Changing the game in South Africa

Helios Towers South Africa (HTSA) has launched into South Africa in a joint venture with domestic fibreco Vulatel, and an acquisition of home grown towerco SA Towers. It now has around 100 sites with ambitions to grow that tenfold over the next three years. In addition to ambitious build to suit plans, HTSA will also offer fibre connections to MNOs and data centre services beyond their normal customer base. Plus, in a major change to business as usual, HTSA plans to manage MNOs’ power and fibre connectivity to offer a converged solution in a traditionally grass and steel market. TowerXchange talks to Helios Towers’ stalwart Jeff Schumacher who is leading the new operations in South Africa. 

If you would like to know more, Helios Towers will be taking part in TowerXchange Meetup Africa, in Johannesburg, on October 8-9th, click here to register or email Anna Mayhew at amayhew@towerxchange.com for more details.

TowerXchange: Please introduce yourself for our readers who don’t know your history with Helios Towers.

I moved to South Africa earlier this year to take the reins as CEO of HTSA, although I still remain CEO at Helios Towers Ghana, a post I’ve held since 2015. I was also CEO of Helios Towers Congo Brazzaville from 2016 until earlier this year. Prior to that I held various positions during the set-up, launch and growth of Helios Towers’ subsidiaries in Tanzania, DRC and Chad, where I was Managing Director. Before Helios Towers I worked at Soros Fund Management LLC, one of our shareholders.

TowerXchange: Can you please give us an introduction to the newly formed Helios Towers South Africa – who is in the team, where have they come from and what assets you already have on the ground?

We formed HTSA formally at the beginning of the year through a partnership with locally-owned fibreco Vulatel (TowerXchange interviewed Vulatel’s CEO Tlhabeli Ralebitso and Helios Towers’ CCO Alex Leigh last quarter). On May 1st we announced the acquisition of SA Towers which is another locally owned digital infrastructure company. 

We purchased around 100 towers from SA Towers and over 500 acquired sites which are at various stages of the permitting process. We plan to deploy over 1,000 towers in a two to three year time period, so SA Towers’ estate and pipeline really helped us hit the ground running. We transferred all staff related to passive infrastructure from SA Towers to Helios Towers South Africa and are now fully up and running, employing 30 FTEs focused on site acquisition, finance, legal, IT, HR and so on; we have a fully staffed team.

TowerXchange: What are your projections for South African build to suit over the next three years? What proportion are you hoping to fulfil?

Our plan is to spend the next three years reaching 1,000 towers. That means we are looking to build 300 per year over the next three years on top of the 100 we already have from SA Towers. At the moment that means we are working on building up our pipeline, getting sites permitted and getting council approvals. That’s 25 a month. We estimate South Africa will require 6,000 additional points of service over the next five years and HTSA is planning on capturing a quarter of that build-to-suit pipeline. We will also be looking at rooftop sites and some IBS, including fibre and converged bandwidth solutions, but our principal product will be towers.

TowerXchange: How are you differentiating yourselves from the other established South Africa towercos?

First of all, HTSA is the only independent towerco in South Africa to have all its site acquisitions people and processes done in-house. It will give us a quicker time to market and allow us to offer more attractive rates. That was the appeal of acquiring SA Towers, they have an excellent team who know the planning environment and processes of South Africa really well.

We also bring that expertise in planning and permitting together with an expertise in fibre optics from Vulatel. We can offer fibre to the tower and the whole package of short haul, medium haul and metro fibre.

We also have a plan to further differentiate ourselves by offering auxiliary products and services too.

Because of the joint venture with Vulatel, we already own 13 fibre regeneration sites between Pretoria and Empangeni . Our sites facilitate signal transmission for mobile operators and internet service providers from the administrative capital to the undersea cables, and we can offer similar products as our services evolve and our partnership with Vulatel develops.

You could call these regen sites “edge data centres.” A data centre is a hotel environment where information can be exchanged and rack space can be utilised. Our regen sites are enclosed, climate controlled spaces with exceptionally high uptime. We offer rack space to Dark Fibre Africa and they manage internet traffic there with its customers. We will be marketing that rack space to other tenants too, and have plans to expand this service. The operational excellence that underlies running an edge data centre is part of what Helios Towers does, but of course the sales process for edge data centres is different to selling towers space. So there will be a difference there to address, but this is an important part of being a converged infrastructure player.

TowerXchange: Do you anticipate selected cell sites evolving into edge data centres in the future? Would you want to own edge data centres or lease space to third parties?

Edge data centres mean something different to different people, and it isn’t clear whether edge data centres in South Africa will be located at cell sites, fibre regen points, like the ones we own, or de novo constructions to link back to a larger data centre deployment that provides cloud resources and centralised data processing.

We plan to lease rack space in our regen sites and newly constructed facilities to whoever can use it, whether that is Google, Facebook or whoever who want to cache data on the site. There are different applications for an edge data centre, but there are lots of potential customers who want to get their latency down, even in a 4G era. But to really leverage the speed of 5G you need to move the internet exchange points closer to the user, plus every site will need be fibreised. Every part of that plays into the ethos of smaller, denser networks and the rationale for our converged solution offering.

