Aird Towers: new towerco for Australia and New Zealand has a vision for the macro and small cell network

TowerXchange is pleased to announce the launch of a new towerco for the 15,000 tower Australian and 4,000 tower New Zealand tower markets. Aird Towers’ vision extends beyond the duplication of the U.S. towerco blueprint first introduced by Crown Castle (now Axicom), looking beyond ground based towers and rooftops to consider small cell and other RAN solutions to support the rollout of 4G and, in future, 5G.

TowerXchange: Please introduce yourself and Aird Towers.

Having a background in military and civil engineering I have been involved in the civilian wireless industry either building towers or with towercos on and off for about 30 years now. My early experience was in the UK and Europe until 1998 when I moved to Australia. Back in 2001 I set up my first Australian company which was a rooftop aggregator and leasing company followed in 2010 with a tower construction company. These companies laid the solid foundations that Aird Towers is built on.

My personal driving vision is that connectivity is now a basic human right to allow trade, healthcare and above all education, and that wireless is how most people will become connected, in short Making the World Wireless.

Aird Towers was established in 2016 with a view to its formal launch now in early 2017 and while some aspects are like a conventional towerco model, Aird Towers has a range of differences that are unique and are the logical development of a towerco. Worldwide MNOs are unhappy at the traditional rigid towerco / Master Lease Agreement (MLA) type offering especially in the face of falling ARPUs and changing technologies – and Aird Towers has a range of technical and commercial solutions that reset the towerco base model. Aird Towers does of course offer aperture space on towers but we offer a lot more with small cell and RAN solutions along with commercial aspects that our MNO customers advise are highly attractive and compelling.

The principal concept Aird Towers started with is the recognition that the MNO world is changing – with entities such as Google and Facebook actively looking for a means to offer direct connection, the emergence of IoT and then further the progression into the world of 5G mean huge changes and a global reset of both the traditional towerco and the MNO models.

TowerXchange: What is Aird Towers’ vision for organic growth and how would you finance any inorganic growth?

A reasonable proportion of Aird Towers’ growth has been and will continue to be organic – there are many reasons for this but above all it is to ensure that our infrastructure meets with what the MNOs’ and our other customers growing needs are from both a technical and commercial stance. This is especially relevant as we move through 4G/LTE and into the very different world of 5G connectivity and we have established the means to deliver new sites effectively and efficiently. A combination of “build to suit” traditional towers, unique strategies towards small cells, and other RAN solutions is our vision now and in the future.

In terms of our business growth from existing assets, we are currently experiencing tenancy growth of about 0.32 per site per year and I am excited by that metric even though it has a lot of “low hanging fruit” boosting it.

Having said that, as a towerco a certain amount of inorganic growth is inevitable for Aird Towers – and we have many great institutional investors here in Australia and New Zealand that like the tower market as it offers long-term security with attractive tenant listings. If and when we make any major tower portfolio acquisitions we have the financial firepower in place ready to do so.

One of the problems for any new towerco in Australia to achieve site numbers is that there are surprisingly few towers given the land mass – this is, of course, a result of a lowish population (24mn) concentrated in more coastal areas. Many transport corridors have little or no coverage due to low current ARPU versus high build costs combined with huge backhaul distances. However as logistics and agribusiness grow in data needs this situation must change.

Aird Towers ensures a carefully balanced blend of traditional towers, small cells, and other RAN infrastructure solutions that offer MNO’s some unique and so far, highly attractive solutions.

TowerXchange: What is the current status of mobile broadband in Australia – is the 3G rollout complete, at least in terms of “economic coverage” – and what is the status of 4G?

3G is essentially now rolled out to all major population centres and the main efforts of the MNOs are now in LTE/4G roll-outs. Telstra has by far the most extensive coverage of both 3G and 4G outside of the cities and major towns, however Optus and Vodafone are taking steps to catch up. It is likely that some of the regional areas will go from Telstra only coverage on 3G/4G to also having 4G offerings from Optus and Vodafone by-passing 3G from these MNOs. TPG Telecom has also recently purchased spectrum and that is an interesting development though they are keeping their plans and strategy under wraps for now. It is certainly an exciting time to be involved in the mobile network infrastructure business!

There is also the fixed wireless component of the National Broadband Network – this is a 4G type solution with mobility turned off and this network covers many smaller country towns. There are growing numbers of consumers in Australia who rely on a mobile broadband as their only means of personal connectivity and this trend is set to continue.

All the MNOs with current networks have various spectrum bands and are also actively re-farming spectrum to fit in with their technology growth. The licencing authority, the ACMA, has recently called for bidders for more spectrum it has available in the 700MHz range so this may well change the look of the MNO landscape in Australia depending upon the auction results.

