One of the world’s fastest growing tower companies, Russian Towers are evolving into more than a vertical real estate provider. In this interview, Russian Towers President Alexander Chub describes the IT architecture they are leveraging to transition into service-oriented infrastructure provider. We also gain insights into the organic and inorganic growth plans of Russia’s leading independent towerco.
TowerXchange: Please re-introduce yourself and Russian Towers.
Alexander Chub, President, Russian Towers:
Russian Towers Group was founded in 2009. Our shareholders are UFG Asset Management, The European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), Macquarie, ADM Capital and Sumitomo Corporation.
Russian Towers is the largest independent operator and owner of wireless towers in Russia. The company invests in the construction and acquisition of towers of different designs across regions of Russia and ensures their long-term maintenance and operation.
The clients of Russian Towers are national and regional mobile operators, broadband providers, government agencies, developers and other companies. The company provides a wide range of shared telecommunications infrastructure services: provision of sites for telecom equipment placement, provision of power supply, fibre-optic connectivity, 24/7/365 remote monitoring and site access management.
The company’s strategy is focused on expansion of its services portfolio based on a constantly expanding infrastructure product and service offering.
TowerXchange: What is your vision for the evolution of towercos beyond telecommunications real estate aggregation and provision?
Alexander Chub, President, Russian Towers:
Current developments in economies and technologies are leading to mutual penetration (convergence) of industries.
Today’s economy gets digitalized very fast in different spheres. Now consumer data has become one of the most valuable assets. Accordingly, MNOs across the world are starting – in some regions faster, in other regions rather slower – to not only migrate towards provision of digital services, but also to add some additional offerings to their services (e.g., financial services, content, etc.). At the same time other players (e.g., banks) are invading MNOs’ domain by launching their own MVNOs.
Moreover, there are also OTT players (Apple, Google, Facebook, etc.) who are enticing customers of other businesses. Apps like UBER, WhatsApp, Telegram and others originally built their businesses through direct interaction with subscribers on top of someone else’s platform and someone else’s infrastructure.
And the ultimate goal of each and everyone in this digital economy is to increase the engagement time with the customer in order to get more data from this engagement and then develop customized services on the basis of its analysis.
Today customers expect personal attention and quality of service is critically important for them - they are not ready to put up with any delays in service or deterioration of its quality. The most important thing for service providers is to be able to quickly adapt to ever changing market conditions, to ever changing customer preferences, to know what is of utmost importance for a customer and what is of less importance. Companies should focus on improving the customer experience, marketing and differentiating themselves from the competition. In this environment the large scale, distributed tower infrastructure of MNOs is transforming from a source of competitive advantage into burden that limits their transformation into digital businesses.
And against this background, companies have started to emerge which take care of this capital-intensive infrastructure professionally and exclusively, and which remove this infrastructure burden from digital service-oriented companies.
The time has come for sharing economy: shared computing power and software (clouds), collaborative logistics, car sharing, shared towers, shared offices, etc.
The task of infrastructure companies is to provide their customers (in our case MNOs) with a level of service which will let them forget all the hassle with infrastructure and focus on what really is important today in our digitalizing economy.
As years go by, the tower industry increases its footprint and its importance in the mobile telecom industry. For example, our interaction with the MNOs has shifted from discussion of the lease rates at a particular tower to discussion of the percentage of the MNOs’ rollout plan Russian Towers is prepared to implement. And this is determined by the possibility of access to the basic infrastructure (land, lighting poles, energy, et cetera) where towers can be built, as well as by the speed and efficiency of our business processes.
It’s obvious that the future of infrastructure companies in the 5G era lies in creating mobile networks at a much higher speed and efficiency than mobile operators can demonstrate.
TowerXchange: What are the technology platforms and processes that will enable you to realise that vision?
Alexander Chub, President, Russian Towers:
Before I give you the description of the components of our IT solution I’d like to draw your attention to why we think our solution is unique.
First of all, the flexibility of our solution is critical. We believe that the tower industry is transforming into a wider infrastructure industry that will be providing a wider range of services. Because of this, IT solutions for infrastructure companies (infracos) must be flexible and enable such companies to achieve cost-effective and fast adaptation of their current business processes, or facilitate the development of new processes. That’s why we used an enterprise class Business Process Management (BPM) solution as the core of our platform.
Second, our solution is constructed on a modular basis. These modules are based on the well-known global software products which are readily available around the world. As a result, a towerco or infraco can easily and without any hassle hire a local partner for the adaptation or development of each of these modules to align with their processes and objectives.
