Zero to hero: The Pakistani towerco ripping up the rule book

Even in countries with developed telecoms markets there remain significant areas underserved by existing providers; Pakistan connections are growing at over 5% year-on-year but its penetration rate is still 76%. Despite this strong growth the country will never reach full penetration while large areas of the country lack coverage. AWAL Telecom took the unusual approach of making a speculative investment to fulfil latent demand in an underserved market. If towercos are going to help plug-in the least connected communities there are important lessons which can be taken from their experience. Since starting in 2015 AWAL has built a 45 tower portfolio of well-engineered, ready-to-share towers which are approaching a tenancy ratio of two. With 20% year-on-year growth predicted and the capacity to do much more with the right investment, AWAL Telecom is breaking the mould and showing the versatility of the towerco business model and the advantages.

TowerXchange: First of all, can you please give us a brief introduction to AWAL Towers, how long have you been active and how many assets do you have on the ground?

AWAL Telecom is a towerco company focused on building and managing telecommunications and cellular tower infrastructure nationwide in Pakistan. The company provides full turnkey capabilities to all cellular and broadband operators with an interest in the regions where AWAL towers are located.

We set up the business in January 2014 and received an operating license from the Pakistani regulator in November 2014. AWAL began talks with Pakistani MNOs in early 2015, pioneering a true-to-definition build-to-suit (BTS) concept of tower, space and power. Given the enormous potential of BTS requirements in the country, AWAL’s focus has remained on building BTS assets in unserved markets with great market potential for cellular operators.

What makes AWAL different is that we are the first operator in Pakistan to first building infrastructure then seek tenants. This meets our Corporate Social Responsibility (CSR) goal of bringing quality, affordable service and choice to mobile subscribers in a manner that is also profitable to our stakeholders.

AWAL’s plans in the Federally Administered Tribal Areas (FATA) and Khyber Pakhtunkhwa are fully aligned with the Pakistani Government Peace Restoration and Rehabilitation efforts in these areas. The Pakistan Telecommunication Authority (PTA) and Ministry of IT & Telecom have a keen interest in provision of telecommunication services in these areas. And Pakistani Prime Minister Imran Khan himself visited our areas of operations pledging support for mobile connectivity in the region. So we are well placed to ride this rising tide of development and investment. 

We currently have 45 completed sites and are undergoing a circa 20% site inventory expansion.

TowerXchange: What is the background and calibre of your management team and investors? Do you have a long history in the telecoms or tower industry?

Marius Armeanca, CEO of AWAL’s investment backer Progressive Technologies Investments, which is based in Dubai, and myself as founders of AWAL Telecom have a shared professional relationship for over 14 years. We have a solid understanding of the local environment, operators’ needs, and the overall telecommunication industry’s pain points. We are true believers in the concept of network infrastructure sharing, like most of your readers are.

The first 50+ site sharing agreement between two Pakistan MNOs was also initiated and implemented by Marius during his time working as CTO for a Pakistani MNO. Subsequently, Marius was a key promoter and facilitator of the BTS concept in Canada, where he was the first ever independent operator for the country which has a very rigid and complex telecoms regulatory environment.

With extensive experience to draw on from time spent within MNOs in various parts of the world – including Europe, Africa, Asia, and the Middle East – AWAL’s management team understands and promotes the benefits of BTS to its MNO clients. AWAL puts particular emphasis creating a positive relationship with each client MNO and reducing the environmental and visual impact of the networks’ infrastructure, as well as significantly reducing the cost of their networks.

TowerXchange: Your initial strategy to build a network without an anchor tenant was unusual and risky, what made you confident enough to go ahead? How did you convince investors to back you?

We decided that if we invested before the area was fully pacified, AWAL could effectively dominate a large portion of a large unserved sector in the Pakistani market, allowing the company to define the buildouts to the benefit of all its then-prospective tenants as well as unserved, potential customers.

