A couple of months after becoming operational across six countries in Central and Eastern Europe, the region's biggest passive infrastructure provider at present speaks with TowerXchange about current and future activities
Can you please introduce yourself and the company to TowerXchange and its audience?
Ivo Ivanovski, CEO EuroTeleSites: EuroTeleSites is a spin-off tower company from A1 Telekom Austria Group which became operational on 22nd September 2023 and was listed on the Vienna Stock Exchange. I have been working for Telekom Austria as Director of M&A, International Affairs and Regulation since October 2016. I was the project lead for the spin-off of the assets when the project started in 2019. Through the years we have carved out assets country by country (Bulgaria being the first country to complete in 2021) until the towerco listing in September 2023 in Austria. We are a tower company that operates in Austria, Bulgaria, Croatia, North Macedonia, Serbia and Slovenia. Our assets include over 13,200 rooftops and greenfield sites and currently we’re the largest towerco in the CEE region and the 3rd largest European listed tower company after Cellnex and INWIT.
Can you please introduce the management team that are supporting the new company?
Ivo Ivanovski, CEO EuroTeleSites: At present, Lars Mosdorf, CFO is part if the management team together with me at the holding company. He has previous experience as a CFO in the airport industry.
In the holding group management team we also have Ursula Novotny who leads Corporate Communications, Moritz Palmi who heads Investor Relations and ESG and Natalie Loeblich who heads HR.
In each country where EuroTeleSites is present, we have experienced General Managers who come from the industry, most of them are from mobile operator A1. 95% of the colleagues who are with us have been transferred from A1 - they have a long history of working with A1 and the telco industry where they have worked and developed.
The proportion of women at management level is 32% which is quite a catch given the male-dominated nature of this business segment. But we are further striving to increase the ratio of women in STEM (science, technology, engineering and mathematics).
Diversity is in our everyday lifestyle, employees in different functions have been working together in six countries and speaking different languages for years. One team is organised in six countries. Workplace flexibility allows work to be done, regardless of time and location.
How are you managing the current transition period following the spin-off from A1 Telekom that resulted in the formation of EuroTeleSites?
Ivo Ivanovski, CEO EuroTeleSites: Just like any new company, we have battles and daily challenges that we have to deal with. I have been leading the spin-off with my team since 2019 and we have anticipated some of these challenges. Therefore we have signed inter-company service agreement with A1 Telekom Austria Group where many of our services for the time being have been outsourced into the MNO.
We are striving to be perceived on the market as a fully independent company, as we are. We are not a company of A1, we are a sister company of A1. We want to show to each of our clients that they will receive an equal treatment as an anchor tenant and we believe that in the short period of time we have been doing this, we have been successful to deliver that message. We have our own culture, mission, vision. In our day-to-day operations, we are working to be an efficient company with a focus on growth and be mindful of the operating expenses including maintenance and the budget for 2024. I believe we have been successful in many segments, there have been no glitches since the spin-off. There is always room for improvement, and we believe that 2024 will be a crucial year for us in many segments. The first financial data we will publish in February 2024 covering our operations in 2023, will enable the markets to better understand who EuroTeleSites is. Both investors and markets will see the first release of our financial data which should increase confidence in our company.
What are your operational priorities and challenges and how are you tackling them?
Ivo Ivanovski, CEO EuroTeleSites: Definitely, there are operational challenges, cultural challenges and human resources challenges. We’re still spending a lot of efforts to help our colleagues overcome the cultural shift from A1 where some colleagues have grown and developed for 20 years, to EuroTeleSites.
We have also become a very important vendor for our anchor tenant which is a new relationship that we are managing. We are also working on our HR challenges– hiring new professionals, onboarding and creating an educational platform for our employees so they can have ongoing development. And finally, on the operational side, we need to find ways to be more efficient. All this has been helpful with the experienced people we have onboarded. They have a track record in the telco industry, they have seen the challenges and understand why we need to deliver opex savings and can identify the segments where we should make the necessary changes. The strength and knowledge of our people is not geographically locked, we utilise every person’s capabilities at group level.
