As the world’s sixth largest country, Australia has a total area of roughly 7.7mn km2 but a population of just 23.2mn, with most concentrated in coastal cities and towns such as Brisbane, Melbourne, Sydney, and Victoria. Mobile phone penetration has reached 90%, of which 17% use only mobile for their connectivity for both voice and data. New Zealand is much smaller in size, at 268,021 km2 and a population of roughly 4.75mn, with mobile phone penetration at 110%. With infrastructure sharing building momentum, industry stakeholders explored both the challenges and opportunities in both countries at TowerXchange’s 3rd Annual Meetup Asia in December 2016.
Australia
MNO landscape
Telstra is the incumbent carrier previously government owned and now partially privatised. It has the largest number of sites both in terms of towers and rooftops, and has recently commenced some small cell deployments. It switched off GSM 2G on 1 December, 2016, and now runs its 850MHz Next G and also 4G on the LTE platform. It sold its legacy copper and hybrid fibre-coaxial (HFC) networks to National Broadband Network Co (NBN Co) in late 2014.
With the deregulation of the telecommunications industry in the early 90s, Optus was formed via a consortium that included UK firm Cable & Wireless and US firm BellSouth. It was later acquired and is now owned by Singtel. Optus is the country’s second largest MNO by both subscriber and coverage footprint. It is currently working on rural deployment to improve regional coverage of 3G and 4G.
The third operator is Vodafone, which in Australia is actually a joint venture between Vodafone and Hutchison. The third-placed MNO suffered badly when its core network gave problems leading to the notorious “Vodafail” period that saw the company lose considerable market share. Since then Vodafone Australia has invested in urban areas and improved its 3G network while rolling out 4G, as well as expanding regional coverage. It is now gaining customers quite rapidly as it focused on addressing its network quality over the last few years, and is now looking to expand its coverage footprint.
It is worth noting that in urban areas Optus and Vodafone have a multi-operator radio access networks (MORAN) sharing agreement using very large ten or 12 port antennas.
There is also a new carrier TPG Telecom joining the scene as it recently purchased spectrum. For now its rollout plans remain unclear. It owns a lot of fibre, is the second largest Internet service provider, and enjoys success as the largest mobile virtual network operator (MVNO).
NBN Co is a Government Business Enterprise formed in 2009. It is not an MNO but a fixed wireless network provider. Main cities and large population centres will have their national broadband delivered by fibre/copper and very, very sparse areas will have theirs delivered by satellite, with the lightly populated areas in between being serviced by a fixed wireless broadband network which is essentially LTE with mobility disabled.
Defunct MNOs
There are former MNOs who are worth noting as there are still rooftop assets and some towers tied into them:
AAPT started roll out of a CDMA network in the late 90’s. Some of its sites were sold to Hutchison and others where the lease could not be broken remain leased as quiet sites.
One.tel started major roll out of GSM 2G in the late 90s, but crashed due to funding issues. Some of its sites were sold off, some abandoned, but most have been removed or reused since then.
Hutchison built a 2G CDMA network using the Orange brand, then 3G using the H3GA and “3” brand. It ran an early infrastructure sharing programme with Telstra before the Hutchison and Vodafone merger. There was a high level of site duplication, mainly on rooftops, with leases unable to be broken so many are still running. Tower selection and sharing posed less of an issue.
The Australian government has funded two tranches of mobile blackspot tower provisioning, with funding awarded to the MNOs for providing coverage in nominated blackspots.
Estimated site count for Australia
Towercos
Australia has an interesting mix of public and private companies that are effectively towercos.
Axicom was formally Crown Castle Australia (CCA) until a high value sale in 2015 and subsequent rebranding by the new owners Macquarie Bank consortium. CCA was established in 2001 when they paid Optus US$135mn for 700 towers, a value of US$192,857 per tower, and also paid US$130mn for 670 towers from Vodafone, a value of US$194,029 per tower. Both of these deals were very high at the time, but both Optus and Vodafone were in capex intensive network rollouts at the time so welcomed the cash injection. This set MLA standards/tower rents very high in Australia. CCA added a services arm by purchasing and growing two key companies: KAW, specialising in site acquisition and access consent, and Structel, an industry leader in tower structural engineering. A well-managed tower portfolio combined with strong customer MLA and cost reduction programmes such as ground lease reduction and ground lease buyouts added to a growing EBITDA.
In May 2015, Macquarie purchased Crown Castle Australia and renamed it Axicom for AU$2 billion (US$1.6 Billion) for 1,854 towers and a handful of rooftops. However this can’t be used as a representative Australian tower valuation mechanism as it was for the whole company not just the assets. But it does demonstrate the growth in value in the country.