There were several key factors that together convinced our investors the strategy would work. The region includes over 7mn uncovered and unconnected consumers, more than many countries. Therefore it was clearly a promising market with no MNO present or willing to take the risk of building infrastructure in the area. We were not exactly sure about the time to profitability, but we were certain that any infrastructure established in this area would be of high interest to all telcos given the untapped market. With AWAL shouldering the primary risk, coming into the market was a lot easier for the telcos. And, by taking the initiative, AWAL could ensure that each site was properly constructed with sufficient tower strength, available power and able to accommodate up to four tenants per site.

Once we found the right area we had to judge the right time to invest. Leading to our launch in 2015, the Pakistan Government had announced an intention to change the social, political and economic climates in the area we had identified. The skilled team AWAL had assembled gave us the ability to build and operate in the more challenging areas where we now operate. We carefully selected our team to allow us to achieve the company’s performance targets without stressing the budget objectives.

We are convinced that shared tower infrastructure is the wave of the future and by providing infrastructure already engineered to be shared, AWAL could bypass the need to acquire existing infrastructure and upgrade it. Having a clean slate to build upon is an almost non-existent possibility in today’s crowded telecom market. The western area of Pakistan was one of only a few regions where a rational approach could be taken from day one. 

TowerXchange: What more can you tell us about the market situation in Waziristan and the western area of Pakistan more generally? How many MNOs are active? How much investment will be required to close coverage gaps?

AWAL covers not only North and South Waziristan, but other areas such as Orakzai Agency, parts of the Khyber and Mohmand Agencies, Frontier Region Dera Ismail Khan, Frontier Region Bannu, Frontier Region Tank, and Frontier Region Hangu. Our deployment plans are to continue to try to close the gap in a contained region that has never been served.

Currently, only two MNOs are active on AWAL’s platforms in Waziristan, three MNOs on platforms outside of this area. Once the 4G service is allowed in Waziristan, we should see three MNOs active on the majority of our sites in the area. Negotiations continue with the 4th MNO to come on board and reap the benefits of this market before it too becomes saturated.

AWAL’s efforts currently remain oriented to the western area of Pakistan. Our RF Planning and Transmission team have planned on the range of 100 additional sites in order to properly serve the coverage gaps which will provide service for an additional 5-8 million population. Depending on the cost effectiveness of alternative power for each site, additional investment of some US$8mn will be required to finish our current areas of interest. Another circa US$8mn will be required to build out a new area which we are considering with an anchor tenant already expressing interest.

Beyond the above-mentioned areas and once additional funds are identified, there remain other, promising areas of the country which could benefit this now-proven business model.

TowerXchange: Could you also provide some more information on the energy set-up on you sites?

Overall, during the planning phase we have created a must do list in order to accomplish AWAL’s mission. The right design for the power plant provisioning was one of the top items on our priority list. Accordingly we have engineered and implemented the power solutions with clear requirements in mind. 

The prime inputs considered for the design stage were:

1. The area where we operate (remote locations, lack of basic infrastructure i.e. commercial power availability, access restrictions)

2. The need to provide reliable power supply as our clients are delivering telecom services to a large population, so stability and reliability are a must.

In addition, and with environmental concerns like air pollution and fuel use in mind, our power plant has to be diversified so that we minimize the hours of operation for the gensets. The solution selected is equipped with controllers that accommodate alternate power solutions like wind or solar in addition to the traditional ones.

Even though the capital expenditure was higher, the energy setup for AWAL sites fulfils all our high standard requirements and nothing has been left behind. The outcome of our design solution resulted in a robust platform able to cover all technical, environmental and operational aspects:

High efficiency solar panels - for a clean and better environment

Good quality batteries with high amount of recharging cycles - to ensure a longer back-up autonomy with the aim to minimise the Network Unavailability Rate for the services provided by our clients

Remote monitoring - to allow our maintenance teams to acquire information and received alarms about the status of our platform

Enough capacity for the current and future needs - knowing that our clients will continue to add equipment for diversified telecom services

Redundancy for each module of the platform - to ensure maximum up-time

Last, but not least - our teams have been trained extensively, so that planned and unplanned interventions will be executed with maximum efficiency

TowerXchange: Your operations are away from the major commercial hubs of Pakistan. How does the terrain, weather and security situation in Waziristan affect your opex?