TowerXchange: What is the structure of the tower market Down Under? And how would you characterise opportunities for towercos like Aird Towers in Australia?

The tower market in Australia currently has a surprisingly low national towers numbers to whole landmass area ratio, with existing towercos traditionally following the typical U.S. towerco business formulas of tower acquisition and strong MLA management with the MNOs. The towercos in Australia have done well – a mixture of good timing through the growth of MNO requirements (particularly from GSM through to 3G) and of prudent portfolio management.

The opportunities for Aird Towers are a blend of the traditional towerco model but above all we have set ourselves apart from the traditional U.S. based structure with MNO engagement models that are more reflective of local needs. We understand that the MNOs’ ARPUs are very challenged by regional Australia and that is why our range of unique infrastructure solutions give the MNOs real opportunities to boost their regional coverage in a highly effective way. RAN infrastructure is a very important area of our market strategy not just with traditional MNOs but encompassing IoT technologies.

TowerXchange: And how does the tower market in New Zealand compare? Where do you see the opportunities in New Zealand?

New Zealand is a very different tower market to Australia and one we spent a lot of time analysing before we committed to it.

The way the MNOs have rolled out at different stages means that there are huge amounts of site duplication – seeing a hill with a tower from each MNO on it is not an uncommon sight. What this means is the traditional towerco market entry of tower purchase from a MNO would be short lived as the other MNOs have their own sites nearby. Add to that the fact that these towers were pretty much all designed to be a single operator solution and there is limited scope to increase loadings – we have done a lot of work on different solutions and know what the answers are – and without these solutions it is going to be hard to economically increase capacity or to consolidate sites. I suppose someone might run the figures on the original MNO owner being an anchor and sole tenant, but unless tenancy per site ratios get above 1.8 I think they will find it difficult, very difficult indeed.

Organic growth is the key to New Zealand – it’s a very long-term business plan and it involves a lot of preparing for 5G networks. There is a big opportunity in that area – from small cells in cities through to discreet towers in tourist areas (yes, that probably means camouflaged towers!)  We are doing quite a bit in the South Island just now and it’s a remarkably rugged and beautiful part of the world with very high standards of construction capability so we are excited by this market.

TowerXchange: There have been government initiatives to enhance rural coverage in both countries in recent years – is this an opportunity for towercos, given their natural tendency to focus on urban and suburban sites with demand from multiple tenants?

In principle, yes it is, in execution it is a bit different!

In both countries the blackspots are identified in quite different ways and the end result in each case is a list of identified blackspot areas from which either MNOs or network infrastructure providers (i.e. towercos) may choose candidates and submit business cases for funding. The funding is generally for the capital cost of the site and the site has to be capable of accommodating multi-operator installations. The first round in Australia saw only Telstra and Vodafone gain sites however there was some controversy about the process and in the second round Optus gained some sites as well. I do not know if the other towercos bid or not but the problem would be a conventional towerco model of recurring rental extraction from the MNOs when they themselves would have little ARPU coming in from the site.

Aird Towers is currently looking at this for any future rounds of blackspot funding as some of our solutions may fit well into that scenario.

It is my personal view that to effectively provide a solution for these blackspot areas there needs to be more of a government input than just finance. The obvious way to provide economical coverage is through a shared RAN system and to make that more effective, the sharing of spectrum should be not just encouraged but made mandatory at these blackspot sites.

TowerXchange: What blend of site typologies do you anticipate being in your portfolio as Aird Towers scales? For example, do you interest in aggregating and leasing rooftop sites as well as ground based towers? And what opportunities do you see DAS and small cells, both outdoor and indoor?

A range of site types will be essential to the continued growth and success of Aird Towers. From my first company, I know the rooftop aggregation market inside out, however as the MNOs need to desensitise sites, particularly in urban areas, having a whole lot of rooftops on the books may not be such a great a strategy.

The indoor coverage market in Australia is pretty active with the MNOs having an in-building co-operative deployment model that is very effective and has kept neutral hosts as a rarity in that sector. Aird Towers will not be active in the indoor market just yet.

As Aird Towers grows I see the site types we will be concentrating on will be conventional lattice towers and monopoles where we can see achievement of a tenancy ratio greater than two, and then a range of small cell (including outdoor DAS) and other RAN solutions. We are also looking along transport corridors as a real growth area and have a key strategy toward highway coverage that will become more obvious as 2017 progresses.

Looking into the future of 5G, I think there we will see huge and exciting changes in the area of towercos – they will become more important in the provision of networks – and this will also mean that we will see MNOs that have retained tower assets either divest them or possibly form joint ventures with tower companies.