Broadcast Australia was formally the NTA or the national provider of towers to the ABC broadcaster. Originally the NTA had been part of the Postmaster General (now Telstra) and was a government entity until NTL (now Arqiva) from the UK purchased them in the 90s. In 2004 NTL Broadcast was purchased by Macquarie Bank and the name Broadcast Australia replaced NTL. Subsequently the company was purchased by the Canadian Pension Plan Investment Board in 2009. Overall tower numbers are around 600, however, many are well-loaded or are MF (radiating) structures so an effective site share pool of almost 400 towers is a more accurate number. The majority of these sites are large broadcast towers.
There are also a few government-owned concerns that are effectively tower companies, with Queensland Rail and Transgrid Power as the best two examples. The rail company has about 300 towers along rail lines that it successfully rents out; it has an astute commercial attitude when it comes to tower sharing. The Queensland government does not want to privatise infrastructure, as such this asset is unlikely to come to market. Transgrid Power has built an extensive network for their own use, mainly for smart metering purposes.
There are several other smaller private tower or rooftop management companies operating in Australia and wireless Internet service providers that utilise their tower assets. Examples include AP Wireless (50 to 100 towers) and Vertel (25 to 50 towers).
Tower counts
All in all there are approximately 15,000 towers in Australia, with Telstra owning about half. There’s also a further 10,000 towers that non-MNOs use and 20-25,000 rooftop sites, some of which are dormant sites awaiting lease time out.
The cost to build to build per tower in Australia is around US$150,00-175,000, with most of the sites connected to the grid.
Small cell and in-building solutions
Telstra has some small cell solutions in major cities and are experimenting regionally. A local town in Australia could be two stores and a population of six, which is not economically viable to cover with a tower! However, coverage could be provided with a small cell, especially since there is commitment from NBN to support the MNOs with backhaul.
There are reportedly repeated attempts by others to create an in-building network which never played out. The incumbent carrier has a working agreement for in-building solutions. The Sydney Metro Railway also has a set up where MNOs share infrastructure and take turns being the lead carrier to design and install each building. The model is described as hard to break as the carriers enjoy a lot more clout when they band together to negotiate with landlords. With shopping centres, MNOs have been able to successfully pitch their coverage and services as being essential to the shoppers and their shopping experience, and in the process slash rental prices. New developers are thus often paying for in-building systems.
New Zealand
New Zealand has good 3G coverage in all major population centres and 4G/LTE is progressively being deployed into these centres as well. Rural coverage is patchy and the government has run blackspots programmes to help this.
There are approximately 4,000 tower sites in New Zealand, however, there is a lot of duplication and considerable consolidation would be required before economic towerco activity could take place. All towers currently sit on MNO balance sheets.
The earthquake of 2011 that had a huge impact in Christchurch has seen the MNOs co-operate and develop ad-hoc small cell or small shared macro cell solutions on street furniture such as streetlights.
MNOs
There are three main MNO’s in New Zealand with Vodafone as the leader in terms of number of subscribers and coverage. It started as the BellSouth network until Vodafone took over in the late 90s.
Spark was originally Telecom New Zealand owned by the government, which in 2008 was separated into three divisions covering telecom retail, telecom wholesale, and network infrastructure (Chorus). Spark took on the mobile network and Chorus took on fibre/broadband. Spark has expanded its coverage mainly by building its own sites and capitalising on the rural exchanges from the Telecom days.
2 Degrees is the youngest MNO in the country and currently in coverage catch up mode. They have rolled out their own sites in major population centres and have extensively co-located with Vodafone on their regional sites. 2 Degrees is owned by Trilogy International Partners, and has been rumored to be interested in divesting towers.
Crown Fibre is a development entity of the government charged with the provision of high speed broadband throughout New Zealand. While most of this will be achieved by fibre, it is likely that there will be edge elements of rural populations that will have some kind of wireless solution either fixed or mobile.
Tower build environment
New Zealand is described as having an onerous resource management act, which means getting approvals to put up a new tower can be challenging. Supposedly there is some relaxation on the rules given blackspot and fast broadband expansion programmes, but while timelines may be a bit compressed, the expectations on tower aesthetics and structural integrity remain. Towers need to be rigorously engineered in New Zealand as it is on a fault line and the towers are likely to get shaken at some point. There are opportunities to build more towers since many popular tourist destinations could use the coverage, plus search and rescue and police also require reliable communications networks in the bush.
