The first-generation of CALA independent tower developers is almost entirely gone but over the past few years, Brazil Tower Company has steadily built its tower portfolio while also expanding operations beyond Brazil. Â With active pipelines in Colombia and a 100+ tower portfolio in Ecuador, we caught up with the mastermind behind this multi-country operation, Dr. Chahram Zolfaghari, and its key man in Ecuador, Mauricio Velloso Sampaio, for an interesting chat about the future of towercos, BTS and more.Â
TowerXchange: Please tell us about the expansion of your operations beyond Brazil, which is where we left you a few years ago.
Dr. Chahram Zolfaghari, Founder, Brazil Tower Company (BTC): About five years ago, we were contemplating an expansion beyond Brazil. At the time, we considered Colombia but the market was overcrowded and very irrational. I believe that there were more than fifteen towercos operating in Colombia back then but the actual rollout of new sites got really slow from 2015 onwards. Things started improving as a result of the 2019 spectrum auction but still, the market had been stuck for over four years.
We eyed Ecuador for a series of reasons, but first and foremost was its lack of exposure to foreign exchange. In fact, working in U.S. dollars does give us a lot of stability and makes financing much easier. Ecuador was also a near-virgin tower market so that was another attractive and rather strategic factor.
Mauricio Velloso Sampaio, GM and President, Ecuador Tower Company (ETC): I have been working in the telecom sector for the past twenty years. In 2017, we launched Ecuador Tower Company and we are now active and serving all major operators in the country, including Claro, CNT and Telefуnica.
The local market is small in comparison with other countries of the region. But it’s a market that works well and we are well positioned to make a continued impact. We are small and nimble, too. ETC mainly focuses on build-to-suit but we are keen on opportunities for inorganic growth as well.
TowerXchange: Let’s talk about the first generation of PE-backed towercos which are mostly gone as a function of acquisitions and exits. Is the BTS model still working? And what’s ahead in terms of growth for companies like BTC and ETC?
Dr. Chahram Zolfaghari, Founder, Brazil Tower Company (BTC): With regards to Brazil, you are absolutely right. The first generation of developers is basically gone. They sold to larger platforms and exited one by one.
BTC sees good growth continuing for at least the next five years and right now we aren’t really planning an exit. We don’t expect to build 1,000 towers per year and have added, on average, around 200 sites per year on a build-to-suit basis.
We have a solid pipeline of sites at the moment which will take us to our 200-site target this year and maybe even help us surpass that. In Q1 ‘˜21, we did exceed our goals. That said, I do understand that larger companies have more aggressive growth targets and that scale ambitions might be different. So the consideration on whether BTS works or not for towerco depends on their actual business plans.
In the meantime, a few new towercos are starting to emerge in Brazil which is an indication that BTS is still alive.
Mauricio Velloso Sampaio, GM and President, Ecuador Tower Company (ETC): Ecuador is a small market, nothing compared to Brazil nor Colombia in terms of size, number of actual towers and rollout expectations. But there are also less towercos in this market so our secret sauce is to be nimble and very flexible and meet our customers’ needs whenever possible.
Our growth targets are small relative to Brazil but are strong if compared with our actual size. Also, we are opportunistic in evaluating a variety of growth channels, both organic and through acquisitions.
Dr. Chahram Zolfaghari, Founder, Brazil Tower Company (BTC): Just to add to that, we currently have a portfolio of around 100 sites in Ecuador and our goal is to increase our footprint by 30% a year via BTS. Not being exposed to currency fluctuation is a great advantage which allows us to look at sale and leaseback opportunities and other small acquisitions. Currently, we are targeting 150 sites by year end.
We also have started operations in Colombia via Colombia Tower Company (CTC) and we are evaluating the state of the market by starting a rollout of about fifteen sites in 2021. If the market presents good potential, we will definitely seek more opportunities.
TowerXchange: What kind of innovation is being requested by your customers? And how are you planning to monetise it?
Dr. Chahram Zolfaghari, Founder, Brazil Tower Company (BTC): Now that we have a sizeable portfolio across Brazil, we are trying to optimise our assets to the maximum. Several trials are currently underway to provide solar energy to our sites. We “ BTC and our customers “ are going to monitor for the next six months the performance of these trials which, if acceptable especially in terms of uptime, will be replicated across more sites.
This is something that we believe makes sense for all parties involved. We are the first ones realising that we can do more to run more sustainable operations and decrease our carbon footprint. I believe that these days, everyone welcomes this kind of environmentally and economically smart initiatives.
In addition, we are at a more advanced, already commercial stage in providing FTTS for one carrier here in Brazil. The trial for that project was extremely successful and we’ve already received an additional 70 requests for FTTS in 2021 and over 100 for 2022.
Sites do need to be fiberised as without fiber, there’s no such thing as 5G and in most cases 4G really cannot deliver to customers what they are expecting in terms of bandwidth for video, games and photos. Most of our clients are still busy with 4G upgrades but 5G is coming soon. The biggest hurdle for 5G in Brazil is fiber as not enough sites can offer that.
Mauricio Velloso Sampaio,GM and President, Ecuador Tower Company (ETC): In Ecuador, towers remain our core business but we, as a group, are definitely oriented towards innovation. Fiber is the number one add-on to provide and FTTS is key here in Ecuador, too.
MNOs still see it as relatively innovative but we are definitely exploring it as a new channel. In the case of CNT, the operator is very active in terms of both sites and fiber deployment and is now a possible tower seller. This potential sale transaction has been rumoured for the past three years and is stirring a lot of interest across Ecuador.
TowerXchange: What is the involvement “ if any “ of BTC and ETC in providing power to its customers?
Dr. Chahram Zolfaghari, Founder, Brazil Tower Company (BTC): All our sites in Brazil are connected to the grid and we actually do not have any towers which require a diesel generator. Solar power for us is a “nice to have”, an alternative path towards a greener source of energy. But we are connected to the grid even in rural areas.
Just to clarify, when we refer to rural sites, we think about towers located in small cities with 5,000 - 10,000 inhabitants. We haven’t really built any sites in remote areas. Moreover, we are oftentimes the only tower in these small cities so we get plenty of growth from all the main operators which are required to cover these cities and any ISP that may be operating in that geography.
Mauricio Velloso Sampaio, GM and President, Ecuador Tower Company (ETC): The same happens in Ecuador where all our sites are on-grid. Also, we do run some sites with backup diesel generators.
Here we do run some rural sites, but as Chahram mentioned, they are still very strategic and high demand areas, whether they cover small towns or busy highways.
TowerXchange: So are all independent developers looking for an exit? Is this the case for BTC and ETC?
Dr. Chahram Zolfaghari, Founder, Brazil Tower Company (BTC): We aren’t really planning to exit for the next five years at least and we have a very positive outlook on our growth potential in Brazil.
With the advent of fiber rollout by the operators, the opportunities for growth in our portfolio increase dramatically with 4G and 5G rollouts happening as soon as fiber hits a tower and other opportunities such as edge data centers which simply aren’t feasible without fiber.
Mauricio Velloso Sampaio, GM and President, Ecuador Tower Company (ETC): ETC is here to stay too. We’ve recently closed a financing round with Cifi “ which is our partner in both Brazil and Ecuador “ and now we have the capital to build and keep growing for the next three years. With this line of credit, we have a solid capital foundation to comfortably take us to our next growth phase.
