A Beijing towerco’s past, present, and future: six strategies for business growth

Beijing RLZY (Rui Lan Zhuo Yue) Technology began operations as a service provider to the three MNOs in China back in the early 2000s. As the country embarked on the path to “co-build, co-share,” transferring all tower assets from China Mobile, China Unicom, and China Telecom into China Tower Corporation (CTC), the operators were stopped from building their own towers. This created the market whereby new and old companies emerged to become third-party towercos, constructing and leasing towers as part of their business. As the telecom industry evolved in China, so has RLZY’s business and ambitions.

TowerXchange: Please introduce yourself – how and when did you get into the tower business?

My name is Wendong Liu and I am the vice president of Beijing RLZY Technology (RLZY) and CEO of posesafeIT.

After graduating from Beihang University (formerly known as the Beijing University of Aeronautics and Astronautics) in 2003, I went to work at China Unicom, where I was responsible for base station construction and maintenance. In 2012, I joined Sunwave Communications (????)) at its Beijing office as the deputy general manager, in charge of indoor microcellular base station construction and maintenance. I came to work at RLZY, a third-party towerco in 2016. Around that time, we also set up an R&D company in Hangzhou (posesafeIT), with an eye to solving the inefficiency that often comes with tower management, specifically with a project on intelligent towers.

TowerXchange: Please tell us about your company.

RLZY was established in 2006, with a focus on serving the telecom operators and industry, offering holistic solutions in three major areas: communications network planning, operations and maintenance, and engineering and construction.

The company remains at the forefront of the information age as a top communications technology team. Through our experience and expertise, we’ve maintained consistent and positive long-term working relationships with China Mobile, China Unicom, China Telecom, and China Tower Corporation (CTC). Over the past decade, we’ve been involved with nearly 2,000 telecom base station site acquisition and construction projects, which included different types of sites and special projects.

In March 2016, the company underwent business structural change, going from Beijing RLZY Technology Limited to Beijing RLZY Technology Public Limited Company. In July of the same year, the company also became members of the China Association of Communications Enterprises (CACE,????????) and Beijing Communication Industry Association ((?????????).

On 8 September, 2016, the company became officially listed on the National Equities Exchange and Quotations (NEEQ), also known as the “New Three Board” ((???). This is the Chinese over-the-counter (OTC) system for small-to-medium companies not listed on the Shanghai or Shenzhen Stock Exchanges. The stock code is 839188 and referred to as “????.”

On 22 December, 2016, the company passed Beijing’s second round of high-tech certification, becoming a high-tech enterprise. This is part of a policy initiative through the Ministry of Science and Technology, with approval from the State Council to encourage the innovation, development, and growth of small-to-medium enterprises.

The company currently employs 27 staff.

TowerXchange: And what assets do you have on the ground? What is your geographical footprint?

In terms of our network footprint, to date we have built and completed 1,214 sites, of which 331 are monopoles/towers, 118 are roof tops, and 765 are streetlights. Those the three types of sites we get involved in, and they are spread across Beijing, Hefei, Shanxi, and other regions.

The locations are mainly shopping districts, transportation hubs, large residential communities, and parks and scenic areas.

As a build-to-suit (BTS) firm, we target our sites based on the requirements of the three MNOs.

TowerXchange: Are you buying or building towers – if both, what is the mix?

For now we are building and operating our own towers through BTS agreements with the operators. In the future, should the opportunity be appropriate, we would also consider acquisitions to grow the business. As the company listed on the NEEQ last year, it gives us a means to access capital.

TowerXchange: Can you tell us a bit on how it works when you operate as a third-party towerco in China?

Currently we are working with China Mobile as our main client, providing leasing services as a third-party towerco. China Mobile would provide its search rings to China Tower Corporation (CTC) for the first round of site acquisition; CTC’s success rate for the tier-one cities tends to be around 50-60% range, and up to 70-80% for tier-two cities. All remaining sites are then put out for bidding by independent towercos, who are usually successful with 90% of the sites.

The service model and payment terms differ across various regions in China, but they are increasingly becoming more standardised.

Generally lease rates for third-party towercos tend to be around 90% of CTC’s rate. Payment for each region is typically once a year, or once every two years, received post site completion. As a third-party towerco, there are usually four aspects to the project scope: site acquisition, construction, maintenance, and integrated management.

TowerXchange: What is your business model: do you provide ‘steel and grass’ only or a full- service tower+power proposition?

