Communication Towers is Israel’s only towerco group. Although they currently only have 63 sites, a change of management, and the financial backing of the Aluma Infrastructure Fund has given the company the impetus to shake up the Israeli telecom tower market. At present all but a few dozen of Israel’s 7,000+ telecom tower sites site on MNO balance sheets. Communication Towers has a multi-pronged approach for shaking those sites loose and bringing the benefits of telecom infrastructure sharing to Israel.
TowerXchange: Please introduce Communication Towers, Tibar, and your ambitions in the Israeli telecom tower market.
Uri Sharir, CEO, Communication Towers:
Communication Towers is the only Israel towerco group. Tibar, its holding company was founded 20 years ago. Besides the 63 sites owned by Communication Towers all other sites are owned by the country’s three MNOs.
Our goal is to introduce infrastructure sharing and new telecom solutions to Israel to accelerate the transition to 5G. Today in Israel there are roughly 7800 sites, but 5G will require the construction of another 1,000-3,000 sites. Our goal is to be the main executor of those extra sites and to acquire more sites in Israel.
Our values are entrepreneurial, and we want to be on the front line of the development of Israel’s independent telecom tower market. Our added value is reflected in the ability to install towers quickly and find effective solutions for our customers, Israel’s three MNOs Cellcom, Pelephone, Partner.
The company has proven experience and track record of operating and managing sites for the operators. With 20 years of experience we have developed a lot of knowledge. The company’s current management team is led by Uri Sharir, CEO; and Yaniv Zohar, COO together with a team of finance, engineering and technology experts. In addition, there is the company’s Chairman “ Mr. Ori Y
Uri Sharir, CEO, Communication Towers:
Until now our focus has been on our existing sites, but our strategy is now shifting to encompass five key business areas.
Build-to-suit: we are in discussions with MNOs to build their new sites for them, replacing the need for mobile operators to fund new site construction themselves and maintain tower building expertise in-house. We are negotiating and I hope to sign soon a new contract with an MNO to build new towers for them.
Build-to-fill; we have mapped the whole of Israel looking for areas which lack coverage and found many areas which require new telecom towers. At present we are working on 40 uncovered points as part of our plan to double our site count over the next 2-3 years. We have begun to sign new contracts with property owners in these areas and are looking for more properties to sign contracts with. At the same time, we are speaking with MNOs about locating their equipment on our towers to help the cover areas which they would otherwise lack.
Limited sale and leasebacks: Israel’s MNOs discussed SLBs with several companies several years ago and could not come to a deal. Our strategy is different. In many areas in Israel there is duplicate or triplicate infrastructure, where for 25 years, three towers have stood very close to one another. We are offering to acquire a site from one of the operators and to decommission the other operator’s sites to co-locate and reduce costs for everyone. This is especially important as Israel’s old towers will not be strong enough for the load of 5G equipment.
This will take 6-12 months to negotiate as it is complicated to close a deal like this; but there are more than 100s of towers like this where parallel infrastructure is installed. We want to start with 10-30 towers to prove the model to the MNOs. We have already approached the operators, cherry picking the best sites as demonstration sites. This is win-win-win for us, operators and regulators. We all want to get rid of parallel infrastructure.
Private networks: Israel is home to many high-tech industries. We are now expanding our horizons and looking for collaborators to establish the infrastructure for private networks. All around the world people are building private 5G networks. In Israel we have started to speak with ports - in Israel, there are four major ports, and while two of them have private 4G networks already the other two do not and would benefit from a new private 5G network. Similarly, there are many automation and robotics businesses in Israel that would benefit from private 5G connectivity. High capacity sites like stadiums will benefit from a neutral host supplying its connectivity. Operators are also looking at investing in private networks, together we can complete the product for the customer, for example, we just recently submitted an offer in a tender for establishment of infrastructure for a smart stadium in the city of Petah Tikva.
Small cells: We want to put small cells on lampposts for 5G. A multi-tenant small cell solution will help to increase capacity in urban areas. If we can host all three MNOs on one lighting pole small cell it will help avoid the necessity of additional and unneeded telecom infrastructure. Israel already has plentiful fibre so it would be relatively straightforward to connect urban small cell deployments to core networks.
