Shared fibre and potential towerco partnerships in Africa

CSquared have rolled out fibre networks in Uganda, Ghana and Liberia with plans to expand into new markets. TowerXchange speak to Bhavesh Mistry, CSquared’s CTIO to understand the fibre landscape in Africa, the interface with towercos and how both are likely to evolve. 

TowerXchange: Please can you explain the fibre ecosystem and the status of fibre deployment across the African continent.

There are three principal types of fibre to take into consideration when looking at how mature the African market is. Firstly, there is the submarine cabling which lands at various points along the coast on the African continent. This is pretty well established. Secondly there is long distance backbone fibre, connecting these landing points with the interior. Lots of MNOs and other service providers have invested in bringing fibre from the coast to major cities in multiple markets and so in several countries this is well established. 

The third type of fibre to take into consideration is metropolitan fibre which can be used to connect towers, businesses and also bring fibre to the home. In some markets such as South Africa, Nigeria and Kenya, there is significant metropolitan fibre, in many East African countries such as Uganda, Tanzania, Zambia and Mozambique there is still significant opportunities to expand, whilst in much of central and West Africa including the DRC, Senegal, Guinea, Sierra Leone, Mali and Niger there is still huge growth potential.

In terms of who owns the fibre, subsea cabling is generally owned by either private submarine cable operators or a consortium of MNOs. With regards to the backbone you tend to find that much of it is government owned with a lot of the funding in Africa having come from the Chinese market. Due to a lack of expertise in the public sector, much of this has either been poorly constructed or poorly maintained with the government’s not understanding how to properly operate the infrastructure on strict Service Level Agreements. With the government owned backbone fibre often in a poor state, in some markets you see that MNOs have come together in a consortium to build independent fibre backbones. This has led to duplication of the fibre network which isn’t an efficient use of capital.

With regards to metropolitan fibre, this has been the least developed. Some MNOs have built their own networks, whilst a handful of independent players have emerged in more developed markets but we see the metropolitan fibre space as where there is the biggest gap. This is where CSquared’s primary focus has been to date, rolling out and operating wholesale metropolitan fibre networks.

TowerXchange: Can you introduce CSquared and their entry into the fibre space, what coverage do you currently have?

CSquared started off as a project within Google in 2012, initially referred to as Project Link, with the intention of developing the missing ‘Link’ in the fibre segment. The first city that the fibre was deployed in was Kampala, Uganda in 2013 followed by Accra and Kumasi in Ghana in 2015 and most recently Monrovia, Liberia in 2018. 

In May 2017 Google announced the spin-off of CSquared into an independent company that has four shareholders, these being, Convergence Partners, Google, IFC and Mitsui & Co., Ltd The intention of separating CSquared was to leverage on the experience and knowledge of other investors who are active in Africa and to expand into new markets with a warchest of US$100mn set aside for the same.

Currently CSquared has over 1500 sites, these being a combination of towers and enterprise buildings connected on its fibre across Uganda and Ghana.

TowerXchange: What capabilities does CSquared have in house and what does it outsource?

We have experienced senior management, some network planners and designers and key finance people in house, but all construction work, maintenance and logistics is outsourced. 

TowerXchange: Where is the most business for CSquared at present?

Our principal activity has been in the fibrisation of towers. In markets where an MNO is the leading player and already has their own fibre network in place, they have been more reluctant to use CSquared’s fibre whereas the take-up from the number two and number three MNOs has been higher. 

The towers which are a priority for the MNOs to connect are those with the highest capacity requirements. In rural areas it can be harder to justify the business case so most opportunities are in the main metropolitan areas. Typically we find that if the tower has 4G technology on it, the MNOs have been keen to connect it to fibre; if the tower only has 2G or 3G technology the MNOs usually want to wait longer until the capacity requirements grow. Any new towers that are constructed in urban areas where we are present tend to be fibre ready from day one. 

In both Uganda and Ghana some of the operators have divested towers to independent towercos. A large number of towerco owned towers are now connected to our fibre with the presence of multiple tenants on the site strengthening the business case to connect them.

TowerXchange: How does the dynamic work between CSquared and the towercos? Do you view them as partners, clients or something else?

We see the potential to find a model where towercos act as an agent or reseller of fibre to the tower, whereby we can incentivise them to upsell connectivity to the MNOs. 

TowerXchange: American Tower recently acquired a fibreco in South Africa and IHS Towers holds a fibre license in Nigeria; could towercos potentially become competitors in the metro fibre space?

There is indeed the possibility that an operator could chose to work with a towerco or another infraco active in the fibre space. Whilst competition is inevitable, it doesn’t make sense to have more than two independent players in any given country, as we have seen with the towerco business model. 

CSquared’s preference is to offer efficient flexible structures to help towercos fiberise their towers. We have already built the expertise ourselves and so it makes sense rather to explore some kind of partnership or joint venture with the towerco.

TowerXchange: Do you see the potential for M&A activity between fibrecos and towercos, creating a converged infrastructure company?

Bringing together shared towers, fibre, small cells and DAS networks can bring real advantages to the sector and it is something that we are having many discussions about. 

TowerXchange: As we have seen the trend in the tower industry, do you envisage further fibre assets moving into the hands of an independent player?

Historically, as in the tower industry, MNOs had seen the fibre they had built as a strategic asset, particularly if the MNO in question was the market leader in a given country. Increasingly however we see a growing interest in outsourcing fibre and have had some discussions with MNOs around potential divestments. 

The MNOs have learned a lot from selling their tower assets and when it comes to selling their fibre I believe that they will look to keep a stake in the infrastructure, preferably forming a joint venture with the fibreco as some of the MNOs have done with towercos.

TowerXchange: What opportunities are there beyond the fibrisation of towers?

Whilst our primary focus has been on connecting towers, there is increasing interest from large corporations demanding fibre. We also see opportunities in supplying fibre to the home and we will be launching a pilot FTTH project in Uganda later this year. This is being done on wholesale basis to maximise the uptake and the impact on the market. 

Whilst we’re not there yet, there is a role for fibre in smart metering and other similar applications for utilities and we are in discussions regarding smart cities and special economic zones across multiple markets, focusing on building the right shared infrastructure from the start. 

TowerXchange: What kind of impact has the roll out of fibre had on the markets that you’re in?

We can see how the utilisation of our network has grown over time as well as how the amount of international transit traffic into countries has increased, for example in Uganda this increased threefold within the first 18 months after we launched services. Specialist 4G players in the market have been exclusively using our fibre, offering unlimited data bundles to consumers and you can see how data consumption has grown in metropolitan areas.

In addition to the impact on the end user, we have also worked with educational institutions like RENU in Uganda where our fibre has been used to connect the major universities, with government ISPs like NITA in Uganda to connect government institutions and are exploring the same with the respective authorities in Ghana.

In Liberia, the rollout of our fibre network will have a bigger impact as we are working closely with the government and USAID to bring connectivity to schools and medical institutions which have previously never been connected to the internet. The impact on those entities will be transformational. 

TowerXchange: In terms of geographical expansion, what’s next on the cards for CSquared?

We are looking at a number of other countries in Africa where there is insufficient fibre available to meet the needs of the market, providing the opportunity for strong commercial returns and developmental impact.

Regulations can create a barrier to entry and so we must work closely with governments and regulatory authorities to open up the markets to independent fibrecos. 

Ultimately however we see significant opportunities for growth and expansion in multiple markets across the Sub Saharan Africa region.