We encourage local hiring for our local offices and maintenance purposes. The people we engage are great resources; they are disciplined, eager to learn and develop their technical skills. Working with local crews also means we have excellent response times in what is otherwise an area with major access problems. Working for local people using local people to support the sustainable development of the areas where we are located helps us keep our costs under control too. We organise on-the-job, local training sessions for our staff, but hope that with the introduction of 3G and 4G services we can switch to online, in-house training modules which have recently been developed.  

Knowing that power is the biggest challenge to operate in remote areas, our AC/DC platforms are properly dimensioned, and we have installed batteries that ensure 100% uptime for our clients where O&M is challenging. Our AC/DC platforms are also equipped with remote capabilities for alarm monitoring and operational management. 

Last, but not least, AWAL is involved in the local/tribal communities – we have a great sense of what it means to live, work and operate in the area where we do our business and we are often perceived as a part of the Federally Administrated Tribal Areas family.

TowerXchange: Do you think your strategy of forward investment can be replaced in other areas, or is there something about your regions in Pakistan that makes it particularly suitable?

Our model is not without its risks, but we can show now after four years that we have built a profitable and highly investable business. The western area of Pakistan is an excellent region for us to deploy capital into build to suit towers, but there are other regions in the world where this greenfield model would work too. If anybody is interested in bringing this model to a new market then we would be happy to discuss, but I am sorry I don’t want to give away the next great investment location to your readers!

TowerXchange: There is a problem in many markets or smaller tower companies building poor quality towers or writing bad contracts with ground lease holders or MNOs. How do you avoid these pitfalls?

AWAL’s principal officers have extensive experience with network buildouts throughout the world. This diverse experience has been put to use to ensure that our infrastructure is top notch and more than meets industry standards. Our tenants have nothing but praise for the quality of our sites since establishing service on our towers.

One clear value add AWAL offers is solid ground leases. We have thus spent extra time securing leases, ensuring proper titles, ownership, et cetera, often to the expense of deployment timeframes, to ensure that this would not become a problem in the future.

TowerXchange: You have now passed a 1.0x tenancy ratio after starting at zero; how much higher do you expect your tenancy ratio to rise on your existing sites?

With existing occupancies and ongoing installation of committed leases, we are currently at 1.35x and we forecast by August to be at 1.9x and will grow from there once 4G is approved for areas where our sites are located.

TowerXchange: What are your plans for further new build? Will you build with an anchor tenant, or build towers in similarly underserved areas? To what extent can you be self-financing versus requiring additional external financing?

Akbar Shaukat, CEO & Executive Director, AWAL Telecom: We are open to both build outs for anchor tenants or to options to continue our current model of building out in advance of MNO contracts, depending on the situation. We currently prefer to maintain a regional focus to keep our costs in line rather than expanding nationwide before we have sufficient financial footing to undertake such an expansion. As detailed above, we are undergoing a 20% site inventory expansion and once completed we can self-finance a 30-40% annual increase in inventory but would prefer to make the next major site inventory increase in coordination with a new investment source to allow us to continue exercising market domination in areas where we are located.

TowerXchange: Please summarise the future for the company, and where you would like to make progress over the coming years.

Overall, the Pakistani market offers huge opportunities. 30-40,000 additional towers will be required over the next five years. The introduction of 4G will introduce demand for extra space on towers. And less than 15% of the existing 45k towers see sharing. Another opportunity we are exploring is active sharing, which is due to be introduced in the very near future. There is ample opportunity for existing and new players in Pakistan. 

With the increase in the demand for data, passive optic fibre infrastructure as both backbone and tower-to-tower connectivity also offers significant opportunity. While we are considering servicing more tailored requirements from individual MNOs, we see plenty of growth left in our current business model of bringing affordable wireless service to unserved communities. We provide power to all our tower sites, and expansion of alternative power sources on our sites as part of our buildout plans remains a top priority too, for both environmental and cost-savings benefits. 

We have ambitious plans and AWAL is actively seeking the right partner or partners who can help expand the company to make it one of the dominant Pakistani players in the BTS market.