There are nearly 4bn people offline around the world, and nearly 250mn of them are in the MENA region. This represents a huge untapped resource for humanity and a tremendous social and financial opportunity for the telecoms industry. However, it is difficult both practically and economically to connect the unconnected. The offline population is disproportionately female, rural and poor and, while connecting them is of vital importance to global development, the illiterate cannot use mobile data and the elderly all too often never learn, so expensive solutions are unviable. That is why infrastructure sharing, as championed by towercos, is so important.
In our panel at the 2019 TowerXchange Meetup MENA we brought together Iraq’s Korek Telecom, Afghanistan’s Asia Consultancy Group and telecoms and power engineering experts i-eng to discuss practical next steps for expanding connectivity. The session was chaired by Spencer Crawford-White from the tower-experts Delmec.
Zardasht Khalid is the Site Management Director for Iraq’s Korek Telecom. Korek Telecom was founded in 2000 and has been responsible for rolling out and rebuilding and rerebuilding infrastructure in Iraq ever since. It was particularly active in reconnecting communities which had been disconnected by ISIS. In Iraq Korek Telecom has 18% market share, while Zain has 44% market share and Ooredoo, operating as AsiaCell, has 38%. There are another four Kurdistan-only 4G LTE operators, Fastlink, Tishknet Goran-Netand Mobitel, which are excluded from our marketshare figures.
Hussein Abdulkader is the Chief Operating Office of the Asia Consultancy Group, who are a towerco active in Afghanistan. They own around 100 Afghan towers, out of a country total of 6,645, and offer both traditional co-location tenancies and RANsharing services. The security situation in Afghanistan has fluctuated since the 2001 war and it is expensive, not to mention dangerous, to operate across large parts of the country.
Salah Medawar is Chief Operating Office of ieng Group. ieng Group provides end-to-end engineering infrastructure solutions to the telecommunications and power industries across Africa, the Middle East and Southeast Asia and are operate in eighteen countries: Afghanistan, Algeria, Cameroon, Chad, Congo, DR Congo,, Ethiopia, Ghana, Guinea, Kenya, KSA, Lebanon, Liberia, Myanmar, Nigeria, Pakistan, Uganda and Zambia. They manage over 11,500 sites for Africa’s largest MNOs and all four towercos and have extensive experience in working in rural, hard-to-serve markets.
Low-cost rural sites
Our panel began by discussing options for reducing the cost of a rural cell site. There are many costs to connecting the unconnected, most of which need to be covered by subscription revenues of low ARPU customers, so reductions in roll-out costs are essential to transform these lower revenues into investable margins. Towers typically cost US$80-120,000 in MENA and SSA, so reductions in tower cost can make or break marginal sites. Salah Medawar of ieng group discussed two solutions they had developed for MTN for their rural Africa sites. They developed low-cost rural sites (LCRs) and ultra low-cost rural sites (ULCRs), which were brand new solutions aimed specifically at rural areas.
LCRs used 18m monopole rather than free standing lattice structures in three, four or six legged varieties. ULCRs used 12m monopoles which reduced the towers’ coverage but further reduced cost. These were off-grid sites, so rather than install, fuel and maintain a diesel genset these sites relied solely on solar and batteries. A solo-solar system is much cheaper to install than a hybrid system and also offers lower ongoing opex costs. Of course, the gensets are there for a reason, and this choice sacrifices reliability for lower capex, reduced site visits, reduced theft-risk and lower maintenance costs. The installed systems had lower power consumption than conventional sites, using only 0.15-0.35kW per day versus circa 2kW a day for a conventional site.
The result was a radically cheaper solution.
The capex cost for the LCR solution was US$45k and for ULCR is US$35k, compared to a minimum cost of US$80k for a conventional tower in these markets. By using cheaper passive infrastructure, reducing O&M costs, eliminating fuel and therefore security costs, the opex for these sites was reduced from a typical US$1,500 a month bill to only US$500. Importantly, these sites are upgradeable; gensets can be added, towers can be strengthened, and tenants can be added, so initially low-cost, low-revenue sites can become normal-cost, normal-revenue sites. The panel emphasised that the major barrier to marginal telecoms sites are not technological but a lack of investment prioritisation from MNOs.
The Afghan experience
The sorts of ultra-rural, off-grid sites which ieng is working to connect are present in MENA, but are far less common than in SSA, where the solutions were developed. But there are many sites which are difficult to reach due to poor security situations or which have yet to be connected or had had their connection severed due to recent conflict.
Afghanistan has security issues which make grid power very unreliable. Security issues also make it difficult to deliver fuel and to keep it secure. The lack of a fibre backbone means that additional power and tower space is required for microwave transceivers. All of this makes reducing a power a key concern for operators and towercos and ACG has responded by providing active sharing services which reduces power demand, even if it reduces possible tenancy revenue. In addition to active sharing, ACG also has some sites reliant on pure solar, doing away with diesel gensets and associated maintenance and expense, as described earlier by ieng.
