This past July, during the sixth edition of the TowerXchange Meetup Americas, we hosted a live poll to engage the audience and find out what their views are on the CALA region, its opportunities and threats. We received around 50 answers per question and given that the majority of people in the room were senior management of key companies across CALA, we consider the results to be based on a substantial sample. Here are some key findings and considerations from the latest TowerXchange poll.
Q1. Do you anticipate the volume of new build towers increasing, decreasing or staying about the same in the markets in which you operate?
49% of respondents agreed that the volume of new builds is due to increase a little in the future, while 28% even more optimistically expect their organic growth to increase significantly. The answers reflect last year’s results, when 48% of respondents opted for a modest increase of new builds.
Q2. Is tenancy ratio growth accelerating or slowing in the markets in which you operate?
Same as last year, 61% of respondents remain cautious with regards to tenancy ratio growth, especially in light of the MNO consolidation occurring in Central America and the absence of new operators entering the CALA market.
Q3. What has been the % of macro towers versus other types of sites (e.g. urban poles, rooftops, billboards) in your new build in 2019?
While macro-towers are still the predominant product developed by towercos, with 41% of respondents still having built over 75% traditional towers as opposed to new site typologies, new solutions are definitely finding their way. In fact, the other half of respondents are all involved in deploying sites other than macro-towers, including urban poles, rooftops, billboards and more. There’s an interesting trend surfacing in CALA, with a number of more traditional towercos focusing on macro-towers and some progressive entities pushing towards innovation.
Q4. What do you expect will be the % of macro towers versus other types of sites (e.g. urban poles, rooftops, billboards) in your new build in 2020-2021?
Once again, it’s clear that the CALA tower market is shifting towards urban densification and innovation, with 70% of respondents expecting to be increasingly involved in new site typologies. That said, the efforts to cover rural areas and to deploy macro-sites won’t stop in the imminent future as CALA still needs tens of thousands of sites to reach optimal coverage throughout.
Q5. Should CALA towercos incorporate provision of energy to their offer?
Our readers will be familiar with the relatively new trend that sees CALA towercos involved in energy management or, at least, assessing the potential of getting into this operational aspect. There hasn’t been yet a considerable volume of business going from towercos to energy providers and ESCOs but 76% of respondents agreed that towercos should get involved in energy management. TowerXchange is aware of pilot projects in the Dominican Republic, examples in Brazil and ongoing discussions across the region but we’ll keep an eye and report on more developments as they occur.
Q6. What are the greatest threats to the CALA tower market and its growth?
While CALA is home to some of the best performing towercos in the world, it should come as no surprise that the regional industry is also affected by the wrongdoings of some inexperienced entities. In fact, the unsustainable terms agreed with MNOs by those towercos are seen as the number one threat to the market and its development by the wide majority of the audience. The hurdles of sourcing permits and navigating through complex regulatory and tax environments come in second place – again, with no surprise. The TowerXchange Meetup Americas hosted several discussions on the topic and while much effort has been put on improving the state of permitting and regulatory environments, there’s still a long way to go before the regional industry can be defined mature and functioning.
Q7. As of Q119, towercos currently own nearly 53% of CALA’s towers. What proportion of the region’s towers do you think towercos will own by next year’s event?
In terms of towerco penetration, the majority of the audience agreed on relatively healthy levels of growth. To date, TowerXchange is aware of a couple of sales processes, including Entel’s, which will definitely affect the level of towerco penetration across CALA for the better.
Q8. Do you think we’ll see more operator-led carve-outs in CALA in the next year?
There’s definitely less consensus on the opportunity for more MNOs to opt for carving out their assets rather than divesting them to towercos. To date, notable examples across CALA include América Móvil’s Telesites and Telefónica’s Telxius and only a few MNOs still retain their towers. América Móvil could opt for transferring more towers to Telesites across some of the markets where it operates as the MNO is basically the only one in the region – exception made for Argentinian Telecom – who has not sold any towers to towercos.
