Another year of growth for Africa’s biggest rural towerco

AMN (Africa Mobile Networks) deployed their first base station in January 2014 and has since grown to operate over 3,300 sites across 13 different African countries. TowerXchange speaks with AMNs CEO Mike Darcy about his plans for the year ahead, how rural towercos have become masters of their craft, and the opportunities for NaaSCOs to expand from the geographical fringes to compete directly with conventional towercos.

Financing is a central facet to our business plan and we require a lot of capital with total investments to date reaching over US$100mn. Our funding deal with Finnfund and BlueOrchard is for an initial US$20mn but will increase to $30mn, providing the capital needed to reach 7,000 sites. The US$40mn equity deal with Metier we signed in 2021 allowed us to deploy up to 5,000 sites, 3,300 of which have already been deployed, and we have equipment in the supply chain to take us to 4,000 over the next 4 months.

This puts our cost-per-site at around US$10,000 which has remained pretty much consistent since we began operations. AMN is currently active in 13 counties; Benin, Cameroon, Congo Brazzaville, DRC, Ghana, Guinnea, Guinea Bissau, Liberia, Nigeria, Sudan, Zambia, Rwanda and the Ivory Coast with operations starting in the next few months in Panama and Madagascar.

While we have been successful in raising capital, it hasn’t always been an easy experience. However, it has gotten easier over time and a key part of this is that we remain cash positive. We did raise capital from Meta and Intelsat early on, but these were strategic investments for the benefit of their own businesses, not for pure financial return.

Our funding deal with Metier was a key milestone as it was a commercial investment, the first one in a rural infrastructure provider, and illustrates how rural infrastructure is becoming a recognised commercial investment opportunity. We hope that our ability to deliver continued returns to investors will make it easier to attract more commercial investment for ourselves and others in this space. 

Development finance is still a big part of rural infrastructure funding in Africa, but even development finance investors don’t want to lose money or take big risks. While they might accept higher risk at lower returns, Development Finance Institutions (DFIs) still want positive commercial returns while facilitating positive development impacts. Although DFIs play a key role in providing access to rural connectivity funding where commercial banks may not, this should change now the business model proves to be successful. This has also been observed in rural electrification which has relied on development finance where private funding has so far struggled to see commercial opportunity. 

When AMN first started in 2013, many rural projects were either failing or getting cancelled. We recognised that with strong execution and careful planning it is possible to have an economically sustainable and viable business based on rural connectivity. 

The first challenge is high capex investment. Conventional towercos are building rural base-stations for US$30-50,000 while AMN has reduced this cost to around US$10,000. Site selection is also crucial, and we have developed strong expertise in identifying the correct villages to deploy rural sites. The return on investment has been working for us but conventional towerco’s haven’t quite figured out the model. 

We conduct very comprehensive surveys assessing a multitude of factors including retail, schools, buildings, population, number of serviceable people and growth predictions to develop a score card where we can identify which villages are best suited for a telecom tower. We also take existing service into account, targeting villages where we are the first through the door and face no other competition. Our experience and wealth of real-world data is what makes us succeed in rural deployment where conventional towercos have struggled. 

There is a big push to move beyond the traditional ‘ultra-rural’ space towards semi-urban and semi-rural areas. We have developed an efficient tower solution which can be deployed in 4-5 days offering more capacity and coverage compared to a high-volume 12-meter monopole used in small villages. This puts us in direct competition with conventional towercos, but AMN has fostered a real edge in managing capex and opex from the thin margins in rural connectivity which gives the edge  to win contracts from MNOs. However, it’s hard to say if other rural specialists like NuRAN or Vanu will follow this model and end up competing with conventional towercos in the same way.

AMN provide two different turn-key Network-as-a-Service (NaaS) models. A revenue share model offers MNOs a share of the revenues, taking the risk away from operators. MNOs love this as AMN is responsible for the entirety of the network including all capex and opex, but we reserve the right to select the sites and equipment to deploy. This way we ensure that any site built and operated by AMN is selected based on the commercial opportunity we have identified.

However, we also offer an opex model where MNOs pay a fixed fee and AMN will deploy and operate a site located wherever they like, even if it does not meet AMN’s criteria for revenue share. Regulators require MNOs to provide certain levels of coverage across specific areas, and as a result MNOs will still need a conventional opex model deployment to maintain their coverage requirements. However, the revenue share model is still the preferred option for MNOs and around 2/3 of our towers are on revenue share.

Conventional towercos are not NaaSCOs and don’t really want to be involved on the active equipment side. They don’t understand it and their current business model based on just passive has worked well for them. However, NaaSCOs are developing a new turn-key infrastructure space offering a one-stop passive and active solution for MNOs who see real value in this. They get one partner to work with instead of 3 (the towerco, the OEM and the MSP) which AMN offers in one contract.

It is hard to say if conventional towercos will need to become NaaSCOs themselves but if MNOs start to demand active as well as passive management, they may not have a choice. We are already having conversations with tier 1 MNOs about doing macro and rooftop sites in urban areas and is something we will continue to make inroad into. At some point conventional towercos will need to respond.

This is a major focus for us as building a tower is just the beginning of the story. The only way that we can deliver on our KPIs is to rely on digital solutions and technology. We have deployed our own bespoke tools including real-time site maps of Africa that show uptime, battery voltage, backhaul statistics, core drop rates and CCTV footage. We also have new auto-commissioning tools to manage the high volumes of site builds and maintenance.

To support all these teams, we use ACS which engineers plug into the modem at the site that does a completely automated quality check. Maintenance workers are not allowed to leave the site until all conditions are met which allows us to standardise high quality maintenance across our sites and markets.  

As result we have reduced aggregate time between visits to around 18-24 months and a low-maintenance approach is central to how we make the rural connectivity business model work. We are always on the lookout for new features and tools to help better automate our operations and management and there is almost unlimited potential for optimising the management of the network.

AMN has developed a sustainable minigrid system to provide rural electrification for the end-user (households and small businesses), paid using mobile money that is serviced by our tower network. Our model is based on a typical 300-household installation representing the average village we deploy telecom sites at. However, this does not include the telecoms tower on an ABC (Anchor-Business-Customer) model but deployed in parallel with telecom towers.

This is because the energy consumption of towers is very specific and needs to be monitored with precision, requiring a separate power source. Instead, it’s about having energy and telecoms infrastructure, both of which play crucial and overlapping roles in developing rural areas, that we can service and operate using the same management and maintenance platforms. We plan to electrify 1 in 10 villages where we have a telecom tower.

AMNs modular-based minigrid on units of 25KWp PV for a 2KW load (1.5MWh per month). The distribution network works at 1000V AC over distances of up to 1Km from the grid

The numbers are very marginal when looking at the cost of batteries and solar panels versus the kW usage and revenue potential; I'm talking about single-digit IRRs. Given the associated risks and low returns, minigrids aren’t very attractive to most financial investors. DFIs really need to step in and help scale the industry to create the volume that will attract pure commercial investment.

We have engaged a DFI to run pilots for minigrids in 3 villages for the first half of this year and are hoping to secure funding as a result of these trials. The minigrid solution has already been successfully tested in the UK to validate the technology and now it’s about understanding and optimising the solution. At this stage it’s about figuring out what the business model is and how we want to go forward with a commercial deployment.