TASC Towers has finalised its second of three tower portfolio acquisitions as part of its regional sale leaseback deal with multinational MNO Zain. The deal includes 4,968 acquired sites with an additional 300 managed sites for a total of US$180mn. These 300 managed sites are either on private or government locations that could not be transferred due to security reasons, as well as some in-building sites which have strategic advantages for Zain to retain ownership of.
This is typical for the region and closely echoes a condition of Helios Towers’ acquisition deal with Oman Telecom where around 100 sensitive sites remained with the operator. Zain provide nationwide service coverage and the tower portfolio contain sites located throughout the country.
TASC Towers are focused on setting up their operations, equipment and vendors to quickly bring management of the towers up to a high standard. “We have live RFPs out for almost everything: batteries, solar panels, hybrid solutions, RMS and maintenance vendors” explains Garth Self, EVP Commercial & Operating Markets.
Introducing the Iraq team
Running on-the-ground operations for TASC in Iraq is Managing Director Khalil Kalo who has been in Iraq’s telecoms space for 12 years, working with telecom operators and digital transformation companies including the Orascon Group, Zain Group, Orange and SAP mostly around customer service, commercial and digital transformation.
TASC Towers have been carefully building up a team of experts with a senior team of directors covering all aspects of TASCs Iraq operations, around 80 insourced and outsourced staff as well as two Headqauters in Baghdad and Erbil. With operations and management scaling quickly, TASC Iraq plan to reach 140 employees by the end of the year.
The secret to a rapid and successful expansion of tower infrastructure is in the hiring, explains Garth. “We have been working on this project since 2015 and had a lot of time to hire the right people. We started designing and preparing IT systems before launching to ensure we could rapidly expand operations. When we hire people, we choose the right people who understand the market and who have the right technical expertise”.
Iraq's telecom tower ecosystem is bustling with activity
While TASC started with Zain the towerco is keen to expand their footprint and market share in Iraq, and the country has plenty of potential for expansion. Asiacell, Ooredoo's local subsidiary, is selling its passive 7,500 towers as part of the MNOs regional tower sale, while local MNO Korek Telecom is also reviewing its passive infrastructure in preparation for a sale leaseback deal.
“We see lots of potential in Iraq” says Garth Self, “Iraq has gone from almost zero development to a huge wave of activity, and we see hope to acquire more types of businesses in the future”.
Approximately 10-15% of the country's total stock of tower infrastructure was understood to have been destroyed up until the defeat of ISIS in Iraq in 2017 and since then the government has been encouraging MNOs to rebuild connectivity infrastructure, particularly in the western region hit hardest by the conflict. This has largely been funded by international organisations and development finance institutions, but TASC Towers brings a fresh wave of commercial investment to Iraq’s network rollout.
“We are targeting between 300-450 new builds per year as well as increasing our occupancy ratio on existing sites” explains Khalil Khalo, Managing Director, Iraq. Tower sharing is almost non-existent with the aggregate tenancy ratio not much higher than 1x. “We would think to get to around 1.3x in the medium term and are always looking to scale the business and consolidate our position in the market”.
New builds are focused on supporting MNOs to roll out their 4G networks, which all operators now provide service for after Korek Telecom launched 4G in 2021. MNOs are looking at upgrading the existing network and increasing capacity including antenna organisation, fibre-to-site and data centres to improve quality of service. While TASC Towers have expressed that new service verticals are not on the roadmap in Iraq for the short term, they are being considered.
In support of TASCs growth in Iraq are the CMC, Iraq’s telecoms regulatory body, who share the same vision to reduce the number of towers, the carbon footprint of each site and increase colocation. No policy has come yet which explicitly encourages infrastructure sharing among MNOs. However, as Garth explains, “excessive regulation, even with the best intentions, can slow down commercial activity. We don’t necessarily want a highly regulated market; the more successful towerco markets are the lightly regulated ones”.
Energy management is a challenge
One of the main challenges TASC face is how to manage energy on their new sites. Included in the sale leaseback was all Zains energy equipment and infrastructure including generators and battery systems, and power provision is part of part of their service to tenants.
Grid availability varies largely by region and around 15% of sites are off grid. However, even electrified sites experience around 11-12 hours of loadshedding a day, so on-site generation is a primary source of power for nearly all towers.
“Energy is a big pain-point for MNOs and one of the main reasons why they are bringing in a towerco; to reduce the carbon footprint and energy cost of telecom infrastructure” explains Khalil. “Quickly taking control of energy management and adapting effective carbon and price reduction solutions is how we are going to generate quick wins”.
The energy market has changed a lot since TASC first launched in 2014 and solar + battery hybrid solutions are a viable alternative to traditional diesel generators now; “we are confident in eventually switching all sites to a solar/hybrid solution”.
A particular challenge is the large number of rooftop sites included in the portfolio. The spatial constraints of rooftop sites means that solar panels can’t provide enough power to completely replace a DC generator. Digital and automated management tools are key to minimising generator use.
Although other alternative energy solutions are available, solar + battery power has been identified as the most effective solution. “I have looked at hydrogen in other businesses” says Garth, “but the issue with fuel cells is that most countries don’t yet have the hydrogen distribution system and creating the logistics network on our own would be hugely expensive with little benefit”. Iraq also lacks any current hydrogen fuel cell projects, meaning TASC Towers would have to start from scratch.
TASC Towers are in the process of setting corporate-wide sustainability objectives and are looking at their current consumption to set meaningful percentage reduction targets. This is also in line with the emission reduction target their MNO partner Zain is setting too and “towercos are a catalyst to help [operators] hit their green targets”. Zain Group has highlighted the need to lower carbon reduction footprint of their network outlined in their last sustainability report and are in the process of setting science-based targets.
What this means for TASC Towers and MENA tower industry
TASC Towers acquired their first portfolio from Zain in December 2021 with 2,830 sites in Jordan, growing to over 3,100 by the end of 2022 through new tower deployments. With A build-to-suit commitment of 300 – 450 sites in Iraq and a pipeline of 500 towers in Bahrain expected to close in the first half of this year, TASC Towers have quickly closed the gap to become the 2nd largest towerco in the Middle East.
While further deals are not publicly known, TASC Towers have been linked to both the sale of Deodar’s 10,500 tower portfolio by Pakistan MNO Jazz as well as the ongoing bidding process of Ooredoo’s 20,000 tower sale leaseback. Zain also operates a tower portfolio in Sudan and is the parent company of Inwi, who operate around 5,500 towers in a market ripe for infrastructure sharing.
The Zain/TASC tower transaction deal marks a milestone in MENA towers as the first multi-country sale leaseback deal between an operator and a towerco and appears to be the catalyst to spurn on other operators to follow suit. Ooredoo have been next to follow, and Orange are finalising a review of their tower infrastructure set to complete mid-February which will outline what the MNOs plans are for their 14,000 towers in North Africa and Jordan. Through its subsidiaries, e& operates the largest tower portfolio in MENA but has yet to make any public statement on its tower strategy.
A recent TowerXchange poll has reported that towercos are predicted to own over 40% of the region's towers by 2024. With smaller MNOs like Korek Telecom, Tunisie Telecom, Oman Telecom and Jazz all in various stages of tower assessments or transactions 2023 is set to be a big year for towerco growth.
Want to hear more about TASC Towers' activities in Iraq? Join Khalil Khalo on our Iraq Spotlight roundtable at TowerXchange Meetup MENA on the 13-14 March in Dubai.