Third, the licensing structure of our solution is based not on the number of towers, but on the number of users. Thus, in cases of fast organic growth or in cases of large scale tower acquisitions, the cost of our solution will increase only slightly, disproportionate to the increase in the size of the tower portfolio.
Fourth, the architecture of our solution allows it to be deployed locally, at the premises of a towerco, or to be deployed in the cloud, or partially at the premise and partially in the cloud.
And the last, but not the least, the price of our solution as well as its total cost of ownership is much lower than similar solutions available in the market.
Talking about the components of our platform, its key technology elements are:
- Business Processes Management (BPM) system, allowing maximum automation of business processes, their fast adaptation or development of new processes;
- Customer portal to streamline services ordering, their visualization, et cetera;
- Customer Relationship Management (CRM) system for efficient management of relationships with the MNOs;
- Geographical Information System (GIS) with extensive analytics;
- Enterprise Data Warehouse.
The triad of BPM, CRM, and GIS systems built atop a data warehouse assures the maximum speed, and best value for the MNOs using off-the-shelf (OTS) interoperable software modules. Clients can work with the Russian Tower managers and/or use automated service orders, from leasing space on a tower or ordering fibre to mounting equipment and revising levels of service, et cetera. All client orders, history, contracts, and information on assets are stored within the CRM system.
The GIS solution is a highly efficient IT tool that supports site location search, selection, and comparison of several sites as well as some analytical functions.
Since every customer has very specific needs and requirements, a customer portal was developed which enables a customer to easily access a variety of services, as well as status on their orders and information about their assets. The interface of this customer portal is executed in the format of an e-commerce shop that we all are familiar with.
Russian Towers’ growth narrative
TowerXchange: How many new sites have you built in the last year, what kind of structures, and how have you been able to rollout so fast?
Alexander Chub, President, Russian Towers: We built more than 800 sites in total in the last year. Almost all of them are city poles, and the rest are regular ground-based towers. Since we are using existing light poles, energy poles and urban electric transport poles infrastructure, getting access to this typical city infrastructure is critical to our success. We identified this driver well in advance and have become fully prepared to meet the 4G penetration rush, providing MNOs with a variety of options to serve their needs. The deep level of mutual trust we have engendered with MNOs enabled us to actively participate in their network planning process and save time at this stage too.
Needless to say we stretched our ability to deliver through optimisation of our processes and through operational excellence.
TowerXchange: I understand you’ve supplemented your organic growth with the acquisitions of some small local towercos in Russia – are there many privately owned tower portfolios in Russia and how receptive have their owners been to your approaches?
Alexander Chub, President, Russian Towers: There are dozens of them. Most of them are small-scale niche regional players and are not designed or prepared for the long term tower business. We offer them a cooperation model including the buy-out of their assets and a long-term partnership within the Russian Towers-centric business ecosystem. And it works.
TowerXchange: To what extent has the ‘land grab’ for new sites in Russia moved from macro to micro sites, and from outdoor to indoor?
Alexander Chub, President, Russian Towers: What we are witnessing for the last three years is very strong shift from macro to micro sites. A significant portion of our current tower portfolio comprises of different types of urban poles which are located in urban areas, i.e., the places experiencing high demand for mobile traffic from mobile subscribers.
The other big shift we are seeing right now is growth of indoor infrastructure solutions. We believe in-building solutions during the next several years will become a significant part of our business.
TowerXchange: Please take us through how a typical new tower build (or co-location) is facilitated through your new IT solution, and explain how automation accelerates and optimises the process.
Alexander Chub, President, Russian Towers:
Now thanks to our IT platform our customer can forget about tedious email communication with the managers of Russian Towers. Instead he or she should just log into our Customer Portal where they get full access to all the services of Russian Towers in digital format. In the Customer Portal the customer sees not only readily available sites of Russian Towers, but also those under construction as well as complete information on its existing locations. The customer can enjoy all the benefits of using advanced GIS when choosing the location for their site.
In addition, when the customer has to search for not just one site, but tens of them, they can easily do it by simply uploading an Excel file into our portal and get the results within a minute.
Using our Customer Portal streamlines all the communication between MNOs and our account managers, significantly improving efficiency of their interaction. In just this use case the savings from using our Customer Portal can reach many manhours.
TowerXchange: How do these streamlined processes specifically enable towercos to accelerate provision of new services in the heterogeneous network layer?