We are currently under the tower+power model, while offering tower maintenance as an additional service. The capex on the power side is recovered through the operator’s lease rate.

The operators have clear requirements when it comes to the power system, and while setting everything up can be costly, third-party towercos for the time being must build per operator specifications.

Under the current model, the operator handles and pays for the energy consumption directly.

TowerXchange: Is the land under your towers protected or is there a risk from ground lease aggregators? In other words, who owns the land?

Land ownership differs across areas. They could be business, industry, government, or personal. We sign long-term agreements with all land owners, subject to proof of legitimate title to the deed to avoid potential legal issues in the future. No agreements or construction will take place otherwise.

In general, the threat isn’t coming from land owners, but more from the community around the land. Upon completion of a site, there will sometimes be dispute around the issue of radiation concerns; while at the same time, we also seek testing from relevant governmental departments.

TowerXchange: What is the cost of building new towers compared to the cost of leasing towers in the Chinese market?

The cost to build a tower is around CNY¥160,000 (US$23,000). And due to geographical differences, ground lease costs range from CNY¥200,000 (US$29,000) to CNY¥500,000 (US$73,000). The terms also tend to vary, ranging from five, to 10, to 20 years.

Tower lease rates tend to average between CNY¥50,000 (US$600 pcm) and CNY ¥80,000 (US$970 pcm), with 10-year terms. Occasionally it’s 5+5 years.

TowerXchange: What is the typical time-to-market for a green field tower build?

The standard tower construction period is typically 40 days, with 10 days for site acquisition and 30 days for actual construction.

Green field sites do require pre-consultation with the government for approval and sign-off, and must be done prior to the commencement of any site work.

TowerXchange: Are you engaging with the rooftop, microcell, DAS, IBS and small cell markets?

We’ve always been involved with rooftops, and have them in Beijing, Anhui, Hebei, and other provinces and cities. But the reality is rooftops are more complicated when it comes to weight, lease negotiations, et cetera, so we construct far fewer of them compared to ground based towers.

Our next focus and expansion will be on smart towers, especially via the Internet-of-Things, and tower maintenance, with an eye to raising the industry’s overall O&M efficiency.

TowerXchange: How is the business financed and what does this mean about your interest/capacity to acquire or build more towers?

Funding and financing is one of the drivers of a business in becoming operational, but also one of the biggest challenges.

We are tackling future financing from a few angles: 1) developing positive working relations with banks to access additional credit, 2) raising funds from investors through private placements, 3) tapping into the securities market via our listing on the NEEQ, and 4) other methods. The combination of the various options helps to guarantee more funding for our tower construction, business portfolio expansion, and operational prowess.

TowerXchange: Please summarise your vision for the future of your company.

Globalisation. Informatisation. That while we continue to provide value as a third-party towerco in China, we can also extend our O&M experience to all tower owners worldwide through our smart/intelligent platform.

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1. Multiple and concurrent funding initiatives

2. Speed and agility to acquire key sites

3. Superior customer service to MNO clients

4. Domestic towerco acquisition if the right opportunities arise

5. Investment in R&D and government high-tech certification

6. Global expansion via tower management platform

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The national small-to-medium-sized enterprise share transfer system (commonly known as the “New Three Board”) is approved by the State Council and set up as a national securities trading place. The company was incorporated with the State Administration for Industry and Commerce (SAIC) on 20 September, 2012, with a registered capital of CNY¥3bn.

Shareholders of the company are Shanghai Stock Exchange, Shenzhen Stock Exchange, China Securities Depository and Clearing Corporation Limited, Shanghai Futures Exchange, China Financial Futures Exchange, Zhengzhou Commodity Exchange, and Dalian Commodity Exchange.

The scope of business is to organise the public transfer of unlisted shares; to provide services to non-listed companies in the areas of financing, mergers and acquisitions, and to provide information, technology, and training services for market participants.

The NEEQ is the only over-the-counter (OTC) exchange regulated by the China Securities Regulatory Commission (CSRC). Investors need at least CNY¥5mn to participate.

Compared to an IPO on the Shanghai or Shenzhen Stock Exchanges, the NEEQ’s listing process is faster, with less stringent requirements and lower costs. Valuations have also been reported to be high with a lower threshold. A little over 700 companies are currently in line for IPO approval in China. There has also been talks of a pilot programme to help qualified NEEQ-listed companies get on Shenzhen’s ChiNext board.

As of 21 February, 2017, a total of 10,675 companies are now listed on the NEEQ, according to a recent article from China Daily.

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