At present ACG owns and operates around 100 sites, but is aiming to add around two a week to reach 300 by mid-2020, against a total organic growth target of 500. As is often the case in difficult markets, diversification is key to ACG’s plans. ACG are investing in a fibre to improve the security, cost effectiveness and quality of Afghanistan’s telecoms backbone and have won a contract to direct Afghanistan’s airspace communications infrastructure, the first time Afghanistan will ever control its own airspace domestically
Hussein Abdulkader of the Asia Consultancy Group (ACG) discussed his experience in bringing towers to Afghanistan’s rural areas. ACG works with Aghanistan’s number one operator Roshan, and there is government support for rural sites. Payments are collected from the country’s MNOs and redistributed through tenders for rural site construction. At present ACG owns and operates around 100 sites, but it aiming to add around two a week to reach 300 by mid-2020, against a total organic growth target of 500. As is often the case in difficult markets, diversification is key to ACG’s plans. ACG are investing in a fibre to improve the security, cost effectiveness and quality of Afghanistan’s telecoms backbone and have won a contract to direct Afghanistan’s airspace communications infrastructure, the first time Afghanistan will ever control its own airspace domestically.
Rebuilding Iraq
Following the capture of 30% of Iraq’s land by ISIS from 2014, much telecoms infrastructure has been destroyed or degraded in Iraq. ISIS targeted telecoms towers in order to cut off captive populations from the outside world, and from 2014 as ISIS expanded its territory and in subsequent years as it was gradually pushed back and defeated, telcos like Korek Telecoms have been working to rebuild towers and bring back 2G and 3G services to populations that have lost them. Our panellist Zardasht Khalid revealed that communities which were cut off from the outside world after the destruction of their telecom towers now see higher rates of voice and data usage than populations which were not cut off, once towers were rebuilt and service restored.
Hearing about the work to connect captive populations was a highlight of the conference, and a reminder of the important work our industry does. From 2014-2019 the focus in Iraq has been on rebuilding the 1,000-2,000 towers destroyed deliberately during the conflict, many as permanent sites, but also through a host of temporary sites. Mosul was captured early in the conflict with ISIS and for two years through its occupation, Korek Telecom provided semi-temporary towers on the surrounding hillsides to enable a weak 2G service in the city as a vital lifeline.
From 2016 onwards as the liberation progressed the degradation of Iraq’s telecoms infrastructure went into reverse with further temporary towers required to follow the train of military units, NGOs and media which chased ISIS out of Iraq. Dealing with this surge of demand was vital for the war effort and our panellists paid tributes to the crews who spent the last years of this decade building towers in a warzone. It was during this time of liberation that Korek Telecom first deployed 3G.
Even today, the security situation in Iraq makes it a difficult market to operate in, with battery and fuel theft creating an operating environment with expensive opex challenges. That said, international donors having promised funding to invest in new towers to reconnect Iraq’s population, which will ease the economics of connectivity. Korek Telecom has estimated it will need to build 2,500 towers over the coming years. For four years the focus has been on reconnection and recovery, but there is now a new cabinet, and the government is issuing national 4G licences at last.
LTE catch-up
It will be no surprise that our panellists agreed that 5G was some way from being viable in low ARPU, hard-to-reach rural sites, not least because of the technology’s required density and short propagation distances. However, all discussed the options for 4G technology in the markets in which they operate. Korek Telecom have begun to fibreise their network and discussions to share infrastructure in the country to reduce the capex cost of a 4G roll-out that is underway. Afghani telcos have 4G licences and roll-out in urban areas is happening at the same time 2G is only just reaching rural areas. However, due the minimal extent of fibreisation in the country 4G feels more like 3.5G in the cities where is available.
Government help and hindrance
Governments almost without exception claim to want to improve rural connectivity and often have licence conditions and active programmes to promote it. However, what is given with one hand can be taken away with another. Governments in the developing world often find it difficult to raise revenues through traditional forms of taxation and can turn to high licence fees, compulsory charges of direct MNO taxation which all discourage investment in marginal sites.
There was some debate at the TowerXchange Meetup about how successful or important government incentives were for improving rural connectivity. ACG receive essentially all of the capex for many rural sites from the government’s rural build out fund, and argued that without direct support many sites they serve, with their opex costs, those sites would not be viable. Likewise, Iraq’s telcos will receive significant outside investment to rebuild their towers but cannot use components for those towers specified to global standards because local standards are different.
Future proofing marginal sites
Reducing the cost of site installation and operation is vital for bringing connectivity to hard to reach groups and areas. However, costs are only one side of the equation and the potential for healthy revenue upside is also important. Initially sites will usually only have one tenant, significantly reducing potential returns. If a low site cost is achieved by minimising the leasable space on a tower then the site may never become economical and so never be built in the first place. Likewise, despite reducing opex and capex, active sharing also reduces prospective revenues for towercos and reduces the appeal of marginal sites. ieng’s Salah and ACG’s Hussain both discussed options for transitioning temporary sites into permanent ones. The session chair Spencer Crawford-White from Delmec was also confident that reinforcing temporary or smaller towers will be easy to enable expansion from two tenant to four or more tenants if planned for from the start.
Commitment
The tower industry has long horizons and is used to thinking in 10-15 year tenancies, and making capex investments which will take years to pay off, so it makes sense that commitment was a critical requirement for our panellists. If the commitment to delivering low cost but flexible sites is real, then it offers a huge potential market and firms like ieng. But engineering firms can only invest in developing and producing cheap to install and easy to maintain sites if the demand for them is there. But that, in turn, requires commitments from telcos and from government. Both Korek Telecom and ACG want to invest in larger and better networks, but without a top down commitment to bringing connectivity to difficult to reach areas it won’t be possible for MNOs or towercos to invest and reach people are rapidly as theoretically possible. There is lots of good work and innovative strategies already being pursued to connect the unconnected, but as always, more can be done.
