Operational efficiency is always an important topic at TowerXchange Meetups, and the theme was covered throughout the TowerXchange Meetup MENA 2019 this January. In this article you will hear from two towercos and one MNO on how they are addressing their operational challenges and how lessons learned elsewhere can be applied in the MENA region. Wiktor Barcicki, CTO of Etisalat, was joined by Alex Leigh, CCO of Helios Towers and Gordon Porter, VP for Operations of IHS Towers. The discussion was chaired by Delmec’s Spencer Crawford-White.
Helios Towers are now active in five markets in Africa and follow a Lean Six Sigma philosophy to drive improvements in operational efficiency which had fed through into a steadily improving operating margin.
Etisalat operates in 16 countries, including UAE, Saudi Arabia, Egypt, Morocco, Pakistan and Afghanistan, and has a wealth of experience of the operational challenges as they vary across the region.
IHS Towers is Africa’s largest towerco and has signed deals to acquire Zain’s Kuwaiti and Saudi towers and have already developed plans to improve the operational efficiency of their new networks.
Beyond outsourcing
The panel began by discussing the different opex challenges of steel and grass towercos, more prevalent in the Americas, contrasted with the power management expertise required for towercos in Africa, Asia and now in the Middle East too. With limited power challenges there had been a tendency to outsource and forget maintenance and other operational expenses, but our panel agreed this that was a mistake and was not viable in MENA. Instead of outsourcing towercos should view operational efficiency as a source of competitive advantage and a key part of their value add.
Critical to making opex a key part of the a towerco service proposition is a close and collaborative partnership with suppliers. This idea of team work between towercos and their vendors and suppliers came up repeatedly throughout the panel discussion. Alex Leigh pointed to Helios Towers’ experience. Downtime had been reduced from an average of 22 minutes per site per week to just one minute of downtime per site per week. This is outperformance relative to the service level agreements (SLAs) agreed between towerco and MNO is good for the relationship and good for towerco margins as less downtime means fewer visits and lower opex. The aim will be to reduce the current average of one site visit per month to one site visit per quarter.
Flash insights: Rent
One of the largest contributors to your opex on your balance sheet will be made up of something no engineer can fix: your rent and ground lease. That not to say there is nothing to be done about it; get a property team set up on day zero and engage your landlords and local communities. Finding the best financial settlement from the beginning of a tenancy is key to keeping your ground lease economical, and locking in lower opex for the long-term.
Building partnerships
The first thing which needs to be eliminated is any “us versus them” attitude. There are commercial relationships and contracts signed between towercos and their supply chain, but managing actual working relationships strictly through contracted obligations and duties is a recipe for disaster. If you want to experiment with new ideas or new technologies you have to be open to working together, and be open to potentially making mistakes together. One solution for literally breaking down walls between the towerco and the supply chain is the colocation of offices; Helios Towers have had success in doing this in some markets. Sharing office space makes sharing data and sharing ideas more natural.
Another strategy that was widely supported by our panel is concentrating suppliers. Of course it can be tempting to optimise each site and customise each capex deployment but that leads to a proliferation of suppliers and that makes collaboration more complex and relationships harder to monitor and manage. Committing more heavily to a smaller number of suppliers makes firm-specific and relationship-specific investments safer and easier to justify. Once you work with fewer suppliers, it makes sense to invest more in training each one to cultivate best practice.
Another important partner is your tenant, the MNO. Building a trusted relationship with an MNO allows for greater honesty. Our panel discussed the advantages of working with MNOs to understand evolving power requirements and helping the MNO understand the energy opex implications of their decisions. Likewise, the antennae configuration can affect the wind load of the tower greatly. Too much equipment might mean having to reinforce a tower and without clear two way coordination between MNO and towerco, neither party may know about the knock-on effects of the decisions they make. Working together means win-win solutions can be found that keep costs down.
The advantage of greater honesty and openness that comes from building partnerships up and down the supply chain comes in many forms. If your suppliers feel they can be honest you with you about problems they are experiencing then they will tell you, and you will be able to be honest with an MNO about necessary planned downtime. The panel felt that although mistakes cannot be avoided, the way you communicate and manage expectations can make a huge difference to how those mistakes are perceived. Being told a few weeks in advance that a problem is likely to occur causes much less friction than discovering a problem as it happens.
Flash insights: Crying
One panellists remarked that improving operational efficiency was a lot like peeling an onion: each time you remove a layer of cost you reveal another and discover something new that needs fixing too….and the entire time you want to cry.