TowerXchange: What is the regulation around operating as a towerco? What are the typical safety regulations and permitting requirements for erecting a tower in Israel?
Yaniv Zohar, COO, Communication Towers:
Until 2014 sharing was banned, but in that year the regulation was changed to allow passive sharing. There are no licencing requirements for operating as a towerco. What separates us is that we are already active and have a lot of experience and financial capabilities. But anyone can set up here.
Uri Sharir, CEO, Communication Towers:
We have a good relationship with the government and the communication office; we were speaking with the CEO only days ago. They are encouraging us because they see the value in reducing parallel infrastructure and accelerating the rollout of 5G.
Whilst there is no licensing regime, permitting is however more complex - permitting for a site can take up to one year. There are a lot of regulations on how to erect towers, maintain towers, which type of tower may go where, what height they should be; we know how to manage that process.
We already have agreements with property owners and have started to do the mapping all around the city, following all the regulations. Not anyone who wants to build a tower can do it. You need to have money, expertise and patience.
TowerXchange: How many sites does Communication Towers operate? What are the typical site typologies in Israel? Are macros most common or are there other typologies like rooftops, billboards or street furniture?
Uri Sharir, CEO, Communication Towers:
Communication Towers has 63 sites which we own, maintain and lease to the operators. Our principal customers are the MNOs but we have a few smaller clients also. Our current tenancy ratio is 2.2x but we need to both increase our tenancy ratio and site count. In 2-3 years will have 100-120 towers. In Israel there are over 7,800 sites overall with between 4,000-5,000 towers and rooftops and the balance being made up of small cells and other typologies.
TowerXchange What are the current views towards tower sales and leasebacks at Cellcom, Pelephone, Partner? Are they interested in build-to-suit?
Yaniv Zohar, COO, Communication Towers:
MNOs in Israel are under some financial strain. Some are under more pressure than others. Of course, one of the options is acquiring towers from the MNOs, but we are happy with our current plan of action. Attitudes in the market mean we would be premature discussing a large or small-scale acquisition. We will be able to discuss a bigger deal once we have proven our value in smaller transactions.
TowerXchange: What is your investment firepower? Building, acquiring and operating towers is a capital-intensive business, what is your capacity to build and acquire in the short and long-term?
Yaniv Zohar, COO, Communication Towers:
Our holding company, Tibar, was purchased by the Aluma Infrastructure Fund. This means that we have the firepower to invest in building new towers but also to acquire existing towers too. This financial support is why we are able to try ventures in private networks and small cells.
Were Israel to leave it to the MNOs, 5G would come only slowly to Israel. Communication Towers can act now to accelerate 5G deployment and expand private 5G networks.
TowerXchange: What is your energy investment strategy, would you seek to manage power as well as the tower? Or are you looking to establish as a steel and grass player?
Yaniv Zohar, COO, Communication Towers:
We understand that in order to become a leading towerco we will need to also provide a power solution. To get the full benefits of sharing it is better for a towerco to manage primary and back-up power at sites too. We are currently looking into solar solutions, lithium ion batteries and energy controllers and planning a few pilots. This is definitely something which Communication Towers will do, but it is less important right now thanks to Israel’s reliable grid.
TowerXchange: Who are the other major players in the Israeli telecom tower market? Are there key local MSPs and O&M partners? Does Israel have to import steel towers, diesel generators and base station equipment?
Uri Sharir, CEO, Communication Towers:
Radio and telecom equipment is not produced locally “ one MNO buys their equipment from Nokia and two others work with Ericsson. There are many companies which import steel from abroad and build towers, but telecom towers do not come with a very complex supply chain. We are working with a few MSPs here in Israel; there are three main telecom contractors and three second tier MSPs. There’s one company very close to us and they will build most of our towers. There’s a kind of tradition in Israel where the towers are maintained by the same company that builds them.
TowerXchange: What are the next steps for Communication Towers?
Uri Sharir, CEO, Communication Towers:
Communication Towers plans to double its site count over the next 2-3 years and to become a leader in small cells and private networks in Israel. We will continue discussing how we can deliver new sites for Israel’s MNOs as well as how we can help to rationalise their networks. We are also looking to meet people with proven experience in private networks and small cells that can help us expand our business. We would like to discuss our plans with the broader global telecom tower market and find partners to help us serve the Israeli market.