How are you preparing to support higher demand for 5G sites, 5G upgrades and network densification in this part of the continent?
Ivo Ivanovski, CEO EuroTeleSites: In some markets we’re in a very advanced stage of upgrading the sites to be 5G-ready. In some other markets due to the lack of 5G spectrum availability such as Serbia, we have not started yet. We expect the government of Serbia to award 5G spectrum licenses at some point in 2024. For the rest of the markets, existing site preparation for the anchor tenant as well as for third party co-location, and new locations for 5G densification in urban areas is our focus. Data growth and demand is exponentially growing year-on-year, according to the Ericsson Mobility Report of 2023 which means that more equipment will be needed closer to the proximity of the user and we’re preparing for that. In addition, we are working on meeting coverage obligations to enable mobile operators to meet their targets and provide quality service for their consumers.
At present, 1% of our revenue comes from non-MNO clients such as broadcasters, IoT companies, energy companies. What we have in our strategy is to continue to grow this segment and we’re positioning our new sites in areas where we can serve telcos as well as non-telco customers.
You mention you expect an 18% growth in tenancy growth longer-term, can you please share what new types of clients this will come from?
Ivo Ivanovski, CEO EuroTeleSites: The majority of our growth will come from MNOs and we’re seeing the interest is already there. Once the competitors of our anchor tenant are comfortable that we are an independent company which serves all MNOs, the orders will come. Of course, if we look at revenues percentage-wise there will be some non-MNOs but I do not expect that to have a significant impact on the revenue - it will mainly improve our tenancy ratio. Looking independently at the tenancy ratio or revenue growth is not fair to draw a picture of a towerco’s performance. It’s a mix of different parameters. Our ambition is to achieve a 1.44x tenancy with solid revenue growth and EBIDTAaL growth.
In your corporate presentation you mention having long-term sharing agreements with other MNOs in your countries of operation (similar to A1 MLA’s), would you be able to tell us your priorities for MLAs that satisfy you and your new tenants?
Ivo Ivanovski, CEO EuroTeleSites: Existing towers where A1 is an anchor customer are from the spin-off of A1. We are in discussions with non-A1 MNOs to build for them so they can become anchor tenants. The lease agreement is identical regardless of who we build the tower for. The prices are at arm’s length, and the co-location MNO receives a discount due to the position on the tower and availability for their equipment.
We have demonstrated to the MNOs that we can build for them. We don’t have orders yet but we expect in 2024 we can build for other MNOs who will be the anchor tenant on the new towers.
Is expanding your offerings beyond traditional tower services such as in-building solutions part of your strategy and if so, how do you need to change as a business to provide them?
Ivo Ivanovski, CEO EuroTeleSites: We do have current micro solutions, DAS, and indoor coverage, and we will continue to expand in this area. With the current experience that we have and due to the strength of our anchor tenant A1 in the countries where they are the No1 or No2 mobile operator, we believe we’re in the lead position to be able to implement indoor coverage solutions. This is important due to the consumer demand and that A1 has coverage in indoor locations so we will deliver the infrastructure so A1 can continue to grow as well as other MNO clients.
What is your long-term vision for the towerco and how do you see the European towerco market developing in the next five years?
Ivo Ivanovski, CEO EuroTeleSites: I do believe we will see more tower companies being carved out from the telcos. Then, once every teIco has carved out, I believe we will see in-market consolidation. In a longer-term, we will see cross-border consolidation. It is a dynamic period ahead of us.
I do believe EuroTelesites has a very strong position with the two shareholders America Movil and OeBAG which both have committed to the “5+5 years” to stay as shareholders in the company. Our anchor tenant A1 is a very financially strong MNO and continues to grow which will give us the opportunity to continue to grow. You will also see many more sites where EuroTeleSites is building for other MNOs in the region.
Ivo Ivanovksi will speak at TowerXchange Meetup Europe taking place on 23-24 April 2024 about developing a towerco model for Central and Eastern Europe. To join him and other CEE-present towercos, register here.
