This brief market update captures the current state of the restructuring tower market in Bangladesh. The licensing of four tower companies is about to re-ignite new tower build, but the regulator’s exploration of the competitive landscape could hinder the emerging sale and leaseback market in the country. Ultimately, the prohibition of tower build by MNOs, and the requirement to unwind their existing co-location agreements by 2023, will precipitate an efficient, towerco-driven communications infrastructure in Bangladesh.
New site build in Bangladesh slowed almost to a halt in 2018, but the hiatus was a necessary step in the re-organisation of the tower market. It had become clear that the Bangladesh Telecommunication Regulatory Commission (BTRC) intended to prohibit the country’s MNOs from continuing to build their own tower, while uncertainty surrounding the new towerco license regime inhibited towercos from building.
After several draft tower licensing regimes were painstakingly refined over a period of two years, in August 2018, the BTRC announced the four winners of the battle for towerco licenses in Bangladesh: edotco, Kirtonkhola Tower (iSON Tower), TASC Summit Towers and AB Hightech Consortium. By November those licenses had been received. Paperwork for new foreign investors has also created a time lag: FDI licenses are believed to take around four months.
Stakeholders who remain concerned that tower building has not yet resumed in Bangladesh can be partially re-assured: the pipeline of new site build is moving again, now awaiting only the new towercos to negotiate and agree Master Lease / Master Service Agreements with the MNOs; and awaiting the natural lag between permit application, securing permits and breaking ground. Permitting a new site takes several months in Bangladesh, with longer periods required for sites on the border. The new towercos are required to start operating within 180 days of being licensed.
The costs to setup and run a new towerco in Bangladesh are substantial – significantly higher, for example, than in the thriving Myanmar tower market. Bangladesh’s tower license fee is US$2.97mn, with a US$2.37mn bank guarantee, a US$593k annual fee, plus a 5.5% revenue share and a 1% Social Obligation Fund contribution. Fees of this magnitude will of course compromise capital available to deploy into the network, but are obviously not prohibitive, otherwise Bangladesh’s four towercos would not have bid for their licenses.
However, a new layer of complexity continues to inhibit maximum investment in towers in Bangladesh. The BTRC are believed to be considering taking action against ‘Significant Market Players’ (SMP), which could affect Grameenphone, which owns around 7,800 of the country’s ~30,000 towers.
Bangladesh’s newly licensed towercos
edotco Bangladesh entered the market in December 2013, via the transfer of ownership of Robi’s towers for US$145mn. To date, edotco owns and manages more than 9,821 sites in the country and has been operating thanks to a no-objection certificate (NOC) while waiting for the licenses to be issued. With edotco Group as foreign shareholder, the firm partners with Greencon Tower for its local shareholding.
TASC Summit Towers Summit Corporation is the largest fibre operator in the country and have so far connected hundreds of towers to its network. One of the towerco’s foreign shareholder, TASC Towers, is mainly active in the Middle East (Jordan, Lebanon and UAE) but has been eyeing opportunities in other regions such as Africa too. TASC Summit lists Global Holding Corporation Private Ltd. as an additional foreign shareholder.
iSON Tower Bangladesh (now renamed Kirtonkhola Tower) is part of the iSON Tower group, with operations in Africa, India and the Middle East where they are an established network deployment and managed service provider operating over 10,000 sites. iSON’s local shareholder is Confidence Tower Holdings while ECP Tower Singapore is its foreign partner.
AB Hightech Consortium is owned by various local shareholders including ADN Telecom, AB Hightech International, ZN Enterprise, Synergy Logistic and Orange Digital and by foreign shareholders China Communications Services International and Changshu Fengfan Power Equipment Company.
Grameenphone has been leasing up their towers on a commercial basis, effectively functioning as the country’s largest towerco. With new tower build by MNOs now prohibited, the SMP dialogue, combined with the BTRCs requirement that MNOs roll back all existing co-location agreements by 2023 (there are around 6,500 co-locations currently in Bangladesh) could result in pressure on Grameenphone to divest some or all of their existing towers. With Banglalink believed to be keen to monetise their ~6,000 towers, but with the threat that SMP review could extend to towercos as well, these competitive concerns could distort the investibility of prospective tower sale and leasebacks in Bangladesh.
While some commentators consider appetite and investment in sale and leaseback as a distinct issue from build-to-suit, others consider the two issues deeply linked. If one towerco cannot exceed, 40-45% market share in Bangladesh without falling foul of SMP, then this may prohibit a single towerco from acquiring all the Grameenphone towers, and may also shrink the pool of prospective buyers of Banglalink towers (already narrowed by the license regime and – current – cap on four towercos in the country). Any country’s tower market is effectively in competition with other tower markets for capital, both from strategic investors – towercos – that could invest elsewhere, and from financial investors. If SMP concerns put a glass ceiling on the growth of a Bangladeshi towerco, that doesn’t necessarily make that towerco uninvestible, but it may make it less investible.
TowerXchange would contend that the tower market functions most efficiently with a light touch from regulators – including on the issue of competitive balance. TowerXchange would also contend that a regulator should be less concerned about a towerco having a significant market share, for example 50% or higher, than an MNO as towers are a ‘natural monopoly’ – the most efficient hypothetical model is a pervasive network of towers with 3-4 tenants on every site and only such overlapping infrastructure as was required for densification. There is no reason a single towerco cannot provide such a network, and certainly no reason that four towercos cannot co-exist with one or two having significantly larger portfolios, especially given that the regulatory has to approve towerco tariffs.
Estimated tower count for Bangladesh
In conclusion, the tower build hiatus in Bangladesh is drawing to an end – we’re now just awaiting contract negotiations and permitting to run their course. But the tower market in Bangladesh will only achieve optimum efficiency, attracting maximum funding to expand and densify the network, if the market can be refined to support the efficient sale and leaseback of existing MNO towers to the towercos. If this last inhibitor can be eased, TowerXchange foresee a relatively swift transfer of over 13,000 MNO-captive legacy tower assets to Bangladesh’s towercos, enabling the towercos to bring new efficiencies to the build, maintenance and operation of the country’s towers, and to release further efficiencies by decommissioning the country’s many overlapping and naked sites. With 4G being launched in 2018, Bangladesh’s towercos are poised to bridge the digital divide and enable the Digital Bangladesh vision.