Q9. If you had US$500mn to invest in any CALA market today, in which country would you invest it?
Brazil and Argentina ranked first in the list of investible markets, followed by Peru and Chile. While none of them comes a real surprise, TowerXchange remains cautious about Argentina, whose political and economic turmoil has so far seriously hindered the development of the tower sector, alongside the well-known taxation and permitting hurdles.
Brazil is now on its way to recovery, hence presenting good opportunities for organic growth and possible future consolidations among towercos. Peru and Chile, with their stable economies and solid MNOs, definitely represent good bets for towercos looking for relatively de-risked environments.
Interestingly, last year’s top three investible markets were Mexico (44%), Colombia (40%) and Brazil (27%), showing that while Brazil as well as the Andean region are showing improved conditions and more stable environments, doubts remain regarding the potential for growth and returns in Mexico and Colombia.
Q10. Which segments do you think makes more sense for towercos to get involved in CALA?
The audience agreed that small cells, IBS and DAS are the most natural extensions for towercos to get involved in. However, to date only marginal examples of deployments have been taking place across CALA, with towercos struggling to find the business case for small cells and DAS, and mostly opting for IBS.
Fibre and power as a service are additional products for towercos to get involved in. TowerXchange is aware of pilot projects in power as well initial examples of towercos acquiring and starting to deploy fibre, such as Phoenix Tower International in Mexico, American Tower in Mexico and in Argentina.
Q11. Which of these will be significant inhibitors to 5G rollout?
The MNOs’ financial availability to contract all the sites needed to densify their networks was recognized as the number one inhibitor to 5G. That is only partially a surprise, as MNOs across CALA are still heavily involved in 4G overlay and aren’t likely to be ready to invest in 5G in the imminent future. On the other hand, permitting is seen as another bottleneck, especially since 5G is set to densify urban networks and permitting within major cities and urban centres is likely to be more complicated than in suburban and rural areas. On the technical front, power requirements are set to dramatically increase with 5G and that is seen as yet another hurdle to its development.
Q12. What is the greatest opportunity in CALA towers in the coming year?
The industry expects inorganic growth to be the biggest opportunity for the next few months, with MNOs potentially divesting more towers across multiple markets. Additional growth streams can be found in diversifying into new services and products as well as in focusing on organic growth. Interestingly, last year’s poll saw consolidation among towercos as one of the greatest growth opportunities across the region (28%) but this year’s results (11%) prove that the trend of towercos acquiring towercos has considerably slowed done in recent months.
Q13. Which of the following are significant inhibitors to investment in CALA towers?
Once again, the difficulties in acquiring permits across CALA is seen as the number one limitation to regional investments. Tedious paperwork and bureaucracy are followed by the burdensome tax regimes at both local and federal level, with the latter stopping sale and leaseback opportunities in markets such as Argentina.
To check all the results from last year’s live poll check this page.
Conclusions
While the Central and Latin American telecom infrastructure industry might not be living its golden age, it is definitely entering into a new and more dynamic phase. Regional players expect more sale and leaseback to take place, with the likes of Entel assessing a tower sale and Digicel and Millicom having started to divest assets among others, while towercos are now going beyond towers and eyeing opportunities in small cells, fibre and energy management.
Growth might not be at an all-time high, but CALA remains an extremely attractive region thanks to its scale, creditworthy MNOs and wide array of strong and experienced towercos. But at the same time, the region is affected by a series of bottlenecks, causing slowdowns in the opening of new markets, deployment of sites and in the overall flow of investments. In fact, permitting and regulation across the region remains a major issue, with various countries still affected by complex permitting procedures as well as burdensome tax regimes.
The TowerXchange Meetup Americas and its live poll created an opportunity for players from across the industry to share their thoughts and express their considerations on where the industry is heading, some of the challenges ahead as well as where growth can be found. We look forward to more insights and discussions at the next TowerXchange Meetup Americas, taking place 23-24 June 2020, in Boca Raton. Stay tuned!
