While infrastructure sharing is not common in Japan, one firm has found a niche to serve leading MNOs NTT DOCOMO, KDDI and Softbank. Five-years old JTOWER specialises in providing in-building sharing solutions in Japan, with presence across the country in various shopping malls and commercial buildings of all sizes. With strong backing and support by financial institutions and funds, the firm made its first acquisition in the summer of 2017, expanding its network overseas to Vietnam. JTOWER is looking to apply its high-quality service and proprietary technology to advance the IBS market and telecommunications infrastructure in Vietnam.
TowerXchange: Please introduce yourself, your role, and company.
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
I am the founder of JTOWER Inc.
JTOWER is the sole provider of in-building telecom infrastructure sharing solutions in Japan. Our proprietary in-building Distributed Antenna System (DAS) is used in prominent establishments across Japan, including commercial complexes and office buildings by all three major mobile network operators (NTT DOCOMO, KDDI and Softbank). Our system is MIMO-ready active DAS and covers six bands used by the Japanese MNOs.
TowerXchange: What was the vision for JTOWER? How did the company come together and how was it funded?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
Prior to founding JTOWER in 2012, I was CFO of eAccess and its subsidiary, EMOBILE, (acquired by Softbank in 2013, and now Y!mobile) which I founded together with Dr. Semmoto and Eric Gan.
Since eAccess was a new comer to the telecom industry in Japan, not only we had to learn and adapt to the customs and tradition of the industry very quickly, but also challenge or even break them at times. It was during that time when I started to ponder on the lack of “infrastructure sharing” concept in the Japanese telecom industry.
When I founded JTOWER in 2012, I had a vision to make infrastructure sharing the norm in the industry. Initially, my idea was to try and build a tower sharing company (thus the name “JTOWER”…), but soon I discovered there was a limited demand for tower sharing in Japan, so I switched to providing indoor DAS solutions, which was basically a non-existent market at the time.
With the concept of infrastructure sharing for the telecom industry, JTOWER got funding from Innovation Network Corporation of Japan (INCJ), a JPY300bn Japanese government fund under the Ministry of Economy, Trade and Industry with a total government guarantee of JPY1,800bn.
We are proud to have now been funded by the investment funds of the Development Bank of Japan, JA Mitsui Lease Ltd. (a major Japanese financial institution held by The Norinchukin Bank and Mitsui & Co. with total assets of JPY1,300 billion), as well as all three mega-banks in Japan (Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation and the Bank of Tokyo-Mitsubishi UFJ, Ltd.).
TowerXchange: As we know, Japan does not currently have a tower market as assets remain in the hands of operators. How does JTOWER fit into the overall telecom ecosystem in Japan?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
Yes, that’s correct. In Japan, the operators regard towers as strategic assets and infrastructure sharing is very limited. Before JTOWER came into the market, there was no DAS sharing either, except in underground subways where a public initiative was created to bring operators together to develop and use a common DAS.
One of the reasons for the lack of infrastructure sharing by the Japanese network operators is the high quality of service provided to end users. While it’s common for DAS solution providers in Asia to procure and install off-the-shelf equipment, we have developed a proprietary system to cater to the strict standards of all three major operators in Japan.
We spent the first two to three years developing the system and getting it tested and approved by the operators. For this reason, the barrier to enter the market is quite high and we are proud to say that JTOWER is the sole provider of in-building telecom infrastructure sharing solutions in Japan.
TowerXchange: Can you share some details on your operations and network?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
We have installed our system and hold high tenancy at a number of landmark buildings by major Japanese developers and shopping malls across Japan, from Tokyo to Tokushima, Hokkaido, Aichi, and more. They range from two-floor up to 53-floor buildings, with total floor space from 7,000m2 to 160,000m2. TowerXchange: What is your business model?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
We work with developers to install our DAS inside buildings and sign a long-term contract with operators for the infrastructure sharing service. Our MIMO-ready active DAS covers six bands used by the operators.
We are also responsible for monitoring and maintenance of our equipment after installation.
Contract terms vary and depend on several factors including location and building type.
As previously mentioned, Japanese MNOs have very high standards of service, so you’ll find a DAS installed in almost every building where there is demand for coverage. For this reason, one of JTOWER’s missions is to tap into new builds.
Right now, we see lots of opportunities here in Japan! The real estate market is very dynamic and there are plenty of new large developments going on for the 2020 Tokyo Olympics.
TowerXchange: You were previously focused just on Japan and now expanding into Vietnam with your recent acquisition of the largest IBS portfolio in the country. Congratulations! Can you tell us more about this?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
In addition to expanding our network across Japan, we decided to broaden our perspective and extend our reach to capture the growing demand outside of Japan. The opportunity in Vietnam presented itself to us at a very good time and with this new foothold in Southeast Asia, we want to explore opportunities and expand our business aggressively in the region.
On 31 July 2017, we completed the acquisition of the largest IBS company in Vietnam, Southern Star Telecommunication Equipment Joint Stock Company (SPN) through a special purpose company (VIBS Pte Ltd.) jointly established with Japan South East Asia Growth Fund L.P. (JSEAGF) and jointly funded and managed by Development Bank of Japan Inc. (DBJ) and Risa Partners Inc. (RISA).
This portfolio includes over 120 IBS.
Established in 2007, SPN is the largest IBS operator by coverage area and the largest market share in Vietnam, supported by its positive relationships with all three major MNOs, high quality services and expansive network with real estate developers. SPN has installed its equipment and services MNOs at a variety of buildings in Vietnam, including major high-rise office buildings, airport, hotels and commercial complexes.
TowerXchange: What do you like about the Vietnamese market? How does it compare/contrast to your home market?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
We saw Vietnam as a great candidate for the first country outside of Japan to establish our presence in because of its relatively large population and steady economic growth over the last few years. We acquired the largest IBS company in Vietnam, but the market is highly fragmented with a number of small players who don’t have enough scale to be efficient or profitable. So, we expect a continued steady growth of the real estate market and also see the existing IBS market as largely untapped in terms of consolidation in Vietnam.
TowerXchange: What does the future hold of JTOWER in terms of growth and possible expansions in other markets?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
We plan to grow the company in Vietnam both organically and inorganically. Naturally, we are looking at other markets in the region to explore opportunities to further expand our business.
We are very excited about our first acquisition in Vietnam, and would love to find partners in the region and beyond to accelerate our plans for business expansion.
TowerXchange: Lastly, what other opportunities within the telecom infrastructure are you exploring?
Atsushi Tanaka, Founder and Representative Director, JTOWER Inc.:
We are closely watching the infrastructure sharing trends in the industry and are keen and always open to new ideas to expand our business portfolio. Just last month, we made a joint announcement with Tokyo Electric, the largest electricity provider in Japan, on the launch of a new service called “SITE LOCATOR” where we provide a tool for Japanese network operators to locate and lease space on transmission towers and building rooftops for setting up their telecom equipment.
The carve out of SEATH portfolio
Southeast Asia Telecommunications Holdings Pte. Ltd. (SEATH) was 100% owned by Vietnam Infrastructure Limited (VNI), an investment vehicle established to target infrastructure-related investments within Vietnam’s emerging market; it is also listed on the AIM (Alternative Investment Market) of the London Stock Exchange. VinaCapital was the private equity firm managing the portfolio.
In January 2017 VinaCapital successfully divested its shares in SEATH (1,972 towers) to Malaysia-based OCK Group for US$50mn. The IBS component however was not included at the time. As a result of this sale to JTOWER, VinaCapital has now executed its divestment strategy, with plans to wind up the fund and delisting on the AIM.