Local expertise
You have to take the rough with the smooth when it comes to relying on local expertise. The panel agreed that often it was in the last mile of operations where problems occurred, often the last man. The last man needs to be the best man: resourceful, thoughtful, and able to respond to the challenges as they come. However in some markets, many in Africa, the level of skill of the workforce leaves something to be desired. Sometimes, rather than fixing an issue, things will get worse if an unqualified technician attempts to “fix” something in the wrong way.
Luckily, there was agreement across our panel that the level of skills in the MENA region are generally higher, indeed, thanks to the oil and gas industry’s dominance in many markets, there is a ready supply of trained engineers, used to working autonomously at remote locations on mission critical infrastructure. IHS Towers’ Gordon Porter highlighted the higher skills of the workforce and the longer average tenure which had been revealed in their due diligence work. Turnover is often a sign of poor quality workers.
There is also no substitute for having a good local team when it comes to working with regulators, engaging with communities and knowing the local ‘lay of the land.’ Without local knowledge it is hard to effectively execute due diligence on new deals or projects. Using local knowledge doesn’t mean outsourcing to locals, it means a more collaborative approach to bring that local knowledge in-house, such that permitting, planning and execution can be successful.
Flash insights: Augmented reality
Our roundtablers offered inspiration from the offshore wind industry for the use of augmented reality (AR) goggles. Like the tower industry, the range of installed components on each wind turbine can vary greatly. When maintenance crews reach each wind turbine AR goggles display the relevant information on the specific make and model of each installed component, as well as the schedule of necessary maintenance. This accelerates the execution of maintenance tasks and reduces the incidence of mistakes. Although our roundtablers loved the idea, there was widespread acceptance that low hanging fruit like access data, and genset rationalisation should be picked first and that AR goggles were unlikely to be adopted soon.
Diversity
The panellists thought local knowledge was especially important for MENA. You have a diversity of markets like almost no other region on earth. Syria and Yemen are both conflict markets, and unrest remains commonplace in both Iraq and Afghanistan. On the other hand the states of the gulf are some of the most developed in the world. Rolling out 2G connectivity in rural Afghanistan is synchronous with 5G deployment in Saudi Arabia, both markets in which Etisalat operates.
In markets like Iraq, Syria, Yemen and Afghanistan you have security problems which bleed into power problems. A lack of law and order means that power infrastructure for sites is poor, necessitating the use of generators but that same lack of law and order makes fuel delivery expensive and fuel theft a problem. On the other hand, in Saudi Arabia there is no security profile to deal with, but the country is absolutely enormous, hot, dry and dusty which increases the cost of services in other ways. In contrast Egypt’s population around the Nile delta and valley is very dense, making it easy to find service labour but increases security problems like fuel theft.
Flash insights: Drones
One area of cutting-edge technology which is being employed in the towers industry is drones and remote asset monitoring. Previously the surveying and auditing of towers was a two man job, involving several man-hours of travel between towers, risky ascents and manual counting of assets. A lengthy process of data entry and validation was also required. Unmanned aerial vehicles with camera and scanning technology enables one man to do the work of two, in less time, without the risky climb and with more accurate counting of assets and automatic logging of asset information. The process seems especially useful for towercos acquiring a large, new estate of towers which need auditing.
Big data overload
Our panel, like most professionals in technology or operations, are dazzled by the volume and potential of the data being produced on their assets. The frequency and specificity of readings now available far outstrips our capacity to use all of the data produced, but all of our panellists were confident that they would continue to find a lot of value in the data being produced – although recognising that the tower industry remains a long way from making full use of data.
The most straightforward place to start is with access data, something which improvements in access control systems has made easy to collect and manipulate. Access data can help you pinpoint staff who are stealing fuel, having naps or skipping jobs. It is the low hanging fruit of data analysis and all our panel were enthusiastic about it. Alex Leigh of Helios Towers recommended taking a deep breath, simplifying the streams of data coming in, and working out where your easy wins are for value add. Gordon Porter of IHS Towers agreed that getting the basics right first was the most important thing.
Etisalat’s Wiktor Barcicki offered the MNO perspective and discussed the data avalanche that MNOs face: they have data on their customers’ usage, on their demographics, live information on their network performance and information on their towers. Sadly, the passive assets probably come last in the hierarchy of value add for a MNO’s data team, who are typically more focused on the radio network or with their customers’ experience. The key advantage for towercos when it comes to using tower data to optimise operations is that nobody cares about towers quite as much as a towerco. Wiktor also circled back round to discuss the importance of long-term partnerships with suppliers if you are going to be optimising your operations based on a ‘single source of truth’ set of data. He also suggested other datasets which could provide useful data but with less frequency; satellite and drone imagery for example can help direct partners on the ground to the best places to work.
