Iran is the Middle East’s largest mobile market and, with infrastructure sharing having been limited to date, significant parallel infrastructure and inefficiencies exist. In early 2017, number one and number three operators, MCI and RighTel joined forces with Fanasia to create a new towerco, Iranian Towers, an entity designed to bring new efficiencies to the MNOs’ networks. TowerXchange speak to Morteza Taheribakhsh, Chairman of Iranian Towers.
Iran is the Middle East’s largest mobile market with 118mn subscribers. There are three national operators in the country of which MCI (Mobile Communication Company of Iran) is the largest with 59% of the market share. The company became public five years ago and is the 15th largest operator globally. MTN-Irancell, a joint venture in which MTN holds a 49% stake, is Iran’s second largest operator with 38% of the market share; and RighTel, is the third largest operator with around 3% market share. In addition to this there are a number of FCP players and WiMAX operators who make up the balance of the market share (figure one).
There are currently around 38,000 towers in the Iranian market (figure two) and with very little infrastructure sharing between the operators there is a significant degree of parallel infrastructure. In 2014, Fanasia, an Iranian company with a background as a turnkey service provider to the country’s MNOs, started their own towerco business. Their first project on Kish Island, conducted with the support of the Kish Free Zone Organisation, was to rationalise the number of towers on the island. With 110 sites on the Island, each with a single tenant and unsuitable for the addition of further tenants, Fanasia built 27 new sites which the operators were mandated to use, whilst existing sites were decommissioned. The municipality benefited from a revenue sharing model on top of the land rental fee and further benefited from the freeing up of land under the old towers. Following the success of the Kish Island project, Fanasia reached a similar agreement with the municipality of Mashhad, Iran’s second most populous city to develop a core network of 350 sites in March 2016.
In early 2017, in response to the growing trend towards infrastructure sharing in Iran, a new tower company, Iranian Towers, was formed. The three shareholders in the company are MCI and Rightel, Iran’s first and third largest operators and Fanasia, Iran’s first towerco. TowerXchange were delighted to speak to the CTO of MCI and Chairman of Iranian Towers, Morteza Taheribakhsh, to learn about the new venture.
Figure one: MNO market share of Iran’s 118mn subscriber base
Figure two: Ownership of Iran’s ~38,000 towers
TowerXchange: Please can you introduce Iranian Towers and the rationale behind its formation
Morteza Taheribakhsh, Chairman, Iranian Towers:
Iranian Towers is a new tower company whose three shareholders are MCI, the number one operator in Iran, RighTel, the country’s third largest operator and Fanasia, the Iranian towerco with operations on Kish Island and in Mashhad. I currently serve as the Chairman of Iranian Towers with Saeed Karimzadeh, representative of RighTel and Hossein Khodayari, representative of Fanasia also on the board.
Iranian Towers was established to act as an exclusive towerco for both MCI and RighTel. It is expected that most new sites required by both operators will be built and operated by Iranian Towers.. Furthermore, we will gradually proceed to purchase and leaseback the existing sites of MNOs. Therefore both build to suit and buy-leaseback scenarios have been considered by Iranian Towers.
In Iran, as with the rest of the world, operator voice revenues and ARPU are continuing to decline whilst demand for data continues to increase. Significant capital is required to deploy 4G and 4.5G technologies which are required to support the increased data requirements. This places significant strain on mobile network operators and as such cost saving measures become increasingly important. Considering this fact, the primary motivation behind the creation of Iranian Towers is cost management. Sharing the cost of new site deployment as well as site operations will bring considerable savings to the business. Having Iranian Towers in place will enable MNOs to invest in their technological requirements without worrying about site infrastructure costs.
Furthermore, MNOs expect a higher degree of operational efficiency and faster rollout through Iranian Towers’ agile organisation. In other words, Iranian Towers’ mission is to cut the cost of operations and to contribute to MNO revenue through faster rollout and site build. It is worth mentioning that involvement in Iranian Towers will also bring a new revenue stream to MCI and RighTel and it will allow us to benefit from co-locations on the sites.
TowerXchange: What is the initial scope of Iranian Towers?
Morteza Taheribakhsh, Chairman, Iranian Towers:
The first phase of Iranian Towers’ operations will be the construction of approximately 1000 new sites which are capable of accommodating multiple tenants. These sites will be constructed primarily in the major cities in order to accommodate 4G and 4.5G rollout. The new rollout will include both ground based and rooftop sites and will be conducted with the coordination of municipalities. In terms of the buy and leaseback phase, we have not decided the exact number of towers, but the team is working on it to finalise details. Soon after launching the new build sites, the buy and leaseback process will start.
TowerXchange: How will the site rollout be managed? Do Iranian Towers have a full team in place and have they selected their partners?
Morteza Taheribakhsh, Chairman, Iranian Towers:
We have a temporary CEO in place for Iranian Towers but we plan to recruit a neutral CEO who also has strong experience in the Iranian market. In terms of the broader team, our aim is to outsource the majority of the works in order to keep the company small and agile.
The Fanasia team already brought a considerable experience of working with municipalities and will manage these relationships in order to expedite planning and permitting. Having two operators on one site is a much more attractive proposition to the municipalities who have strict criteria for allowing new sites to be built.
In terms of other equipment on the sites, we have spoken to a number of the leading suppliers of site monitoring and management systems and are currently evaluating our options. We are also examining various energy and space saving solutions including new racks and solutions for outdoorisation.
TowerXchange: Will all sites host both MCI and RighTel equipment? What potential exists for the co-location of additional tenants beyond MCI and RighTel on sites?
Morteza Taheribakhsh, Chairman, Iranian Towers:
RighTel have a smaller subscriber base than MCI and so will not require as many sites as MCI. If only one operator requires the site, then there will be negotiations between the two operators on how this is managed.
In terms of the scope for further co-locations on sites, in addition to MTN-Irancell there are a number FCP operators and WiMAX players in the Iranian market who could serve as additional tenants on sites, thus further improving the economics.
TowerXchange: Are there plans to transfer MCI and RighTel’s existing sites into Iranian Towers?
Morteza Taheribakhsh, Chairman, Iranian Towers:
MCI own approximately 21,000 sites in Iran, many of which are in particularly attractive locations, in addition to this, Rightel own 4,000 sites. The goal is for a gradual transition of existing locations into the portfolio but with a lot of parallel infrastructure between operators it doesn’t make sense to transfer all. What’s more, the majority of sites are unsuitable for additional tenants and so new towers will need to be constructed and agreeing a fair valuation for locations and towers will be a challenge. Whilst our current focus is on an initial scope of 1000 sites, over the next 4-5 years we plan for further consolidation and integration.
