Phoenix Tower International: from towerco to infraco

With operations across fifteen countries, Phoenix Tower International (PTI) is one of the fastest growing towercos in the western hemisphere and has proven to be very entrepreneurial in its geographical expansion. In Q3 2018, PTI acquired 974km (or 17 rings) from a carrier in Mexico and in this exclusive interview, Don van Splunteren, responsible for the company’s global commercial activities, shares with TowerXchange insights into its fibre projects and why this “new” segment makes perfect sense for towercos to complement the traditional tower business model.

TowerXchange: Please introduce yourself and your role within PTI.

In 2017, I joined PTI to serve as Global Vice President of Sales and Leasing. In this role, I oversee every commercial segment across fifteen markets, and I am responsible for the performance of PTI’s commercial initiatives around co-locations, lease-ups, build-to-suit, small cells, DAS and, lately, fibre.

Prior to my current role, I worked for NAAP Global Solutions, Ciena Communications as well as Nortel Networks in various executive roles. Over my 20 years of experience in the telecom industry, I became deeply acquainted with the carriers’ needs including their expectations in terms of technology as well as infrastructure, which is very helpful in my current professional endeavour.

TowerXchange: Please share with us the drivers behind PTI’s investment in fibre.

The infrastructure business is slowly evolving from the traditional steel and grass model but the change is accelerating. PTI believes that towercos will soon play a broader role within the infrastructure industry and can successfully get involved in fibre as well as in some of the active equipment segments.Fibre fits well as it is modelled as a telecom infrastructure asset in the same way that towers are.

With regards to the demand for fibre, the main driving factor is the exponential growth of small cells’ deployments expected in the foreseeable future. In the United States for example, it’s estimated that over 800,000 small cells will be deployed by 2026… That’s more than what has been deployed over the past 20 years!

While mesh infrastructure can be utilised temporarily, fibre is essential to ensure that small cells work properly so every single site will require fibre connectivity in the future. At the same time though, carriers are becoming much leaner in their operations and focusing on their core business so the deployment of fibre, just like the towers one, is likely to get outsourced to infrastructure companies, or infracos.

Towercos, with their infrastructure-related know how, can definitely help carriers with more value adding solutions such as fibre. Whenever I am referring to fibre, I am talking about dark fibre whose behaviour both as an asset and financially is quite similar to the towers’ one.

TowerXchange: How did PTI sell the fibre opportunity both internally and to its investors?

It’s been an exciting journey and  while it took us some time to get there, we were quick in seizing the first opportunity to acquire some existing fibre assets from one of the carriers in Mexico, when they became available.

All it took for us to take the leap was to identify an opportunity that matched both our customers’ needs as well as satisfied our investors from a financial standpoint. Once those two aspects were met, we went ahead without hesitations.

After the acquisition in Mexico, we are now deploying fibre and, similarly to the tower model, looking at leasing up our assets. The ROI in fibre is modelled similarly to the tower one so we are seeing good returns from day one and strong growth potential. While the sharing of fibre is a relatively new concept, we found Mexican customers to be very receptive to the model and we are sealing several interesting partnerships and collaborations.

Fibre is a great opportunity on its own and even more so, in combination with the traditional tower business. PTI is always interested in products and solutions that can add value to our customers and to our bottom line and fibre is definitely not a mitigation strategy. We are continuing to grow at a fast pace in the tower space, and fibre can provide more benefits to our customers and, in return, to us.

TowerXchange: Do you foresee fibre becoming an essential component of the towercos’ portfolio? And what does that mean in terms of competition among different players?

With regards to the competition among towercos, I definitely think there’s the potential for more companies to get involved and some are already deploying fibre such as Crown Castle in the U.S. and American Tower across Mexico and Argentina for example. However, I don’t think smaller towercos will necessarily eye fibre opportunities. Fibre, just like towers, requires scale and a different skill-set and smaller towercos might opt to focus on the latter for the time being.

TowerXchange: Could you explain how the fibre ecosystem works and what role does PTI play?

PTI is involved in the so called “outside plant” component, meaning the deployment of fibre required to connect Points of Presence (PoPs) of our customers. The outside plant is where infracos usually own the physical fibre cable, ducts, posts, to deploy and operate these assets.

Plenty of players operate in the ecosystem, from service companies who build and maintain the fibre for us to the manufacturers of posts, if aerial fibre is being installed, as well as the cable and hardware solution providers.

Infracos don’t usually own the active equipment but just the cable, hardware and rights leading to the various PoPs where carriers and the other customers install their own equipment. The key PoPs for us are obviously towers and small cells.

Customers can be carriers but also other fibre providers who are interested in providing capacity to their own customers in cities where we operate. We are also working with partners who manage smart cities and other municipal projects and PTI is always interested in getting involved in this type of activities.

TowerXchange: What are the pain points of fibre deployment? And the key opportunities?

Fibre is a similar model to the tower one. But the challenge relates to its execution and if you ask me, what “keeps me awake at night” is how to create and execute flawless fibre projects and make the experience for our customers as easy as possible. There aren’t many innovations in the technology horizon that would change these models, but the competitive edge lies in making it easy for our end users to decide to outsource their fibre to us.

The macroeconomic context helps us nowadays as carriers are definitely under more pressure than they used to and also want to keep quality of their service as high as possible and at the quickest time-to-market. For infracos, this is a great selling point.

TowerXchange: Do most carriers own fibre portfolios? And do you foresee them divesting fibre assets like they did (or didn’t) with towers?

Most carriers do own fibre across CALA and I believe they will treat their fibre portfolios similarly to their tower ones. The strategy of divesting versus retaining could be applied to fibre too and build-to-suit in the fibre space will soon become the norm, and not only for the last mile but for larger projects too.

It took quite a few years for towers to stop being seen as a competitive advantage, and some carriers still treat them as such. Fibre will follow a very similar path and many carriers will soon see the advantage of operating under an opex model for their fibre projects. That’s when sale and leaseback will become more popular. It’s only a matter of time!

TowerXchange: Beside fibre, how do you see the tower market evolving across CALA?

These are exciting times for CALA towers as well. Many changes are happening including some consolidation and acquisition among MNOs and this creates plenty of opportunities for growth. In fact, whoever ends up owning the spectrum following any consolidation or acquisition will need to leverage it and monetise it, which in simple terms equals to more antennas and more towers being required that ultimately will need fibre for back or front-haul.

I don’t see that equation changing anytime soon and at PTI we remain optimistic about CALA and its tower industry. For any company that exits the market, there will be others that will invest even more than before.