TowerXchange discusses who’s building what for who within Kazakhstan and the development of the independent tower market in Central Asia
Central Asia is the region least penetrated by the telecom tower model. TowerXchange estimates just 1.3% of the 33,350 towers in the five Central Asian are owned by towercos. In fact, outside Russia, the tower model is rare in all ex-Soviet states. However, in Kazakhstan, the largest independent towerco is called LC Commerce and it has successfully expanded and now owns almost all the independently managed towers in Central Asia that TowerXchange monitors. If you know about any Central Asian towercos we’re missing, email me at David.Tran@towerxchange.com.
Central Asia’s lonely towerco
The portfolio was established with a small sale and leaseback (SLB) transaction with ALTEL-owned MNO Tele2 and has continued to grow through built-to-suit (BTS) for Tele2 and for Kcell, owned by Kazakhtelecom, with 400 sites currently active and with another 100 under construction.
Until recently local MNOs have considered passive infrastructure as a source of competitive advantage and have refused to share towers. TowerXchange understands that the country’s MNOs will relinquish the majority of their towers, according to one industry insider. Tele2 operates approximately 1,400 towers but new management are reviewing the company’s tower strategy. “The transition is not embedded as quickly as we would like to see, but they are not against the idea of selling up in the future,” Vladimir Gerassimov, Deputy Director, LC Commerce tells TowerXchange.
Kcell, owned by state-backed Kazakhtelecom, has 2,500 towers, but TowerXchange understands it is further from selling its towers than other operators despite currently engaging in build-to-suit with LC Commerce. Meanwhile, VEON-backed Beeline has the largest portfolio in the country with approximately 3,500.
LC Commerce’s road to Central Asia’s largest towerco started in 2014. One year later the towerco signed a 77-site SLB agreement with ALTEL. Its commercial relationship with ALTEL’s Tele2 strengthened in the following years with a further 250-site BTS agreement, to enable to MNO to add coverage in previously underserved suburban areas of the country, constructing towers and monopoles in those locations.
Beeline’s carve out and exit strategy
LC Commerce also reports to be in SLB discussions with the third MNO, VEON-owned Beeline. Prior to a sale it is believed, as in other markets, that Beeline will create a special purpose company to house the towers and “transform” all the tower sites to get the best return on a sale. MNOs are increasingly savvy in understanding the potential value of their towers. For example, Zain and Ooredoo are forming an independent towerco with TASC Towers in the Middle East. In South Africa. Swiftnet’s MNO owner, Telkom, negotiated the best price from buyer Actis because it took time to update paperwork and upgrade sites.
“VEON isn’t hiding from this fact – it is their strategy,” he says. “In the near future there will be a new towerco carve out in Kazakhstan that will have a considerable number of sites.” The company is showing signs of wanting to manage its presence in Central Asia. In March, the telecom company announced the sale of its 50.1% indirect stake in Beeline Kyrgyzstan to CG Corp Global owned CG Cell Technologies. The sale is a part of VEON’s strategy to simplify the Group’s structure and focus on its large markets. TowerXchange has approached VEON for comment.
Measured expansion plans
LC Commerce’s growth plans are incremental at this stage, with an emphasis towards BTS. It faces competition from smaller towercos backed by individual businessmen in the country. With local connections they form land-lease agreements with local landlords and build towers and monopoles for operators. These smaller towercos are self-financing, and both build quality and contract quality is variable which limits the potential for significant growth of a major competitor in the market. “These companies cannot construct significant number of sites simultaneously,” said Gerassimov. “It is not having a significant effect but at the same time it isn’t comfortable for us.”
Despite local market challenges, LC Commerce has the scale and the ability to meet MNOs’ tower demands. He continues: “We want to build at a larger scale but there are challenges in the rate that we want to develop, which should help increase the quantity of the sites required to produce the optimal level of coverage. MNOs want to install equipment in existing sites. The quantity of new sites, including new towers, is not as big as we’d like.”
4G rollout is largely complete in urban areas with a population of over 250,000 covered. As for 5G, it is being rolled out only in large cities, with MNOs granted licences to deploy the network. Coverage targets won’t have implications on LC Commerce’s day-to-day operations, says Gerassimov, adding that much of the infrastructure deployed is sufficient to service the country’s connectivity needs.
“For LC Commerce – it will not bring any significant changes in our operations, even for the development of 4G coverage,” he says. “MNOs will need to position monopoles in the cities. They also need some more towers, but not a significant number. [The MNOs] have no problem providing coverage in the suburban areas.”
Gerassimov says that as the countries’ MNOs have the opportunity to install base stations on their existing sites, they therefore won’t need “enormous numbers” fitted into new sites. Gerassimov concludes that MNOs are also considering implementing smart poles and also video surveillance, showing flickering signs the country can advance its digital capabilities for Kazakhstan’s 19mn population.
That potential for lease-up makes telecom towers in Kazakhstan an attractive investment opportunity, but who will buy, and at what price?
TowerXchange’s estimated site count for Kazakhstan
What we know about Central Asia
A relative settled telecom tower industry picture is also witnessed in Kazakstan’s neighbouring country, Mongolia. There are approximately 1,000 towers in the country, and more than half are shared between the country's mobile operators. Mongolia is home to four MNOs – G-Mobile, MobiCom (KDDI), SKYtel and Unitel – and 4.4mn mobile connections with a population of 3.3mn. Almost half of Mongolia’s population is located in the capital.
Ulaanbaatar, which homes 1.45 million people and the majority of the telecoms infrastructure. Following the separation of the telecom and infrastructure businesses in 2013, a few infrastructure providers now run towers, active equipment, fibre and microwave backhaul across the 1.5mn sq km Mongolian landscape. In March 2021, MobiCom began 5G trials, but no spectrum has been allocated in the country.
TowerXchange doesn’t have much information on what’s happening in other Central Asian countries. We estimate that there are 6,000 towers in Kyrgyzstan, 4,000 in Tajikistan, 2,000 in Turkmenistan, and 13,500 in Uzbekistan – all of which are owned by MNOs operating in those countries.
We are not aware of any significant telecom tower developments in these countries – please do email David.Tran@towerxchange.com if you are active in these markets.
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