Flash insights: Aligning incentive
A major driver of opex inefficiency is fuel theft. Key for many strategies for dealing with fuel theft is to realign incentives to make fuel theft the problem of the vendor or maintenance contractor on the ground. The method, at its simplest, is to offer a fixed fee on genset run time and pay a very small premium relative to that run time’s cost in fuel. This means that a vendor which eliminates fuel theft makes a little extra margin, and will monitor local communities and employees closely to eliminate fuel theft. Around 85% of fuel theft is believed to originate within the tower value chain and so their employers are well placed to policy and punish this.
Despite this being a strategy with good heritage it proved controversial at our roundtable. There were two elements to the controversy over passing on the costs of theft to vendors. The first was the risk of bankrupting your service provider if they also can’t get on top of the fuel theft problem, with obvious knock-on effects for operational costs. Secondly, and more fundamentally, delegating the problem to your supplier doesn’t actually solve the problem and unless you eliminate the theft you will still be left with opex inefficiencies and inflated costs. Improving law and order, and campaigning locally to turn around the image of diesel theft as a “victimless crime” were mentioned. Also mentioned was the creation and maintenance of a blacklist of fuel thieves to keep them out the industry, although the practicality of this in large countries with poor bureaucracies was questioned.
Active infrastructure
Our panel spent some time discussing the potential for active sharing to reduce operational costs. Active sharing involves MNOs sharing the radio network (and sometimes sharing other parts of the network) rather than deploying multiple antennae on towers. This of course changes the revenue potential of a tower, but it also reduces the power consumption of a tower and helps improve the economics of rural coverage. The trend towards network virtualisation splits the hardware from the software used to manage radio networks and makes it much easier for MNOs to share active equipment.
Both Helios Towers and IHS Towers said they were exploring opportunities in semi-active infrastructure, in many ways in-building solutions are already close to active infrastructure sharing models. But overall there was some scepticism about the likelihood of the adoption of widespread active sharing as spectrum regulation usually blocks using spectrum without the correct licence. Of course, the creation of an independent netco to roll-out a shared 5G infrastructure is one option being explored around the world, as well as reducing opex it would also reduce the substantial capex required for the much denser network required for 5G. However, such ventures continue to prove highly complex from a political and competitive perspective.
Flash insights: reducing theft
One participant offered an inspirational story of active engagement and campaigning which eliminated 100% of previously endemic tower back-up battery theft. At one point battery theft was costing US$1mn a year, tearing a big hole in opex budgets of a 1,500 tower market. Instead of delegating the problem, or writing off the assets, or exiting the market, behaviour changed and the problem was eliminated.
This was a multi-pronged attack, but initially it was unsuccessful. Trackers were fitted to batteries so battery thieves could be caught. However, as the crime was non-violent the local judiciary refused to heavily punish those caught, theft was not discouraged despite thieves being caught.
To make the strategy work the reality on the ground had to be changed. The government defined telecom towers as critical national infrastructure, and this pushed it up the priority list. But top down solutions don’t work alone, so a media campaign was launched involving the police, TV and local newspapers explaining why battery theft mattered; the police set up a battery hotline; lawyers were sent to argue to judges the seriousness of the damage done.
Eventually convictions increased and battery thefts decreased to nothing, removing $1mn annual from opex costs and reducing lawlessness locally. This would have been impossible were this problem delegated to local vendors as is often the case with diesel theft. Ambitious solutions to theft can’t be delegated, they need leadership.
The future of operations
The panel also spent some time discussing what would come next for operations excellence. They were all optimistic that there were major wins available for towercos using existing technologies and learning from each other and other industries too. The internet of things offers an alternative to regular site visits by allowing direct monitoring of assets and maintenance only being scheduled for when it is necessary. This has at least three benefits, firstly it reduces site visits and directly reduces costs, secondly by reducing site visits it reduces opportunities for mistakes to be made, and thirdly by keeping maintenance crews off the road it reduces the chance of traffic accidents, a major hazard in Africa.
Spencer Crawford-White, of the tower experts Delmec, discussed the possibilities for accelerometers and improved monitoring of towers. Weather information and access logs can be compared to actual tower behaviour so that monitoring structural integrity becomes easier and more automated. Eventually being able to monitor tower structural performance in real time will eliminate catastrophic failures and reduce site downtime even further. There was also optimism that increased use of drones can reduce costs. Optimism for the internet of things and other monitoring advances were tempered by the realisation that it will take a couple of years before we really see these new technologies bedded into processes.
