos to invest: a crucial deficit of infrastructure, stable macroeconomics and a new administration focused on attracting more investment into the country.

With close to 10,000 sites and over 33 million connections, there is a huge need for infrastructure to enhance both coverage and capacity. According to telecom regulator OSIPTEL, Peru needs as many as 7,000 new sites by 2025!

The Plan Nacional de Infraestructura 2016-2025 estimates that approximately US$2.5bn is the total investment required in mobile telecom infrastructure.

On the MNO front, Peru is a very dynamic market thanks to the recent entrance of Entel, which has stirred the landscape. On the regulatory front, the amendment of the law N. 29022 for the expansion of telecom infrastructure (made via the law N. 30228 of 2014) has considerably simplified the process to obtain construction licenses, all of which are very good news for towercos and for the telecom sector as a whole.

To round up on the Andean region, this is quite different from the status of things in Chile, where permitting is so complex that it could take up to two years to build a new tower.

TowerXchange: How engaged is AMT with new types of products such as fibre, small cells and DAS?

American Tower is mainly focused on acquiring and managing assets whose typology makes sense to the local market and the needs of our existing and potential customers. We are very disciplined and have a financially-savvy, return-focused approach to new opportunities.

Due to our scale, we’ve become enablers to make wireless communication available on a global basis. And there are plenty of initiatives around the globe aimed at assessing the opportunity of new products such as fibre, to name one. With regards to that, as mentioned before, we’ve recently acquired 2,500km of fibre in Argentina and we are currently engaged in a process to better understand and potentially maximise the value of what we can do with it: fibre has various ways in which it can be utilised (eg. FTTH, FTTO and FTTT among others).

American Tower is also committed to deploying DAS to complement the traditional infrastructure network and we’ve been deploying it in LatAm and around the globe with a disciplined, multi-tenant approach.

In a nutshell, I’d say we do seize new opportunities when and if they make sense to us and are always keeping an eye on what’s new.

TowerXchange: What about new markets in LatAm?

We have the same disciplined approach to new markets that we apply to new products. The elements that we take into consideration when we run a due diligence on a new market are its macroeconomic (inflation, forex, etc.) and political, regulatory and social conditions, its telecom ecosystem and advancement in technology deployment and permitting.

And while we do keep an eye on new market opportunities across the globe, I’d say that our focus is always on consolidating existing markets. In LatAm, we cover a huge proportion of the telecom market and reach out to a high percentage of the local population thanks to our existing operations across multiple countries.

TowerXchange: What has been the impact, if any, of the rise of operator-led towercos on the independent towerco business?

We’ll need to see over time but for now there’s been very little impact on American Tower. But one positive aspect is that the market has proven once again the need to deploy infrastructure via a neutral-host type of business model. I believe that the rise of operator-led infracos has just confirmed it and this can only be good news to our business.

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Oliver Puech is one of the top executives who will be speaking at the upcoming TowerXchange Meetup Americas, held at the exclusive Boca Raton Resort & Club (Boca Raton, Florida), 7-8 June 2017. Click here to find out more.