The question of whether we run edge data centres at cell sites is an open one. We can envision running our own edge data centres at our towers, but we could also lease space at the towers to someone else who runs them. South Africa isn’t the United States, so we’re not expecting the same business that Crown Castle or Vapor.io are betting on, but there is an important opportunity here which we are in a strong position to explore.

TowerXchange: South Africa will be the first country in Africa to launch 5G, what investments are being made now by Helios Towers South Africa in anticipation?

So far we haven’t seen much demand for 5G leases. MTN launched a 5G trial site on 28GHz spectrum earlier this year, but because they don’t have access to 3.5GHz spectrum we don’t expect 5G at scale. Until there’s a change in regulation to permit MNOs to use more attractive spectrum, it will be hard for them to offer 5G economically. But when that change comes we want to be ready.

5G will require significantly more antennae and they will need to be much closer to the user in dense urban settings. This is where fibre becomes so important. All those antennae, radios and base stations will need to be connected to fibre and together with Vulatel that is now our expertise. HTSA is not a tower company, it is a converged infrastructure provider with expertise in fibre maintenance, construction and operations.

TowerXchange: What are your plans for urban infrastructure to densify mobile networks? How responsive have municipalities been to enabling access to their street furniture to deploy small cells?

South Africa has a challenging permitting environment, which could slow down network densification and hold back deployment of LTE and 5G, so getting this right is important. Some municipalities are more receptive to rolling out digital infrastructure than others and it is early days to see to what degree we can improve cooperation with municipalities. These challenges are one of the reasons we have in-sourced our permitting team. Likewise, so far we haven’t used municipality owned street furniture, we have used all our own vertical infrastructure. In South Africa we have built pine trees, lampposts and other different forms of camouflage for sites from 15m to 35m.

We are also taking an innovative approach to camouflage and how we host equipment where we cannot make things work with municipalities. To take an example from Brazzaville, we had trouble permitting a site and so hosted the equipment of an internet provider using dark fibre connectivity to remote radio heads via a Kathrein system. So even where municipalities won’t cooperate we still have options thanks to innovations from the vendor community. These are the types of solutions we can use if we cannot get enough space or the right security.

The traditional tower will be the minority in three to four years’ time because the densification for LTE and for 5G requires different solutions, so we have re-tailored our product lines to meet these requirements.

TowerXchange: What is the current extent of fiberisation of the tower network? What are your predictions for future fibreisation in South Africa?

I won’t give an exact figure of tower fibreisation at this point, but I estimate we have connections into about a third of our towers, but that number is growing.

We expect significant growth in the fibre market in South Africa. It is a significant focus area of the MNOs to bring fibre to their towers, and HTSA want to bring fibre to our towers to make them more attractive. In the next five years, we expect all towers in capital regions around Johannesburg and Pretoria will be connected to fibre where we estimate only 10-20% of them are on fibre now. Across developed, urban South Africa generally, we expect 50%-75% of towers to be fibreised in the next five years.

TowerXchange: Will you be offering only a ‘steel and grass’ service in South Africa, or do you think towercos will have to evolve and offer a full service tower+power proposition?

I come from a tower and power background and hope to be able to put that to good use in South Africa. I plan to build a team to deliver a tower+power proposition here.

At the moment we only provide a steel and grass service on our sites because that is what SA Towers offered and what MNOs in South Africa were used to. To a degree it is difficult to change those existing sites because of legacy configurations and the current owners don’t want to write off legacy equipment. Plus different tenants have different set ups and requirements and it isn’t straight forward for HTSA to jump in and take them all over, but offering power management on new sites will be much easier.

On our new sites, we will be able to introduce our own security solutions and power from the outset. The fleet will be newer and built to a scale and focused around Johannesburg and Pretoria; that means we will reach the economics of scale for managing power quickly. The MNOs in South Africa are very receptive to the idea because power is becoming a bigger challenge in South Africa every single day due to planned and unplanned power outages.

TowerXchange: Towercos are sometimes seen as producing a better return on invested capital than fibrecos, what made you confident the joint venture with Vulatel was the best next step for your investors?

We think there’s a lot of value in offering converged solution to MNOs in South Africa and we wanted to offer a product that combines wholesale fibre and vertical real estate. Together they are a very valuable proposition. Simply put: one plus one equals more than two. We will continue with our traditional tower product and also offer back up power and wholesale connectivity. We see enormous value creation by becoming a converged solution provider.

TowerXchange: Please summarise your vision for the future of your company.

We want to build on the 100 or so sites we acquired from SA Towers and build upon our pipeline of 500 sites to get up to the 1,000 sites we envision owning by 2023. We have an incredible and dedicated internal permitting team which we should make us the first choice for those looking for new towers in South Africa.

We will use our partnership with Vulatel to allow us to offer a converged infrastructure product that encompasses towers, fibre and even edge data centres.  Plus we will be using Helios Towers’ expertise in tower ownership and power management and distribution to support South Africa’s MNOs in their struggles with power stability. We are excited about what is already happening and want to get out there.

If you would like to know more, Helios Towers will be taking part in TowerXchange Meetup Africa, in Johannesburg, on October 8-9th, click here to register or email Anna Mayhew at amayhew@towerxchange.com for more details.