Alexander Chub, President, Russian Towers:
Continuous growth of 4G traffic coupled with the expected launch of 5G networks in the next 3-4 years will require a multifold densification of mobile networks. Taking into account that MNOs are keen on maintaining reasonable CAPEX to revenue margins, a site’s Total Cost of Ownership (TCO) for an MNO must decrease several times. This could be achieved simply by changing the approach to network rollout and handling. One of the solutions is sharing of the radio access network, but this is not enough. We need to make shared networks even more efficient.
Given that we cannot alter the laws of physics, not all of the elements of the cost structure can be made cheaper than today. That means that others must be delivered even more economically. One way of making things cheaper on a per unit basis is to make more units at the same time. That works, for example, in the cases of installation works, site search, maintenance and use of standardised processes, hardware, and settings… everything a towerco – or an infraco – should be good at! Every decision point decreases speed of process, increasing its cost.
For example, choosing a location for a site today, a decision made by network planners, supported by 3D radio propagation modelling et cetera, finally comes down to choosing between several available sites, perhaps 25 meters apart, and selecting one by answering few simple questions. Much of this is now automated without compromising on quality, but with a significant effect on rollout speed. By implementing streamlined processes through modern IT tools we can achieve real optimisation of network costs for our clients.
TowerXchange: How have towercos traditionally sold space on towers, and how will that change?
Alexander Chub, President, Russian Towers:
Towercos started their evolution as simple real estate providers; renting vertical tower space, just like floor space in an office building. That was enough at a time when operators required thousands of such “offices” to accommodate equipment, worth hundred thousand euros, and needed those “offices” for decades.
But as the infrastructure industry matures, towercos’ (or to be more accurate, infracos’) future is in selling services, including finding the optimal location of a site, full operation of that site, possibly upgrade and development of that site dependent on changes in behaviour of mobile subscribers. That will require not only much faster processes, but a much deeper understanding of our clients’ clients.
TowerXchange: Please sum up your vision.
Alexander Chub, President, Russian Towers:
For many towercos, tower asset is the ultimate goal. For us, tower asset is merely a tool that lets us create more value for MNOs by developing and offering them new types of services.
Today the typical service offering of a towerco includes vertical space on a tower, together with fibre and electricity connectivity. In the future with the emergence of 5G we expect some serious changes in the structure of the radio access network. For example, RAN sharing – just one set of antennas to serve a number of MNOs. Another evolution is edge computing: edge data centres that must be placed in proximity to the fronthaul of the mobile network. Another important trend is Network Function Virtualization (NFV) which in case of base stations will lead to their migration from the tower to a small scale data centre not far away from the site.
In other words, what we’re expecting to witness in several years is that the fronthaul infrastructure of mobile networks is going to get more complex and diverse. And the question that arises here – who is going to provide MNOs with these fronthaul infrastructure services? Will it be a number of players specialising in a specific component of infrastructure (e.g., edge computing service providers)? Or will it be a unified service provider?
I believe modern towercos are well poised to become such a unified service provider covering all components from antennas to edge computing to connectivity to MNO’s base stations.
Alexander Chub, President, Russian Towers
For more than 25 years, Alexander has worked and delivered on several successful projects in the IT services and telecommunications sectors.
Most recently, from 2012-2014, Alexander served as General Director at Navigation Information Systems (NIS GLONASS), a subsidiary of AFK Sistema. Prior to that from 2005, Alexander worked as Country Manager for the American company 3COM in Russia and the CIS. In 2002, Alexander served as Chief Representative and General Manager for Dell’s operations in Russia and prior to this was GM of Bull S.A. Earlier in 1995, Alexander was Managing Director of Hewlett-Packard for CIS countries and Mongolia.
Alexander has a degree in Computer Science from the Moscow Institute of Electronic Technology (MIET) and an MBA from MGIMO International Business School and he has also completed the Senior Executive Programme at London Business School.
In 2017 Alexander was elected co-chairman of the Committee on Information Technology of the Managers’ Association. Alexander is a member of the TowerXchange ‘inner circle’ informal advisory board.
Russian Towers will be providing other towercos with a unique demonstration of the platforms and processes that have enabled their growth, hosted at the Paddington office of their partners Microsoft on Friday, June 1 2018, and followed by the first TowerXchange CXO dinner hosted in London! Register now at www.towerxchange.com/CXODinner-RussianTowers (towercos only please)
