With four ESCO contracts signed and another three RFPs live, Orange has been leading in the adoption of the ESCO model in the telecom space. TowerXchange speak to Nat-sy Missamou, Orange MEA’s Director of New Business Models for Network Infrastructure to understand the MNO’s perspective on ESCOs and how they are fitting into their passive infrastructure strategy.
TowerXchange: Please can you explain more about Orange’s footprint and history of sharing and outsourcing passive infrastructure?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
Orange has a footprint in 22 markets across the African and Middle Eastern region, owning a total portfolio of around 33000 radio sites. Of these sites, 34% are shared with half under towerco ownership or management and another half where Orange is hosted directly by another MNO (figure one).
We work with towercos in Cameroon and Cote d’Ivoire (where we have a management contract in place with IHS Towers) and in the DRC (Helios Towers), Madagascar (Towerco of Madagascar) and Niger and Burkina Faso (Eaton Towers).
In general, in markets where towercos are present, they manage the vast majority of our sites in the country (figure two).
TowerXchange: When and why did Orange start studying the ESCO model as an outsourcing strategy?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
We started assessing the model several years ago, seeing it as an opportunity to lower our cost of operations. Whilst towercos present one opportunity there are certain limitations of working with them. Towercos only have an appetite for towers with sharing potential, this means that even in markets where towercos are present there are towers they have no interest in buying, managing or building, which remain Orange’s responsibility. Plus we also need to power things other than mobile towers, in Cote d’Ivoire, for example, we have sites for our fixed network which do not have mobile equipment on them and so do not make sense for towercos. On top of this we have shops and other forms of infrastructure which require power but are outside of a towerco’s remit.
ESCOs offer a solution in areas that towercos cannot; we don’t see ESCOs as competitive to towercos, rather we see them as complementary. In markets where towercos operate, they still remain our biggest partners, managing the vast majority of our sites.
TowerXchange: In which markets is Orange examining the ESCO model and how advanced are you in this?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
Orange has signed four ESCO contracts to date, in the DRC, Niger, Guinea Conakry and Burkina Faso. In addition to this we have three further RFPs live in Cote d’Ivoire, Egypt, and Madagascar which we expect to finalise this year. We are also studying opportunities in other markets. Generally speaking, in markets where we have a small number of towers, our plan would be to hand the full portfolio over to an ESCO, whereas in our larger markets it will most likely be a subset of towers.
TowerXchange: With the DRC being the most advanced of your projects, please can you shed a bit more light on the details of your ESCO agreement
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
In the DRC we signed a contract with GreenWish Partners and Sagemcom for them to take over management of power on 250 of Orange’s sites in the country, with Sagemcom responsible for field operations. This figure includes towers but it also includes shops and the provision of energy to houses. The contract was signed in July and GreenWish-Sagemcom has now taken over management of all sites. They are working to upgrade equipment based on its level of performance and so it will be an ongoing process over the duration of the project.
ESCOs offer a solution in areas that towercos cannot; we don’t see ESCOs as competitive to towercos, rather we see them as complementary.
TowerXchange: Did you carry out pilot projects prior to deciding on a winning bidder?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
Sagemcom have the experience of operating a large number of towers across the African continent and Orange have worked with them previously and so as such, we did not deem it necessary to carry out a pilot project. Pilot projects would slow down the process and Sagemcom have proven experience in carrying out the works already, including for some towercos.
TowerXchange: Is the agreement very similar to that in the other markets in which you have signed contracts?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
When it comes to setting the terms of the contract, that is something which is decided upon by Orange, and generally speaking the details of the contract are very similar, country to country and RFP to RFP. We don’t ask for the bidders to come up with alternative agreements, rather they must differentiate based on price and their ability to execute the project. It is up to the bidder to decide on what technology they will use, but we have tended to find that most bidders are using very similar suppliers.
TowerXchange: Can you share some details into the typical length of agreement that you are offering to ESCOs?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
The ROI on the project is typically 6-7 years and so we don’t give any less than that to enable the ESCO to invest in the project. If you shorten the terms of the contract you end up having to pay more as a fixed fee. Whilst the shorter limit of the contract duration is 6-7 years, the upper limit is around 12-15 years. One never knows what is going to happen and so committing to a longer period doesn’t make sense.
TowerXchange: To what extent does the ESCO take over management of the existing energy equipment on site, versus install new equipment?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
It varies; in some instances the energy systems in place are performing well and so the ESCO just takes over the equipment, whereas in others the systems are reaching the end of their lifespan or are performing sub-optimally and so it makes sense to replace them. It really depends on the quality of the equipment in place. Ultimately however, the upgrade of energy systems will be a rolling and continuous process, rather than the just one major upgrade project from the start.
TowerXchange: Do you see a role for ESCOs in carrying out additional site activities and services beyond power?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
Some ESCOs who are participating in our RFPs also have experience in building towers as well as carrying out O&M. When a company carries out additional works beyond the power we term them an “ESCO plus”; i.e. ESCO plus tower and it is something which we are looking at.
Figure three: Orange’s ESCO contracts and RFPs across MEA
TowerXchange: Have you seen the types of companies approaching you change from when you started studying the ESCO model?
Nat-sy Missamou, Director of New Business Models for Network Infrastructure, Orange MEA:
When we first started looking at the ESCO model, the majority of interest was from the large power companies, players such as Engie, Total, etc. Over time we have started to see the number of companies with an interest in the space starting to expand, and have increasingly seen companies with a background in telecoms and towers reaching out to us.
We now see technology companies, pureplay ESCOs, different types of investors and O&M contractors all submitting bids in our RFPs; often in partnership with each other to either bring a better cost of finance or greater experience in the sector to the bid. It remains to be seen which types of companies will predominate in the long run and each have their pros and cons; for example the big power companies have access to good solutions and good sources of financing but on the flip side they can be a bit slow to react, with a lot of internal processes and decision making to go through which makes it harder for them to follow Orange’s timelines.
The very nature of an RFP process is that it is a competitive bid and so we remain open to studying proposals from a broad spectrum of companies and make our selection based on the most competitive offer, which usually comes down to price, optimised power solutions and their ability to execute the works in the field.
